Comments on the presentationFirstly, this was a generalists event - a lot of presentations over 2 days, and mainly emerging companies in all sectors (so not surprised if the crowd was not "oil & gas savvy").
How to rate it:
- A solid enough presentation, and the video showing ops was good.
- You can hear the belief in what 2014 Q3 is going to deliver. I sense Rene is staking a lot of the companies credibility on Q3 (here we are, here is a normal quarter, look at what we can do).
- Whilst there is an infatuation with talking about the $6BN in Mcap down south with US public peers, and why on comps this should be a 70 cent stock (or whatever) - it simply underscores that these guys will only grow into that level of valuation when they get through phase 2. This is a development project - so they will be measured on execution.
- The story seems good - "we invested $5M in a plant and its BV is now $25M-30M" - but there are also things they need to improve to drive efficiency - i.e. plant being 900 meters off rail illustrates obvious inefficiency. When they get a rail spur in - that will save double handing, and cut down on a lot of time at the 7P plant
- Phase 2: they just need to work through the JV - set it up and integrate it into the comapny.
-Phase 3: He reported its 2 years away. There is good and bad in that. On one hand it may speak to balanced and planned developement. On the otherhand it may say their development/execution capabilities could be better. Can they accelerate? What is the value of accelerating and what is the opportunity cost if you dont accelerate.
- "The Future": a new soundbite: Minago's frac sand (yes, knew about it - but now in the scheme of phase 1,2,3 they have minago frac sand as a fourth pillar).
10:1 share consolidation approved - up the the board as to when.
Keys:
1. He has set a high expectation for Q3 - so deliver on that, when he reports in November, 2014.
2. Execution, execution, execution - hit your quarters, show cash flow, progress in Phase 2 is a critical for credibility, and do they things - like your 900m rail spur - which (IMHO) will add another $2.50/ton of margin - when the operation is configured correctly.
3. So better to focus on delivery - as opposed to the gap with your US public peer groups (who have logistics sorted out, and have been humming for the last 4 years, in all honesty). You do a good job (in your control) - the market will reward you.
3 (b) being on rail a huge resource/capability/advantage. The company should also use its rail advantage to attract other sources (thats a possible game changer - you own the rail, the route to market/customer - feed the beast).
4. Execution, execution, execution.