RE:RE:RE:Operations UpdateI thought it was a very good NR and it may well have an impact in the market. Give a little time; it is not like POE is well covered.
I had not responded to your earlier post about your hopes for further exploration or investment. I appreciate your discussing your reason and I certainly recognize that share prices for a number of companies have taken off following increased investment. I would point specifically to Headwater, Spartan Delta and - maybe more relevant to Pan Orient - Transglobe. However, I believe a major consideration, particularly in the first two mentioned, was that the investment was being undertaken by a very well-regarded management group with proven prior success. I don't think the POE management team has yet earned the faith of the market.
That being said, I personally am not interested in further investment. My sense is that if the Company is being significantly undervalued now, why would we think the market would appreciate the Company taking a flyer on a new program when they have not had great success in the past.
I'm not sure what the exact best method is but I would like to see a monetization of the Company's assets over the medium-term.
With Brent averaging $65, Thailand can easily bring POE about $15M CAD in free cash flow for this year (that is after our 50% share of the subsidiary's $30M CAD of taxes in Thailand). After POE G&A including Andora, the Company would have about $12.5M in total FCF available. That would leave the Company with about $45M cash, the Thailand asset and Andora.
Jeff and the team appear to have strong connections in Thailand and have made very good sales there in the past including the sale of the first 50% of POE Siam to Sea Oil Public Company of Thailand in 2015 for $42.5M USD. It is difficult to put a value on our 50% interest without knowing the parameters around EURs of the wells but I would think $45M CAD would be a low target, equating to about 2.5 x EBITDA (and less than the sale of the first 50% interest in 2015).
That would leave Andora. The investment in Andora may be worth nothing now but POE has spent $80M on it and there should be material value if oil prices look to remain at current or higher levels which I believe is very likely looking out towards 2022 and beyond following a global reopening.
All in all, I believe a monetization strategy offers an easy double of the stock from here. Any alternative strategy should show greater promise on a risk-adjusted basis.
In the near term, the Company can continue buying back stock. Personally, I would encourage a Substantial Issuer Bid as well. To me, these are easy calls.
What about a dividend? Again, I am not sure. But, if the Company is considering it, the dividend should be very meaningful. After purchasing 10% of the outstanding shares in an SIB, the Company could pay $10M in annual dividends out of free cash flow (and still bring in excess free cash flow at current oil prices), which would equate to about $0.22 per share or $0.055 per quarter. I think that would be a meaningful return while we wait.
Anyways, those are just some thoughts, and there may be better opportunities out there.
Steve