Hello Everyone:
We are finally having a decent discussion.
I will address the two questions sent to me.
On the issue of the 10% royalty. The PSC contract was amended in October 2011 by the heavyweights of Vallares and probably Sinopec in the background. The previous PSC contract mentionned a 40% royalty. The amended PSC contract mentions a 10% royalty. The original PSC area which mentionned the 40% royalty has been blacked out, meaning it is no longer applicable.
The question is, why would the kurds agree to reduce the royalty rate to 10%? A property that is not being drilled is of no value to anyone, given that the area is still risky both for oil (ie: VST results) and politically. I agree that Longford should have issued a press release indicating the amendments done to the PSC contract however, they may feel that Sedar disclosure is enough. This has given Longford an unexpected windfall. The government contract is the amended one that was filled in October 2011, those are the conditions that apply. It states F&M, which is Longford, holding 40% and royalty to be paid 10%. That is it.
With regards to sums paid by Vallares to Genel. In essence Vallares valued the total 7 fields at $ 4.2 billion, of which they paid $ 2.1 billion to acquire 50% of it. In my earlier analysis I did mention that I did not have the proper breakdown of all 7 fields and I made an assumption that they were of similar nature. Now some may be valued more, some less, however what you must keep in mind is that Vallares agreed to pay $ 2.1 billion for a 50% share, which means that they see value going foward as nobody pays an asset fully priced in for the future.
Now I calculated the value of LFD 40% share at $ 628 million. It could be possible that it is only $ 500 million. It could also be possible that it may be $ 800 million since this Chia property has been de-risked due to prior historical drilling.
What I do know for sure is that management is not going to give this property away, they must be nuts if they do this knowing what it is valued. We have concrete numbers, no guessing. What is also important is that we have three giants (Vallares, Genel and Sinopec) whom have confirmed strong interest in this property. Genel would have sold all out if it did not see additional value going foward. Wouldn't you?
So now we know why Soros loaded up, why Ahmed bought 500,000 shares, why the geolgist bought 200,000 shares and, why even the accountant bought 100,000 shares. All of these people must have seen this coming.
Longford has the funds to drill the one hole or two, this is not an issue. They now want a blockbuster deal like Genel negotiated. Given the hunger shown by Sinopec at wanting to go at it alone, I would say that a MAJOR DEAL will probably be announced for Christmas, as a gift for your patience.
I don't believe that I have to convince you too much, if I tell you that you should LOAD UP....
Just my honest opinion.