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Wise words Jiddy, I never invest more than 2% of our portfolio into any share and usually sell half on a double. I thought I recognised your name from the 88e board. I got of of 88e in profit last year having sat underwater for years. The one that bit me was UKOG but I sold out last year. I made the mistake of believing Sanderson,lol!!
Hi Jiddy, I don't actually think that this stock is speculative (compared with say 88e or Matad). We are an oil producer and the current SP barely covers what we already had prior to the recent discovery. It is by definition at the higher end of the risk spectrum but when the CEO puts in 225k of his own money and oil is at this price it bodes well. In terms of risk/reward I have rarely seen a better opportunity. GLA
FWIW, I have Matad and 88e both making me good money . Both bought for this years drill hype. I also have a far larger amount here. I am still at a loss why people persist in this either or argument. I have all 3 and am enjoying the trip. The difference is I will trade 88e and Matad whereas I am here for the CPR and JV. GLA
FWIW I want to change my car. Last week I invested an additional amount here being the purchase price of a used car. The question is will I keep the old car? Now what I really want is a new Bentley convertible.... here's hoping for multi bags. GLA
I am not sure why posters here feel the need to DIS 88e. The opportunity here is all we need to focus on. I am invested in both and enjoying the ride, making money on both. Investment is all about diversification so it is actually healthy to have your fingers in a number of pies. GLA
I have a very different view of the current BOD than many here in that I am very pro them. They manage a company with high debt and at one stage with oil at $20 we were in serious issues. The hedged production combined with the recovery in poo has driven the sp up from 7p and virtual bankruptcy to our current position. Yes I was diappointed with the recent statement and the amount of hedging currently in place and with 20/20 hindsight I wish we could sell all our oil at current price per barrel. Yes I am disappointed by the recent pullback but I am not selling. The company is far more solid than when I invested (yes I bought my first tranche at 7p..by sheer dumb luck getting the bottom) and I see a bright future. For me this is an investment not just a short term trading position. GLA
Hi Doug, perhaps I should clarify. MM's can manipulate when there is low volume and we have all seen that. My point was that when the big money arrives demand constrains their ability to do so. My post was written to explore the reasons why the big money is yet to arrive because having read the board it is clear that many just don't get it. I hope I also got the message across about the importance of a JV to NPV and therefore the SP. To best understand this one needs to consider this . What is the value of a barrel of oil today? Answer $88. Next question how much would you pay me today for a barrel of oil that I will deliver to you in 5,10,15, 20and 25 years time? The market typically discounts the value by circa 10% pa thus is the JV speeds up extraction by a factor of 3 or 4 the impact on the NPV is considerable .
I am not one for conspiracy theories about MM's etc because if volume was huge demand would pull the SP higher. So why hasn't the sp re-rated? Firstly I think that there is distrust due to previous failures and dilutions but also because we have a tiny mcap and no CPR. PI's are happy to invest there own cash and have no one to answer to (eg a BOD or investors). In contrast an oil major needs actual numbers to justify a JV and similarly an analyst at an institution needs numbers to analyze. On top of that it needs to be worthwhile for the institution and typically an institution would not hold this type of share for anyone except very high risk clients and would not want more than 5% of the stock for liquidity. Assume the institution is investing £1bn and 5% of a £60m MCAP is £3m. It quickly become obvious that this company is too small to be worth consideration for most companies. Then let us analyze what we know about the new find The company expects that they have 1.25-1.64 OIP under their land and will own 55-85% of it. However, OIP is very different to having confirmed commercially extractable oil. One can take a punt (and PI's do) that a reasonable amount will be commercially extractable and that is the basis on which I have invested but oil companies and institutions do not take a punt they wait for the numbers. Thus if you believe the CPR will come out good you have an opportunity to load up before the big money arrives. I actually think there will be 2 main rerates 1) on CPR and then 2) with a JV. The relevance of a JV is that it brings about finance and expertise which accelerates the rate of oil extraction. The faster the oil can be removed the less discount that is used when working out the NPV. I hope this is helpful. Basically if you believe the CPR will come through good then you just need patience and be comfortable that increasing production will in any event be supportive of the SP.
Devilboy, you clearly know bugger all about how intuitions and large oil companies work when it comes to investment! A PI plays with his own money. He has no one else to answer to. An analyst at an institution invests following robust analysis. They are investing other people's money and are accountable. It is not a whim. Similarly a JV partner would be investing very heavily in a project - several £m. Do you seriously expect board approval for such an investment with no CPR, no IRR and no idea of cashflow and NPV. What a dick!
Newlunar, I think you have missed the point. There are no figures that are more "realistic". There is no CPR, No known extraction rate and no JV partner. One is thus left to make certain assumptions. Any one assumption can massively change NPV and therefore sp. It is why the institutions are not investing yet as they don't know what to pay.
Using the calculation below the reason why a JV has such an impact on NPV is that a) it provides expertise and funding but also b) It increases the speed of extraction. When doing an NPV one typically discounts the value of each barrel by circa 10% per annum. Thus slow extraction has a massive impact. I have used $1 per barrel as being ultra conservative. Clearly if a JV occurred and production was expediated a much higher NPV and therefore SP would apply and it is for this reason that others have produced far higher mcap with resultant SP. Again I hope that this is helpful. People are not ramping when they come up with £1bn plus valuations it is all in the assumptions but the upside is crystal clear.
I don't do fantasy numbers but in terms of commenting on this subject I would refer posters to calculations based on IRR and NPV. The whole exercise is designed to work out the current value of the assets taking into account costs of extraction and how fast. The lower the costs and the faster the extraction the higher NPV for the same size of oil reserve. Since much of the above is unknown an accurate calculation is currently impossible which is why the big boys will only play post CPR. But I would simply say this. Our MCAP is currently circa £60m. If we have 1bn barrels confirmed recoverable and then assume our share is 50% that is 500m barrels. If each barrel is valued at just 1$ in terms of NPV the company would be worth $500m which is £375m. Thus even taking what is deliberately a very conservative basis the share should 6 bag post CPR. One can come up with different calculations but this was my most pessimistic calculation on which I invested. I hope it is useful
Totally agree Sasa. Sadly some people will have gone in balls deep to start with and have had no opportunity to average down. I have been here for 5 years and got my average in the 3's but had placed this in the bottom drawer. The mine is a major national strategic asset with no access and lots of politics in the way. However, it will get built. The only question is when and to what extent PI's would be allowed to benefit. 7p would allow most to exit profitably but it is a low ball offer with a more reasonable offer being somewhat higher. Time will tell but AMC is now out of the bottom draw and I am daring to see a profitable exit. GLA
I go back to my post before the RNS. This is Russia. A bidding war would be great and I do not rule it out but in practice the board may have little option but to accept. Russia does not play by Queensbury rules….I always expected a JV or a buyout but hoped for the buyout to be at a higher level. Time will tell.
When the Russians decide they want to buy in practice you get little choice. I posted here last year about a case where I heard of a company who were literally given no choice whatsoever other than to accept a deal or face very unpalatable consequences. This mine is a core strategic asset . It will get built but probably not by AMC. A £100m offer is low ball but unsurprising and would enable us to walk away. As a long term holder my B/E is just under 3p so 6p plus would allow for a profitable exit. Not what I hoped for but a profit is a profit. GLA
USA is staging a strong rally today from loans Dow was down over 1000 points now circa 150 points. When combined with XOP at 59 we have hope for a blue day. Today was an indiscriminate market sell off so an equally indiscriminate bounce will do me fine!