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Exploration Costs Net Book Value US$76m (16p/sh)

lse:char

#1

Partnering may lead to a Recovery of these Costs :fire:

As at 30 June 2019:

  • Namibia US$50.8 million (10.7p/sh)
  • Morocco US$9.8 million (2.1p/sh)
  • Brazil US$15.4 million (3.2p/sh)


#2

We can only recover back costs if the company can farmout, there has been no partnering since March 2016 - why do you think the company has been unable to conclude partnering discussions?


#3

Look at this timeline from early 2016, what have been the achievements since then?


#4

We’ve drilled two wells,

  • 10% Morocco JP-1, net drilling costs: free carried (net 77mmbbls)
  • 65% Namibia S-1, net drilling costs US$12m (net 305mmbbls)

shareprice would have rocketed if…

The reason we have not farmed out Namibia is that no one wanted to pay the price we were asking for.

Given the historic low costs to drill at that time (US$12m net costs for 65%) I very much agreed with the company going forward to drill S-1 without partnering.

Unfortunately it was a dry well. :expressionless:


#5

I wouldn’t say those are achievements. The Moroccan well was used to push the share price up to 20p+ to help bail out the likes of Richard Griffiths and Sprott, you can see the amount of interviews LB was doing late 2017 and early 2018. After they bailed, we had an equity raise at 13p. Even if Chariot succeeded with the well, we only retained 10% equity in the licence. We managed zero cost on this licence, which is the only positive I would take from this.

That backfired then didn’t it?

But it didn’t

How can you say that you were happy with drilling alone due to the low drilling cost when we were led to believe that we will not drill unless we partner? Please study the timeline that I have posted carefully. We were led to believe that we will have a tier 1 farmout to cover seismic costs then tier 2 farmout for drilling - was this achieved? Other companies managed to farmout their acreage, who is responsible at Chariot for demanding too much?

You can see on the timeline that we failed to partner on Mohammedia, Mauritania, Central blocks in Namibia, Southern blocks in Namibia and Brazil in the given timescale - who is responsible for these failures? We still haven’t managed any partnering nearly 4 years on.


#6

The other option would have been to not drill at all or to give away much more than what we would have been happy with… given the potential 300mmbbls+ net outcome it was absolutely worth it imo…

What I did not agree with was to pay 100% of the US$84m cost to drill Tapir South-1 in 2012 (US$84m). That was crazy. The gross cost to drill S-1 amounted to US$16m…

https://www.namcor.com.na/


#7

What was the purpose of the last raise? Was this not supposed to give us the upperhand in farmout negotiations?


#8

The reason for the raise was “to deliver a second well within the near term comprising the drilling of Prospect S in Namibia, in addition to the carried drilling of the RD-1 well in Morocco by Eni”. Either with or without a new partner. Preferred option was to farm out and share the risk and indeed according to management discussions had been strengthened by S-1 having already been fully funded. From what I remember 2 companies who wanted to partner failed to excute in time…


#9

You’re saying that the reason for the raise was to deliver a second well with or without a partner - why were you talking about “strengthening our negotiating position” at the time then? The company had 5 years to conclude partnering discussions so don’t buy the “failed to execute in time” theory as there is nothing to substantiate this claim, do you have any evidence apart from LBs word?


#10

preciousmaj, as I’ve said before:

I also was hoping for a farmout and felt there was a good chance to acquire one or more new partners. But at the same time I was fully aware that a farmout never was 100% guaranteed and I not only accepted but welcomed the option to drill without a new partner as well. That’s all.

If today we had a chance to drill another net 300mmbbls+ prospect with a 29% COS for net US$12m I would love seeing Chariot to go for it again.


#11

Maybe have a look at the bank account before doing that :face_with_raised_eyebrow:


#12

lol :wink:


#13

Hi, so I think there are three separate issues:

1 Did the drill offer value in terms of cost, reward and ECoS?
2 Was it prudent for CHAR to drill on its own even if it was a good value opportunity? What was the cost of not drilling e.g. cancelling?
3 Should LB have realised that other companies could be at different stages of their investment cycles and therefore be unable to participate? So having no sharing of costs was much more likely than we were ever led to believe beforehand.


#14

Hi theoryman,
in my opinion

  1. YES
    Cost US$12m, Reward 300mmbbls, ECoS 80%
    Canaccord unrisked valuation US$5.3/bbl

  2. YES
    Considering Chariot had a good cash position and they still have ~US$12m in cash left with no debt and only little commitments (~US$1m) ; Chariot was in partnering discussions until and after the spudding of the well, so it would have been very costly to cancel the well at that point of time.

  3. NO
    Other companies would have been able to participate, during the drill they’ve almost concluded farmout deals with 2 companies, but to get to the main reservoirs the drill took much less time than expected.