The ongoing strategic review will, I am certain, consider winding up an option. I briefly spoke to Steve, the new MD, who was in Australia this week. Very open, honest and straight. The options are all on the table. He is assessing and will report to the board shortly. Do we hope to find a farm-in partner? If so most likely an outsider wanting to get into Wolfcamp ie not BHP or Approach or EOG etc who are concentrating on their own holdings there already. I think we are unlikely to keep drilling alone due to the cost $7 mill per well and maybe another 10 or more wells required to most likely guarantee success...but what if we fail? Done and dusted and all cash spent. Too risky. But with cash in the bank we are attractive as a partner...ready to go and participate rather than seeking a partner to save us from oblivion. We are in a good position here. Unless someone comes along to join us in the Wolfcamp I think the board will ultimately follow the liquidation scenario. Maybe decided in 6 months and 1 year to activate/finalise? In the meantime ongoing, and especially employment, costs need to be slashed and this will happen. Re Quebec, the moratorium lifts June 2014. This could be held back and realised later in an orderly cashing up and capital return distribution process. Although there seems little confidence at the moment that anything will develop after the moratorium. There is no evidence apparently of anyone gearing up to start drilling campaigns there in a little over 12 months time and therefore little confidence of re-entry immediately post June 2014. But you never know...I remeber past CEO Ian Gorman considering this a potentially extremely valuable asset...although that was maybe 4 years ago now. But I always did think he was a very wise man and there's no control over moratoriums.
Unfortunately for us long term holders in at around $1+/- I do fear the new and possibly aggresive 2 x 10% holders who are NAm based and might seek representation on the board. With a much lower entry price they may be happy just to get up to 40 or 50c and bail. Take their profits and run. Thank goodness we have some substantial Aus based big holders who might be able to soak them up for all of our benefit. I don't know and haven't even tried to do the detailed sums on a winding up and capital distribution scenario but I do know we have franking credits from Aus tax paid 2 or so years ago so if we got something back in the next 12 months it may be able to be structured to include a part fully franked dividend and then a balance later on sale of Quebec. I'd have a guess...50c including a 20c ff div and then 40c+ on sale of Q in 2+ years time. Anyone prepared to do a detailed breakdown of asset sales in an orderly fashion with ongoing costs cut to the bone?
MPO Price at posting:
28.5¢ Sentiment: Hold Disclosure: Held
