Worth a Dabble?

24th Jun '09 by davjo

10 comments 4351 reads

Interesting at US$4.35/boe 2P 50% developed reserves (US$10/boe on 1P basis)

Canada CEN.V - AIM CEO
http://www.coastalenergy.com/

Assets
Offshore Thailand Oil Production + explo appraisal upside
Onshore Thailand Gas Production + explo appraisal upside

Annual Results Dec 2008
http://www.coastalenergy.com/coastal/investor/report/2009/2009-04-28/2009-04-28.pdf

Presentation May 2009*
http://www.coastalenergy.com/coastal/media/presentation/2009/pres09/pres09.pdf

SP Canada $2.75 - AIM £1.55

Shares Out 99.6m (fully diluted 113m)

M/cap $274m

May 2009 placing 5.75m shares @ $3.20

NAV (RBC June 2009 $6.98/sh)

EPS 2010 RBC est $0.64 - prospective PER 4.3

Debt at May 2009
Long term $36m
Short term $18m
Cash $22m

2m warrants @ $1.136 outstanding (expiring Jan 2014)

CPR Audited Reserves at Dec 2008
http://www.investis.com/coastal/investor/report/2007/reserves/reserves_2008.pdf
2P Oil 42mmbbls
2P Gas 20mmboe
3P 75mmboe
Contingent/prospective 773mmboe (high case)
2P NPV10 post tax US$610m

Production 9500 boepd ( 79:21 Oil:Gas). 18,000 boepd forecast y/end 2009 - 21,000 boepd 2010.

Half of gas reserves(proven element) under 15 year power sales contract expiring 2021

All CA$ except where noted.

1CAD = 0.87USD

*Fiscal Terms on P.19-20....interest of Soco/Salamander holders - note the unusual "Special Remuneratory Benefit" tax

E&OE

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emptyend

24th Jun '09

Fiscal Terms on P.19-20....interest of Soco/Salamander holders - note the unusual "Special Remuneratory Benefit" tax

Thanks for pointiung that out. I notice it is tax deductible against Petroleum Income Tax and that Coastal don't expect to be paying any anyway in the next two years. Nevertheless it is useful to know.

Re Coastal, I'm currently not able to fully consider its merits due to lack of time. However, one thought that occurs to me is to wonder what endgame the management have in mind - and I'm also wondering what the position of PTTEP and the Thai authorities is towards cross-border (or domestic) takeovers ....and whether they have any interest in playing that game themselves?

Coastal looks pretty interesting on the valuation metrics, though their plan to resume offshore drilling in Q3 sounds a bit "contingent". I wonder if funding concerns remain even after the May issue, given that they have $20.5mn of cash almost balanced by $17.8mn of short term debt (and the other question that arises is who the debt is owed to).

rgds

davjo

In reply to emptyend (post #1)

We're now up and running after the hiccoughs encountered !

Morning ee

Thanks for your thoughts. Re the SRB, you'll recall Soco weren't bothered about this tax. However, I guess the same applies to them as CEO, in that it's a couple of years down the line before it's likely to have any affect, always assuming historically high prices prevail.

As to CEO's funding, tbh, I haven't looked that closely. For sure though, there's been quite a few piddly loans in the past which I assume are reflected in the declared short term debt total. Going forward, it's worthy of note that the recent fundraising included underwriters exercising their over-allotment option, raising another $2.4m. I assume c/flow from current 9500 boepd and rising will close any potential gap.

Regards endgame, no idea I'm afraid. My focus on this company was that it stood out as undervalued compared to many. A lot of Canadian investors do tend to home in on c/flow multiples and next year should see a sea change in that area.

Very illiquid on AIM but reasonable on TSX.

In reply to davjo (post #2)

Regards endgame, no idea I'm afraid. My focus on this company was that it stood out as undervalued compared to many

Don't disagree - but what is going to get the market excited other than gentle value-building?

Going forward, it's worthy of note that the recent fundraising included underwriters exercising their over-allotment option, raising another $2.4m.

I wouldn't read too much into that. They would exercise an over-allottment option over their dead grandmothers if they thought they could sell them at a profit! I assume the fund raising coincided with a fairly strong period for oil prices, so I'm not especially surprised they took more. Explanation/derivation of Greenshoe options is here, FYI : http://www.investopedia.com/terms/g/greenshoe.asp?

cheers

MrT

3rd Jul '09

RNS today re: spudding of Phu Kheng-1 exploration well [ps. price check - currently at 149]

http://www.stockopedia.com/forum/view/30299/worth-a-dabble

Announces that the Phu Kheng-1 exploration well on Block L27/43 located in the Khorat Basin in Northeast Thailand was spudded on July 2, 2009. The well is planned to be drilled to a total depth of 2,070 meters sub-sea and is expected to take approximately 40 days to drill on a dry-hole basis, with testing to be completed immediately if the well is successful. Coastal is the largest holder in Block L27/43 with a 36.1% net working interest.

I note that this has also been reported in the Salamander Thread - http://www.stockopedia.com/forum/view/30774/2009-agm - and Wiki - http://www.stockopedia.com/wiki/view/SMDR - given the shared holding.

17th Jul '09

I see Tristone have a note out today, reducing their 12 month target from $4.85/273p to $4.60/259p, as a result of Songkhla production 7000 bopd, 500 bopd less than expected.

They have the current Phu Keng drill at $0.38/sh risked, $2.98/sh unrisked.

Total RENAV is $6.42/361p. Unrisked $19.30 (1083p)

Interesting to note their forecast netbacks for 2009-2010 are $23.22-$22.26 respectively, at Brent $53.20-$70.00. Guess that mismatch reflects the "Special Remuneratory Benefit tax" kicking in next year? (says he pondering the impact at Bualuang?!)

doverbeach

20th Jul '10

@ ee

Coastal looks pretty interesting on the valuation metrics, though their plan to resume offshore drilling in Q3 sounds a bit "contingent".

9 month rig contract announced yesterday http://phx.corporate-ir.net/phoenix.zhtml?c=115338&p=irol-newsArticle&ID=1449119&highlight=

Coastal's AGM is tomorrow : Thursday July 22, 2010 at 10 AM (British Summer Time) at the offices of Strand Hanson Limited at 26 Mount Row, London, W1K 35Q, United Kingdom.

Anyone going? Unfortunately I can't. There is an interesting list of questions posted on the Investor Village board: http://www.investorvillage.com/smbd.asp?mb=11837&pt=msg&mn=3258 if anyone is...

thegreatgeraldo

22nd Jul '10

Hi db, just back from the AGM....

First things first - coffee, no biscuits!!!!!!

Actually arrived before kick off for a change & shared the lift up to the fifth floor with Forrest, who's been involved since the very start (he goes back to NuCoastal)

Probably about 15 in attendance, all suits bar me & one other who was a Canadian shareholder on holiday over here. Incidentally, there are 1123 shareholders in total, of which 218 are UK based, which means I know a couple of percent of the UK shareholder base! (DAK if a broker acting as a nomineee holder would show up as one holder or would seperate nominee a/cs show on the register?)

Formal business was swiftly despatched & I'm pretty sure no votes were put to the meeting on a show of hands - possibly because no shareholders were officially present?

There was no presentation, although hard copies of the pres were available & there's an updated pres on the website

http://www.coastalenergy.com/images/stories/agm_pres_july2010.pdf

After the meeting, Barney, who I'd forgotten was a director, introduced me to Randy. I think it's fair to say that Randy was in a fairly upbeat mood! He began with an overview of the Songkhla & Bua Ban fields - they're basically the eastern & western edges of a basin of what was formerly a freshwater lake, the water they've sampled is apparently almost up to drinking quality.

I think it's fair to say that the geology is not straightforward, but with the seismic they have & the number of wells drilled they have a pretty good handle on it, but are still pinning down the thick & thin sand locations.

I had a pretty long one to one chat with Randy, but took no notes, so the follow8ing is from memory. A-01 & A-02 are now up to speed & producing around 500bopd each. I didn't check, but assume A-05 is still around the 2500bopd mark, although the AGM pres sticks to the earlier announced 3000bopd for the 3 wells combined.

BB A-07 is still drilling, away to the south & has entered the Eocene there, no hint from Randy as to what if anything they'd found.At A-03, both the Oligocene & Miocene will be tested (again I didn't ask, but assume the Miocene , if productive will not be put on production while it's further investigated). When talking about the Miocene, SMDR cropped up a couple of times, understandably. Randy definitely mentioned a graben, which I think was where they'd first experienced the Miocene & the graben extends northerly from around the platform area & into the area where the northern prospects are which will be drilled later this year. A further 5 wells are planned up to September on Bua Ban, one of which will be a technical well drilled vertically from the platform for the purpose of pressure testing of, again from memory, the underlying water. Returning to the graben, I'm also pretty sure that they'd previously drilled across the western side of it without encountering Miocene sands, the Miocene were found
in the eastern side

It was also mentioned that PMO encountered Miocene sands with Bua Ban 1, down to the south, but they ween't tested

It was stressed that the currently booked reserves are all in the Oligocene & that the Miocene & Eocene are prospects. I think we'll hear more on that in coming weeks.

On Benjarong, they believe there are ITRO 400mmbbls in place, but the reservoir's on the tight side. It wouldn't be too expensive to try fraccing this, again from memory around $6 mill (I assume that covers the 2 wells?) but no decision has yet been taken.

Regarding the northern explo, that will involve 2 or 3 wells & is next on the agenda after Bua Ban dev drilling, they have some very chunky prospects up there(page 23 of pres), then back to Songkhla to drill the Eocene "wedge"

Current company guidance is for offshore production of around 15,000bopd on completion of Bua Ban dev drilling, giving 17,000boepd including the onshore gas.

Bound to be a few bits I've missed, if you have any questions, feel free.......

23rd Jul '10

I've spent a bit of time reflecting on yesterday's AGM & think I may have made one major mistake. I referred yesterday to the BB 1 well drilled to the south by PMO & said they'd hit the Miocene. I'm now pretty sure they clipped the Eocene with that well, but didn't test it, possibly because of concerns about porosity?

Also worth a mention is that CEO are pencilled in for the November Oilbarrel, by which time they'll have completed the first phase of dev drilling at Bua Ban & should have sunk 2 or 3 explo wells to the north & could possibly be back at Songkhla?

26th Jul '10

Another take on the AGM from GreatSwami

http://investorvillage.com/smbd.asp?mb=11837&mn=3443&pt=msg&mid=9312405

25th Aug '10

Possibly hit bottom tonight in Toronto after a rather disappointing run?

Worth a Dabble?

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Davjo

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