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  1. #16036
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    Quote Originally Posted by THEONE View Post
    I would think that the chances of success at 62 cents would be quite low. Surely they will need to increase the offer.. I will not be selling mine.
    Hopefully NZO isn't paying for this. If they are prepared to pay over 70 cents not long ago. Surely is worth paying a few million more for a potential asset worth billions.. I would like to know more about the probability of success of Ironbank.. I am sure OGOG would know. In any valuation they need to assess this. I wonder if Zeta would make a counter offer..
    Perhaps that's their strategy, low ball offer then make a small increase so that it seems more attractive. Even though it's still a low ball offer. Just as they did before.

    The price is actually irrelevant when the upside with Ironbank is taken into account, and that's what most of us remain invested in the oil & gas sector to see eventuate. And that's what seems to be missing from OGOG's approach in relation to the minority shareholders. They want it all for themselves.

  2. #16037
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    Quote Originally Posted by Wiremu View Post
    Perhaps that's their strategy, low ball offer then make a small increase so that it seems more attractive. Even though it's still a low ball offer. Just as they did before.

    ... They want it all for themselves.
    Yeah. OGOG hold 114,876,016 shares. If I offered them the same deal to buy them out, my offer price would be about $71M.

    Given the massive (many billions of dollars) upside potential, do you think OGOG would sell me their equity for that price? They would laugh me out of the Board Room.

    So why the hell would I sell my equity for the same pittance?

  3. #16038
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    mistaTea, your comment "given the massive (many billions of dollars) upside potential" for Ironbank I thought I would try and find some measure of that upside.

    On April 11 2019 Cue Energy included this in a press release: “This is an exciting time for Cue. Shareholders now have the opportunity to participate in a fully-funded well with a 21.5 percent participating interest. This is a 15tcf prospect, 50 kilometers from existing LNG infrastructure. “It will be company-changing if the well is successful.” Matthew Boyall said.

    Presumably tcf means trillion cubic feet. So what is one trillion cubic feet of gas worth?

    Steve Maley (Steve Maley, 40+ years of reservoir, operations, economics & management) through Quora replies as following, noting the dollars he uses are US$:

    "It depends on a number of factors, including quality, location, contract delivery terms, etc.

    In the U.S., the value at the wellhead is about $3.00 per million BTU, which for 1,000 BTU gas is the same as $3.00 per thousand cubic feet.
    One trillion cubic feet would therefore be worth $3 billion at the wellhead (i.e., to the producer), which is kind of nonsensical because it will take a while to deliver that quantity.
    If you’re contracting for delivery of LNG by tanker, you’re probably going to pay a higher price, probably one based on the energy content on a barrel of oil equivalent basis.
    That would be a price closer to $9.00/mcf. The value of a 1 TCF contract delivered over a several year term would be $9 billion to the purchaser.
    The cost of processing, transporting, and liquefying the gas is considerable."

    Very interesting.

  4. #16039
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    Fabulous potential there for sure, Wiremu but i seem to remember that about 9 out of 10 exploratory drills turn out to be dusters, how do we value a 10% chance of success, generally speaking?

  5. #16040
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    Quote Originally Posted by Joshuatree View Post
    Fabulous potential there for sure, Wiremu but i seem to remember that about 9 out of 10 exploratory drills turn out to be dusters, how do we value a 10% chance of success, generally speaking?
    Joshuatree, that's the point. Long term investors in NZOG aren't there for a valuation of a 10% chance of success, however the experts arrive at that figure. They are there to take the risk of success or not, to go the whole way. To be bought out at way less than the break-up value of the company is not why they invest, and is why they will vote no despite the alternative truths in the talking points being used to justify the scheme of arrangement.

  6. #16041
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    Especially those who converted options at $1.50 (from memeory) years ago to grow the company. Only to see that money sit in the bank waiting for an opportunity like Ironbank or similar

  7. #16042
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    Quote Originally Posted by Joshuatree View Post
    .. how do we value a 10% chance of success, generally speaking?
    I suppose one school of thought would be to take the predicted net earnings attributable to NZOG, and multiply it by the probability of success (generally stated as 20% for these types of ventures).

    So for example, if you thought a strike would net NZOG $2B (in today's money) over the well lifespan, and multiplied that by 20% probability of success then you would arrive at a figure of $400M.

    I think this way of thinking is nonsensical though. There either is commercially viable levels of gas down there, or there isn't. It is binary. All or nothing.

    And to echo Wiremu somewhat, successful long-term investors tend to look for opportunities with large upsides and small downsides (Heads I win, Tails I don't lose much). Since NZOG has been selling at a discount to NTA, any downside realised by Ironbark turning out to be a dud is somewhat mitigated for people buying in at the low share price. It would be painful, but not catastrophic. The market may well react negatively in this scenario, however the existing producing assets would still be intact, as well as the majority of the cash.

    So, in summary, I don't try to pretend I can reduce risk by factoring in some kind of probability equation. I just make sure that I only buy in when the company is selling at a price that makes sense, given the opportunities.

  8. #16043
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    Quote Originally Posted by mistaTea View Post
    I suppose one school of thought would be to take the predicted net earnings attributable to NZOG, and multiply it by the probability of success (generally stated as 20% for these types of ventures).

    So for example, if you thought a strike would net NZOG $2B (in today's money) over the well lifespan, and multiplied that by 20% probability of success then you would arrive at a figure of $400M.

    I think this way of thinking is nonsensical though. There either is commercially viable levels of gas down there, or there isn't. It is binary. All or nothing....
    Yes it is binary (kind of, as an oil/gas reservoir can still be viable if the results aren't quite up to expectation, unlike the cost of putting in a tender for a construction job, whereby the outcome truly is binary), but it must be evaluated somehow.

    Off the top of my head it's a calc weighing up the benefit of success x the odds of success verses the cost of failure x the odds of failure. I'll look it up next week sometime. In any case these 4 variables can be heavily skewed one way to suit a buyer, and the other to suit a seller.

  9. #16044
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    Quote Originally Posted by Vaygor1 View Post
    ... but it must be evaluated somehow.

    Off the top of my head it's a calc weighing up the benefit of success x the odds of success verses the cost of failure x the odds of failure. .
    When an exploration company is looking at a range of opportunities to drill, then I think the more complex calculations become more important. Probabilities of success, costs involved, upside potential and opportunity costs will all be weighted and added up as the organisation tries to work out which drill site to go after...where it should focus its capital.

    When you are buying into a listed company that has already (presumably) done these calculations and committed to a drill site...

    Then I think it is a little different. You compare the current market capitalisation of the business against existing assets + production, and then make adjustments based on different scenarios. Like:


    • Ironbark comes up dry (WORST CASE SCENARIO). How much $$$ will NZOG have wasted? How much worse off is the balance sheet?
    • Ironbark strikes, but only has 5Tcf of commercially viable gas. How does that change the upside?
    • Ironbark strikes, but only has 10Tcf of commercially viable gas. How does that change the upside?
    • Ironbark strikes, and does have 15Tcf of commercially viable gas. BEST CASE SCENARIO! JACKPOT!!


    When you run these types of scenarios, and contrast it against the share price you can make a value judgement as to whether or not it makes sense to buy into the company.

    In fact, I steer clear of calculations that aim to provide precision/certainty. In my experience, they are usually precise alright - precisely wrong
    Last edited by mistaTea; 19-07-2019 at 01:32 PM.

  10. #16045
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    Default Ironbark valuation=$10 per nzog share?

    Quote Originally Posted by Wiremu View Post
    mistaTea, your comment "given the massive (many billions of dollars) upside potential" for Ironbank I thought I would try and find some measure of that upside.

    On April 11 2019 Cue Energy included this in a press release: “This is an exciting time for Cue. Shareholders now have the opportunity to participate in a fully-funded well with a 21.5 percent participating interest. This is a 15tcf prospect, 50 kilometers from existing LNG infrastructure. “It will be company-changing if the well is successful.” Matthew Boyall said.

    Presumably tcf means trillion cubic feet. So what is one trillion cubic feet of gas worth?

    Steve Maley (Steve Maley, 40+ years of reservoir, operations, economics & management) through Quora replies as following, noting the dollars he uses are US$:

    "It depends on a number of factors, including quality, location, contract delivery terms, etc.

    In the U.S., the value at the wellhead is about $3.00 per million BTU, which for 1,000 BTU gas is the same as $3.00 per thousand cubic feet.
    One trillion cubic feet would therefore be worth $3 billion at the wellhead (i.e., to the producer), which is kind of nonsensical because it will take a while to deliver that quantity.
    If you’re contracting for delivery of LNG by tanker, you’re probably going to pay a higher price, probably one based on the energy content on a barrel of oil equivalent basis.
    That would be a price closer to $9.00/mcf. The value of a 1 TCF contract delivered over a several year term would be $9 billion to the purchaser.
    The cost of processing, transporting, and liquefying the gas is considerable."

    Very interesting.
    Thanks so much for that pricing.
    A quick crude valuation counting NZO share of CUE is a success equals $100 per share of gas over a period of time.
    Using a chance of success at 1 in 5 equals $20 a share
    Then discount for drilling and development,running expenses etc and maybe $10 a share

  11. #16046
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    Interesting comments here the last few days. Nonsensical and probabilities thrown about. The probabilities are sure nonsensical.
    If there is a 1 in 8 chance of success then NZO next drill [ironbank] had better come in as we have used up our quota of dry wells. Now as everyone knows that is nonsensical as a fair coin can be heads or tails as long as it like and the average is still the same over a long enought throwing. What we need to keep clear is that we oilers drill because we always hope for that big one.

    Anyone remember long enough back to the KUPE drilling soon after NZO was floated. The SP rocked up but later came down as it was thought the figures were too optimistic. Fast forward about two decades to the discovery and the size of the well was again near the first guess. We will never probably know the final figure as some idiot [ZETA] sold us out. Anyways why I am bring this up is because in trying to assess the probabilities of success we need to remember that figures can be shifted around to suit making any probability nonsensical.
    I think we should keep nonsensical not too far from our vocabulary because shortly we will be receiving from NZO Mao Tse Tung little red book of facts. Then we will all know the true meaning of nonsensical.
    digger

  12. #16047
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    Interesting to note the CUE Market Cap is currently sitting at AU$74M (NZ$77M).

    So 50% of 77 = NZ$38.5M. Plus, say, NZ$85M of cold hard cash attributable to NZOG.

    Already, that brings us to a total of NZ$123.5M (about 75c/share). We haven't even sold our 4% in Kupe yet, nor factored in any value of Ironbark yet we are already easily above the $102M implied business value that OGOG have offered.

    This booklet and independent valuation we are about to receive soon is going to need to be pretty damned slick indeed - no matter which way I look at it, I just can't seem to get it through my thick skull.
    Last edited by mistaTea; Today at 10:55 AM.

  13. #16048
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    I'm not a NZO holder, but was interested to see the SofA announcement. The first thing you guys need to get clear is whether OGOG is entitled to vote. If they are, it's what is commonly known as a minority squeeze-out, and if ALL directors vote in favour, the pass rate is 50% not 75%

    I know from experience that this type of underhand tactic is common in jurisdictions such as Bermuda - not sure about NZ, and can't find anything from a brief search, but you guys will be motivated to check it out.

    Don't mean to be the fox in the coop, but it's worth finding out early, whether this is already a fait accompli, or not.

    John Pagani might be able to categorically dismiss my line of thought in a moment for you.........

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