Hugely disappointing news for 88E, Disappointing partially because the recent see-saw ride did seemingly give grounds for measured optimism. Disappointing because Winx was a potential 'means' to a much bigger 'end', and while the much bigger 'end' is still there, we now have one less 'means' to achieving it,.Disappointing because a 'maiden discovery' was important for retail sentiment in the company and management, particularly after the events of 2017 and 2018. And of course disappointing because a win is always better than a loss. But context, as ever, is important
However, harsh as it sounds, and perhaps glib sounding, after the fact - Winx#1 performed to the expectations (initially) set by the company. It was 75% chance of failure. Of course, while we all tacitly acknowledge the risk, most of us are typically conditioned to focus disproportionately on the reward. Until we get that reality check. Some have always understood and accepted the risks, while others have only truly appreciated these risks with the passage of time and the unfolding of events. Of course, many have never found the risk worth investing in. Each of us need to only answer to ourselves as to whether our assessment of risk and reward at various points on the 88E journey, matched reality. And in turn assess if it matched our true inner risk tolerances. And then act accordingly. I am certainly revisiting my rationale, appetite and tolerances.
That decision of course, is better served by not just getting a better appreciation of the actual risks, and one's genuine tolerance for it....but also an updated understanding of the potential rewards. And in that sense, the potential reward size is materially unchanged by the Winx result.
The big potential value for 88E remains. And it almost entirely resides in the Icewine acreage. Both conventional and unconventional. However, speaking only for myself....the time will come to reassess the risk/reward scenario's associated with this, given where we now stand. That big potential 'suffers' from the risk and/or cost of funding further exploration activity, and also from the risk of commercially viable discovery. The two more obvious sources of funding are either diluting the bottom-line by significant additional Capital Raise(s), or diluting the top-line by farming out a likely majority Working Interest to a deep pocketed partner. IMO, it is likely that both will be necessary prior to another drilling event. Actually, both have always been necessary as ongoing sources of funds, from day 1 of IW being initially conceived. Dilutionary funding of some sort has always been an integral part of the fabled 'creaming the curve' narrative. However, lack of sufficient subterranean success, (in terms of a maiden discovery) with the dollars raised so far has made that narrative now feel more distant, at best, or increasingly implausible at worst. IMO.
Meanwhile, speculative sentiment will take a beating. And till we have a pre-discovery fundamental lever such as FO, it will continue to take one, IMO. Which makes any necessary CR more dilutionary that it could be under more positive sentiment settings. An FO announcement within days would be extremely welcome. A good FO announcement even more so. Inevitable further CR or two prior to next underground activity. It will be like refueling the tank, while taking on more passengers. So be it.
Consolidation unlikely to be on the near term agenda unless no FO and only CR as a funding route. In that case, there may well be a restructuring hiatus and consolidation and then a significant CR. If CR at basement prices or post consolidation, is deemed preferable to whatever FO deal was rejected (in that event), then confidence in getting geological success going alone would be ....ahhh...muted.
If we get a good FO then subject to terms and timeframes,,,,the main game is still in play. Even then, some CR more likely than not.
I await FO news, terms and associated timelines for activity, prior to concluding my re-visitation of personal strategy here. I hope that the encouragement that DW has previously expressed about the interest exhibited by potential farmout partners is proven more concrete than the encouragement read from the preliminary Winx results.
All IMO and GLTA. We need it.
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