I received a call yesterday from Andrew Dimsey in response to my email. We had quite a long chat regarding recent developments. I would urge anyone with questions to contact him, he is very happy to talk about the company, where they are heading and PNG oil and gas generally.
The following is what I took from the conversation....
Since Heritage farmed in to 437 there has been a shift in strategy and I think it might be fair to say that CMT has been somewhat marginalised. CMT's share of the recent seismic program was $2m, I got the impression that CMT were not convinced of the targets prospectivity. A well here would have cost approx. $50m, Cotts share would have been $10m. As Sam pointed out, to raise this kind of money would be horrendously dilutive at any where near current prices and a slap in the face to l/t shareholders. Andrew stated that they didn't see this as an option that was fair to shareholders. It was said that they were in talks with a potential buyer(s) of their stake but the other party withdrew (possibly after getting a look at the seismic??). IMO CMT did well to avoid the cost of the seismic and I think the cost/benefit of this future well probably didn't stack up for Cott.
It would actually be cheaper to drill a hole into Pandora to test one of the targets there than drill at 437.
Andrew certainly see's the commercialisation of Pandora as the main game. IMO the choice became a simple one, burn money on risky assets on the mainland or preserve capital and concentrate on commercialisation of an already proven gas resource. Sure it may not be as exciting but I think it will pay off for shareholders.
OSH and others (Santos) are hungry for gas and indeed will need to find a lot more of it to fulfil their ambitions. On the mainland many of the explorers are tight for $$$ and anyone tied up with Talisman is just plain tied up
We discussed the payment to IES. CMT is in discussions with several "majors" regarding the development of Pandora. The concept put forward by Wison is very feasible but somewhat untested, that is to say there is no operating model yet up and running in the field. The majors are slow moving cautious animals. The relationship with IES is a critical one and the payment serves 2 purposes...1. It sends a message of confidence in Pandora to shareholders, the market and potential future partners and 2. It is an act of good faith toward IES who have the ability to bring partners to the Pandora project.
I got the sense that having dodged the $2m seismic costs CMT management decided that the $1.7m payment to IES was going to be the most productive deployment of capital in the interests of accelerating the commercialisation of Pandora. I certainly feel comfortable that the correct decisions have been made in shareholders best interests.
Andrew will be making a presentation at the AGM and I think anyone able to attend should do so. Andrew's knowledge of the PNG scene is extensive and imo shareholders will learn a lot about the who's who of PNG oil and gas and what likely scenarios may play out.
