Indeed, Boysy, a minority stake will not achieve those ends and...

Indeed, Boysy, a minority stake will not achieve those ends and hence the ongoing negotiation of a corporate transaction.

Maybe this wasn’t the golf course deal I previously suspected. Back on June 5 their ambition to invest in upstream was reported in the Bangkok Post. I suspect the NDO stake was in mind when these comments were made, although pre Baragatan they were not quite ready for sale.

http://www.bangkokpost.com/business/news/413592/bangchak-sets-b5bn-budget-for-m-as
“SET-listed Bangchak Petroleum (BCP), the majority state-owned oil refiner, has set a budget of 5 billion baht for mergers and acquisitions from this year through 2020.  President Vichien Usanachot said the capital expenditure would be used to expand Bangchak’s business including renewable energy, in Thailand and elsewhere in Asia, by acquiring at least a 20% share in each deal. “At present, we're interested in investing in upstream petroleum exploration and production fields in Thailand and across Asia to secure sources of crude oil to supply our refinery, especially low-sulphur crude that we use mainly to refine petroleum products,” he said.
This year, Bangchak plans to conclude a share acquisition deal in an upstream exploration block, said Mr Vichien. “

So we can see that they are planning an approximately 150m USD budget for M&A between now and 2020. A takeover at this time would account for a very large chunk of their 6 year M&A budget. At the same time it is clear from NDO’s announcement that a corporate transaction is in progress that clearly requires neither an offer to shareholders, nor shareholder approval (at this stage anyway - an approval vote may be required later), so I think we can pretty much rule out a takeover at this time.

This article reveals the strategic intent to be securing low sulphur crude for their refinery. Interestingly, their refining capacity is 120k bbl/day but they report that they are currently running 98k bbl/day apparently due to various equipment maintenance issues.
http://bcp.listedcompany.com/misc/mdna/20140509-bcp-mdna1q2014-en.pdf

In the later article on the acquisition they highlight again the producing and development assets.

http://www.bangkokpost.com/business/news/423486/bangchak-buys-into-foreign-explorer
“The advantage of Nido is that the company already has petroleum blocks in operation as well as others in development and additional potential locations," said Mr Vichien. "That translates into growth potential for our company in terms of revenue contribution and prospects.”

There are many things that could be at play in a corporate transaction but with their stake sitting just under the 20% TO trigger, further equity in NDO is not likely to be amongst them.  

It seems pretty clear to me that they will be looking for physical oil and development prospects. Will we see an offtake arrangement tied to a funding deal for WLA?

Maybe they will take a direct stake in WLA - a little from NDO, a little from RMA and Pitkin with some funding and offtake deal thrown in for good measure. Perhaps something similar could happen at SC54A in due course - I am sure there are a few JV partners that wouldn’t mind being undburdened.  

In terms of assets I don’t see any asset they have got that we would want but maybe at some stage they would be a broker deal for NDO to buy in to something , or vice versa.

I suspect we will find that the transaction has multiple elements but I would be surprised if it didn’t include an offtake agreement and funding in some form to kick start development of WLA and maybe in SC54A.

My one fear - the 20% cap doesn’t necessarily rule out a convertible notes funding deal but I think PB would realise he would be pilloried if we were to be further diluted in an environment where a straightforward debt deal is possible…

Overall it seems very positive – BCP look like they have bought in for the long haul and I would be surprised if they didn’t add to their stake under the creep provisions whenever the sp is attractive to them… I think we have a new support level well north of last weeks sp.