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Belek, sorry I haven't been keeping up with the board for a while. I haven't talked to Jessie in a couple of months. I've put COGLF in the back of my mind and hope they sell or do something eventually. Maybe I'll try to call him tomorrow and see if anything is up.
How far is the NEGI pipeline from our property?
What was the office like? I didn't get a chance to go to it when I went to Calgary for the annual meeting. I know the area that it is in and it is not the "posh" part of Calgary.
Jesse and Bill mentioned that they shared an office at a pretty reasonable rent. The stock price hasn't done much but I find that the managements actions and behavior is consistent with good stalwarts of the company.
you and me both. my cost basis is about 31 cents and I've been in this thing for almost 4 years now so even a 10 banger gets me a mediocre return.
I think they are communicating most of the relevant information but they sure aren't "promoting" the business.
I think part of this goes back to the fact that they are the insiders and are more confident with what the true value of the company is and aren't as concerned about the day to day price.
I think the company has some financing hurdles to overcome but as I mentioned before I don't sense them to be dire.
Jesse also mentioned that in his former life of arranging financing for Jr. Oil Companies that he had placed $4B in financing to about 40 projects over a 4 year period and that the financing in the next post 4 years only about 4-500M was placed in the same segment.
So it looks like patience maybe the winning formula for this one:)
Not directly, there were only 3 of us besides the management (Bill Sr. & Jr. & Jesse), legal and KPMG.
I brought up the point that I felt that there are two classes of shareholders, those that are on the inside such as the management team and the rest of us. I mentioned that this probably allows them to have more confidence in the true value of the company and to be able to ignore the daily OTC quotation. This is pretty much just a characteristic of all companies and that is why there is the term "insider."
Jesse admitted that he looks at the price daily and that he can't help himself even though he knows it doesn't truly reflect the company's value. He said that ideally you have a situation of high value and liquidity meaning publicly traded at true value. The next best thing would be to have high value and poor liquidity meaning de-listing the company and taking it private. They have to keep it listed to at least October 2015 per the merger agreement.
Jesse mentioned that it is very difficult to get funding at anything close to the stock's NAV when the trading price is so much lower.
Some notes from the annual meeting in Calgary:
Central has not yet started fracking on the two wells adjoining our property. No reserves are attributed to ATP582 but any success by Central/Total would bring about a major change in value. Jessie mentioned that the previous farm in agreements implied a value of about $37 per acre with ATP582 having about 1 million out of the total 5 million acres fitting the profile for an implied value of $37M IF the same agreement could be reached.
Jessie confirmed that they were at the 11th hour in discussions with Total to reach a farm out agreement. I believe he mentioned that the discussions ended when Total reached an agreement with Central so my assumption is that Total wanted one deal and went with whoever they reached an agreement with first.
The Queensland government has introduced the ability to transfer work commitments between properties. For example, if Total/Central don’t find anything in the two wells next to us it would be a waste of money for Chelsea to continue with their $11M work commitment for 582. The transferability would allow Chelsea to transfer the $11M work commitment over to their assets in the Surratt Basin and move those proven reserves into production.
Need about 7 million to pay off 3M loan, 800k a/p and move forward with work commitments. Mauri Delbaere, the Australian country manager, holds the 3M loan and I believe is Chelsea’s largest shareholder with approximately 9 million shares.
Projected royalty income of about 200k for 2015 which is down significantly from $362k in 2014.
William Petrie and Jesse Meidl confirmed that the majority of their shares were purchased through the private placement at a cost of 35 cents per share.
Jesse mentioned that they pay about $3,000 per month rent for an office that both he and Willam Petrie share. I didn’t go to the office but I was by the general area and it is not in the posh/expensive portion of Calgary. I’m pretty well convinced that the management is spending and safeguarding the assets of the company as if they were their own personal assets. This is further supported by them not taking salaries, limited expenditures and not placing equity offers below their 35 cent buy in.
On a final note, I was impressed with both William Petrie and Jesse Meidl’s knowledge of the industry and their frankness about Chelsea’s operations. The formal meeting took a little over 6 minutes and they stayed for a further hour and a half to answer all questions. Their appointment of KPMG and use of Torys LLP further convinces me that they are conducting this business in a serious and professional manner.
Screw em then!
I'm jammed at work after being gone all week but I'll post some bullets from the meeting a bit later today.
Did I mention the pretty receptionist at the law firm where the meeting was held?
I'll go through my notes later and post the major bullet points.
One overall impression was that there are some hurdles to overcome with getting financing for various work commitments but none dire.
I'm convinced that the management bought in at .35 a share and are convinced of a much higher intrinsic value. Diluting the share base at anything lower is totally off the table also.
Yesterday's meeting
I'll post more detail in a couple hours when I get to the airport.
Overall I was quite happy with the meeting. The formal meeting took about 6 minutes but mr Petrie (pardon my spelling) sr and Jessie discussed and answered questions about Chelsea for about an hour and a half.
Greetings from cloudy Calgary. 90 minutes away from annual meeting. I stopped at the law office where the meeting is going to held and the receptionist didn't see it on the schedule but we will see for real in a bit. At least the office was nice and the receptionist was pretty!
I still think the bulk of the shares were all pre-arranged. What were the bulk of the shares traded at .046 then "down" to .045 and all pretty much within seconds of each other.
If you really wanted to get out of a 100,000 share position would you do it the way it was done yesterday?
For myself, I'm not going to consider any of these trades for determining the true market value of Chelsea. We need about 600k shares to make a 1% of total volume day and I'm waiting to see couple of those in real trades before I guess at the real value.
Well we have a couple of upcoming catalyst on this one.
1. The rainy season has just ended and Central is supposed to be completing their exploratory fracking of one of their wells right next to our property.
2. Chelsea's financing arrangement was imminent (couple of weeks away) according to Jessie. The last private offering that the current management participated in was .35 per share. This price was exactly equal to the valuation of I believe the "probable" or first level/most likely of gas/oil reserves.
I like the current activity but I'm not going to get to optimistic until I see a 1% day or 500k plus shares traded.
This is how I feel about the MMs
That sounds right from what I remember also.
What I found interesting was that Jessie didn't view it as a major asset but it was still worth $870k. $870k is a fair amount for a company that the market puts at only 4-5M. So it brings to mind where is the disconnect?
Same here. It did entertain me a while back when they sold some of their "nominal non-core assets" for about $870k. I didn't realize that $870k was nominal for a 4-5M market cap company:)
My read is nothing is going to happen until Central/Total report their progress on the offsetting wells. Until then it is all quiet on the "Eastern" Front literally!
Statoil and Total are both coming to the dinner party, it is just a question of who shows up first and who brings the nicest bottle of wine.
I picked up about 30k of that dump! I wish I could have built my whole position in today's market!
Didn't discuss that acreage much other than they were happy that the royalties were more than budgeted. I mentioned that I felt the basic whole value of the company was based on the outcome of ATP582 and Jessie agreed. I'm an ITME investor so I'm probably a bit biased. I think the other assets are valuable but to me this is pretty much a binary investment. ATP582/Central/Total is commercially viable or it is a bust.
The macro factors of proximity to Asian markets, Australian government support and long term oil prices all provide tail winds but my personal opinion is that it comes down to Central/Total's frac results.
Good point. I used to think of oil as one price per barrel all around the world and then I learned how it varies quite a bit even within the U.S..
This is my bet on how this stock is going to play out.
1) Total/Central are drilling right next to our fence line in the Toko Syncline.
2) They either hit it big or bust it big there.
3) If they hit it big they want to get our geologically similar/better property so they can plan all the required infrastructure at once.
4) Total & Chelsea negotiate a tender price. QED
Another thing Jesse mentioned is that in a previous discussion with Total, Total mentioned that based on what is going on in the Permian Basin that it would probably take 4,000 drilling sites to harvest the area and that Chelsea doesn't have the resources for that.
The other item that shows that the current price is crazy is the warrants that management has outstanding. 5 million shares @ .35 if stock trades above a buck for 10 days.
I stated to Jesse that you guys (the management team) set that bogey all by themselves and that nobody said hey how about $1.20 and he agreed. So I told them if I was setting my own bonus target that I would make it an easy one or I was a complete idiot. So either the assets justify the $1 or we have the stupidest management team on earth. He laughed at that one and said yes the assets justify a buck all day long. Looking at the team's resumes I don't think we have a bunch of idiots.
Of course this price makes no sense and that is why I loaded up with a bunch at .086 Wed - Fri like Cougar.
I talked to Jesse for a half hour on Friday and he thinks there will be movement in about 6 months after Central/Total frac a well or two next to our property. He also commented that we(Chelsea) are 3 wells ahead of Central/Total and those are the 3 that were drilled in the 80s. He said that Central used a lot of the data from those 3 wells to get Total interested which again goes to the geological similarities between our property and Central's adjacent area.
Evidently the Miraca well (I'm sure I'm not spelling it correctly) was drilled to 10,000 feet around 1980 and had gas shows almost all the way down but not commercially enough volume which is the definitive "tight" gas well that fracking takes care of now.
I keep going back to management setting their own compensation target at $1 per share for 10 consecutive days. Either they know something or we have the biggest set of idiots for management that the oil industry has ever seen:)
totally orchestrated trades and I don't think it was a coincidence that it was done when you didn't have a floor bid...
just look at the odd prices /lots, complete all or nothing hand off trades
Seems to me that someone is trying to shake the tree to get some cheap apples. Maybe they can help you get your 1% cheaper.
I just heard that Australia is planning on mimicking Chavez' oil nationalization of 2007. SELL! SELL! SELL! Cats and dogs living together!
Hopefully the mgt team gets to exercise their warrants by the end of January!
Who knows what games are being played. It seems like a pretty large buy block to just show up and get completely filled with two large blocks within minutes of each other. Reminds me of the two roommates tossing the rent check back and forth to each other and feeling twice as rich.
I have a tough time believing that the company as a whole is now only worth $5.1M with only considering the investments by the 582 neighbors and ignoring the whole rest of the portfolio.
The management team bought their approx 30% of the company with the private offering @ .35/share for a implied valuation of $22.4M. They then set 5M warrant performance targets for themselves at $1/share for an implied valuation of $78.96M.
Who has the most knowledge of the "true" value of Chelsea's assets?
Definitely makes me feel better after seeing the couple of high volume days at the blow out prices. He said that he was a bit disappointed in the shares trading that low as they know of individuals that would have liked a large block a much higher prices than the single digits. He confirmed that the mgt team got the majority of their shares when the private placement @ .35 a share was done.
Jeff, based on your size descriptions I would say my current t-shirt size is somewhere between large and XL. I've been adding/holding on to this position over the last couple of years. I'm either going to be a very happy man when this thing hits or I'm going to be crying in some beers!
EOM7, didn't hear much on the funding. One of the positives that he referred to regarding the new government rules was that they could better negotiate their terms from what I recall. He was very positive on the new rules and he explained that the PEL process was much more straight forward now. Also there was something I did't quite get that related to how much acreage they were given to use for the PEL. I believe it was an increase over previous amounts giving the operator more leeway in how they can carry out the production.
Jesse returned my call yesterday from a couple of weeks ago(something about them moving offices and phone systems).
Anyways, I asked him about the goal setting of $1 share price for 10 days to trigger executive warrants. I mentioned that if I was setting my own goals that I would definitely make them chip shots and he replied that he felt that the company's assets make the goal very realistic.
Jesse also mentioned that the non-successful original horizontal drilling program by PetroFrontier may have significantly set back investor perception of Chelsea. He also felt that Central/Total's efforts/success are a much better indicator for Chelsea as they are very similar from a geologic point of view.
At today's close the market cap is about $6m. I have a tough time believing that the company's assets are only worth $6m given the investment taking place on the adjoining properties.
I also go back to one of my earlier comments on the warrants that the mgt team basically issued to themselves that go live when the stock trades for >=$1 for 10 days. These guys as a group own about 30% of the company and have a lot more information than we do. I still have a tough time believing that they didn't feel a dollar was a chip shot.
I have not talked to Jesse since February and he thought then that financing was going to take place within a couple of months. My biggest concern has been that they "have" to raise $11m to cover their work requirements over the next two years and that they might have to take really crappy terms to get the money. Either massive share dilution or asset liens or something worse. The new government relaxation seems to mitigate this concern quite a bit for me anyways.
That being said, I'm also a bit disappointed with the lack of progress but I'm hoping it is due more to the mgt team waiting for the right pitch.
What I meant by the assets being the same is that they still have the exploration rights to the same properties now that they had when the merger first took place.
The up and down price of this stock reminds me of Graham's Mr. Market analysis from the Intelligent Investor:
"Imagine that in some private business you own a small share that cost you $1,000. One of your partners, named Mr. Market, is very obliging indeed. Every day he tells you what he thinks your interest is worth and furthermore offers either to buy you out or to sell you an additional interest on that basis. Sometimes his idea of value appears plausible and justified by business developments and prospects as you know them. Often, on the other hand, Mr. Market lets his enthusiasm or his fears run away with him, and the value he proposes seems to you a little short of silly."
Too me, either Chelsea has oil and gas that is economically viable or they do not. I'm also not aware of "daily" updates on this status that should cause the value/share price of the company to logically take such wild swings that we have recently seen.
Just my two+ cents,
Casper :)
Has anyone talked to Jesse lately? I've left him a couple of messages over the last week and I haven't gotten a reply from him. Over the last year I've talked to him a couple of times and always got a quick response from him.
The mgt team has 5m of performance warrants @ .25 ending Jan 2015 if stock price is over $1 for 10 days. From what I can tell they pretty much set this target for themselves. If I was setting bonus targets for myself I would make sure I could easily hit it out of the park.
The last time I talked to Jesse in February he was intensely working on the financing arrangement for the 11m they needed for their work commitments over the next two years. The recent relaxation of rules by the Australian government would seem to reduce the urgency of the financing. I'm not sure the reduction in urgency is a good or bad thing.
Long time listener, first time caller/poster!
I'm a somewhat old ITME shareholder and from what I can tell the company's assets are still the same as they have always been.
Yesterday's volume (600k+) was a big day for Chelsea but still was only about 1% of total shares which is a typical day for Ford everyday.
I'm still a bit concerned with the price drop but I suspect from the odd number lots and prices that NITE or an institution might be doing some manipulation.
Just a few of my thoughts/guesses...