The tiny Irish stock on the brink of landing 'the first' post-sanction oil deal in Iraq. Ref 'Fleet Street Letter' 12-04-04..

Hi all.

Just got back from christmas shopping in Norwich. What Fun I had!!

Has anyone else seen anything in the press today? Maybe the sunday papers will carry some news. Theres not alot else anyone can say on this till an RNS. This is worse tahn christmas shopping!.

wilbs

wilbs,
went there the other day, b*****d to park!!

dexter

Its a nightmare. I went on train, its easier.It made a change from having PET on my mind all day.

wilbs

wilbs appears to be having a conversation with himself! Hope it doesn't distract from responses to my post 1444! wilbs is so gob-smacked with his shopping expedition, he hasn't even read the post re the Irish Independent article!

Sorry, wilbs! Realised (Monday) that you did the Irish Independent post!

Eric

The way I see it is that the rns was released because they are sick of being contacted by shareholders asking whats happening. So there we have it, what they have said is "We don't know either" so please stop pestering us.(Includes myself) Bit surprised about the 5year mentioned by the Irish paper so the odds in our favour may have increased as I can't see for one minute a Major accepting these terms. Was it not 23 year contracts for exploration and recent discussions have been of reducing these to 12/13 yr? Can only see 1 contract coming from the pot but then again 12/13 yr for block 6. Has to be extra shares hitting the market via institutions (cheapest way.) As far as Subba+Luhais, can't see it coming off, as yes, it is the largest and estimated cost of $300m but not only that, a service contract was expected (earlier posts) to be signed only 2 yr ago by a joint venture and I can't see these not retendering. The important thing is to get any kind of contract and put a floor below these shares. Why people talk about Halliburton being a possible partner of Pet I don't no. This is a company guilty of fraud and charged for work never done, infact did they ever tender for contracts.z

Morning all! Just a thought ill share. At what point does anyone out there feel/know that institutes will get involved in PET? At this stage its small fry to the instistutes, who, look at fundementals etc, but surely they look for unique opportunities, like us!!!!!!!

Any thoughts guys

Gentle downward drift ahead for the next couple of weeks. Thereafter excitement starting to build again. That's my take on the RNS anyway.IMO

MOSCOW (AFX) - Iraqi interim prime minister Iyad Allawi has arrived in Moscow for the first time since taking office six months ago, to take part in talks focused on future economic prospects.

However, he will also aim to soothe tensions with Russia over the latter's opposition to the US-led war in Iraq.

US-backed Allawi will hold a meeting with President Vladimir Putin at some point before his departure on Wednesday, when both sides will discuss oil and debt.

Officials in Moscow said Russia will try to win back lucrative oil contracts it signed under Saddam Hussein's regime, in exchange for Moscow's promise to write off 90 pct of Iraq's 8 bln usd Soviet era debt.

Iraq tore up most of the oil deals amid confusion over the approaching war and despite furious protests from such Russian oil giants as LUKoil.

One reason for Russia's vigorous opposition to the war was its fear of losing its oil interests, observers said..

'Both sides are discussing the question of expanding Russia's involvement in post-crisis Iraq', said foreign ministry spokesman Alexander Yakovenko.

He however added that this involvement must 'include previously signed agreements', in a clear reference to the oil deals.

LUKoil, Russia's second-largest producer, had major interests in Iraq under Saddam and is now holding talks with the current oil ministry in Baghdad for authorization to extract Iraqi oil.

The company is trying to win back the Iraqi market through US major ConocoPhillips Inc, which it sold a 10 pct stake earlier this year under an agreement that the company will push the Russians' interests in the Iraqi oil industry.

LUKoil in 1997 signed a contract worth several billion dollars to develop Iraq's vast West Qurna 2 field.

But, it was expelled from the country before the start of the war in March 2003.

Iraq's ambassador to Moscow, Abdel Mustafa, told ITAR-TASS news agency that 'Russian companies have great experience in Iraq, and many of them are interested in returning to the country.'

'Iraq thinks very highly of Russia's decision to write off 90 percent' of the country's debt, Mustafa said.

'There are no problems between our two countries', he added.

However, he gave no hint of any specific agreements and said only that LUKoil will invite 150 Iraqis to Russia for training in the oil industry.

Allawi's visit comes as Iraqi and US officials continue to insist that elections in Iraqi, scheduled for Jan 30, will go ahead despite a sharp upsurge in violence which has left 90 people dead in the past three days.

However, the UN continues to question the feasibility of this timetable.

Putin said last week in India that continuing violence in Iraq 'will certainly call into question the chances of holding fair and democratic elections in Iraq', but other Russian officials have indicated that Moscow is resigned to vote going ahead as scheduled.

'The upcoming elections are a very vital step' in stabilising the situation in Iraq, Foreign Minister Sergei Lavrov said ahead of Allawi's visit, as quoted by ITAR-TASS news agency.

Lakhdar Brahimi -- a special advisor to UN Secretary General Kofi Annan and, until recently, UN envoy in Iraq -- said in an interview published on Saturday in the Dutch daily, NRC Handelsblad, that the January vote can only take place 'if first and foremost, security improves.'

ingrid.smith@afxnews.com

zak-cb/mb/ims/

gra1969. there are so few shares institutions would be in danger of owning the company because they only deal in millions+ what does anyone else think

I dont think institutions would be interested in PET yet!

They dont do outright gambling with their funds.

This is a gamble make no mistake, however good the odds may seem.

All imho etc.

And yes, I do realise buying stock is a gamble what ever you buy!

Some have better odds.

If PET do win the contracts(s), then they may cast an eye towards this, but till then.............

Tokyo, dexter

Surprised that there hasn't been interest expressed in the Irish Independent article, nor my analysis from it. The financial nature of the potential contracts appears to be realistic and fresh news. Not surprising that a Dublin newspaper should break the story. The really big plus point to me is that it answers the question as to why the Iraqi Governement should take the risk (possibly of bad publicity rather than risk of failure) of letting the contracts to such a relatively small player as PET. The answer is that PET are prepared to undertake the contracts on a cost plus basis. They need a smaller player who will give this top priority and effectively act in a front role to bring in the majors where they have specific expertise, such as Haliburton and Caterpillar. Is this how you read it?

Eric

Good Morning Pet Lovers!

On Friday we had an rns telling us the 2 tenders awaiting decisions and the 3r one ready and deadline for submission is the 15 december!

Look at it this way: Would you encourage a company to bid for the 2nd tender if you weren't happy with 1st one, conidering that this involves your time and money! Remember pet received an urgent email to discuss urgently the 2nd Tender. Once again, would you still encourage them and waste you time and money again to tender for the 3rd tender, if you weren't happy with the previous 2 or at least one of the two?

Further, would Pet make last Friday announcement raising investors expectation, only to few days later (announcement has to be soon)say sorry we've got it wrong! And if you were the iraqis would you be happy with and trust such a company who may appear to be misleading their investors! Do you think Pet is not aware of all the above?

In my strongest belief todate, Pet has been given the nod, hence Friday rns and the next one to follow very soon indeed!

Good luck to all pet Lovers!

Hemacik16, well put!!!!! I look forward to all PET holders rejoicing their good fortune.

Morning Eric

sorry I haven't got back to you, but I'm really busy at the moment, probably until the end of the year, as I have to put together a business plan for next year.

Anyway on to PET, I agree 100% with the Irish article, at first I thought the delay may have something to do with the contracts being changed to risk sharing, but from what I've found out, it does appear that any risk sharing or profit sharing agreements will not be awarded until after the elections, and then even after those it is debatable.

PET look set to be awarded a cash contract if indeed they are awarded the contract (my gut stills says "yes", but we await that RNS to confirm it) The PET RNS last week told us nothing we didn't already know, but atleast confirmed that everything was in and they were just waiting on the MOO to make a decision, we've seen in the press that the Iraqi have said by the end of the year, so December will be the month, when well there you have the 64 million dollar question, I'm going for later in the month. I've have two big plays at the moment NBR & PET and I feel NBR will come good before PET.

With a cash contract we will of course have to look at the terms, but you all know that DH would have negiogated some that had a significant risk/reward % for PET. I think again my estimate of 3 pounds a share is not too far out there.

anyway back to work, speak to you guys later

Tokyo

Morning Eric and Kyoto!,
Eric, sorry i have`nt replied to your comments on the Unison article, i`ve not looked on the pc much the last couple of days, any chance you could post it again? to save me looking back.
thanks,
Dexter

dexter

Post was as follows. The article rang true; if any journalist was going to dig up the nature of the deal then likely to be a Dublin paper.

"An interesting point from the Irish Independent article concerns the nature of the contract, i.e. cost plus profit margin. This doesn't seem to tie in with the idea of risk sharing which I believe has arisen late in the day. $250M doesn't sound an awful lot for setting up a field. If we say 135M (obviously in euros I would have thought) and 15% profit margin we have 20K gross profit much of which should come through to the bottom line. There would need to be a fund-raising exercise. If, which seems unlikely, all the money is raised by PET, then existing holdings will be diluted. Following the SEY (and YOO) models this could well be a placing but at a price which takes the assured revenue into account. The calculation must be an iterative process. But lets guess a result and say the price goes to 3, that would be a cap. of 175K. Raise 135K (development cost only) by placing 50M shares at 2.70. Total shares = 108M. Suppose first year completes development and operations goes into second year. Then revenue per share in year 1 is about 145p; gross profit is about 22p per share; pbt, say, is 20p per share; pe ratio is 15. Certainly not too high! Thus the assumption of a share price of 3 is reasonable and may be over-cautious. That is for one field; don't see why 2 fields shouldn't double the result.

The oil specialists will, no doubt, have much more sophisticated ways of doing the sums. One underlying assumption is that the operational years revenue and cost profile are similar; the actual oil revenue going to the Iraqi government. Another assumption is that the other players are not sharing the risk but rather providing services at cost.

I remember Tokyo looking for a bid success price of 3 which is supported by this calculation. Some previous workings seemed to assume that the oil revenues would flow through PET; this model seems more likely. This is just back of the envelope stuff, but how do others see it? Have these Irish Independent figures been seen before? Would they quote them if they didn't have substantiation? The fact that actual figures are quoted increases my own confidence level. Probability up from 75% to 80%! TUT?"

Eric

Eric,
Thanks for that, very good post, totally agree.
JT said in his chairmans statement,June 2003, quote below.

"Petrel has been run on a shoestring for the past three years yet even the lowest level of operations cost money. It costs in excess of 100,000 stg. a year to maintain an AIM listed company. In recent years small placings mainly with the directors and friends has funded ongoing activities. In the Spring of 2003 we agreed a small placing with a City institution which raised 136,000 stg. Since then our price has quadrupled. We will continue a policy of small placements to minimize dilution UNTIL we need to raise money for DEVELOPEMENT AND/OR EXPLORATION"

I don`t see how PET with only 60 million shares could take on exploration and developement without placing several million shares, because, like you say the funding of $250m from japan would`nt cover the cost of more than one contract at the very most. I read somewhere that the total cost for the 3 tenders would be something like $650m.

If PET were to get 2 contracts and block 6, someone on the other board said, which i think is true, that as things stand there are enough shares about for the big institutions to get involved.

Now as for block 6, another quote from JT`s statement.


Petrel entered Iraq seeking a concession to develop and/or refurbish existing oil fields in Iraq. In 1999 we submitted a detailed tender to refurbish the Subba/Luhais oil fields in the Basra area. The feasibility study envisaged the following:

Capital cost $355m.

Daily output of 180,000 bbls rising to 240,000.

27-36 month refurbishment period.

The tender was well received and over the following months a detailed evaluation took place between the Iraqi Oil Ministry staff and Petrel staff and consultants.

As a small junior oil venture Petrel lacked a track record. The Oil Ministry suggested that we cut our teeth on an exploration block and indicated that we should apply for Block 6 a choice block in the Western Desert which lies between Baghdad and Jordan. Only 9 blocks in the area were offered for tender. Outstanding exploration areas in the North and South were not offered.

Block 6 is a 10,000 sq kilometre block about halfway between Baghdad and the Jordanian border. It had some work done in the early 1980s and has pipelines running along the edges of the block.

Over the following two years long and torturous negotiations took place to agree a work programme and then to negotiate commercial and financial terms. In Spring 2001, we signed an agreement with the Oil Ministry. Together with other applicants such as ONGC of India and Petronas of Indonesia we awaited the Proclamation of the Agreement. In December 2002 we were informed that the Proclamation was approved and would be made on December 15th 2002. That is where events remain.

Where are we now? We are open for business in Baghdad. We have presented an interim work programme on Block 6 to the current executives in the Oil Ministry. We have re-affirmed our interest in the development of the Subba and Luhais oil fields. If we get approval we proceed. If we do not we fight. It is as simple as that. We will be flexible not intransigent. I hope and expect that commercial sense prevails and that all realise how we can develop oil projects far quicker than new entrants. It is not as if there is a scarcity of projects. There is oil development work for the next generation. We would like to have a local Iraqi partner as well as the Oil Ministry. We are not averse to taking in an international oil industry partner. The opportunities are so good that to use an old expression half a loaf is better than no bread.

CUT THEIR TEETH ON BLOCK 6!, I bet every oil major in the world would have loved that said to them!.

If,as you suggest, PET were to go to 3 on news(good news!) and they placed shares to have 100m in circulation they would then only have a market cap of 300m.Do you remember when EEN were priced at 2.5p or so, their market cap was about 100m, and they were only producing aprox 1500 bpd!!

I know that was from june 2003, but on the funding front, apart from the Japanese $250m, nothing has changed.

AIMHO,
sorry if it seems disjointed,
regards,
Dexter

Dexter

Thanks for that. I suspect we are homing in on the nature of the deal. I recall mention of the Japanese funding but am not aware of the type of finance -if deferred interest then presumably there are strings, e.g. conversion to equity? It also seems likely that PET would get both northern contracts, given that there must be some economies of scale, particularly in relation to equipment and logistics. So, if you say that the Japanese money funds one field and an equity placement the other, then my figures should stack up and 3 per share would be on the low side. Add in a high probability of Block 6, though probably lower priority time-wise for both Iraq MOO and PET, you get strong support for that price. Political uncertainty is bound to hold things back for a while. But my intention would remain to take profit on one quarter of the holding and run the rest at, effectively, nil cost. Oh, yes, I have moved the probability up to 85%!

Eric

Only 85%!!, i was on that when i first bought in Feb !!

dexter

Come on, then, don't be shy! What's your proablility: (a) of winning contracts regardless of timeframe; (b) contract in December?

Eric