Vets of TISDZ - please review and give me your thoughts
I am a long time FCX shareholder and ventured into MMR prior to buyout. I sold my shares so I did not get the GULTA spin off shares. I have been drawn towards the TISDZ shares due to lifetime royalty and (maybe)cheap price. I am not convinced at all on the UD, but the potential could be huge and FCX is now highly incented to get production.
Help me understand the following:
TISDZ - now only has interests in Blackbeard East and West. (Calico Jack - ?, Lafitte & Morgan expired). The wells drilled thus far under the TISDZ royalty are:
Blackbeard West 1 (33,000 feet as of 10/08). This well is abandoned as MMR deciding whether to drill deeper (really?!) or test existing zones. Why would you not test the existing zones? Spending more money to go deeper doesn't seem to make sense when you have 220 feet of potential pay zone that needs further evaluation. Due to age of well, current abandonment, and lack of production thus far I have very little hopes.
Blackbeard West 2 (Ship Shoal 188 - 25,000 feet as of 1/13). Initial completion efforts underway with conventional equipment. Maybe some hope on this due to multiple zones and recent drilling activity?
Blackbeard East (South Timbalier 144 - 33,000 fee in 1/12). MMR got approval to complete and test. So again maybe a chance.
There are no other wells in progress correct? In addition TISDZ will have to repay administrative costs, but that is limited to a small amount per year.
I would put ultimate probablity of production coming from these interests at 50/50 (and there is no telling how long that will take), but it is very hard to quantify the cash flow to the trust. Any ideas?
Thanks - this is a good board and this is an interesting opportunity, I just want to clearly be able to see the upside even if the probability of success is slim.
Despite being wrong for so long , I will try. Quite the surprise that FCX let go the Lafitte well when on the S-1 dated June 3rd , it was listed as a discovery at a cost of + $ 198 million . 15 days after the merger , FCX lets go of a $ 200 million prospect !! WOW .
TISDZ left with Blackbeard East ( $ 311 million invested ) & Blackbeard West ( $ 31 million in drilling cost) & BBW#2 ( $ 120 million invested ) . Previous presentations by MMR estimated gross reserves @ 30 TCF for this area. TISDZ has a 1.25% ORRI. Interestingly , TISDZ's ORRI interest should be much more likely given FCX's ability to provide the financing. Until one of these wells produces , the value of the ORRI cannot be estimated . It can be guessed at because one should expect these properties to be developed. If you do that calculation ( that the 30 TCF will be produced ) ,there is no doubt that TISDZ is attractive.
One also has to conclude that no one was willing to buy the Lafitte position. The TISDZ leases now represent 3 of GULTU's remaining 18 ultra deep prospects. GULTU has a $ 460 million market cap as compared to TISDZ's $ 18 million . Did not need any more TISDZ but was a buyer today.
The dropping of the Lafitte lease beggars belief, given what had been said abut it, especially the Chris R sands. Reading between the lines, I smell a rat here:
(a) In June 2013 MMR requested from the Bureau of Safety and Environmental Enforcement of the United States Department of the Interior (BSEE) that its pending request for the issuance of a Suspension of Production (SOP) lease extension for the Lafitte unit properties be returned without action, which effectively relinquished MMR's lease rights to the Lafitte unit. In the event on or before December 5, 2017, MMR acquires one or more leasehold interests covering the same area and blocks covered by the terminated leases, such newly acquired leasehold interests shall become subject interests.