Philip covered a few new items in his presentation in Vancouver, and hopefully we will get more detail as the next couple of months unfold. However, Philip was very upbeat and it looks like things are progressing on all fronts.
It looks like the deal with Origin and Sasol will be inked and the $20 million paid over to Falcon in late June or early July, with $7 million of those funds earmarked for Falcon's share of the payments to the reduction in the smaller royalty ownership that are being reduced to 1%. The Origin drilling team is not waiting for the final paperwork to be signed and is already working hard on their overall drill plan for the Beetaloo, with a focus on the best spots for production rather than just deliniating the scope of the entire basin. Origin probably won't be able get drilling equipment in place until after this winter's rainy season, as Origin will have to get all the appropriate drilling permits from the Northern Territory - after the deal is finalized, leaving very little time before the winter rains start. This seems like a long time to wait for the first drill to start, but Philip seems convinced that they are progressing on the right timeline and the right targets to focus the drilling on, and that they are just as anxious to get the process rolling as he is.
I asked about Inpex and whether they were interested in the Beetaloo, and Philip mentioned that he had a brief conversation with the President of Inpex at one stage. Philip says that Falcon would be very interested in talking to Inpex - but the right time for a deal with Inpex would be when the Beetaloo has been proven up and when Inpex is scrambling to secure additional long term supplies of natural gas for their Darwin LNG plant.
In my opinion - Inpex would be a perfect next stage buyer of Falcon's Beetaloo assets at 15 times today pricing or more - if the overall drilling program by Sasol and Origin is successful.
The Hungarian properties may be heating up as NIS continues drilling the second well, but he was disappointed that the first well hadn't proved up to either of their expectations. I asked about the current 30% over ride royalty that the Hungarian government has in place and Philip was fairly confident that Dr. Szabo will help overcome that issue - especially if they can get a new deal on the deep Mako down the road with NIS/Gasprom.
South Africa is finally starting to see some political progress. Philip is on the industry negotiating committee for fracking regulations, and he said the South African government is getting ready to publish about 38 new fracking regulations - that the industry players had some hand in helping to draft. These new regulations are ones that Philip says the drillers can live with and once passed into law, then the moratorium should be lifted for all "existing" applications. I didn't get a real clear picture of the timeline, but got the sense that something may come to pass by this fall, and then Philip will jump start the negotiations with Chevron. I asked Philip whether Sasol would be a part of the process and he was a little coy, but did say that Sasol wants to invested in the Karoo, but that all the good properties were already taken.
With Sasol as a partner in the Beetaloo, it would certainly be a plus for all Falcon shareholders - if they were teamed up with Chevron on a Karoo JV, especially given Sasol's long term position as one of South Africa's biggest and most successful companies.