The Ayala Family’s energy exploration firm, ACE Enexor [ACEX 17.28 5.37%] [link], a subsidiary of AC Energy [ACEN 8.25 1.10%], said that it is in “active talks” with potential partners to “derisk” the exploration of its Service Contract 55 (SC55) franchise area off southwestern coast of Palawan.
ACEX owns SC55 together with Pryce Gases, a subsidiary of Pryce Corp [PPC 5.66], with ACEX owning 56.25% of SC55, ACEN owning 18.75%, and PPC owning the remaining 25%.
ACEX’s President, Rolando Paulino, said that the next step for the SC55 Consortium is to drill an “appraisal well” which he estimated would cost between US $30 million and US $40 million, but noted that this was a “pre-Ukraine” figure.
ACEX also reiterated its plans to offer up to 74 million common shares in a follow-on offering in June of this year, and plans for a stock rights offering in Q3.
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The concept of “derisking” is one that most of us understand, but we just call it by other names. Basically, ACEX is looking for other people to “go in together” with on the cost of the exploration of its rights in the SC55 area.
As Mr. Paulino indicates, the cost of the next stage of exploration is fairly well-defined, but even at “pre-Ukraine” costs, ACEX felt like the pricetag was probably too high for it to shoulder 100% of the cost alone.
By bringing other partners into the mix, ACEX reduces the amount that it needs to pay to explore these rights, and that reduces the long-term risk to the company should the rights not develop into something profitable for whatever reason.
Spending US $10 million as part of a larger group to find nothing is a lot less damaging than spending US $40 million, alone, to find out the same.
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