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You are of cause correct. I knew I must have done something wrong...
...in SP over on NUOG seems held back yesterday by MMs, could be similar here...?
Another 16million Ritas way from me.
Today's announcement is an interesting development for a company, and one that on the face of it makes sense for shareholders, albeit it with a wrinkle which leaves its impact lessened. The management services deal with Western Energy Development LLC (“WED”) is one that in isolation would be a good use of the Company's under-utilised Management team, as the fees would certainly help offset the cost base's erosive effect on shareholder value. However, what we don't understand is the reasoning behind offering 29% of the Company's shares for the privilege of management contract. We believe that this would have been better and more simply arranged as a JV structure, with each party (WED and Magnolia), participating in the economic benefits of the JV's activity alone. That way, the JV would be charged management fees on a day rate basis that reflects the man days of work undertaken. What WED gets under this structure is participation in the Company's pre-existing assets. Consequently, shareholders are entitled to ask what exactly they are getting in return for their paper. By our estimation, the Management cost element of the fully deployed $19mm fund (once it has been raised, if the text of the RNS is to be taken litterally, i.e., only permission has been provided to raise $19mm) amounts to $385,000 (assume to be per year). This is made up thus: Category Value Management Fee ($500/$500m) $185m Earnings (capped) $200m Total $385m If we assume this lasts for 10 years, at which point the valuation contribution tails off due to the time value of money anyway, it provides ~$2.4mm to the current value. On a pre-dilution basis, and here we assume that the current portfolio is perfectly valued by the market, this gives an uplift in value to 0.18p. However, the dilution effect on the overall portfolio means that this is reduced to 13p per share. This means that the 25% interest in the asset base has to generate 0.05p per share, or $1.36mm, of value for shareholders, to be able to call this transaction value neutral for pre-existing shareholders. Of course, this ignores the acre fees, which is a single transitory effect, and even if taken in year 1, and therefore not subject time effects, implies that the Company will be buying or leasing 2,715 acres to leave the pre-acquisition position value neutral for shareholders, which isn’t outrageous, but has to incurred in full within 3 years, otherwise its impact is diluted. On balance, we believe that this is a good deal for shareholders, which could have been better, as the value increase from this transaction is more than diluted by the questionable issue of shares to WED, but is a better deal for the Management team, which now needs to be the focus for shareholders. What shareholders need to understand from WED & Management is how long it will take for the $19mm to be raised, and what the likelihood of success is. To our mind, the only change to the transaction
Mr E, It might be academic but the original 2006 CA 10% threshold was reduced to 5% in 2009 and therefore NTOG/SOS clear the hurdle. As to the WED shares, the RNS states "Application has been made for the Consideration Shares to be admitted to trading on AIM, which is anticipated to occur on or around 7 July 2017 ("Admission"). The Consideration Shares will rank pari passu with existing ordinary shares of the Company." Therefore, if they do get Admitted as planned, they fall under the same proxy rules as the rest of us [vote registered by the 14th for the meeting of the 18th] or they could always accompany RFW to the General Meeting to deliver the coup de grace to NTOG!
Management Services Company: What shareholders need to understand from WED & Management is how long it will take for the $19mm to be raised, and what the likelihood of success is. To our mind, the only change to the transaction should be the use of JV vehicle, or saving that, a proportionate issue of shares to the deployment of the capital. But in doing that, Management would face a greater exposure to the demands of the shareholders. In doing this deal in this manner, by diverting attention from its “day to day” operation, obfuscates the cost structure, which we believe is excessive for the current, and future, asset base.
769m shares not 769k. I still think it's fair to extrapolate so let's go at least 0.4p. Remember that's a minimum too. I'm not so sure we can then say 29% = 0.4p and extrapolate up for company value, though having said that why not? If that wasn't a fair approach then presumably WED would have requested more shares...... Over 30% and they'd have had to make an offer though.
0.2p I think Mr E.
Disco, I have been doing the same basic calculation. I.e. $10m invested by WED would on the basis of the pilot equate to about to about $4m in value to MAGP. Even if you apply an error of 100% to this that is still in effect $2m for 769 shares. $2m -> £1.5m @ 769k shares is 2p per share issued - really ?
Excellent RNS yesterday, looking forward to the coming days now..."Directors believe the Agreement with WED will generate significant value for all its shareholders in the near and long-term"
I've been pondering the numbers whilst making play doh cookies with my youngest. The pilot project saw 500k invested and the benefit to magp was 200k. 75k in revenue and 127k in PV9 uplift. Crudely then every 500k invested seems to be worth at least 200k in combined value. WED has a minimum to invest of 10m so that's 20 times. 20 times 200k is 4m. That as far as I can tell is the minimum. 769m shares issued is the equivalent of 769k value albeit in pounds and above is in dollars. Seems like good business to me. Effectively sold 29% of the business for at least additional value of 4m. Is that right? Back to play doh.....
The share price has been around 0.10 for months! How much is this deal actually worth to MAGP best case scenario per annum? There's the matter of another placing to go with this good news too.
My thinking was that these share are probable not eligible for the vote having been assigned after the record date for the vote. You do raise an interesting point that SOS/NTOG will now hold less then 10% so can't actually call the vote in the first place. Perhaps that was why the BoD were seeking clarification on if the request was legitimate in the first place. However you look at this it is shocking news for the NTOG pie-rats, the do not get control either way and if Rita doesn't retain control WED can simply walk away and they (NTOG) don't get any of the pie. Something major obviously needed to happy here to prevent MAGP remaining becalmed even if the POO picked up, this does appear to have fitted new sails to the old girl.
Another thought if I may. The rns from the 26th may states that mr Snead/ntog own 10.9 % or 204 million shares of magp after Friday there will be 2.633 billion shares in issue. This according to my slightly dodgy maths suggests that their share holding will be reduced to roughly 7.75%. So on or after the 7th we will get an rns stating what holding they have. If my figures are slightly out I have had 1 or 2 drinks I am never the less sure of my facts.
To answer the query if the new shares are eligible to vote at the gm I think the answer is yes. They are admitted to aim on the 7th and will therefore have equal rights with the other shares and if not attending the meeting in person the deadline to vote is the 14th at 3.30pm by the shareholder or company that holds shares in the magp. The meeting is the 18th so I see no problem with WED being able to vote.
Rita sent for the cavalry just as the Sharks were about to move in and what looked like a busted flush last week now looks worth a wager again.Not been in this since it went to under 2p from the big 5p but took a punt on the Rns and anyone buying at this price could have a multi bagger again,Rita maybe showing why she pays herself so much but it's only the going rate at the end of the day and giving your daughter a job wow none of us would do that would we GL.
Mr E - i guess use this as a start point ref additional value but dobt forget the added bonus of extra PV9 value. 'For comparison using the pilot project as a benchmark, to equal the new well inventory that Magnolia could secure under the minimum capital contribution in the Agreement, we calculate Magnolia would have had to raise approximately US$2,500,000 in new equity. On top of this we will receive cash fees along the way.'
I think more pressing is whether or not these shares can be used to vote in the meeting. Am I worrying for nothing? Logic would suggest that they can vote right?! I'm just conscious that there was a deadline I believe for holdings and therefore voting rights.
okay so the general consensus is that this is a good thing... 763,730,000 shares $10m minimum / $18.5m maximum investment Fees payable to MAGP (of which WED) is a shareholder? WED can't sell any shares for two years or until they have invested $10m or a change of control (unlikely as they now hold 29%) I think what it is saying is that WED will 'own' asset, but MAGP gets 25% of the asset value and revenue from the first well in each spacing unit + a management fee. If that's incorrect could somebody please attempt to explain things to me... Can any body fathom out what value this places on MAGP shares?
"SP unmoved on RNS??" 37.50% up would indicate otherwise.........
Who is the joke here? Not Rita
The timing of my post clearly badly timed! Share price unmoved on the RNS so the egg missed but I'd like to be proven wrong...
Busy day today then?? Northbound from here? ATB GLA
Hi oilmagnet this is probably why SOS spat his dummy out. Allegedly he wanted his family to run the show at MAGP and this deal said NO WAY! HAPPY DAYS FOR US IN THE RED CORNER :-p
Good news today