Superb Analysis Blue Ocean. How can one person be so selfish and make thousands of families suffer...some people have no ethics and no intention to do their job, these type of people can never do due deligence...Anyways there must be a way to kick out the idiots...
Overview Disappointing, more so because this outcome was broadly as expected.
Some thoughts Unexpected was a reported loss in Egypt (£314k) – this is worrying – the plan was for this to be a value accretive investment. The good news is the relationship is quite broken and so funding it from cash isn’t needed just yet - temporary breathing room.
Also unexpected were production levels – lower than expected.
I commented on the cost cutting initiative previously i.e. the 42% reduction is measured against 2015 results, which were extortionately high. Looking at H1 2016, the full-year admin cost run rate (excluding the Egypt) is almost 40% higher than it was two years ago. That’s 40% higher than the time the business was generating nearly £1.3M in revenues (rather than £0.1M in 2016).
So, currently it looks like: A monthly cash burn-rate of around £50k per month, which excludes the need to fund borrowing costs. Net proceeds from CT sale approx. £1.5M Borrowings repayable (including net working capital) £1.4M. Although ML indicates not all of the proceeds will be used to repay borrowings – any form of re-fi will come at a cost, which will likely be expensive but could buy a few more months. Net proceeds from raise post 30-Jun-16 £0.2M less amounts paid to TransGlobe £0.1M
They're not nearly bust as they raised £250k post interims plus $2.1m from asset sale. When revenues are received from Egyptian asset the financial position will be far better than is implied by the current mcap if around £1m
The deal RNS’d this morning sounds good – question then arises – what does TransGlobe get for their $2.3M?
Well, they get released from any and all environmental contamination and abandonment liabilities. Fully indemnified.
They believe the write-off of a $2.3M cheque in 12 months is worth it to avoid the environmental liability exposure due in [many] years’ time….hmmm. Do they know something Matt doesn’t….I’m sure you can draw your conclusions on that. But, if past (repeated) behaviour is anything to go on, the DD done on this deal back in Q3/4-15 was ‘light-touch’ at best and that worries me – remember, it was a month after completing the deal that the relationship with the operator fell apart (disagreement over the 2016 budget - which should have been nailed on prior to doing the deal).
The risk comes from not knowing what you’re doing.
So.... the good: the cash exposure which was due 30-Sep-17 has been avoided and NTOG (corporate) has swapped thsat for exposure to potentially significant environmental liabilities - am not convinced the operator is a renowned ‘best in class’.
Whilst typing this I got side-tracked and ended up reading BMD’s article (guerrilla investing website) which has the same broad sentiment.
I'm still here because I'm sat on a huge paper loss and I want all or most of it back. In the meantime il do what I can to warn other prospective investors, not to get involved in anything with Matt Lofgrans name on it. The damage he has done to this company is unbelievable.
The paragraph below I spotted on another aim site this morning and rings true....
The corruption on aim is massive. The companies feed you a little bit of news and prospects for the future. Then they starve you. Send you round the twist. Then slowly take all your money, bit by bit by bit. Increasing the shares by multiples, Diluting, Diluting. Till your stakes worth Jack-shit. You got to laugh. How easy pi's like myself fall for it. Ha, Ha.
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