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Well thanks for all the follow ups...
ITs all a bit beyond me with these other players ..
I thought this Sarah Cope had a bit of a reputation for turning companies/shells around ?
Anyway the chat seems to be hotting up a lot in here ...
GLA
Dutch uit Amsterdam
Petroleum1: re the hedges. I believe they are monthly forward sales contracts covering 70% of Angus’s expected production calculated on a conservative basis, and entered into last summer, when the price of gas in the forward markets was a small fraction of what it is now. The Lenders gave Angus 6 months leeway - the hedges begin in July this year: Angus said at the time the contracts were arranged that they’d have the plant in production at the end of 2021. The risk in them to Angus is therefore that they won’t be producing enough gas in July and thereafter to cover the full amount of the contracts and will have to make up the shortfall (their gas is being sold to Shell: the hedge contracts are settled in cash, not physical gas).
The value of the hedges to the Lenders is very high currently and they're expected at least to maintain their current value in July. Yes, in the event of a bid for Angus or for the Saltfleetby project it’s likely that the bidders might be able to come to an agreement with the Lenders to settle them immediately, but the payment would be huge. And it’s possible anyway that the Lenders, being commodity traders, may have offset the forward sales contracts with another contract or set of contracts, to crystallise a profit, rather than leaving them to fluctuate in value between now and 2025. If they’ve done that, the Lenders will be anxious about the possibility that Angus won’t be able to meet the hedge terms from July. And it will be much harder to unwind them as well. If the Lenders are seriously worried about the quantum of their possible losses on the hedges if their terms can’t be met and if the Lenders are not very impressed with the Angus management’s project management ability/commitment, it’s even possible they might mount a bid for Angus, in spite of the fact they may be able to take Angus over gratis in the summer. It would be complicated and time-consuming, though. The cost/benefit might be marginal. Complicated, isn’t it? The thing investors have to focus on is that Angus and the Saltfleetby asset are two different things. There’s value in Saltfleetby. It’s not clear that there’s value in Angus.
I agree with you, the hedges are the biggest single financial issue in all this and will be the focus of much attention in any bid that’s under consideration. This could just be a pump and dump though.
Petroleum1: the well-informed posters on the ADVFN Angus site, including HITS, 1347, JA51Oiler, JTidsbadly and ClottedQ are worth a read. It seems the detailed terms of the Finance Facilities Agreement between Angus and the Debenture holders have not been divulged. So we don’t seem to know what has been agreed in the event of a bid either for Saltfleetby or for Angus itself in terms of either immediate repayment of the Debenture and interest, or its assignment to new borrowers. If the Debenture holders prefer to retain their 12% annual interest, we don’t know whether the terms of the Debenture stipulate that they can do this, or if new owners of Angus or of Saltfleetby can repay it in full. If it can be repaid at the option of Angus, or anyone taking Angus over, the permission of the Debenture holders for a sale of Poundland or a bid for Angus won’t be required. I apologise for getting this slightly wrong in my earlier post. But it’s just another element of uncertainty, isn’t it? . To add to the absence of information on the condition of the wells themselves, the further cost overruns and completion delays, the unknown current location of some important pieces of kit etc. And Anguish’s apparent need for more money.
OofyProsser: Many thanks for the valuable informatiom you are putting forward. In my view the main issue here is the hedge. On Angus board Q/A(question and answer) with management. Angus said they can cancel the hedge anytime. Is that correct? These new bidders can pay off the hedge(£12m) and keep the gas field and all the tax allawance.
Petroleum1: it may or may not be a lucrative opportunity. It depends on getting gas flowing at 3.4mmcfd by July and at 5.3mmcfd by September, the latter of which probably will require a successful sidetrack. Otherwise the hedges will probably cost a buyer a great deal of money, on top of the purchase price and the cost of completing the project and drilling the sidetrack. All the forecast data we have on flow rates are from the CPR , which is based on data provided to the author by Angus. The hedges continue until June 2025, shortly after which the gas flow is predicted to fall quite sharply. The wells haven't, as far as I’m aware, been tested yet. In view of the OGA’s recently expressed advice, there could be significant regulatory delays following a change of ownership, so the sooner any bid is put to bed, the better. It’s entirely possible that no bid will be forthcoming. Angus appears to need money quite soon, so in the absence of a bid and/or a delay in putting one together, a large placing is quite likely. In any case, the EA and the HSE, as well as LCC, are yet to give approval. And there’s no sign yet of some important bits of kit. Angus revealed in their 6 January RNS that there will be a further delay of some weeks and that it will be a further 10% over budget. And the work at Saltfleetby appeared already to be a month or so behind the October RNS schedule,. There’s significant risk in all this, in my view. It’s murky though, isn’t it?
OofyProsser: Reading skittish analysis I came to the conclusion that AAOG,SEM and ANGS will be combined into one entity. That was before Angus RNS saying five bidders came forward. This is a lucrative buisness opportunity and some of those bidders may be big players. AAOG could have been taken over by any body before but was kept away hidden purposely. I did not know Angus have this much tax allowance. The problem I have now is whether to keep my AAOG(converted to the new entity share) running or to cash it and recover my initial investment.
Petroleum1: yes, if AAOG is or becomes one of the entities that takes over Angus, those tax losses will be valuable. Angus has £19mm of its own to get through but If Saltfleetby is as good as Angus says, the £19mm worth will soon be used up. It’s all so murky, though, there’s no saying who will get Angus, or even if this bid talk is just a smokescreen. Either way, it does look as if gas production and exploration in the UK is about to be right back in fashion, doesn't it?
I guess who ever buy SGF can use AAOG tax allowance of £42m.
I'm confused are people saying that there is or is not a taper that can possibly light up the embers under AAOG?
Petroleum1: as I said in an earlier post, I’m not disputing that there’s now real value in the the Saltfleetby gas field. I’m disputing who will benefit from that value. The terms of the Debenture are onerous, there are near-term deadlines in place and Angus are well behind schedule. And the management, never up to much, are now apparently distracted by the presence of at least six potential bidders in their data room.
Seven unsucccessful sidetracks . If this not mechanical then it may inducate lithological variation within the the reservoir. There are a lot of resevoirs in the Nort Sea with lithological variation.It may reduce the value of the reservoir but it wont write it off.
But the hedges will still apply. They will need the existing wells to perform as predicted and a successful sidetrack to make enough money to justify paying back the £12mm loan and interest and taking on the hedges and the royalty. And the potential delays to do with regulatory approvals. Delays beyond 1 July would make the hedges very expensive to an acquirer.
Also Europe is struggling for gas and they declared a its as green enegy. The UK in slightly better situation. Demand for gas is not going to slow down and the supply is not going to improve.
The government should interfere for national interest. The cost of bringing Angus on stream is nothing .
I will put another spanner in the works.
If we have murky Russian money floating around cash should be no problem. Then employ a team who know what they are doing and Bobs your uncle…. Problem solved.
irishmouse: I don’t know more than I’ve read. I could be completely wrong, though my comments on the Debenture, the charges and the hedges are, I believe, accurate. You’re right though, it’s very murky and open to all sorts of interpretation. My sceptical bent is based on the past performance of the management of Angus, which has been execrable.
OofyProfrosser.
I am so baffled now that I shall stay on the sidelines and leave it to you and Skittish, please keep up the good work.
..sorry, “be obliged” should read “feel obliged” - i.e. there might be a compelling case to bid for Angus in these circumstances. The Lenders might start with a very low bid, though, which in the absence of a competing bid, the management might have to put to shareholders, with a description of the alternatives open to the company.
As someone has pointed out today on one of the Angus sites, it’s also possible that the Lenders will be obliged to bid for Angus, if they’ve laid off all or part of their hedges in the forward markets. If Angus has taken its foot off the accelerator in the knowledge that it can’t now get Saltfleetby producing in time to save itself, the financial risk to Mercuria could be higher than the cost of paying to take over Angus now and spending the money needed to get it finished quickly. This would explain Angus’s putting itself up for sale at this stage. They’ve no confidence in their ability to avoid seizure of their assets in July. So they point out to the Lenders the potential cost of allowing the Angus management to continue mucking it up until the hedges start to cost them millions. Of course, if Mercuria has not offset the hedges with monthly foward contracts, and is merely waiting for the profits to roll in, they may take the view that the Angus management should not be rewarded in this way.
ANGS RNS 17 Jan - 6 approaches.
Strategic Review, Formal Sale Process ("FSP") Update
The Company is pleased to announce that it has had at least six bona fide approaches to participate in the FSP and/or other indications of interest in a potential offer for either all of the shares of the Company or the Company's licence interest in the Saltfleetby Gas Field ("Parties"). In accordance with the Company's announcement of 6 January, the Company considers it inappropriate to identify the Parties but the Company will engage with and evaluate each expression of interest until a firm proposal can be agreed and announced.
Angus is not a large and complicated group and the Company does not envisage an extended period of time will be necessary for the Parties to complete due diligence, other than that involved in familiarising themselves with the documentation details of the £12m Saltfleetby Gas Field Development Loan Facility (the "Loan") and associated security arrangements and gas sales hedge ("Hedge").
Consideration of the capital structure of any combination will be of critical importance not just to shareholders, in the instance of a share for share offer, but also to the Loan and Hedge counterparties, each of whom benefit from change of control provisions. Such provisions require the consent of those counterparties to any change of control if the Loan is not to be immediately refinanced and/or the Hedge accelerated.
Additionally, regulatory guidance, newly restated on 13 January 2022 by the Oil and Gas Authority ("OGA"), lays emphasis on evaluation of the financial resources available to the combined group and interested parties, whether for the Company or its Licence interests, are strongly advised to consult the OGA on this point.
Petroleum1: the terms of the charges on the Debentures don’t allow any more borrowings. In any case, if you’ve accepted usurious terms from a commodity trading company it means the banks won’t touch you. And we don’t know if the Debenture holders have laid off their Saltfleetby hedge contracts and guaranteed themselves a profit (assuming Angus can produce the gas required or can afford to buy it in the market at market prices to make up the deficit). Or whether they're just watching prices go higher and higher and looking forward to the profits on the hedges as they are. Either way, would a commodity trader turn down the option of taking over the Saltfleetby asset unless he were getting a better deal? And Angus can’t afford to offer a better deal. They’ve got a placing coming, which may only raise enough money for another month or so. They can’t borrow. They can’t sell assets, either, without the Debenture holders’ permission. All they can do is have share issues and hope the equipment, some of which is very late, arrives in reasonable time.
Angus has, as you know, put itself on the blocks. Bids are invited, for the company or the Saltfleetby asset. But they can’t sell the asset or part of it without the Debenture holders’ permission and OGA approval. And it seems likely that if they were to accept a bid for Angus itself, the change in ownership might need OGA approval, which can take 18 weeks (I think that’s the figure). The delay would have a serious cash flow effect, particularly as it affected their ability to meet the hedge terms. In any case, even if the loan is repaid, the hedges and the royalty remain intact, or a buyer will be required to pay a premium.
Re the gas transmissibility in the reservoir, they are planning a sidetrack from well SF07. They originally said they were doing it from SF05 but found belatedly that they didn’t have planning permission for that. The previous owners tried 9 sidetracks (I think, it may have been 7) from SF07, all unsuccessful. Angus think they know why and are doing it differently, but the fact remains that in earlier announcements, where they were touting SF05, they were pretty scathing about the prospects of a successful sidetrack from SF07. What this all implies about the reservoir, I don’t know. The fact is, this is what they’re planning to do.
They say they've had indicative, non-binding offers but have no offer on the table and are not currently in discussions with a potential bidder. Some suspect this is just to get the price up for a placing. I can’t believe they'd do that, it’s far too obvious. I suspect they may be serious, since they may think the prospects of Angus finishing the project in time are slim. There’s clearly a chance of a deal such as Skittish suggests, or with Cindrigo. But none of these companies can afford to buy Angus at current prices and the banks are unlikely to finance them.
The economics has changed now with the gas prices rocketing. The CPR figures now are no were
near to represent the true value of the reservoir. Surely the management can do something by aproaching other lenders / governments etc....
OofyProsser
Intereting that The field will be owned by hedge fund provider if the terms of the hedge are not met. Thanks for pointing this out. With gas prices are now sky high can't they correct this now?
Also gas transmissibility within the reservoir is very good and you do not need to sidetrack the well to make it flow unless they are looking for reservoir extension behind a fault block.
Part 2: .. earlier predicted, but that this would not result in material delays. All their announcements are accompanied by provisos that their forecasts, including any containing the word “will”, are not necessarily to be relied upon.
So these are the reasons why doubts remain about Angus, even while the huge rise in gas prices has made Saltfleetby much more attractive to potential investors. Any sale of Saltfleetby, or part of their share in it, would have to be agreed by the Debenture holders. As it stands, there’s a good chance that the Debenture holders will be able to take ownership of the field in the summer. There’s also a chance that, with or without a sidetrack, Angus may not produce enough gas to meet the terms of the hedges, with a similar result. It’s Saltfleetby that’s attractive, not Angus. And any buyer of all or part of Angus’s share will have to meet the terms of the hedges, which remain in place until the summer of 2025, shortly after which gas volume projections suggest a quite large and progressive decline.
Angus may meet the deadlines set out in the Debenture charges and the terms of the hedges. It’s possible. If they fail to, the Debenture holders may be willing to defer the terms of the loan to tide them over - though they will want a quid pro quo to do so. The big risk is that the Debenture holders, who are commodity trading firms, will see a better opportunity in taking over Angus’s assets. This is the risk/reward equation here. And you have to take a decision on the management, who have missed every deadline and exceeded every budget, and have been consistently slow to reveal the state of play to the market.
I don’t know whether your conspiracy theories, which I have genuinely enjoyed reading, will be borne out by events from here. I normally prefer the ****-up theory. It’s simpler. I do agree that the Forum/SEL/AAOG situation is interesting. So is the fact that The Earl of Lucan and Jonathan Tidswell were for some months non-exec Directors at Challenger Acquisitions, a company which shares large shareholders with Angus. Challenger, a suspended cash shell, was recently merged with Cindrigo, a green energy tiddler. There’s a potential conspiracy behind every door with these companies. And as I’ve posited before, are these individuals behind the companies we’re discussing Machiavelli or Baldrick?
Skittish, the EB version could read “we are running a laureate in Mosco “
Skittish: Angus said in about February last year that the hedges were arranged with the lenders, at their insistence. So not SEL/Forum. The Saltfleetby gas field and Angus should not be considered to be the same thing. Angus owns 51% of the Saltfleetby gas licence area. It has arranged a £12mm amortising Debenture to finance it - after initially predicting it would cost only £2.5mm to do so and having exhausted its own resources - at an interest rate of 12%, with final capital repayment in December 2024. Once the loan has been repaid, or is close to being repaid, the Debenture holders will have a royalty of 8% of the field’s revenues. There are limits on the minimum amount of cash Angus must maintain over the life of the loan. Most important, there are hedges in place which start in July this year and by October will exceed the expected production from the two wells which will be put into production, for 9 months. They are planning to drill a sidetrack from an old well from which (I think this is the figure) 9 previous sidetrack attempts have failed to find gas. The drilling of the sidetrack has been pushed back into the spring because the works at the site are way behind schedule. The hedges were arranged at a time when gas prices were far lower and commit Angus to sell at a fraction of the current price. When the Debenture was arranged, charges were put in place whereby a failure by Angus to meet the terms of the Debenture is defined as an event of default, which would enable the Debenture holders to take over Angus’s assets.
So there are two issues: first, Angus’s ability to repay £1.4mm. of interest and an unknown amount of loan capital, but at least £3.4mm by, presumably (we haven't been told the repayment or interest dates) the end of May or June (the loan was signed in mid-May). Second, Angus’s ability to meet the terms of the hedges. Both of these appear to be existential issues.
The gas project is behind Angus’s latest schedule for it. There’s no data on the flow rates of the existing two wells, which have not been tested yet. There is uncertainty as to whether the planned sidetrack will find gas, or be able to produce enough by the time the hedges come into effect. Certain regulatory permissions have not yet been received for elements of the project, including from the Lincolnshire County Council, the Environment Agency and the Health and Safety Executive.
The Angus Board has made a number of forecasts about the start date of gas flowing. The first was May-August 2020. In September 2020, when they announced the requirement for a further £12mm, on top of about £2.5mm already spent, to get it into production, they forecast it would be by the end of the year. The latest forecast was part of the 1 October data in the second CPR. It predicted “first gas” in mid-February 2022. They’re latest announcement, a week or two ago, suggested the6 were another 10% over budget and some parts would be delivered some weeks later than