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Just once more then. SFB is not a company. You can’t invest directly in it. It’s owned by Angus Energy, a poorly-managed company which is drowning in debt and hedge contracts. Its first (of 36) consecutive monthly forward contracts will cost it more than £3.5mm. on Friday this week if today's closing gas price prevails. They’ve over-spent so badly and are so far behind schedule that it’s possible they may not be able to meet this payment. In which case, their lender, Mercuria, who own the other side of the forward (hedge) contracts, will be entitled to take over SFB. I won’t go on about rising interest rates, debt repayments due in September, their inability to pay for a sidetrack to enable them to meet the more onerous hedge contracts beginning in October and the doubts over their being allowed to drill it at all while producing gas nearby. And the prospects for a placing are compromised by a massive overhang of shares in the hands of Mr. Forrest and Angus’s other lender, Aleph. I’ll try not to contribute again but Angus is in a precarious financial position, such that it’s quite possible they’ll lose Saltfleetby or have to give away a yet higher % of its income. It’s important to understand this.
The gas price now is 359p/therm
https://tradingeconomics.com/commodity/uk-natural-gas
The NPV was £250m for a gas price of 220p
The new NPV is 359/220 X250 = £408m
SFB is more than a Mid Cap company.
Forrest did himself personally, nothing at all to do with AAOG
Forest sold 49% stake of SEM and got 21% stake in the combined entity in SFB and some cash.
I’m a word no
Did'nt Forest who is on the board of directors receive cash from Angus £4-5 for combining AAOG with ANGS?
That AAOG could come to Angus’s rescue with the 8 million that we were going to raise to buy into SEL.
Yes, but the previous owner sold it to Angus for £1 and gave Mr. Forrest money for an abandonment reserve for the existing pipeline. Angus bought it on the premise that they could build a full treatment etc. plant, reconnect it to an NG pipeline and provide for eventual abandonment, for £2.5mm. They then discovered that £12mm was closer to the mark and took a loan at 12%+ interest (13% currently, going up) that gives vastly the greater part of the benefit of the current high price for gas to the Lenders, through the hedge contracts. The previous owners would have been able to build the plant for a fraction of the cost, but couldn’t see a profit in it. It’s cost Angus over £20mm. so far, and counting. And 4 or 5 x as many shares in issue through placings. And it’s cost the management what reputation they had originally. No informed investor now believes a word they say. The £6mm they’ve raised recently is largely allocated to financing cost overruns and they’ve got to spend over £3mm for a sidetrack, and probably over £3mm to Mercuria on the July hedge contract. And there’s such a big potential share overhang that a sufficiently large placing may not be available to them.
Who knows though? This is AIM. Anything may happen. Anyway, good luck with it if you do decide to invest. I’ll stop boring the AAOG Board now.
In this reservoir one can easly calculate how much gas can be recovered using a simple Boyl's Law:
PV=ZRT
But no need to do that. The CPR of 2021 put out production profile as calculated by the original owner using reservoir simulation ie digitization the reservoir on the computer.
https://www.angusenergy.co.uk/wp-content/uploads/2021/10/Angus-Energy-Saltfleetby-Reserves-Valuation-Report.pdf
Petroleum1: thank you for this. if this is correct and the initial pressure is maintained, they could be OK. However, they still have to get past the end of July. They won’t be producing any gas this month and the loss on the July hedge is probably over £3mm. currently. Having seen what’s happening at dddd, I would be nervous holding this. Have you looked at the Charge on the Angus Debenture?
If you decide to invest in Angus, however, I wish you good fortune with it.
OofyProsser
Thanks for the informations.
1)
"you need more than a few days’ data from a new or newly-reopened well to establish a reliable pressure."
This is applicable only to new reservoir and not to SFB where you have 15 years of production history.
2)
An NPV of £250m at a gas price of £2.2/therm indicate Angus is a mid cap company. Gas price future trend can be seen here.
https://tradingeconomics.com/commodity/uk-natural-gas
3)
With a gas pressure of 1176 psi you do not need to worry too much about the hedge. They can increase production to much higher level and make good profit.
4)
Combining AAOG tax losses of £42 into Angus future production seem the natural thing to do. The honorable lady Truss is consolidating her lead in PM election. She is with tax cut and against tax increase to stimulate growth.
5)
I am hoping a buying oppurtunity will arise in the future as I am expecting share cosolidation to take place after start of production.
Petroleum1: you are clearly far more knowledgable than I am on hydrocarbon wells and processing. But my understanding is that you need more than a few days’ data from a new or newly-reopened well to establish a reliable pressure. In any case, they only have one compressor, rated at 5mmcsfd, so that even if they have excess pressure, the compressor capacity will limit production.
They’re still working on storage tanks etc., so presumably gas won’t enter the test separator until this work is completed and the components of the gas stream can be stored. There’s no date for nominations yet. The losses on the gas forward contracts are racking up (really, these are big losses) and the gas price is looking strong again, worsening the losses on the absent July gas. The upside in the share price may be limited by Aleph’s holding so many shares, bought just below 1.10p. Added to this, Knowe Properties may convert their loan into 200mm+ shares. They’ve each got a decent profit in these and may feel the need to realise part of it, in the circumstances. There’s still a lot of uncertainty in this. The gas is going to flow at some stage in the next few weeks but Angus’s financial situation is less clear. And they’re precluded from selling assets, borrowing money or factoring.
Today's RNS reported a high wellhead pressure of 80+ bar. This equivalent to 1176 psi. Previously I calculated the wellhead pressure to be 778 psi. I used an average gas gradient extracted from Google. Obviousely the pressure reported on Angus board of 440 psi was wrong.
The above pressure is an excellent news. It inducate a viable reservoir in SFB and successful field life ahead. I wish I was invested in Angus when the share was 0.7-0.8p. I am not sure now when the next buying oppurtunity will arise. The number of shares in Angus now exceed 2 billion and if you add about 0.5 billion of AAOG it will become more than 2.5b.
Petroleum1: I completely agree that it was an excellent deal for Mr. Forrest. He got £250,000 in cash, £1.4mmm. of debt written off and he’s already taken £1mm out of it by selling his first 91mm. Angus shares. So his involvement with Saltfleetby has earned him a handsome return, even if his remaining Angus shares should prove worthless and the other benefits of his deal fall through. If Angus manage to limp on beyond the end of August, he can sell another £1mm. worth of shares and so on every quarter thereafter for another three quarters. An excellent deal for him. No one could accuse Lord Lucan of being a hard-nosed businessman when dealing with old friends.
OofyProsser
Forest sold SEM 49% of SFB to ANGS but got 21% of total SFB in ANGS. I f you double that number you get slightly less nimber than 49%. But he also got cash £4-5 m. What is important is he got an entity (ANGS) that will develope the field for him. I would not say this is a bad deal. Adding to that he is now a direcror of combined entity ANGUS.
As for being able to use the £42m tax losses, this will depend on result of the oncomming election. He should have sold this problem 2 years ago.
Petroleum1: with respect, you’re confusing Angus with Saltfleetby. There’s little doubt the gas field is worth a great deal at current gas prices. However, Angus has mortgaged its interest in Saltfleetby to the providers of its £12mm. Debenture, with monthly forward gas contracts in place for the next three years at an average of about 43p per therm, for up to 70% of their planned output. The hedges started this month and Angus already will owe Mercuria quite a lot of money at the end of this month, since they’ve sold gas forward but are not producing any. They’re very unlikely to be able to meet the higher gas volumes required by the hedges from October unless they manage to drill a successful sidetrack from a well from which at least four previous efforts have failed, and it’s unclear whether they will have regulatory approval to drill a sidetrack at all while they're still building the plant - or even with the plant operating. If they can’t drill it with the plant in operation, and have to close down operations for two months in order to have a chance of meeting the higher hedge requirements, they’re going to be in serious trouble. It’s quite unlikely that they’ll be producing gas this month. They’ve got capital and interest payments on the debt by September, much higher running expenses and a lot of equipment and installation to pay for. Most of the value in Saltfleetby at current gas prices is going to Mercuria, who lent them most of the £12mm and are Angus’s counter-party in the forward gas sales contracts. The gas volumes produced at Saltfleetby are projected to fall sharply from the year following the last of the contracts.
In any case, there appears to be some doubt as to whether past tax losses will be able to be used to offset profits on new oil and gas projects, doesn't there? I’m not sure where the new proposals on that have got to. And Angus have got no spare money to buy AAOG. The financing arrangement with Paul Forrest was with Forum, not with SEL. He retains Forum but he’s sold to Angus SEL, the entity which was supposed to be acquiring a stake in AAOG against the sale of 25% of Saltfleetby.
Anything’s possible though, it’s a murky business.,
In my previous post 165, I said :
"Tthe Net Present Value (NPV) for Saltfleetby reservoir(ANGS+SEM), based on gas price of £2.24/therm,was calculated to be £250m.
A discount factor was used in the original CPR on each year of future production ( about 10%) to arrive at the above NPV. Therefore the future cash flow is a lot highrt than above NPV of £250m. So Paul Forest must think it was worth hiding AAOG for its tax losses of £42m in spite of the fact that ANGS and SEM have £22m and £27m of tax losses respectively.
AAOG tax losses of £42m could have been reversed in any entity that generate cash flow."
So AAOG yax losses can be used for in ANGS without any problem.
Yes Oofy I believe also that Angus is not for us so the world is our oyster, yet again. Enjoy the heat wave.
It’s not a particularly impressive record, is it? Even by AIM standards. This is the AAOG site, though. All I’m trying to point out is that there is a number of reasons why Angus won’t buy AAOG, as follow:
1. Angus hasn’t got any spare cash. It’s got very little cash at all and will have a payment to meet on its July hedge contracts and an interest payment of £1.45mm and capital repayment of about the same by the end of September. And it’s required to maintain a cash balance of £1.5mm+ under the loan terms.
2. It’s unlikely to be able to use AAOG’s tax losses, its got plenty of its own and the recent change proposals have reduced their value.
3. Lord Lucan referred last month, at the time of one of his further deferrals of the date for “first gas”, to 1 July as the “drop dead date”. It doesn’t sound too good, does it? Still, there’s an announcement due tomorrow (his latest deadline date) so we may know more then.
I wish you and other holders good luck with your investment here and that an alternative suitor may be found. I’ll be surprised if it’s Angus.
You don’t really like Angus do you.
Yes, quite. And Angus shareholders were told three years ago that they’d be enjoying the benefits of gas sales between May and August 2020. They’ve been waiting ever since. Lord Lucan forecast expenditure of £2.5mm. So far, it’s well over £20mm. The shares outstanding have grown about fivefold. Angus has debt of £13.4mm.., £12mm.. of which has forward gas sales contracts attached in which the gas is priced at a fraction of the current price. The contracts are in force from 1 July. The latest date given by Lord Lucan for “first gas” is this Monday. Watch this space. As far as AAOG is concerned, Angus seems quite unlikely to be in a position to use them.
Yes you are correct, time fly’s when we are having so much fun here (:-))
February, surely?
Oofy, he became a director here at the end of may, he must have decided to sell SEL to Angus at or before that time.
Irishmouse: perhaps Paul Forrest intended AAOG’s tax losses to be used to defray future taxes on profits on Saltfleetby gas, and was naïf enough to believe Lord Lucan’s public assurances of first gas by end-2021, mid-Feb 2022, end-April, mid-May, end-May, etc., before he finally saw the light and sold him SEL. He must be relieved he didn’t have to rely on Lord Lucan’s subsequent forecasts of mid-June, end-June, 7-12 July and 18July (at the latest). Or perhaps he sold SEL after he got worried about the implausibility of Angus’s drilling a sidetrack in time to achieve the higher gas production required to avoid massive losses on the hedge contracts. He’s done pretty well from SEL - he got very generous terms from Angus. Any losses on his AAOG stake will amount to little more than a balancing error.