Gordon Stein, CFO of CleanTech Lithium, explains why CTL acquired the 23 Laguna Verde licenses. Watch the video here.
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Thanks JD, I can't really argue with that. I suppose RBD's Deltic approach, if it had been successful (and I'm rather glad it wasn't, if I'm honest) would have been allowed under the formal OEIC rules, in that RBD would have acquired a controlling interest in Deltic via their shares, and would not have held the licences directly. It will be interesting to see what RBD and / or Rathlin do next on the corporate front. This should give us a few clues about their longer term aspirations.
Grey Panther,
Very interesting. Regardless of their status, RBD have shown that they are able to acquire a direct Interest in an O&G license asset (From Humber). They have also shown that they are able to swallow up other UK entities, like the Deltic proposal for example.
In both the above scenarios, the legal folks would have been all over the transaction documentation to give them the green light, especially as they quote on Companies House that the nature of the business (SIC code) is 64304 - Activities of open-ended investment companies.
I note your comments on the other Rathlin Shareholders. As RBD now has a 59.5% shareholding in Rathlin, Connaught Oil & Gas Ltd now has 20%. The other 20.5% are held by Rathlin Directors and Management.
We were told on 28 Oct 19 :
"The Company has significantly progressed discussions with certain Existing Rathlin Shareholders regarding the Proposed Equity Swap and the Board continues to expect that the transaction will complete on the terms described in the Circular.
Certain legal and administrative issues have caused a delay to entering into a binding Equity Swap Agreement. "
Were they talking to all 40.5% Shareholders, 20% Connaught or 20.5% Management ? In any event, the Equity Swap never took place. If I was a Rathlin Shareholder with c£18M in the bank as at 31 Dec 19, and the Knowledge of having a good crack at WN over a number of drills, I would not have taking the Equity Swap either.
The way I look at it, is the Oza family, RBD Directors, Fraser lang (Humber), Connaught and Rathlin Directors and Management all have skin in the game.
Note 26 of the last Rathlin Accounts, state that RBD are "the ultimate controlling party for Rathlin" and have significant influence over its operations. RBD has a seat on their Board, 59.5% voting interest and more importantly the whole RBD Rathlin Investment will be covered by a Shareholders Agreement dictating what Rathlin can and can't do.
I think if over the coming months the WN asset performs as expected, all of the interested parties above would want to maximise the exit opportunity.
Jack
Hi Rubey, JackDiamonds. Thanks for your thoughts; it’s all very interesting at the moment. Considering RBD’s 59.5% shareholding in Rathlin, I sincerely hope that Rathlin will be encouraged to acquire further UK projects, and not just limit themselves to WN. In my view no sensible oil company would want to be entirely dependent on one project, no matter how good it might turn out to be. Rathlin certainly seems to have the staff and the know-how to make further successful acquisitions. However, my concern is RBD itself. On Companies House website the business is described as “Activities of open-ended investment companies”. I may be a bit out of date, but I didn’t think that OEICs were allowed to hold non-share assets for themselves and I assumed this was why they originally invested in their UK projects via Rathlin and Corallian, and via other companies in Romania and the USA. So I looked up the definition of an OEIC and found that it’s “a type of investment fund domiciled in the United Kingdom that is structured to invest in stocks and other securities. The company's shares list on the London Stock Excchange and the price of the shares is based largely on the underlying assets of the fund. These funds can mix different types of investment strategies such as income and growth, and can constantly adjust their investment criteria and fund size”.
I had assumed this was still the case but was proved wrong when they were given permission by the OGA to acquire Humber’s 16.665% WN interest for themselves. So, perhaps Humber's WN interest mightn’t be their last UK acquisition.
Grey Panther
RBD hold a 59.5% equity interest in Rathlin. They are classed as an Associate Company where RBD have significant influence.
In the event of a trade sale of WN, Rathlin would get 66.67% of sale proceeds and RBD would also book their share.
Whether RBD get this share via Dividend or IPO is academic, as the value would still flow to the RBD SP.
I guess we should not carve the cake until it is cooked but the impressive lead up to the B1 drill has all the attributes of a better than average investment case where Management also has a significant stake.
Looking forward to the day by day action, as largest UK onshore gas field and potentially the largest hydrocarbon discovery onshore UK since 1973, starts to reveal itself.
Jack
The Group’s interests in equity-accounted investees comprise interests in associates. Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies. Interests in associates are accounted for using the equity method. They are initially recognised at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income (OCI) of equity-accounted investees, until the date on which significant influence ceases.
GP, I don't think the fact that Rathlin are currently ONLY involved in the West Newton licence has any bearing on them doing an IPO/reversing to be honest. Rathlin are comprised of a very experienced and energetic team. From my limited contact with John Hodgins (who I have found to be one of the best people I've ever met), I can't see that they would sell West Newton then call it a day on the company. I believe there are plenty of opportunities for them, particularly in today's environment with the cash they may well have available to them and the licences that may become available.
Hi Jakemann. May I suggest you read some of the more recent RNSs ecause you seem to have the well numbering wrong. WN B-1 is about to spud. If it's successful they are expected to test it first, before moving back to the WN A-2 well to conduct the EWT (extended well test) there. Good luck with your investment. GP
Rubey, I've been told that Rathlin considered an IPO in mid 2018, some time before RBD made their initial investment. I understand the broker they were talking to at the time put them off, or perhaps Rathlin got cold feet, because their only asset then was a 100% interest in the WN licence. Things might be different now, following the success at WN A-2, but they still have only the single asset. They could, I suppose, still be acquired out right by RBD if the remaining Rathlin shareholders could be persuaded to take RBD's cash or shares. However, I suspect they won't be able to do it easily, as a later RBD cash deal for more of Connaught's Rathln shares seems to have fallen through some time ago. Or at least it wasn't completed. Well, I think that's how it was.
I believe Rathlin will IPO/reverse GP. That should provide EVEN MORE value for RBD shareholders from my understanding.
Whoops! The bulk (66.67% )of any cash from a WN sale would go to Rathlin of course, with RBD and UJO only getting the value of their 16.665% direct holdings. Would the market really value RBD's indirect Rathlin holding in the same way as its direct WN holding? I'm not so sure.
Hi Rubey. That would be nice. Of course, it assumes that RBD and UJO will do something sensible with anycash they get from a WN sale ….. like giving it to us, rather than frittering it away on indifferent projects like Corallian, Parta and California
Mischievous imo.
I like all these posts, but I REALLY like the last one Rubey. Yes indeed!!
I see sharetalk are saying spud 8-9 Oct.... even though they did qualify that as their guess. Mischievous?
Another way of looking at it using today's prices:
When the West Newton licence area is sold for £500m, RBD will receive £280m, and UJO £83m. RBD market cap will increase from £43m to £323m, and UJO from £33m to £116m. RBD share price will increase from 0.6p to 4.5p (increase by 7.5), and UJO from 0.17p to 0.6p (increase by 3.5 times).
Hi JackDiamonds. That's a very interesting way to look at it. I use another comparative: the market cap of RBD & UJO divided by their WN equity, even though this ignores all their other assets.
For RBD it's about £43 million / 56.325% = £0.76 million per 1% of WN, and
for UJO it's about £33 million / 16.665% = £1.98 million per 1% of WN, or a factor of 2.6 x RBD.
This would be much more useful if WN was both companies' only asset. I've a feeling the relative valuations are saying either the market prefers UJO's other assets to ours, or perhaps their business model is preferred to RBD's, or their managements etc, etc. Mind you, the list of possible company differentials is probably endless.
ivans
You are obviously correct.
UJO.........Shares in Issue..........19,816m...............WN Stake..........16.665%
RBD.........Shares in Issue............7,097m...............WN Stake..........56.325%
I think for every £1 of WN value creation, RBD should move 9.4 times more than UJO. At the last fund raise, RBD put £16M into Rathlin and also have the cash to fund their direct interest. UJO now look to be well funded, but that came at a cost to their existing Shareholders.
Clearly in the past UJO were much more volatile than RBD, probably due to the lack of a substantial Institutional Investor base.
Jack
UJO starting to rise now. WN news maybe early next week?
RBD need to start rising soon. we have much larger stake !