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Long term thinker It's going to be an interesting week, 'hope it's not a damp squid!'
Or squib even
Buzzthomas,
license is extended out to 22nd November 2022 so they have a good 14 months to kick the can out to. The key will be Navitas, if they kick the can out for them too it would be a little odd as everyone and their dog can see what a clutching at straws deal it was. If Harbour were to go ahead with no back cost payments involved and then give Navitas the option to buy in to the rest of the acreage, 30% from memory, to align their share for a few million quid, they would have to be insane! No it would be far more sensible to say goodbye to Navitas and keep 60% for sure or renegotiate the deal to get some back costs, but again, that was the issue, Navitas didn't have any funds, they were waiting for the back-up of UKEF funding to then be able to go around with the hat for their share of costs! IMHO.
Interestingly I wonder way they went for a an extension out to November next year rather than just 1 year May till May. Maybe so they can get a full years trading in and then make a decision without being rushed to a May 2022 deadline.
LTT
HBR will not make a decision until early next year when the license ends.
As Mogger pointed out previously, there is no longer any mention of Sea Lion in the latest Navitas presentations.
We just have to wait and see what cards HBR play on Thursday.
No news from HBR on Thursday. HBR in no rush to do anything and why would they.
Navitas still in play though because that's what they do. Oil production.
One thing I am pretty sure of is, if HBR have decided Sea Lion is not for them, they will not just come out and say that.
If they did then they would have to write the asset off which would impact their financials, borrowing ability etc.
They'll probably just say it's one for the future and leave it
Good afternoon CroftOriginal
You wrote;
"US oil companies will be queuing round the block to sign up and fully fund."
I respectfully disagree. PMO struggled to farmout SL for years and had to agree VERY generous terms to a minow (Navitas) who were cash poor but assured they could raise capital . Navitas got fantastic terms. SL to date had cost $1.1 BILLION to get where it was and Navitas proposed farmin deal does not require a payment for funds already spent.
The market for such developments has not improved since Navitas emerged. I do not see anyone bidding for SL now.
I think Navitas will leave the project soon.
Back in Sept 2020 I asked Sam Moody regarding if PMO went into insolvency (things at the time were not looking good with regards Debt repayment)
"What happens to PMO's share of the SL development should they head into insolvency, does it go to the administrators or does the PMO/RKH contract protect RKHs interests and all PMO SL investment, Feed information and SL assets revert to RKH?"
Reply
"That is an enormously complex legal question, however I can tell you that as a paying JV partner we are an owner of all the FEED work."
Now if that is to be believed, what if HBR were to walk away from SL project if all reverted back to RKH it could actually raise the RKH sp (imo).
BUT
HBR again imo, will never write of that amount of investment, its easier to sit on it and wait for RKH to run out of cash and keep the reserves as part of their reserves portfolio
OR
HBR could sell it on though for a knockdown price thus reducing their losses.
My bet is they are going to kick the can down the road again. ..."FEED review and discussions with 3rd part investors on SL ongoing"
Sam also confirmed that RKH have NO penalty clause in place on development time scales.
23rd September is going to be interesting, as many have said.
Rgds Sft
Ps thanks to Cyan and all for the good input.
“So in theory, we could be back to owning 100% of SL by the end of the week?”
Yep, 100% of Sealion, oven ready with £100m settlement from zombies Mare (Ombrina Mare) dropping into the bank account the week after, US oil companies will be queuing round the block to sign up and fully fund.
So in theory, we could be back to owning 100% of SL by the end of the week? :)
Hi Daikihaku1,
no me neither to be honest, it would be horrendous, but it would give the company a new freedom to market the asset, something they have been unable to do for many years. Not saying something will fall on their lap, but we are in a different world now, OPEC+ are keeping the oil price in the $65-$75 price band and they are not afraid now to cut production to maintain it; Nationalism raising its head everywhere. Not many places left that are as benign as the FI for a project despite the sabre rattling of Argentina. Mexico has to be a none starter for Harbour in the foreseeable, along with many other internationals.
Plus I am an optimistic person; I'm invested here so my posts naturally have to air to the positive, if I didn't believe this had a good chance of going ahead I would be out of here. But it's an educated guess, weighing up the pros and cons, but there is no certainty and Linda could still walk away as they are a company whom is averse to risk and SL could still be a step too far for them. Then how foolish I would look, but then that is my risk/reward, I wouldn't expect anyone to follow my lead as their risk/reward profile will be different from mine.
Posting here is just cathartic, to stimulate debate, get different points of view to my own and maybe sometime reevaluate.
Good luck to us all.
LTT
The HBR update will give us an indication as to SL's possible future.
The next few days are going to be crucial. IF HBR have made a decision to abandon the SL development they SHOULD immediately inform the market; we should have seen a RNS from RKH and HBR. Its still possible such a dismal RNS could drop before HBR's comprehensive updated.
It goes without saying; IF HBR had made a decision to proceed we ought to have seen an RNS.
We may be looking at another 'can kicking' like statement from HBR suggesting they are still weighing options and even may be wishing to engage with the FIG on taxation issues.
haha I wonder how bad things would have to get for you to turn pessimistic Longtermthinker…? I am not sure I would as upbeat seeing this at 2-3p
I believe the worst case scenario this week apart for Harbour not even mentioning Sea Lion is that Harbour decide to walk away saying it's too remote; the price is too high and the return is too low; oil is in the twilight so there is no point investing in a new province with a 25 year + life span when oil and gas will be needed less and less going forward; Nativas is not a good partner and bigger players are not interested; we are looking at M&S rather than development, etc, etc, etc.
If the above is the case then firstly without the arbitration result in, the share price would be hit really hard, I can see it dropping to 2/3p in an initial rout, then we would be waiting for the arbitration result which should be on the horizon. Lets face it, RKH don't have any say in that but the lawyers who have spent years working on this will want their pound of flesh so don't expect them to sit on their laurels too much longer when they are expecting anything for $10m to $60m+ as their cut.
So where does that leave RKH, lets say they just get their $30m back after the lawyers take their cut, it might not effect the share price, but it would give them a buffer of 3/4 years (at current cash burn) to market Sea Lion. We have spent years tied to a partner who as said, "Jam tomorrow, this time next year Rodders" and to be honest before Covid they might have just got FID sorted, but that is just one of those what if's. Thinking about it, it could have been worse, imagine if Sea Lion has been FID'd and sanctioned a year earlier before Covid and they we up and running with development, covid hit then Harbour swoop in and take everything! However with this new freedom to visit other players who knows what could happen, a fully engineered project, oven ready with a benign government who want it to happen. It might even shake up FIG to offer up further incentives to a new player to get this show on the road if Harbour walk away. This current situation must set some alarm bells ringing, Europe is going to beholden to Russian with the Nord 2 pipeline and gas going through the roof, if doesn't matter how many wind farms you have, if the wind ain't blowing you need a back-up plan.
Therefore all is not lost, however I just cannot see how Harbour will pass on Sea Lion, giving everything to RKH, writing off historic costs to date; all the good will; even if they just see it as, "Well we got Sea Lion for nothing, it came as a job lot of assets we got with PMO whom we only wanted for their NS assets; Toulmont coming on line and the $4B tax breaks", I just don't see how they can explain giving all that potential away to share holders. But then stranger things have happened, Harbour could get into bed with Neptune and then they will just be concentrating on paying down the ballooning debt pile.
It's going to be an interesting week, hope it's not a damp squid!
LTT