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At risk of perpetuating this trail, maybe everyone's at least partly right! A funder's security might or would only be effective against amounts actually owed to them. Almost history be that rkh remain the name actually "on the docket" when funder pursues RoI. Rkh then still actually receives the proceeds from seizing and selling assets. How does funder then make sure its all passed on as agreed? Security presumably is only and exclusively for that.
At the same time the tax status of the proceeds from selling the award might also be receiving attention.
Chess, this is my last post on the matter as we seem to be repeating ourselves.
You keep talking about FIG having a say about how Rock 'DISPENCE' funds.
The monetisation of the OM award is about how Rockhopper 'RECIEVE' funds.
FIG having a veto on that seems odd !
Jesus said to them, “Render to Caesar the things that are Caesar’s, and to God the things that are God’s.” And they marveled at him.
What is indisputable is that Rockhopper require the Falklands Islands Government to approve the OM transaction and the Falklands Island Government have also stipulated that no shareholders are allowed to receive any of the proceeds from OM so this strongly suggests to me that the tax liability is indeed related to OM or any other cash Rkh may come by until the liability is fulfilled, otherwise why on earth would Rkh require FIG to approve the OM transaction and dictate who how the proceeds can or cannot dispensed ?
Thanks Pre2rcd for that information. SM travelling to the Falklands is more likely to be a good sign that things are progressing, as opposed to a need to sort out a problem.
I fell the disputed tax liability regarding the Rock deal with Premier, unless anyone has information to say otherwise, is a totally unrelated issue to the Rock v Italian dispute. It is a red herring.
I emailed SM earlier asking why FIG have an effective veto on what seems a separate company matter, and unrelated to the Falklands. I will post if I get a reply.
Rkh are seeking an adjustment on the £59mln tax as they never received the Premier Free carry as agreed.
I asked Sam if there was any news from FIG regards approving the OM award sale. He said he will be in the Falklands next week so should hopefully have more info then.
Details of tax issue with fig 2015
Falkland Island CGT liability deferment
Released : 09 April 2015 07:00
RNS Number : 6748J
Rockhopper Exploration plc
09 April 2015
9 April 2015
Rockhopper Exploration plc
("Rockhopper" or the "Company")
Confirmation of Falkland Island Capital Gains Tax Liability Deferment
Rockhopper Exploration plc (AIM: RKH), the oil and gas exploration and production company with interests in the North Falkland Basin and the Greater Mediterranean region, is pleased to announce that it has agreed binding documentation with the Falkland Island Government ("FIG") in relation to the tax arising from the Company's 2012 farm-out to Premier Oil plc ("Premier").
The Tax Settlement Deed confirms the quantum and deferment of the outstanding tax liability and reflects the principles agreed between Rockhopper and FIG in December 2013 and is made under Falkland Islands Extra Statutory Concession 16.
Highlights
· Outstanding tax liability confirmed at £64.4 million (approximately $95.7 million) and
payable on the first royalty payment date on Sea Lion (or earlier subject to certain
events)
· First royalty payment date anticipated to occur within six months of first oil production
which itself is estimated to occur in late 2019 (assuming Sea Lion project sanction in
mid 2016)
· Outstanding tax liability amount may be revised downwards if the Falkland Islands'
Commissioner of Taxation is satisfied that either (i) the Exploration Carry from Premier
is used to fund exploration activities in the Falkland Island license areas; or (ii) any
element of the Development Carry from Premier becomes "irrecoverable"
· Rockhopper provides certain "creditor protection" undertakings to FIG while the tax
liability remains outstanding including (i) restriction on dividends or distributions; (ii)
granting of first ranking security over Rockhopper assets; and (iii) while such security
is in place, restrictions, subject to conventional carve outs, on granting further security
· Intention that at the point Rockhopper is able to secure senior debt for the Sea Lion
project, the security provided to FIG will be released and FIG will be provided with a
standby letter of credit to preserve its creditor position
· Rockhopper retains balance sheet strength with cash resources at year end 2015
projected to be approximately $125 million
Sam Moody, CEO of Rockhopper, commented:
"We are delighted to have reached this settlement with FIG under which we now have much greater certainty both on the quantum and timing of the deferred tax liability.
"Under the amended commercial arrangements with Premier we intend to access the full $48 million of Exploration Carry during the 2015 drilling campaign which should allow us to reduce the outstanding tax liability by up to £4.7 million (approximately $7.0 million).
"The security arrangements and unde
We have to expect that FIG will do whatever is best for FIG- regardless of any considerations for Rkh.
I have corresponded numerous times with Stephen Luxton (ex FIG Director Mineral Resources) and fair play in that he always replied to all my mails in detail,addressing my queries & commenting in on my statements but the overiding impression was 'Its got to be right for FIG' , 'Better No deal than a bad deal for FIG', so I wouldn't expect them to give Rkh any unnecessary quarter.
I have corresponded with Sam on the FIG tax issue a number of times too over the years and as far as I know nothing had been resolved, the outstanding figure is not known and I'm not sure the two parties see eye to eye or get along.
I imagine Navitas will be FIGs favourite now as they are pretty much going it alone anyway.
I'm sure Rkh will be pushing them on the matter and they certainly need that as they don't seem ready for what's about to happen once FID gets the green light as they're struggling just to sign OM off.
It’s not in RKH’s interest to settle the tax issue with the FIG until they are in production. It’s an unknown to potential predators which may deter takeover bids at lowball prices.
Best to keep it complicated for now as a form of protection.
I suspect the FIG position results from a legacy issue arising from when Crispen Odey tried (unsuccessfully) to extract monies from RKH which FIG (and other shareholders) did not want to see. In the last years accounts (y/e 12/22 pages 65/66) RKH explained, at length, that after taking professional advice regarding the "Tax settlement Deed" that " the most likely amount that the liability will be settled for $nil" They go on to state that "We are currently engaged with FIG in relation to formalising the tax implications of the termination of the 2012 Premier Oil farm down which resulted in an irrecoverable carry amount of approximately $670million. etc etc.
More T's to cross and I's to dot - I am sure that the lawyers will find an agreeable form of words to suit all parties.
Perhaps FIG are negotiating a possible cut of the OM award from the outstanding tax due 🤔
We don't know the detailed agreement rkh have with FIG, we just know FIG have a legal say in any proceeds rkh may come by, to what extent, we can only speculate but rkh owe them tax, how much, we don't know as they've been negotiating the matter for some years now but I have never seen any resolution. Has anyone here ?
Rkh argued that the Premier free carry didn't materialise as agreed but the did nevertheless receive $231mln cash & I believe a $48million exploration carry !
FIG having a say on what Rock do with the cash they have, is one thing.
Having a veto on how Rock obtain cash, from a separate part of Rocks business in the Falklands, seems irregular.
My understanding is that FIG do have a say in any cash rkh receives as we know they are not allowed to do what they want with the OM award,for example, we know FIG have stipulated no dividend or payment to shareholders is allowed and whilst we don't know what else is allowed or not allowed by FIG, they clearly have some prior agreement on any cash Rkh get from OM or anywhere else.
The detailed terms, we don't know but we do know FIG stated that non of the OM award can be paid out to shareholders until the tax issue on the Pmo farm out is resolved and If none of this was applicable then Rkh would not need FIG to sign off OM.
Thanks Zinced and Chess, but both ideas don't seem to fly as again
1. The award to Rock from Italy via ICSID award is wholly independent of Rocks licences in Falklands and any disputed tax liabilities.
2. The monetisation afaik is selling to ''the "Specialist Fund" to monetise its ICSID Award (the "Award"), in relation to the arbitration against the Republic of Italy relating to the Ombrina Mare oil field''.
FIG and the SL asset should not come into it.
In theory, assuming the award is upheld, the Specialist Fund get the chance to collect Euro$250m plus, by paying Rock less than halve that. They should not get some 'security' over Sea Lion in case they fail, as that would be heads they win, tails they don't lose. Seems odd if that is the case.
Apparently it "is an issue of the the new funder having security over the award"
It may not be as odd as it seems SH, Am I right in saying Rkh owe FIG tax money the agreement with FIG posiibly states that if & when Rkh receive any cash (OM) then the tax bill becomes due, so I imagine rkh will be negotiating with FIG - stating that most of this cash will be used to help fund rkh's share of SL and can FIG wait until production for their tax...but on production rkh must pay back Nav loan first, so FIG will be protecting their own interests on this and that's why negotiations are ongoing.
I'm puzzled as to why FIG have a say in the matter at all??
It is a dispute between Rockhopper and the Italian Gov't.
Monetising the award in the ICSID dispute is a company matter.
Nothing to do with FIG. Seems very odd.
Maybe FIG are working with Navitas and Rockhopper and will sign off on the deal when Navitas and Rockhopper are ready to announce FID.
Maybe FIG are keeping Rockhopper on a short leash so the funds don’t get spent on hobnobs, coffee and Egyptian oil fields.
Who knows? No one that posts on this board that’s for sure. I’m just happy to see the pieces of the puzzle finally coming together. I had written off this whole “investment” but maybe now I’ll at least get my money back.
Hi CitizenTS, I can not think of a single good reason for FIG to delay signing off the OM award monetisation deal.
Their only concern should be ensuring SL gets developed in a safe and environmentally friendly way.
Selling 300M bbls at $85/bbl, nets them over $6billion in tax and royalties and gets the Falklands O&G industry going . P1zzing about over a few million in ICSID award is meaningless in comparison. FIG need to give their heads a sever wobble !
Ralph, Sea Lion is going ahead, oil will flow from the Falkland....IMHO-DYOR
"which is expected to get FID later this year" hope so.
Thanks to Malcy's Blog:
Borders & Southern
I wrote briefly about Borders & Southern recently, on 1st March Harry Baker took over as CEO and he kindly invited me in to meet the team and look at the maps and squiggly lines that I hadn’t seen for many years. I met with him, Finance Director Peter Fleming and Business Development Manager, Bruce Farrer.
There is clearly an enthusiasm at the company that I for one hadn’t detected before, the company has three production licences in the Southern Falklands Basin, 100% owned and the operator. Readers will know that fiscal terms locally are favourable with a 9% Royalty and CT of 26%.
There have been both 2D and 3D seismic operations completed and a drilling campaign which discovered the Darwin field with its first well. Darwin is a 3.2 tcf wet gas discovery with, two adjacent tilted fault blocks, Darwin East and Darwin West which have an un-risked best estimate of wet gas initially in-place for the combined area of 3.2 TCF and for gross Contingent and Prospective Resource of 462 million barrels of liquids (condensate & LPGs).
Most importantly, the significant amount of liquids makes the discovery economic at current economics in its own right and with near field prospectivity there is very decent upside. I get the impression that the primary move for Harry Baker as incoming CEO is to monetise this discovery and with a data room open that option is route one.
But as he said to me in our meeting ‘funding is the key to unlocking this asset and there are very few projects around the world with its risk profile’. Indeed we both feel that with a great deal of under investment of late, partly created by ESG and a misread of fossil fuel demand, companies are competing for more, not less substantial opportunities worldwide to fill their hoppers.
This makes a number of things that might happen quite important to B&S, firstly there is the small matter of the Sea Lion project still underway in the nearby North Falkland Basin which is expected to get FID later this year, should that happen it would surely give the SFB a significant boost. Another positive is that there are plenty of rigs in the Namibia area for obvious reasons and that mobilisation from there is a simpler task than most.
Accordingly I feel that this is a brilliant opportunity for Baker to use his industry knowledge and perhaps more importantly his financial heavy lifting skills to develop this asset which is one of very few worldwide projects with the opportunity to make a difference.
Https://ukdefencejournal.org.uk/argentina-has-purchased-24-f-16-fighter-jets/
A good decision and will hopefully result in more western investment in the Argies' own resources, including energy.