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Hmmmmm I rather like the sound of 'The Rockhopper Collective formerly known as The Borg' !
In truth, any Private Investor willing to plough line by line through the bumph, ring Salisbury and ask direct questions and contribute to Bulletin Boards in a positive way - will be less likely to stumble into the various man traps set to catch the unwary.
How many investors spotted the brief reference to the Italian decom costs in a recent RNS - probably not an issue until 2024. Or bother to use Google to translate the extremely detailed RNS released by Navitas to the Tel Aviv Stock Exchange. As an investor in ECO (Atlantic) it was apparent that compared with AIM, the TASE sets the reporting bar considerably higher. A 500 word one page RNS will turn into a 5,000 word ten page document lodged with TASE.
Last post today I think - early start in the morning to get down to Salisbury in time for breakfast with a group of LTH from the old days. Hopefully an upbeat AGM, although I suspect it may be one of the shorter ones.
DEM
DEM
Thanks to you all for taking the time to explain the figures , I for one appreciate it.
DEX. This is a good example of what the collective minds of a forum can add for the benefit of all shareholders.
Since last week I now know even with full take up of the OO, my dilution is only 23.5% not 31%
and more significantly thanks to yours and CitizensTS's counter posts,
that Rock don't have to find 1/3rd of 35% of whatever the total Capex will be.
After understanding the above I earlier decided to buy back the 1/8th I sold, and also apply for another 46k.
Thanks SH for the explanation and I now understand where you were coming from. I actually spent more time reading articles on calculating dilution than the actual RKH calculations took. Way more complex than I ever imagined. I think the methodology behind the 23.5% dilution figure is sound when discussing share dilutions and it is based on this article - which is reasonably easy to follow for a non-mathematician.
https://www.equidam.com/dilution-101-calculation-and-examples/
All thanks to Godders who drove me to knuckle down and do the 'math' after he claimed that the dilution was 45%-50%, which I knew was a fantasy figure. It's a funny old world !
DEM
Hi DEX, yes I saw that post and ticked it us as a lot of work went into those details.
I differed from your calculations as I look at it differently. Figurers rounded.
Previous situation was 458m shares,
if all OO taken up then 599m, so an increase of 141m.
458 + 31% = 599
Hence why I say 31% dilution, or 31% more shares issued.
I understand your calculation being 141m of 599m is 23.5%
Simplified:
My method 100 shares + 31% = 131 shares
Your method 31 represents 23.5% of 131 shares
I agree with your method in saying that although an extra 31% of shares have been issued,
this has only effectively resulted in shareholders being diluted by 23.5%.
Thanks for pointing that out as I didn’t clock it correctly the first time.
Hi SpaceHoppa
You possibly missed the following post by myself on Sat 18 June re Dilution – reprinted below. Its actually even better than your figures.
After the II Placing and PI Open Offer we will have 599m shares, £9.8m raised and dilution of 23.49%.
By 31-12-2023 (drop dead date for Warrants), assuming 100% take up – we will have 669m shares in issue, an additional £6.3m raised (total of £16.1m) with an overall dilution of 31.5%.
QUOTE: “All figures sourced from most recent RKH RNS. To provide an accurate figure IMO one needs to do two separate calculations ie dilution after Placing & Open Offer and then the dilution in 18m post expiry of Warrants. (See Notes at end).
PRE-PLACING
458,482,117 shares (Launch doc)
£36,678,569 Mkt Cap @8p
AS OF FIRST ADMISSION ON 20-06-2022
82,182,776 Placing Shares (Results doc)
£5,752,794 Mkt Cap @7p
AS OF ‘OPEN OFFER RECORD DATE’ (tbc)
58,571,429 Open Offer Shares
£4,100,000 Mkt Cap @7p (Launch doc)
POST PLACING & OPEN OFFER
599,236,322 (458m+82m+59m) TOTAL SHARES (excl Warrants)
£41,946,542 Mkt Cap @7p
£9,852,794 Capital Raised
DILUTION POST PLACING & OPEN OFFER
Diluted Shareholding is calculated by dividing the number of existing shares by the sum of the total number of existing shares and the total number of new shares.
458,482,117 divided by 599,236,322 = 76.51% = 23.49% dilution
https://www.equidam.com/dilution-101-calculation-and-examples/
£££££££££££££££££££££££££££££££££££££££££££££££
WARRANT EXERCISE PERIOD EXPIRES ON 31-12-2023
41,091,388 Placing Warrants convert to shares
29,285,714 Open Offer Warrants convert to shares
70,377,102 if all warrants exercised @9p
£6,333,939 Capital Raised
£££££££££££££££££££££££££££££££££££££££££££££££
FINAL TOTALS
669,613,424 (599m+41m+29m) Total Shares (incl converted Warrants)
£16,186,733 Total Capital Raised (gross figure before costs of placing etc)
458,482,117 (original number of shares)
divided by 669,613,424 (original number + new shares & converted warrants)
= 68.47% = 31.53% dilution
Notes:
1. As FID is likely towards the end on 2023, I would expect the majority of holders will delay converting their Warrants until Q4 2023, in the hope of benefiting from the uplift in the SP post FID. As there will be no secondary market in the Warrants (ie they cannot be bought or sold) they will have no value until they are converted into shares. The dilution will only occur when the conversion tales place. Reductio ad absurdum, if none of the Warrants were converted then they would just expire on 31-12-2023 and no dilution will have taken place, apart from the original dilution arising from the Placing & O/O.
2. In practice, dilution will probably be under 30% as there will inevitably be Warrants which do not get exercised for a variety of reasons.” ENDQUOTE
DEM
LTT, I was sceptical at first, no disrespect to forum contributors, as it is such a significant financial move in Rocks favour from what I thought was the situation. The financial side of the deal struck with Navitas shows SM at his best, and also just how keen and confident of Navitas to take 65% and pretty much find funding for 97% of Capex !
On a separate subject, Equity raise/dilution.
458m shares were in issue prior to raise.
If EVERY OO shares is taken up we will have 599m, being a maximum 31% dilution.
Also 70m warrants at 9p.
For that dilution Rock will have an extra £9.85m/$11.8m cash.
We know Rock are not significantly over burdened for funding commitments either prior to, or after FID.
The few remaining ducks to be lined up.
1. FIG sign off
2. FID sign off
3. Secure Sea Lion/Navitas debt funding
4. Rock securing approx. $35m more which may come through an OM award
With POO still stubbornly over $100bbl and energy security including fossils back in vogue, surely this time SL will get over the last hurdle, and with perhaps under 600m shares in issue this has got to be a great risk reward share.
Thanks SpaceHoppa, that really is good news to get from the Horses Mouth. So that reduces our needs even further, so if Navitas get a $1B in and we only have to find another $35m, then a $70m win in our favour would be 50/50 split, so we would be funded to first oil and pay off the interest free debt for 85% of production. Now that is great news.
I cannot help thinking there will be another player come on board, someone with technical and development expertise. Navitas could give them 30% and still be operator with 35% of the spoils. Ok it might not be Beacon Offshore, they might not want to venture too far from the Gulf, but just feel Navitas will share the burden.
With regards to the Shenandoah project at FID they had already got the entire development budget, so I would like to think Navitas are beavering away as we speak.
LTT
Thanks for sharing, SpaceHoppa.
BW
well done spacehoppa. That’s a really useful piece of info.
Well I'll give Rockhopper/ Sam Moody some credit, he came back quickly to my enquiry regarding how much Rock will have to find post FID. CitizenTS and DEM you are correct according to SM. On a hypothetical Capex of $1.3B, and Navitas get $1B in debt funding, then Rock need to just find $35m to first oil !!
If OM comes in with with just a $50m award then Rock would be substantially covered financially and this current fund raising might be the last required. Here is his reply which I'm sure he has no problem sharing.
Thank you for your e mail
In short the answer is yes. So in your example of $1.3bn - $1.0bn we would need a gross JV equity contribution of $300mm. We are on the hook for 35% of that which is $105mm but we get 2/3 of that in the Navitas loan leaving us with $35mm.
Hope that makes sense.
Please do feel free to mail me directly if you have any more questions
Sam
Thank you DEM, it is always good to hear other confirmation. I am surprised that this understanding has, as far as I know, not been discussed and definitively put to bed already, as both myself and LTT did not read it that way.
Finding circa $35m would be relatively easy for Rockhopper post FID and hopefully more than covered by an OM award, should there be one.
May I also confirm that my understanding of the net cost to RKH of Sea Lion Phase 1 – not covered by the two loan deals with Navitas – is around c. $43m +/- I have a very detailed explanation somewhere on my PC which I validated with Sam a year or two ago. It was based on the original higher cost estimates, so $35m feels about right.
IMHO I think it’s a cracking deal. To have retained 35% of a field the size of Sea Lion and attract a Farm In partner of the quality and financial muscle of Navitas is an excellent outcome.
Several years later than we all hoped and if you wish to blame the global collapse in the price of oil in 2016 and 2020 together with five years of financial woes at Premier – on Sam Moody and the Board – then so be it. I expect SM was also responsible for Brexit, Covid, galloping inflation and Ukraine as well.
DEM
CitizenTS, thank you for your reply. This question, and the answer is incredibly important when we consider whether or not Rock would need to find/fund $150m, or $35m on a hypothetical post FID Capex of $1,300m. Whilst I appreciate what you say, and hope you are correct. I feel it is an answer that needs to come from Rockhopper themselves to be 100% certain. To that end I have written to them and will post their reply should I get one.
Dear Rockhopper,
a quick question if I may. WRT the statement in your latest presentation that Navitas will post FID, fund 66.7% of all project costs NOT met by third party debt funding.
Hypothetically, if Capex was $1.3Billion, and Navitas managed to get $1Billion of debt funding,
would Rockhopper only need to find $35m, this being 1/3rd of their 35% interest in the remaining $300m required?
Many thanks
"Sort of has to be" dratted typos
@SpaceHoppa, LTT
The $35m is correct on the numbers you are using.
I have clarified this - it was reasonably clear early on anyway though persistent misreading of terms on here actually made me wonder at one stage.
However to avoid any doubt the terms were re-stated in the 19 April rns where the second bullet of Navitas loan funding explanation stated that Navitas's interest free loan funding of rkh was "for any costs not met by third party debt financing". The third party debt financing wording there is as wide as it could possibly be to make clear how the deal works. ALL debt, whether arranged by Navitas or vendor financing or whatever counts; it does not have to be secured on the project and/or meet any particular definition of project financing. Its just what's left that is split 65:35 etc. Sor to has to be.
Really!
Good eh?
maybe the Italians'll pay, if Sam asks nicely.
''Rkh have to find their likely 33%ish of 35% or whatever ONLY of development costs AFTER all debt raised. ''
CitizenTS, this would be a most welcome situation if it is right. My understanding, and that of LTT,
is that Navitas would sort out their 65% funding, and also fund 2/3rds of our 35%,
leaving Rock to find 1/3 of our 35% interest, which our estimate is approx. $150m ish.
If your interpretation is right. EG, say hypothetically capex is $1.3B, and Navitas secure debt funding for $1B.
Your scenario means $300m more needs to be found. Rocks 35% of $300m is $105m, and Navitas 65% is $195m
Navitas will also fund 2/3rds of Rock $105m, being £70m. Leaving Rock needing to find just $35m.
Summery, Navitas would need to find a total of $1,265m
$1B debt funding + $195m + $70m ($265m) and Rock just $35m, being 1/3rds of 35% of $300m.
I prefer Rock finding $35m instead of $150m, so it would be good to know whose understanding is correct.
If anyone has good contact with management perhaps they could clarify.
@LTT, Hoppa
This is mistaken, see earlier post and Rkh RNS.
Rkh have to find their likely 33%ish of 35% or whatever ONLY of development costs AFTER all debt raised. The part of costs funded by debt is, to state the obvious, funded by the lenders.
And Navitas is expected to arrange debt to cover most of the costs!
A (relatively) modest OM result along some of the excess that might be raised in the current exercise when warrant subs are included could quite possibly see us through by itself.
Think about it
Quite right Hoppa, and one would like to think with $150m a year coming in the share price would be considerably higher than 7p even with the extra dilution from the OO and the full take up of the warrants.
LTT
''we would have to find $155m approx to fund our 1/3rd.''
Hopefully an OM pay out will cover some of that even if just $20m
After than, if phase 1 production is scaled down to 45,000b/d and costs go up to $50/b, perhaps with POO at $90/b
45,000 x 40 = $1.8m revenue per day, $657m a year
royalty 9%, Corp Tax 26% = $427m profit
Rock 35% = $150m profit net to Rock per year.
I'm hopeful Rock would find some funding with those figurers.
Bloo, Navitas is looking at a $1.3B development with 20 wells being drilled, so if we allow Navitas to pay up to FID in full and the basis of a loan for our part, and we let them loan us the development costs interest free to pay back out of 85% of our production, then we would have to find $155m approx to fund our 1/3rd.
This is way down the line and I would imagine once FID is done and the project is sanctioned we will have far more options to fund our share of costs.
Regards LTT
Happy to correct, these mistakes have all been made before.
All those proportions only apply to funds needed AFTER all debt debt financing relating to the development. Navitas are expected to arrange debt funding for most of the development.
Should read $120 Million not $130 Million
"*Navitas will provide an interest free loan to Rockhopper to fund two-thirds of Rockhopper's share of Sea Lion phase one development costs".
It seems that RKH will have to come up with 1/3 of 35% of maybe $1Billion cost of Sea Lion ... almost $130 Million.
Could someone correct me if I'm wrong.