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I would also add that RRE spent £254k on pension advice as part of DD prior to re-admission so I would be very confident that AA has more of a clue about the situation than than a distressed SOU investor who is likely desperate invest in RRE but not before trying to make some hot air out of nothing.
At the end of the day from the pension fund of circa £500m RRE are annually liable for a 40% of a deficit of circa £6m of which it's likely only £3m or so is actually realised due to the way tax schemes operate.
The Group currently operates a DB Scheme and DC Scheme. In March 2010, the DB Scheme was closed to new entrants and was further closed to future accrual on a defined benefit basis in December 2015. On 1 April 2010, MOUK established the DC Scheme to provide benefits to new employees and, on 1 January 2016 all former DB Scheme members were transferred to the DC Scheme. The most recent full triennial valuation of the DB Scheme was carried out as at 31 March 2016. As part of that valuation, a funding plan was agreed with the DB Scheme trustees which provides for annual contributions of £13,000,000 until 31 December 2020.
On completion of the Marathon Acquisition on 1 July 2019 RockRose delivered a cashbacked letter of credit to the trustees of the DB Scheme in the sum of £39,000,000 (covering the Group ***and its partners*** anticipated contributions to the DB Scheme for a period of three years).
As funding obligations become due under the DB Scheme ***a significant proportion are recharged to the partners on licences*** these payment obligations of the partners were affirmed by the Court of Appeal in a judgment delivered on 17 January 2019 (which was not appealed by the partners). (note : see link to article on this in next post)
Pursuant to the Marathon Acquisition, RockRose has undertaken to use all reasonable commercial efforts to procure the release of the current MOC parental guarantee in respect of the obligations of the DB Scheme, and to this end has also delivered its own parental guarantee to the trustees of the DB Scheme.
The DB Scheme will shortly commence its next formal triennial review, the statutory deadline for completion of such review being 30 June 2020. RockRose intends tabling proposals for a formal buy-out of the DB Scheme as part of that process, which involve an insurance company assuming all of the obligations and liabilities of the DB Scheme. These costs have been factored into the Enlarged Group’s working capital statement and the Company can confirm that the working capital available to the Enlarged Group (which for the avoidance of doubt includes the Marathon Group) is sufficient for the present requirements of the Enlarged Group, that is, for at least 12 months following the date of this document. RockRose and MOC remain in active discussions with the trustees of the DB Scheme and the Pension Regulator concerning the future funding and current obligations of the DB Scheme.
Blade we do want to be fully informed. I'm not too sure though that your post does that. You have basically stated that the fundamentals of RRE are incorrect or questionable because there may or may not be a pension deficit. but at this time there isn't a deficit. There are many more, more significant risks to the fundamentals than pension deficits I would have thought.
MTSparky and Mytton. I'm not suggesting that Denziiil has said anything untrue. But there's liabilities here that aren't obvious by the figures quoted by Denziil, thats all.
Look, if you don't want to be fully informed and only want to hear positives, fair enough. Rockrose got the deal of a lifetime under the conditions in which they bought (or were basically paid to buy) the Marathon assets. But investors should be aware of the full story.
They wanted to become an "Operator" and this looks to be very short lived. They still have liabilities on a pension scheme that they own 40% of, that has a fund requirement of over £500mm and whilst it's performing OK, it is not fully funded at this time. They'll likely sell this to an insurance company but that comes at a premium. In other words and as an example, an insurance company will only take on a £500mm pension fund if paid £600mm to do it.
I won't write on here again. You crack on and invest unwittingly without fully understanding the risk potential. Trying to add facts and get shot down because it isn't all rosy rosy rosy stories.
Marathon Oil were established and competent operators of the Brae assets. Rockrose bought out Marathon's share, assuming that they'd become operators. But Marathon only owned 40% of the Brae assets. Other partners including Taqa (who incidentally own more than 40%) DO NOT want Rockrose as operators and have voted to remove them from the operator position, leaving Taqa to operate the assets. All the partners want this. A unanimous decision.
So what does this mean. Well, Rockrose still have to fund 40% of operating costs whilst yes, they still take 40% of the profit stream. But they don't "grow" as a company because they're still not "operators". They function and provide funds as Taqa and the other partners request.
Whilst in all likelihood, the Taqa operator-ship exchange will go through and the current Rockrose (ex Marathon) employee's will transfer to Taqa - as part of the deal with Marathon, Rockrose took on the old final salary pension scheme and will retain this responsibility as Taqa will refuse to take over responsibility for this £500mm+ scheme.
A few years ago, Marathon took Taqa to the high court because of Taqa's refusal to pay their allocated share of the pension liabilities. There is absolutely no way that Taqa have to or will want to take on the pension fund that Rockrose now sponsor - just because Taqa want to become current day operators. The pension scheme is a liability that Rockrose took over from Marathon.
All a bit of a mess and will be resolved eventually.
No doubt about it - for the amount that Rockrose paid for the Brae assets, they've worked a great deal. But it's turning into less than they thought it was going to be.
Google and read for yourself. Taqa versus Rockrose