Gordon Stein, CFO of CleanTech Lithium, explains why CTL acquired the 23 Laguna Verde licenses. Watch the video here.
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GreyPanther, how could UJO and, recently, Reabold just have gone out and raised millions in new equity whilst at the same time knowing that one of the JV-partners were defaulting on their JV-liabilities?
In my view, clearly a JV-partner with 20% of Biscathorpe and 16.665% % in West Newton defaulting to the point that the operator has commenced [legal] proceedings is a major price sensitive event which should have been RNS-notified at the time. It seems obvious that the two licence operators, Egdon and Rathlin did not do their homework and credit checked Humber and asked for guarantees if they were not creditworthy. After all Humber Oil & Gas Ltd was only registered as a limited company 23 months ago with £1 share capital. In my finance leasing days, a long time ago, I couldn't even give such a company lease finance on a fax machine.
That's a good summary GreyPanther. Everything's gone south it seems from missing the target at Biscathorpe, to Humber being an unreliable partner, to Rathlin suspending the EWT but not bothering to tell shareholders why, to CO and others dumping the stock. I think things will turn around here but it's all been a massive disappointment the last few months. I really thought the revised volumes at WN would give the shares a bottom of at least 0.25 but no.
Shareaction: You make a good point. However, I wonder if UJO have had to stump up already for their pro rata share of the Humber default. It clearly happened quite a while ago.
Fairview: I think an interesting pattern emerges if you look at the chronology of UJO's RNSs concerning Humber Oil.
10 June: Frazer Lang resigns from UJO's board. At that time the directors would probably have been insiders with respect to ongoing West Newton operations.
27 June: GP Jersey, an associate of the Lang Family / Humber Oil, reduces its UJO shareholding from 15% to 5.6%
28 June: Over-subscribed UJO Placing
11 July: GP Jersey reduces its UJO holding to less than 3%
15 July: Biscathorpe Up-date issued by Egdon and UJO
19 Nov: Egdon's 2018-19 annual results published. These show that at 31 July Humber were already in default over the Biscathorpe costs.
To my mind this suggests that the relationship had soured quite badly by early June, if not well before that. It must have been obvious within the Biscathorpe partnership that Humber weren't paying their way on a project that UJO introduced them to. I would guess that Frazer Lang needed to sell down their UJO shareholding but couldn't do so while he was on their board. I don't think Humber's default has been resolved yet or we would have seen a mention of it in the "Subsequent Events" section of Egdon's RNS today.
Get Corbyn in , he will give hard earned money to any lost cause
Get Corbyn in , he will give hard earned money to any lost cause
GreyPanther, ref your comment "Looking on the bright side, it means that UJO may be able pick up an extra 5.5% of Biscathorpe. Any thoughts?"
I'm not sure if this unfortunate situation has any bright side. If/when Humber Oil and Gas default is confirmed the remaining JV-parties will be responsible for the payment of defaulted invoices. Biscathorpe has a very, very long way to go with lots of uncertainty and I doubt very much that UJO would want all this extra cost in spite of added ownership. Cash is hard enough to raise on a good day and JV-partners going bust is hardly a selling point when raising more equity.
An interesting point GreyPanther. I have long wondered what happened to the UJO / Humber commercial partnership and why Frazer Lang sold huge amounts of UJO stock. The fraught relations between UJO and Humber are becoming clearer now with this news of them defaulting on payments. It is certainly possible that UJO could pick up some more of the Biscathorpe licence. It's a shame they can't pick up more of the WN licence too as Humber are clearly struggling to raise capital.
Sorry - I missed something earlier in Egdon's accounts.
"Note 4. Trade Receivables: During the year, one of the Group's joint venture partners on PEDL253 (Humber Oil and Gas Limited), defaulted on a balance due to Egdon. The payments were due under the Joint Operating Agreement (JOA) and the Farm-out Agreements. The outstanding balance at the date of default was £0.78 million. Egdon (as Operator and on behalf of the remaining joint venture partners) have enforced their rights under the JOA default provisions and commenced proceedings to recover the sums owed. Under the terms of the JOA, the defaulting party can be removed from the licence and that party's share of the asset redistributed amongst the remaining joint venture parties. Humber remain liable for the outstanding debt but in the interim the remaining joint venture parties have assumed responsibility for the payment of invoices. Egdon's pro-rata share of the outstanding Humber JOA default amounts to £327,200".
If Humber owe £0.78million on just one licence, their 20% interest suggests that the items on which they have defaulted must have cost a whopping £3.9 million! If that's the case, then Humber must have defaulted on the whole of the Bisc-2 well costs plus a few other items. Can this be right? Looking on the bright side, it means that UJO may be able pick up an extra 5.5% of Biscathorpe. Any thoughts?