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It’s impossible to know whether Angus will be in a position to meet the terms of the hedge contracts from 1 July. It is possible to know roughly what the possibilities are if it doesn’t. The contracts are monthly forward sales of gas and Mercuria, the principal lender behind Angus’s £12mm. loan, is the beneficiary of the contracts. Angus and SEL are both on the hook to meet the loan terms, as borrower and guarantor respectively and the forward contracts are part of the loan terms. Any failure to meet the contractual terms represents an event of default. The Lenders (principally Mercuria) can then assume ownership of Angus's and SEL’s assets, which are already in the technical ownership of their security agent, Law Debenture. Whether Mercuria would take over the assets in this event is not knowable, but they’d certainly be in a position to dictate changes in the contract terms to their own advantage, as an alternative.
If Angus do produce enough gas by 1 July to meet the contract terms, they’ll be OK until the end of September. At that point, the contract requires more gas than the existing wells are expected to produce. So additional gas output will be required from the sidetrack which Angus has been debating drilling for the past nine months. There is considerable doubt as to the likelihood of the sidetrack from well SF07 finding any gas. It’s also unclear whether the HSE will deem it safe for them to drill it while gas is flowing in the pipeline a few yards away. They can’t drill the sidetrack until gas is flowing, they know that will not be allowed.
If Angus had a better history of meeting deadlines and budgets, the market would have more confidence that they can do all the above in time. As it is, there’s a strong suspicion that they won’t. They’re probably in need of some more money, which they can only raise through equity placings. There’s also an overhang now of 39.2mm shares resulting from their settling their legal dispute with Gneiss. Those were available to Gneiss from yesterday. Gneiss will have a pretty clear view on Angus’s financial situation.
It’s a judgment call, or guesswork, as to whether they’ll get the gas flowing in time. It’s as well to be clear as to what will happen if they don’t.
Well we seem to have an optimist and a pessimist on board, time will tell us who is correct.
P1. SEL are jointly liable for the loan and also have debentures against its assets. If Angus fails, so does SEL!
I’m sorry but you seem to be clutching at straws.
If AAOG do take a slice of SEL it almost certainly won’t make much difference to current AAOG holders as you will be getting not even a penny to the £ valuation.
It will almost certainly be to offset the massive de-comm costs on the pipeline that they still have also.
Irishmouse
The way I see it is a win win situation for AAOG. AAOG wil change name for SEL who will be richer by £42m overnight. As SEL own 49% of Saltfleetby field they will get revenue from the gas flow irrespective who will own the 51% share of Angus share. It has been put forward that SEL is a gurantoor to SEL operation but that liability surely will cease to exist if the hedge fund take over Angus for failing to meet obligation.
What is more important to me is now is if I should buy in Angus and when.
Where is Skittish? He said he will come back when things become clear.
May the luck of the Irish be with you all.
It seems that revised planning permission for saltfleeby has been granted today.
https://lincolnshire.planning-register.co.uk/Planning/Display?applicationNumber=PL%2F0176%2F21
Petroleum1: am I interpreting your post correctly? There is no hedge in June. Any gas production in June is therefore going to achieve the market price. I don’t think anyone is seriously predicting 8mmscd from Saltfleetby without a very successful sidetrack. There may be a temporary peak as a result of a pressure build-up following the wells’ 3-year closure, but that will be for a very limited period and is not expected to reach anywhere near 8mmscfd.
On the subject of the sidetrack, I’d be very surprised if they manage to begin drilling that in June, as he predicted yesterday. I believe they’ve spent the money earmarked last year for a sidetrack. They can’t borrow any more until they’ve paid off the existing loan.
On the subject of finishing the gas plant by early May (the final parts are now scheduled for 29 April, the Friday before the bank holiday weekend): they’ve completed 15% of the pipe welding, begun a month ago. That leaves 85% to do. They’re going to need many more welders if they’re going to have it done in time. All these forecasts depend on the performance of their stated plans by the Angus management, which has never met a single forecast deadline or budget. Not one. Ever. And I think another share placing is just round the corner. The Report and Accounts are slightly later than usual. There’s no announcement from Sound Energy today. It must come today or on Monday. Why would a company about to produce gas on the scale you’re predicting by June put itself up for sale at the current price?
Iam bot sure if this is also concluded on Angus board.
George Lucan said in Today's RNS:
"In fact, gross production, of which we have a 51% share, solely from the existing wells and which is wholly unhedged for the month of June, is expected to yield 1.5 million therms or gross revenue of £7.2 million at today's forward price for that month alone"
1.5 million therm for June.
Therm per day = 1.5m/30 = 50,000 therm/day
Each therm s equivalent to 100 scf.
Therefore gas flow rate for the unhedged gas volume 50,000 x 100 = 5 mmscf/d
As the hedged gas flowrate 3.34 mmscf/d the total gas flowrate is 5+3.34 = 8.34 mmscf/d
So a flow rate of about 8 mmscf/d is expected for Saltfleetby reservoir is expected by the management.
Yes, if they manage to achieve that before the loan service payments and the hedges are due, Angus will be an excellent investment. I merely question the timing and your estimate of likely volume.
If the Saltfleetby flows at 8mmscf/d for 3 months, I calculated the profit to be £27m from the unhedged production only. If you add to that the profit from the hedged production the result will be company changing event. With this money they do not have to drill side track . They can go and drill a new onshore well in a better lacation or they can use it in other venture. All of this is attributed to high gas price.
.. I do expect another placing and these are often preceded by a bit of a ramp. The FY 2021 figures and Report and Accounts are due this week, and the Sound bid term expires on Friday. The auditor’s report will be worth a look, as will the cash figure. But six firms have been in Angus’s “data room” (they may still be in there, Angus haven’t updated this information). They’ll most likely have access to information that people without that access (i.e. the rest of us) haven’t got, including information on the loan itself (e.g. the payment schedules on the interest and principal repayments). This is AIM and it remains to be seen whether this will be a relevant consideration.
Petroleum1: I’m sorry, I owe you an apology for that last remark in my earlier post. I understand your position and hope that I’m wrong and you’re right about Angus’s ability to get the plant finished and piping gas at the required rate by July. I appreciate that the gas price has made Saltfleetby many times more attractive than it was even a year ago. The question is, who will own it when the gas starts flowing? You are much more optimistic than I am about it being Angus.
My doubts are based on these factors:
1. Angus’s management can’t meet deadlines or budgets, they’ve never done so, not once. They also have problems project-managing. And you can’t rely on their pronouncements.
2. The start-up of the project has been successively put back, from the original August 2020, through several iterations, to the CPR’s mid-March 2022 and now to (probably) end-April. Some items of kit are unlikely to arrive before then.
3. It’s over budget and over the £12mm they borrowed. The loan payments start some time in the next three months (probably), a month or two before the hedges apply.
4. They haven’t got LCC approval for the changes they’ve applied for in the existing permission. The changes are much more extensive than they are saying. They haven’t got the EA approval that they said was expected “by 17 December 2021” either and the issue with both the EA and LCC appears to be the increased noise level expected to result from the changed plans. The CPR start date forecast was based on receiving permissions as forecast by Angus in late September last year. They refer to “first gas” and most people on these sites assume this means full production. As you will know, it doesn’t. There’s HSE and NG approval of everything they’ve installed to be acquired first. This will take weeks.
5. Their plans were based until recently on drilling a successful sidetrack before starting the main building work on the plant. They then took a very late decision to defer the sidetrack until they were producing gas at a sustained rate. Then they discovered that three items of kit are going to be delivered as late as 30 April. They perhaps should have stuck to the earlier plan. Their chances of producing enough gas to meet the hedges from October don’t look very good without a successful sidetrack.
Failure to make the loan payments and meet the hedge terms on time are events of default. The Lenders are commodity traders who’ll make more money if they own the asset. If I were them, I’d take it over. .
There’s a chance Angus will get it going in time. The nonsense of the FSP and the absence of an update since 27 January don’t fill me with confidence. If you think your asset is worth a multiple of the current share price and believe you can make it work, why would you put your company on the blocks?
I also think that people on all these sites give Mr. Forrest and the Earl of Lucan too much credit, I think they’re probably making it up as they go along.
OofyProsser
Your contribution to these board is greatly appreciated. You are adding information and opinions that make this board one of the best.
May I inform you that I have spent my working life developing hydrocarbon reservoirs both in the North Sea and abroad. The reason I am hoping Saltfleetby become a success is that I was heavily invested in AAOG and its success depend on Saltfleetby success. Also can I point out that the development plan for the reservoir was made when the gas price was 64p. The gas pric now is nearly 10 times higher. My only aim is that I hope people do not make the wrong decision which result in them loosing money.
They’re very unlikely to get a sustained gas flow rate from the existing two wells at anything like 8mmscfd. They’ll need a sidetrack for that. Apart from the well documented issues with the SF07 well for sidetracking from, there are doubts, which Angus has still not cleared up, as to whether they’ll be allowed to run the existing wells while drilling a sidetrack. If they have to stop producing in order to drill it, they’ll have big problems with the hedges unless the gas flow is pretty strong from the existing wells. The production rate to meet the hedges rises to 5.3mmscfd in October for eight or nine months. This is a higher rate than WIingas achieved in its later years.
I’ve been over this stuff before and don’t want to spend more time on it or be boring so if you’d like to continue posting this stuff unmolested, please be my guest.
(There is no editing fascilities on LSE board so I am reposting the previous post)
Angus can pays off the £12m loan from revenues during the firs 40 days of production:
Data used:
- Reservoir flow rate 8 mmscf/d
-Gas price £6.36/therm
-One therm is equivalent to 100 scf
The amount of gas hedged during Jul-Sep range is3.34-3.45 mmscf/d. As we are assuming a gas flowrate of 8 mmscf/d,the remaining unhedged volume together with monthly profit is reported below:
Month Hedged Unhedged Revenue
volune volume £m
mmscf/d mmscf/d
July 3.34 4.66 9.19
Aug 3.34 4.66 9.19
Sep 3.45 4.65 8.89
--------
Total 27.27
To assume a gas flowrate of 8 mmscf/d is not unreasonable due to:
1) Extended period of reservoir shut in and subsequent pressure build up
2) Copressors problems resolved with the new equipment.
The above gas price used in the calculation is out of date.
https://tradingeconomics.com/commodity/uk-natural-gas
Angus can pays off the £12m loan from revenues during the firs 40 days of production:
Data used:
- Reservoir flow rate 8 mmscf/d
-Gas price £6.36/therm
-One therm is equivalent to 100 scf
The amount of gas hedged during Jul-Sep range is3.34-3.45 mmscf/d. As we are assuming a gas flowrate of 8 mmscf/d,the remaining unhedged volume together with monthly profit is reported below:
Month Hedged Unhedged Revenue
volune volume £m
mmscf/d mmscf/d
July 3.34 4.66 9.19
Aug 3.34 4.66 9.19
Sep 3.45 4.65 8.89
--------
Total 27.27
To assume a gas flowrate of 8 mmscf/d is not unreasonable due to:
1) Extended period of reservoir shut in and subsequent pressure build up
2) Copressors problems resolved with the new equipment.
The above gas price used in the calculation is out of date.
https://tradingeconomics.com/commodity/uk-natural-gas
..I should have added that all this talk at last of the hedges is obscuring the fact that the first anniversary of the initial drawdown of the loan is in early June and it was signed in mid-May. Without the Facilities Agreement, it's impossible to know when the first repayment of capital and the annual £1.45mm of interest are due but it’s got to be some time round then, hasn’t it? Failure to meet a payment, or to meet the terms of the hedges, represents an event of default, entitling the Lenders to take Angus’s assets.
Petroleum1: this was the relevant Q&A re the hedges:
“ The Hedge on gas production/sale of gas, is fixed for 36 months. a member on LSE chat board has stated that even if the loan is paid of early, The Hedge remains in place for the remainder of 36 months. Is this true? Asked on 20 December 20.
Yes, the hedge is for a fixed term on a declining balance which roughly aims to decline wiith the scheduled loan repayments. It would be very likely (asusuming we succeed in obtaining target production from the side track, itself 100% unhedged, and representing windfall gains at present forward gas prices) that the loan would repay earlier, but the hedge would be fixed on that scheduled loan amortisation profile.
However it would be open to the company to break or reset the hedge once the loan was repaid – although this would incur a normal mark to market charge – allowing for more dynamic hedging – i.e. picking particular moments to reset the hedge. The amount of hedged production after, say, two years would be less than c 25% of total production (including production from the sidetrack).“
“A normal mark to market charge”. This would reflect the prevailing monthly forward prices for the contracts for each of the remaining months in which they apply. I think Angus’s ability to renegotiate the hedges would depend on the willingness of their counterparty to agree to it. Though we haven’t seen the loan Facilities Agreement and it’s possible there’s something in there that covers this. In any case, the sums payable would be enormous, they wouldn’t be able to pay them all off immediately.
The discussion of the sidetrack needs treating with caution, too. They’re drilling it from a well which they said was fraught with issues - until they discovered they didn’t have planning permission for drilling it from their chosen well. I believe 9 sidetracks have been attempted from this well, all of them unsuccessful.
And the point remains- they’re way behind schedule, with no EA approval, no LCC planning permission and important bits of kit now re-scheduled for not later than 30 April. And there's a potentially major timing difference between “first gas” and an approved, regular gas flow to the NG connection. And they're short of cash, I’m expecting another placing. The 2021 Report and Accounts are due this week and a decision has to be announced by Friday on Sound Energy’s “bid”.
OofyProsser
I thought I read in the Angus wesite Q/A section that the company can teminate the Hedge agreement at anytime. I am expecting Angus themselves can pay the £12 loan from unhedged gas flowrate during Jul,Aug and Sep. The hedged gas flowrate for the three months is 3.34,3.34 and 3.45 mmscf/d respectively while the actual field flowrate will be much higher due to reservoir pressure build up and new gas compressors..
Petroleum1: the Lenders are not going to dump the hedges (and we don’t know if they’ve laid off their risk in them with other forward contracts of their own). They’re commodity traders, not charities. And the hedges apply for three years from this July, not for just this year. The lenders are going to make far more on the hedges than they are on the loan. The hedge contracts have been written, you can’t undo them without paying at least the theoretical present value for them and then only with the agreement of the counterparty.
How many years can AAOG tax losses be carried forward in the UK"
A question for our Director (and accountant) Paul Forrest!
Also
Q/
Can capital losses be carried forward indefinitely UK?
A/
........ If you have an unused capital loss, this can be carried forward indefinitely against gains of future years.
MrEMC2
RMP was cancelled from trading from AIM on 19th May 2021 .It reappeared as FME on 21st Oct 2021. I have shares in this co.
When googling tax losses carried forward:
Q/
How many years can tax losses be carried forward UK?
A/
You do not have to report losses straight away - you can claim up to 4 years after the end of the tax year that you disposed of the asset.
I am not sure I can answer this question.
petroleum1 - thanks.
But from AAOG perspective the position is:
1. Cancellation of trading on AIM RNS 5 May 2021
2. £500k investment by Forum RNS 21 Jan 2020
3. Riverfort £1.5 loan facility RNS 11 Jun 2020 (only part drawndown - no expiry date stated in RNS)
4. Somewhere a register of shareholders [to vote for resolutions at AGMs ?]
5. AGM 6 Jul 2021 resolutions passed to allot shares - expire 30 Jun 2022 [Companies House 21 Jul 2021]
6. Directors Paul Forrest, Sara Cope and Dexter Ferreira [Companies House 1 Feb 2022]
7. Accounts up to 31 Dec 2021 due 30 June 2022 [Companies House - Overview]
8. £42m tax allowance [expires ??]
MrEMC2
From Dec 2019 presentation,the following was extracted:
“12.7 BCF should be recoverable from 2 remaining wells in production during the following 12 years.”
https://www.angusenergy.co.uk/wp-content/uploads/2019/12/Saltfleetby-Gas-Field-Dec19.pdf
Assuming a gas price of £5.4/therm, the value of the above gas would be:
12.7BCFx5.4/100 =£685.8m
The £42m tax allowance can be used with either ANGS, SEL or both.
But the problem here is that ANGS had already sold their gas for this year at reduced value due to hedge agreement. What is needed here is to abolish the hedge agreement altogether by paying them the £12m that ANGS had borrowed. As ANGS management are expert in accountancy they should come to realize that the existing arrangement is not a good one.
If one of those bidders in the data room pay off the £12 to the hedge fund they can combine ANGS,SEL,AAOG and themselves into one company and everyone will do well including the hedge fund who will get 8% royalty.
Note:
The optimistic case indicates a production of 18 BCF over 12 years.