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9,272 x £3.15 we receive per day from Mercuria.
9,272 x spot price we pay per day to Mercuria
Oh, the hedge. From memory isn't this around the lowest price on the hedge. I thought that it went up from here? HITS can you clarify?
The hedges are a little confusing right at the moment, because as mentioned by others, between Jan to Jun this year, two sets of hedges apply. The second set that was negotiated in Sep 22 concludes at the end of this month. This was revealed in the Annual Report released on 7th March. It looks like this:-
Jan-Mar 23 Hedge 1 5,250,000 therms @ £0.5205 per therm
Jan-Mar 23 Hedge 2 843,750 therms @ £4.38 per therm (yes, really)
Apr-Jun 23 Hedge 1 5,250,000 therms @ £0.3755 per therm
Apr-Jun 23 Hedge 2 843,750 therms @ £3.15 per therm (yes, really)
Jul-Sep 23 Hedge 1 4,500,000 therms @ £0.3755 per therm
Oct-Mar 24 Hedge 1 9,000,000 therms @ £0.4655 per therm
Apr-Jun 24 Hedge 1 4,500,000 therms @ £0.3560 per therm
Jul-Sep 24 Hedge 1 3,750,000 therms @ £0.3560 per therm
Oct-Mar 25 Hedge 1 7,500,000 therms @ £0.4500 per therm
Apr-Jun 25 Hedge 1 3,750,000 therms @ £0.3525 per therm
The two hedges concurrently running from Jan-Jun this year, that's what.
U still don't understand quite why Mercuria agreed to that second hedge, but the fact as stated is that it did.
Mercuria are a energy derivatives trading company just like a mm that trades shares. They would have
had another client to take the other side of the trade. In August and September JAN and FEB futures were
trading at over £5 a therm.
Hits/ so you are saying we are losing money hand over fist
No Maddog, not in the least? No clue where you got that idea from? Hedge 2 in particular is wildly profitable for ANGS, albeit for a relatively small number of therms.
If you want to see the effect of both hedges on daily/monthly revenues, just check out Gallder's regulat updates showing this.
Mmmm. So Gallder
“Mercuria are an energy derivatives trading company just like a mm that trades shares.”
I suggest you take a look at their website if you think that’s the case. If that’s all they did can you explain why they are the party on the other side of the £12 million loan, hold the debentures over all Angus assets and get that very sweet 8% gross on all Saltfleetby production once 85% of the loan is repaid?
Again you are presenting the secondary hedges as fact, despite not knowing what agreement Mercuria Angus and Mr Forrest came to when they negotiated the deal when they missed the original hedge costing many millions.
All we know for sure is that they failed to supply enough gas for the Jan -March secondary hedge at £4.38, and also failed in April to supply the gas on the secondary hedge at £3.15.
Now why would Mercuria sign a deal at those mind boggling prices if there was any way they could make more money or lose on them? They literally held all the cards. Let’s not forget they wouldn’t have known if the sidetrack was even going to be successful at that stage to supply enough gas to fulfill them ( which of course they didn’t for 4 months)
Then we have the Annual accounts that tell us that the hedges are for gas only supplied from Saltfleetby and that if they miss the production target the hedge would be crystalised as a liability. Well as far as I can see they failed on both secondary hedges on that account and would have been crystalised possibly saving Mercuria millions if they were a half decent business.
This company has a two tier shareholder base. Its probably worth considering why the guy who signed a contract on those hedges has been selling all the shares that he can?
£7 million plus is due this month and it will be a tall order without your hopped windfall.
HITS , sorry to bombard you with questions, but is WG818 correct that the company has missed the hedges in Jan March and April. How far are they behind, how much do they cost, and can they be made up with additional supplies now? Or is all of this just information that is not public knowledge?
Don't treat me as any sort of guru on derivative contracts, CITM, but my understanding is that those hedge contracts are purely financial instruments (or literally, swap contracts) where only money and not gas changes hands. Therefore the amount owed by either side of any hedge gets paid out anyway, regardless of how much or how little gas has been produced. I therefore don't believe that part of WG's post is correct in terms of "missing the hedge", because the exchange on the swap contracts will be due anyway.
Perhaps best to put forward a hypothetical example (and feel free to correct this if necessary, anyone):-
Say for the month of June the spot price for gas is £0.80p a therm.
Say a company has hedged 1 million therms at £0.50p a therm in that month.
Say that same company has also hedged 100,000 therms at £1.50p per therm in that month.
Resolve those swap contracts. The company owes £300k on the first hedge, come what may (1 million x £0.50p-£0.80p), but is due £70k on the second hedge (100k x £1.50p-£0.80p). Net balance owed by the company once those monthly hedges are resolved? £230k... and that's owed, regardless of any amount of gas production.
Now say the company actually produces 500,000 therms that month. It sells those on the open market at £0.80p per therm and generates £400k of revenue...
The company then ends up with nett revenues of £170k for that month after all production and all hedges have been taken into account. This nett revenue position is what Gallder's frequent summary posts show.
Where WG is right however is mentioning that £4.1 million "catch-up" payment. This was mentioned for the first and only time in the Full Year report (released on Mar 7th) which states this:-
"It is also noted there is a catch-up derivative payment of £4,175k due in June 2023 which the group is forecast to meet however should therebe a timing difference between cash inflows and outflows then Further funding may be required. The Directors have therefore identified a material uncertainty which may cast doubt over the Group’s ability to
continue as a going concern." (page 50 in the last FY report).
Given the decidedly odd performance of the ANGS SP over the last month, as I've mentioned before, I'm now wondering if the market is jittery about a potential short-term cashflow issue for ANGS? That £4.1 million mentioned above seems due, and then there's the £3 million bridging loan also falling due at the same time (unless extended by 3 months).
Seen over a 2 year view, ANGS repaying its current levels of debt and liabilities should not prove any issue at all. However the timing of required repayments may be the current spanner in the works of the SP.
AIMO.
Canary.
The production numbers are easily verifiable from RNS,s Singhie and Gallders links and probably most accurately here.
https://www.nstauthority.co.uk/data-centre/nsta-open-data/production/
Some will try and tell you this is a normal hedge, well it’s not! It’s a catch up hedge from a previous missed production timeline when gas prices were at an all time high, with a cutthroat hard nosed company that lent them £12 million at credit card rates!
Normal PI,s don’t have any idea what terms have been agreed.
I could speculate that Mercuria have taken the view that Angus missed the production schedule and now have to pay the full amount on the secondary hedges for example? That’s several million more to find. But it would just be a guess, just as Gallders daily figures combining the two hedges are. We just don’t know.
I will add to that following HITS post that if what he suggested is correct and the swaps are “purely financial instruments “ why have Angus had and got to pay the £3 million from the mega placing and the £4.1 million derivative catch up this month on the original missed hedge?
HITS - I think that you are right when you say that the catch-up repayments for the missed hedge and the bridging loan are probably the issue for the company share-price at the moment. We have been looking for an explanation of the poor share-price performance and this seems like the most concrete reason for it so far. As you point out it is more of a cash-flow issue than a profitability issue and should be able to be refinanced at terms that are not too onerous considering the current production revenue. However, it does need sensible management . Some clarity on this would be welcomed. I will put a question up about this on the Angus Q&A section of the website and see what response we get at the end of the month.
WG818, thanks for the response. It makes sense. Debts are debts however they are incurred. However, as I said to HITS it should not take a financial genius to refinance them with the current income stream, just sensible and prudent management.
CITM, I would agree with you... except in all its borrowing to date, ANGS has only managed to negotiate eye-watering Wonga-esque rates (LIBOR + 12% on the main £12 million loan signed on 13th May 2021 and then SONIA + 15% on the £3 million bridging facility signed on 28th March 2023). That first rate seems to be around 13% and the second seems to be around 19.5% (!!!)
Perhaps now that consistently achievable production rates are becoming known, any refinancing needed by ANGS (if available) could be secured on less loan-sharky terms?
Fortunately HITS.........!
we have "George Lucan is an experienced finance professional with over thirty years’ behind him in debt and equity markets" as our Executive Chairman.........! :)
All the best (hmmm.......! :()
We also do not know what the total excess revenues after Mercuria equate too, + around £2m in condensate so far, they have been producing for around 10 months now, so for sure some of the excess has been utilized in various ways, including some servicing of other debts, the total excess is likely significant over the 10 months.
A lot of the talk seems to focus on future revenues but we should also ensure if we are doing that then also apply past too.
Canary
If only it wasn’t for the restrictions placed on them by Mercuria in the debentures placed on them they probably could negotiate a better deal.
See company’s house web site for the charge placed on them and the restrictions applied.
Lol WG, point out where Angus give away 8% gross of " ALL THE SBY FIELD PRODUCTION" at the end of the loan. And tell us what percentage of SBY was purchased with the Mercuria loan just to be honest of course??????
BV needs to check facts before joining into an actual conversation about the company. You actually haven't realized still that giving away 8% of revenues after the swap hedge finishes was part of the £12m loan arrangement?
Maybe spend less time thinking up insults, and more time reading company documents would help both yourself and everyone on this board?
But Octane, that is a simple question without insulting anyone. And I like that HITS has mentioned all the interest payments, but forgot the Tax reduction advantages.
What are the tax advantages?
Octane
The unbalanced one is on filter for me as it offers absolutely nothing…..apart from insults. I take it he was questioning the 8% gross figure? Not like it’s not mentioned anywhere is it!! Several RNS’s, CPR,s, annual accounts…….and it’s the fact that it’s a gross figure that’s the kick in the teeth. And yes the CPR confirmed it kicks in after 85% of the loan is paid before the unbalanced one starts again!
Canary, all interest payable on loans in deducted against profits.