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Kejoglo, First a qualification. I'm not an expert on Canadian bid process. These are my opinions and my decison to hold is based on my judgments until I'm convinced otherwise. I expect a lot more clarity when the formal bid documents are issued. I'd also expect more commentary from the large institutional shareholders. Delek may succeed with the bid but finish with less than the two-thirds that permits the secondary mechanism. I don't consider a Delek share holding of 60% to be a bad outcome. There are many listed companies successfully run with majority shareholders (>50%). I don't know the current share holding but I believe Google started out this way. Snap is planning an IPO with 90% of the voting shares held by the two founders. Londoner7
Thanks for your post londoner7. See below, you said; "If less than 50% is tendered, Delek may acquire those shares but they are not committed to do so" This is actually one bit I was unsure about. Delek can actually lose the vote ie be less than 50% of the remaining shareholders voting for the deal but still become majority shareholder and essentially control the company. A vote of say a bit more than 3/8ths of the remaining shares would just enable that. Could Delek buy up what shares were offered even if they then did not become majority shareholder, say to get them up to 45% or so? Once again thanks for the reply
Good post. Didn't know that Delek could amend terms during the 35 day period and also that they can't buy on open market above 20% holding.
Kenjoglo, you’re right to seek clarity. I did a considerable amount of research into this bid before deciding that I would sit tight and await developments. I believe my answers to your questions are correct but I’m happy to be corrected by anyone more knowledgeable in the Canadian bid process. I have been surprised by the lack of clear informed opinion on the Canadian Stockhouse BB. My answers in order: Delek doesn’t need over 20% to launch the bid but must launch the bid to get over 20%. I don’t know if the 2.6% signed over by the board subject to the deal succeeding is part of the 80% or so balance Delek’s bid is targeting. Total is 415,049,036 following the additional shares listing 14th Feb. This changes your numbers slightly. Correct. With 90% Deleck can squeeze out the last 10% or less of share holders. If more than 50% of the remaining 80% support the bid then Delek is committed to buying these shares at the latest bid price. Delek has reached agreement with the BOD at $1.95 Canadian. However, it is possible that the formal bid due late March may be launched at a different price. Once the bid is launched it runs for a minimum of 35 days during which Delek has the option to amend the terms of the bid, including price, to secure success. If the terms are changed, say the bid is raised; they apply to all tendered shares. The bid is extended by 10 days on any change to terms. There is a mechanism whereby Delek can secure the entire capital of Ithaca if it owns two-thirds of the capital at the conclusion of the bid. But I’m not clear on the mechanism. Delek are committed to buying tendered shares if =>50% of the 80% outstanding are tendered. It is a requirement of the process that Delek demonstrate they have the financial resource to complete the bid. If less than 50% is tendered, Delek may acquire those shares but they are not committed to do so. Ithaca will remain listed if Delek finish with between 20% and 90% of the total capital. However, if they achieve a holding of more than 66.6% I would expect them to proceed with the mechanism which allows them to acquire the total capital and delist Ithaca. Just to add. I believe that Delek’s intention is to acquire the entire share capital of Ithaca and delist but they may settle for a holding of say 40%. This bid is the only mechanism which allows Delek to hold more than 20%. They can’t acquire shares in the open market above a 20% holding. London7
Forgive me if this is obvious or old hat to you all but I want to be absolutely certain on a few points. Can you let me know if my summary is correct? 1) Delek own 19.7% of Ithaca, the board of directors own 2.6%. For the purposes of the vote does the "remaining shareholders" include the bod 2.6%? Or is the remaining shareholders the 77.7% who are not Delek and the board. I was under the impression that for a Canadian "takeover bid" the original party needed to be an over 20% shareholder in the company which Delek would only be with the guarantee of the boards 2.6%. 2) If the vote is for the 77.7% who are not Delek or the shareholders does the following hold; There are 412.7 Million shares in total (from Ithaca website but is this still correct??) 77.7% of this is 320.67 Million shares. If 90% or over of this 320.67 Million shares (288.6 Million shares) vote for the deal Delek buys them and all the remaining shares on a squeeze out. All shareholders sell, Delek own entire company and it is taken off stock market. If 50% or over but less than 90% of this 320.67 Million shares (160.34 Million shares or more) vote for the deal then Delek buys the shares voting for it and the remaining shares owned by those not voting for the deal remain held by the original shareholders. Delek becomes majority shareholder but Ithaca still listed on stock exchange. If less than 50% of this 320.67 Million shares (less than 160.33 Million shares) vote for the deal. The deal fails and Delek buy none of the shares. Current shareholders still hold shares and Ithaca still listed on stock market and there is no majority shareholder. (This last point is the one I am least sure about).
thanks very interesting. There is a lot more detail in a valuation but the basic calculations point to a higher price than £1.2. My guess is that there will be a significant increase in 2P reserves when the results come out - and yes a big chunk is gas. Either way, its difficult to get such a low value on the "back of the envelope calculation" that we are doing. I also think we own a large share in the FPF1? As such, that has real value. There is also future opportunities as yet unknown and having come through the worst of times, we should be allowed to enjoy some good times. I also do not believe Delek want the whole company so would be happy to get complete control but retain the listing. Therefore, take the cash now or hang around for a further recovery in oil price and those new tie-backs painting production. Any sort of optimistic view will see this heading towards £2. I am staying put. The issue will be that if the whole things fails then we have a damaged management team and there will need to be changes which would be a shame as I think they are technically good.
Part 2: The multi-billion barrel Ekofisk field north of Stella has developed much of it's reserves from the tight Ekofisk chalk. Sure - the reservoir is characterized as a high porosity low matrix perm rock but uncoventional horizontal multi-stage fractured wells eat that kind of rock up for breakfast. There is a development story not being told here I think. And that's not including the high probability of exceeding initial reserve estimates (which are by nature conservative), other nearby undrilled exploration targets, identified formations yet to be evaluated and cheaply increasing interest in other stranded pools. Tons of upside - and not one pence included in Delek's bid for that. Of course that would be forward looking and what self-respecting management would want to be caught doing that.... IAE is a company with a World Class assets surrounding and including FPF-1. Hopefully that catches the interest of other serious North Sea players and not just an opportunistic insider with deep enough pockets. Read more at http://www.stockhouse.com/companies/bullboard#lOEvPyW2y4Xq4u82.99
Foresight: your post from yesterday was reposted by ditchdigger251 on the Stockhouse board with some interesting additional comment. Hope you don't mind if I repost it here for those who may not have seen it. Just thought I'd share foresight's IAE share value estimate posted this morning: "here are some basic maths 1) Audited reserves - 57 million barrels 2) oil price $55 3) Operating cost $18 4) net margin $37 5) net revenue 37 x 55m = $2bn 6) less debt of $600m = $1.4bn 7) FX of 1.25 = £1.1bn 8) shares outstanding 420m 9) value per share = £2.6 These are conservative - oil prices could go higher and reserves will increase with the new tie backs. Also, there is the time value of money - so £2.6 should be more like £1.6 today. Its difficult to find a way to go to £1.2 unless oil is $30. Its a judgement call on where oil prices are going and what might happen to production. The SP would be £1.2 anyway so you have the choice of selling in the market at £1.2 now or hanging on if you feel positive about oil price and the company to continue delivering projects. The deleveraging effect would increase the SP anyway over the next year - so SP would inevitably go up absent anything else.... Need I say more" Well...yes you could say more. There's development costs for about half of the Proved+Prob (P+P) reserves given above. Let's say those with FPF-1 already in place is $15/boe (rough guess). Also the reserves contain natural gas boe's which at 6:1 are roughly valued at about $35/boe (the price is about 45 pence/therm (10.32 therms/mcf). That said let's say roughly 1/4 of the boe's are nat. gas and 3/4 are oil (just going from FPF-1's gas and oil design capacities) but also increasing the average oil price for the next two years to $68/bbl (I think WTI is forecast in the $65 range) and then use that price flat along with the $35/boe gas price. This results in a weighted average price of $60/boe. There's probably natural gas liquids (propane/butane/condensate) that would enhance gas value but I'm leaving that out for now. Using the new assumptions I get an undiscounted per share price of $3.22 USD which converts approximately into $4.18 CDN. Discounting to ~PV10 using a 0.6 factor equates to $2.51/share. So I can see where the £1.50 current value comes from. I've got a sneaking suspicion that Delek's bid is more based on a PV15 value estimate or maybe not including the full P+P reserves (like P+1/2P) - which is what most shrewd buyers will do and not pay anything for upside. And keep in mind that there is significant upside to be had in the GSA. Not only is there 4 primary Stella Andrew sandstone producers but the fifth well is in the Ekofisk chalk reservoir - the secondary reservoir underlying Stella Andrew which could be, as the Donald likes to say, HUGE! The multi-billion barrel Ekofisk field north of Stella has developed much of it's reserves from the tight Ekofisk
Agree and assuming everything remains constant then we will pay down debt considerably over next two years and the share price would be £2.5 by doing nothing. That's just the math and how it works. The enterprise value is dominated by the debt so removing will leave more for equity holders.
Keep your finger off the sell button. Don't accept the offer and watch and wait. At worst the bid fails and Delek walk away (actually, I say 'at worst' but to me that would be the best case scenario). Yes the share price, for a brief time, might fall below what it was pre bid (especially as some of the directors would have to fall on their swords). But I envisage that will be short lived and before very long (a month or two at most) we would be at a price above where we are now. Thereafter the share price will steadily rise as production increases, debt is paid down and new value enhancing assets are acquired. Within twelve months this will be at £1.50 per share at least!!
We need to wait for the formal offer and reaction of main players to that. Should be next week. If the main holders say they are rejecting then either Delek will up the offer or continue in the hope of getting a working majority. If they don't get the whole thing then we can stay in as minorities. I am happy with that as they could come back at some point with a higher offer to get complete control. I don't see another bidder as it would be somewhat hostile and they are not strategic enough to bother with. So either a higher offer to get it all or close at a majority position. Or they don't get to the required threshold and deal fails and we trade at a normal market level building over next 12 months to £1.5+
I had thought the exact same thing yesterday and had began to post a comment but got distracted. We could be at the "real" share price now - but what happens next?
Share price falling back may indicate that the market thinks this deal may fail - at least as to a complete take out.
Simply put if we compare where we would have been without this deal we have to conclude that come the vote the Board have agreed to sell at a DISCOUNT (in my opinion) - it won't even be a small premium. There is, to me at least, no conceivable reason why a deal was entered BEFORE news of first oil. It is obviously and simply wrong. That the deal includes an 18 Million Canadian Dollar break fee, at an offer of 1.95 Canadian Dollar per share, is an absolute disgrace! The news of first oil was tantamount to an admission of guilt. It was whispered to the world like a boy showing us a biscuit after being caught with his hand in the cookie jar. .... and now the share price stagnates as the market wonders how it can get at the value that is undoubtedly in Ithaca. If you cannot convince then confuse eh?
here are some basic maths 1) Audited reserves - 57 million barrels 2) oil price $55 3) Operating cost $18 4) net margin $37 5) net revenue 37 x 55m = $2bn 6) less debt of $600m = $1.4bn 7) FX of 1.25 = £1.1bn 8) shares outstanding 420m 9) value per share = £2.6 These are conservative - oil prices could go higher and reserves will increase with the new tie backs. Also, there is the time value of money - so £2.6 should be more like £1.6 today. Its difficult to find a way to go to £1.2 unless oil is $30. Its a judgement call on where oil prices are going and what might happen to production. The SP would be £1.2 anyway so you have the choice of selling in the market at £1.2 now or hanging on if you feel positive about oil price and the company to continue delivering projects. The deleveraging effect would increase the SP anyway over the next year - so SP would inevitably go up absent anything else.... Need I say more
Any bright sparks out there able to work out production given the number of days it takes to fill up the tanker? Lets have some answers please as this board is stagnating. Not one post yesterday. Cue the boat watching crew.
Was looking at the figures for Kraft's short-lived offer for Unilever. Note the ferocity of Unilever's rejection of a bid premium of only 18%. Compare this with the derisory 10% premium here (or possibly less if currency fluctuations impact negatively) and you can see our BOD almost hiding under the table hoping this will go away quietly, hence the whispering RNS announcing the game-changing, first-oil production at Stella. The maths here is so out of kilter that a significantly higher bid just has to materialise. After all, who would want to hand a bargain on a plate to an anonymous, opportunistic predator from a country which produces precisely no black stuff of its own? The BOD I here you shout?
'Family Day' a public holiday in Canada. Markets closed in Canada which could explain slight drop in the UK AIM pricing.
Are Off because they know people are tracking slime bags?.
This price surely 116.75 worth buying a few 100,000 and waiting for £1;20 provided money not needed any where else for a few month's ? anyway GLA stay positive.
It will take a while to ramp up production - we know the tanker is there. Nothing new now till end March. Then we get a sense as to how initial rates are performing. But would not expect anything different if all wells are opening up and no valve problems. We should get a reserve report as well i think. Also the formal offer will be out soon so we can see how they have come up with £1.2.
Fair enough Keith.....but why the blackout....what's so secret on ship status?
Mirapods, they will open the valves gradually between 6-8 weeks and then they will have the full potential, imo...
So why would Ithaca/BOD have the various ship transponders turned off at the FPF-1 location? Mickey mouse RNS (pretty weak from The Les) announced production last week. ..Is it not going well or is it major significant flow rates? Why the blackout ....to suppress price is my guess....greedy BOD bunch! What are the big share holders sayin?
No way is this going to be sold for what Delek have offered. They will fall seriously short of what they require. But they have invested too much time and effort to just walk away. They will up the bid - by how much is the real question. Always assuming of course that we don't, in the mean time, have an alternative buyer! Now that really would set the cat amongst the pigeons!! No, this is far from over and there is serious money to be made here rather than chasing the next best thing that could see the money earned on Ithaca lost as soon as you switch.