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As PaulDrayton says, it’s a clever situation which benefits both RKH and FIG.
This “deemed Capital Gains Tax” from 2012 was valid at the time, but everyone knows that it is no longer payable including FIG. It has been written down to zero in the Company’ s accounts and the auditors approved that. The liability no longer exists under status quo. But there is a useful clause in the tax deed where it becomes immediately payable if the Company were to be taken over. It’s a poison pill to prevent a takeover and anyone in the know, knows it, so it’s useful to keep it.
When Odey tried to grab the cash element of the Premier farmout in 2013, via a court action to convert the share premium to distributable reserves, FIG used the CGT liability to take a security over “all” of the Company’s assets to prevent that happening. Odey was thwarted and left with his tail between his legs. That security is now the apparent clash with the OM award funder, as the potential cash assets increase.
It is a clash that can easily be resolved through a legal agreement for the ranking of securities, viz. who gets what first, if it all goes belly up. Banking consortia do this every day.
Maybe that’s why Sam is going to meet FIG next week?
I think the poison pill will remain even after the clash is resolved.
“London Calling” …..remember The Clash?
HI ii my broker hasnt converted my 100k shares in to the new co ?
any one else have this issue ?
Thanks Digitalboy1 for sharing SM's reply, and CitizenTS 08:38 post.
I personally feel FIG are total Pen1sHeads if they prioritise the ludicrous idea that Rock owe FIG £59.6 million from a 'irrecoverable carry of approximately US$ 670 million' that Rock did not receive from Premier.
Financially blackmailing Rock, if that is what they are doing, over Rocks monetising the OM award, instead of helping Rock to create their O&G industry, which Sea Lion alone will benefit them with $6Billion, is moronic at best !!
It's good to know why FIG now have a say in the OM award, however it leaves me with the impression FIG are way out of their depth, petty and incredibly short sighted.
As per my post yesterday, it’s a clever situation that suits both FIG and RKH. There is a good reason why it hasn’t been resolved!
From all of the post I have read it seems FIG are shi**ing in their own nest ! 🤷♂️
Informative posts chaps 👍..So after 4 years, FIG have still yet to agree the tax ammendment made by Rockhopper and they have security over all rkh's assets from the tax settlement deed.
That sounds pretty much exactly like what I was suggesting yesterday in my 23.03 post !
I had an email reply from SM ref the tax situation:
Please see below:
‘ In fact, when Premier left the Falklands it resulted in some $674 million of carry never being received by us. The tax calculation assumes that money is received. We have therefore reflected a reduction in the deferred tax from £59m to zero in our accounts, based on legal advice. FIG is yet to formally agree to that adjustment from their end.’
The likely next milestone will be putting the revised EIS out to public consultation
Security over the Award proceeds. Arguably the funder is junior to FIG in the pecking order. Sequential not pro-rata.
Patience
Had a reply from SM. I think Zinced came closest to answering but it's apparently a bit complex and involves a conflict. Here's his reply.
There is more complexity than this but at a high level we require FIG consent because the incoming funder wants security over the Award proceeds. That security would then clash with the broader security enjoyed by FIG over all of our assets which came into being at the time of the tax settlement deed many years ago.
Aaaaargh, spell check, "has to" , not history
At risk of perpetuating this trail, maybe everyone's at least partly right! A funder's security might or would only be effective against amounts actually owed to them. Almost history be that rkh remain the name actually "on the docket" when funder pursues RoI. Rkh then still actually receives the proceeds from seizing and selling assets. How does funder then make sure its all passed on as agreed? Security presumably is only and exclusively for that.
At the same time the tax status of the proceeds from selling the award might also be receiving attention.
Chess, this is my last post on the matter as we seem to be repeating ourselves.
You keep talking about FIG having a say about how Rock 'DISPENCE' funds.
The monetisation of the OM award is about how Rockhopper 'RECIEVE' funds.
FIG having a veto on that seems odd !
Jesus said to them, “Render to Caesar the things that are Caesar’s, and to God the things that are God’s.” And they marveled at him.
What is indisputable is that Rockhopper require the Falklands Islands Government to approve the OM transaction and the Falklands Island Government have also stipulated that no shareholders are allowed to receive any of the proceeds from OM so this strongly suggests to me that the tax liability is indeed related to OM or any other cash Rkh may come by until the liability is fulfilled, otherwise why on earth would Rkh require FIG to approve the OM transaction and dictate who how the proceeds can or cannot dispensed ?
Thanks Pre2rcd for that information. SM travelling to the Falklands is more likely to be a good sign that things are progressing, as opposed to a need to sort out a problem.
I fell the disputed tax liability regarding the Rock deal with Premier, unless anyone has information to say otherwise, is a totally unrelated issue to the Rock v Italian dispute. It is a red herring.
I emailed SM earlier asking why FIG have an effective veto on what seems a separate company matter, and unrelated to the Falklands. I will post if I get a reply.
Rkh are seeking an adjustment on the £59mln tax as they never received the Premier Free carry as agreed.
I asked Sam if there was any news from FIG regards approving the OM award sale. He said he will be in the Falklands next week so should hopefully have more info then.
Details of tax issue with fig 2015
Falkland Island CGT liability deferment
Released : 09 April 2015 07:00
RNS Number : 6748J
Rockhopper Exploration plc
09 April 2015
9 April 2015
Rockhopper Exploration plc
("Rockhopper" or the "Company")
Confirmation of Falkland Island Capital Gains Tax Liability Deferment
Rockhopper Exploration plc (AIM: RKH), the oil and gas exploration and production company with interests in the North Falkland Basin and the Greater Mediterranean region, is pleased to announce that it has agreed binding documentation with the Falkland Island Government ("FIG") in relation to the tax arising from the Company's 2012 farm-out to Premier Oil plc ("Premier").
The Tax Settlement Deed confirms the quantum and deferment of the outstanding tax liability and reflects the principles agreed between Rockhopper and FIG in December 2013 and is made under Falkland Islands Extra Statutory Concession 16.
Highlights
· Outstanding tax liability confirmed at £64.4 million (approximately $95.7 million) and
payable on the first royalty payment date on Sea Lion (or earlier subject to certain
events)
· First royalty payment date anticipated to occur within six months of first oil production
which itself is estimated to occur in late 2019 (assuming Sea Lion project sanction in
mid 2016)
· Outstanding tax liability amount may be revised downwards if the Falkland Islands'
Commissioner of Taxation is satisfied that either (i) the Exploration Carry from Premier
is used to fund exploration activities in the Falkland Island license areas; or (ii) any
element of the Development Carry from Premier becomes "irrecoverable"
· Rockhopper provides certain "creditor protection" undertakings to FIG while the tax
liability remains outstanding including (i) restriction on dividends or distributions; (ii)
granting of first ranking security over Rockhopper assets; and (iii) while such security
is in place, restrictions, subject to conventional carve outs, on granting further security
· Intention that at the point Rockhopper is able to secure senior debt for the Sea Lion
project, the security provided to FIG will be released and FIG will be provided with a
standby letter of credit to preserve its creditor position
· Rockhopper retains balance sheet strength with cash resources at year end 2015
projected to be approximately $125 million
Sam Moody, CEO of Rockhopper, commented:
"We are delighted to have reached this settlement with FIG under which we now have much greater certainty both on the quantum and timing of the deferred tax liability.
"Under the amended commercial arrangements with Premier we intend to access the full $48 million of Exploration Carry during the 2015 drilling campaign which should allow us to reduce the outstanding tax liability by up to £4.7 million (approximately $7.0 million).
"The security arrangements and unde
We have to expect that FIG will do whatever is best for FIG- regardless of any considerations for Rkh.
I have corresponded numerous times with Stephen Luxton (ex FIG Director Mineral Resources) and fair play in that he always replied to all my mails in detail,addressing my queries & commenting in on my statements but the overiding impression was 'Its got to be right for FIG' , 'Better No deal than a bad deal for FIG', so I wouldn't expect them to give Rkh any unnecessary quarter.
I have corresponded with Sam on the FIG tax issue a number of times too over the years and as far as I know nothing had been resolved, the outstanding figure is not known and I'm not sure the two parties see eye to eye or get along.
I imagine Navitas will be FIGs favourite now as they are pretty much going it alone anyway.
I'm sure Rkh will be pushing them on the matter and they certainly need that as they don't seem ready for what's about to happen once FID gets the green light as they're struggling just to sign OM off.
It’s not in RKH’s interest to settle the tax issue with the FIG until they are in production. It’s an unknown to potential predators which may deter takeover bids at lowball prices.
Best to keep it complicated for now as a form of protection.
I suspect the FIG position results from a legacy issue arising from when Crispen Odey tried (unsuccessfully) to extract monies from RKH which FIG (and other shareholders) did not want to see. In the last years accounts (y/e 12/22 pages 65/66) RKH explained, at length, that after taking professional advice regarding the "Tax settlement Deed" that " the most likely amount that the liability will be settled for $nil" They go on to state that "We are currently engaged with FIG in relation to formalising the tax implications of the termination of the 2012 Premier Oil farm down which resulted in an irrecoverable carry amount of approximately $670million. etc etc.
More T's to cross and I's to dot - I am sure that the lawyers will find an agreeable form of words to suit all parties.
Perhaps FIG are negotiating a possible cut of the OM award from the outstanding tax due 🤔
We don't know the detailed agreement rkh have with FIG, we just know FIG have a legal say in any proceeds rkh may come by, to what extent, we can only speculate but rkh owe them tax, how much, we don't know as they've been negotiating the matter for some years now but I have never seen any resolution. Has anyone here ?
Rkh argued that the Premier free carry didn't materialise as agreed but the did nevertheless receive $231mln cash & I believe a $48million exploration carry !
FIG having a say on what Rock do with the cash they have, is one thing.
Having a veto on how Rock obtain cash, from a separate part of Rocks business in the Falklands, seems irregular.
My understanding is that FIG do have a say in any cash rkh receives as we know they are not allowed to do what they want with the OM award,for example, we know FIG have stipulated no dividend or payment to shareholders is allowed and whilst we don't know what else is allowed or not allowed by FIG, they clearly have some prior agreement on any cash Rkh get from OM or anywhere else.
The detailed terms, we don't know but we do know FIG stated that non of the OM award can be paid out to shareholders until the tax issue on the Pmo farm out is resolved and If none of this was applicable then Rkh would not need FIG to sign off OM.