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ralph2010,
How much debt have Tullow got ?
My thoughts are with Zama and UKEF and PMO'S FCF the numbers still work, they might need a modest fund raise in addition.
PMO still US$2.15 billion in debt .
"rather simplistic to say the least"
Thanks for that. The starting point is the deal PMO signed up for; $337 carry and $750 million standby loan.
DURRANT states he is "comfortable" and RKH state they are "fully funded"; Isn't that clear?
You wrote;
"So even in the best case scenario, RKH are $223M short on the costs to fund Sea Lion with no discernible cash flow to pay G&A before Sea Lion produces oil."
Are you telling me that PMO could not find $223 m to loan to RKH? Their finances are much improved and Zama is to be sold.
Look, I'm sure it will all come out in the wash but it's not as clear cut as cyan2 might have it. His view is rather simplistic to say the least.
GLA.
Thanks Biffadog. I will take time to digest your clarification but like Cyan I thought the situation was far more straightforward as stated in RKH presentation - in fact provided the project went ahead RKH were fully funded.
Remember too that a farminee will bring in cash for their share AND reduce the cash requirement by PMO for their now lesser share of SL.
PMO are fully aware of what they signed up for. In the 1st May interview DURRANT stated he was "comfortable".
He obviously believes all the numbers work for SEALION to ackieve sanction.
That standby loan is important and he knows it. He wouldn't have said he was comfortable if PMO could not honour EVERYTHING they signed up to.
"Rockhopper’s share of Sea Lion Phase 1 development fully funded post project sanction through $337 million Development Carry and $750 million Standby Loan from Premier"
What you need to understand is that a whole heap of stuff has changed since the original PMO/RKH deal and that everything is very much up in the air until there i clarification on the ECA/UKEF funding.
However take the $750M stand by loan from PMO. Good luck with that. No chance.
If you have your doubts then phone RKH yourself and get clarification.
I'm not saying it won't go ahead, I'm just pointing out what's in play. That's my lot.
GLA.
$750 million Standby Loan from Premier - How laughable ! Thats about PMO MCAP. They cant even find that for themselves
I find your argument very confusing. The carry of $375 million is for PMO to honour.
Rockhopper have updated their presentation to include the revised overall $1.8 billion cost
" Rockhopper’s share of Sea Lion Phase 1 development FULLY funded post"
"fully funded" means just that.
hTTps://rockhopperexploration.co.uk/wp-content/uploads/2019/09/Investor-Presentation-September-2019.pdf
18th September 2019
p19
"Sea Lion funding package progressing with ECAs, project finance lenders
and contractors
? Rockhopper’s share of Sea Lion Phase 1 development fully funded post
project sanction through $337 million Development Carry and $750
million Standby Loan from Premier"
Morning Whackford,
Apologies for any confusion I may have caused. It was certainly not intentional.
When the project cost was $1.5B we had $800M from the ECA, $400M from the service companies (pretty much agreed) and $300-400M cash from RKH and PMO.
Whilst RKH have a $337M carry, there was no certainty at the time that this could be split between the the ECA part and the cash the actual companies would need to find. This is up in the air and is for RKH to negotiate with PMO.
So, if RKH cannot get that flexibility, it might well meant that they only get 40% of the $300-400M ($160M at 40% of $400M) and "lose" the rest of the carry. That was certainly the situation a while back when I spoke to RKH about it.
However, if the ECA funding does not come up trumps, it may well be that RKH manage to transfer the remaining $217M of the carry ($377M-$160M) over to the ECA part of the deal.
RKH need 40% of that $800M which is $320M, so even then they are a bit short.
However the project cost has now increased to $1.8B so RKH require an extra $120M (40% of $300M).
So even in the best case scenario, RKH are $223M short on the costs to fund Sea Lion with no discernible cash flow to pay G&A before Sea Lion produces oil.
My main point still stands though. The gamble is not whether Sea Lion will go ahead.
It almost certainly will and PMO have various options to pay for their share comfortably.
The gamble is on what basis RKH can manage to fund their share should the ECA funding not come be approved (in part or while). Even a small amount of ECA funding will bring with it the banks. Without any UKEF funding in the pot, the banks are not interested. That is fact.
Maybe I painted a picture that was a little too grim but if you don't understand how this deal is put together then you can't make an informed decision on how good a punt it may or may not be.
I wish you all luck and may well join you.
GLA.
BlooBird,
Have a read through the UKEF annual report 2018-2019.
I posted the Premier Oil quote from it on here a little while ago. It doesn't mean anything in particular I just find it interesting that they have been talking to Premier Oil about one year ago.
I regard Biffadog as one of the best posters and anything he writes is worth careful reading. However, his post of yesterday confuses me.
He says SL will get approval by PMO and there are other options than ECA funding. If one accepts this, there is no problem for RKH because they get a free carry regardless of the source of finance. All that matters to RKH is that PMO goes ahead with SL.
However, I can see two factors that may cause PMO not to go ahead:
1. Poor lookout for the oil price.
2. Failure to get a farmin partner, thus leaving PMO exposed to their current 60% of SL which may present a greater risk than they prepared to accept.
Auson
You posted
"Interestingly Premier Oil were consulted by UKEF in conducting their research."
Where did you get that information ?
Carrot, I agree but the reality of that happening is zero. Unless there is a large share holder willing to pull the trigger. Which you have of course already said you do not believe can happen. There is no chance of galvanizing / organizing a large amount of small share holders in to a group with sufficient percentage to enact such. Nor (IMO) can it be done from this BB (too small a readership or ability to organise). IT may gather some support for the next agm, if we do not lose site of the fact what he/ they have squandered, and If every small share holder voted against on their voting form.
The above options are the only realistic way IMO.
To try and pull the whole board in one go would be suicide. The Captain of the ship is fully responsible for the crew.
Rgds Sft
If anyone cares to do any research they will find the annual demand for oil is increasing year on year. The reserves in the Falklands are large and of a high quality which also additionally is a plus point. OK there is a green revolution but it has along way to go. People forget that oil is used for much more than just energy.
I'll surprised if they get UKEF, with the targets for Co2 and the Greta Turdberg affect. Wont look be good for votes at the next general election and browny points for refusing it , probably even publish a refusal to show how good they are etc.
Hello Biffadog,
Fully agree with your assessment and content.
An accurate appraisal of the situation.
I would be interested to know your opinion of the BoD and if you think Sam Mood is the right person to keep steering the ship.
Mine is: I want him removed, even if RKH survive this and we get what we need.
Rgds Sft
If no UKEF, PMO might aswel kick SL down the road and wait for 2-5p and then take RKH out or maybe Sam will be tempted with a merger and some £££££ with a position in PMO, as tea boy perhaps ?
What about the money agreed for RKH carry? Or amongst other things have you conviently forgotten to mention that!
Probably why directors haven't bought any shares for years. All the RNS have been a polished turd for years now
I am not saying UKEF application will fail. Far from it and yes, I agree that UKEF have plenty of funding available.
Either way PMO will go ahead with Sea Lion. That is pretty much a given.
All I am saying is that if you are a RKH shareholder the gamble is not whether Sea Lion will go ahead, the gamble is whether PMO get UKEF funding as without UKEF funding RKH are up the creek without a paddle. They do not have the luxury PMO have for raising funds to pay for 40% of Sea Lion.
If UKEF funding comes in then you win. If UKEF funding does not come in then the best you can hope for is a sale of the company, as any other route (equity raise, CBs etc) leads to massive dilution to current shareholders.
I've lost money on RKH from 50p down, so just weighing up whether to have a punt at the 18p level or not.
I just think it's important to understand the bet that's all.
GLA.
Hi Biffadog,
UKEF have an extra £2billion to grant for years 2020 and 2021 @ £1b extra per year. Interestingly Premier Oil were consulted by UKEF in conducting their research.
All the best
I think there is very little doubt (if any) that PMO will progress with Sea Lion.
The question is how it is funded and the implications of this to RKH.
If the ECA funding does not come in, then PMO have plenty of other options to finance Sea Lion.
The sale of Zama will help, combined with cash flow and/or some other form of corporate finance. Plenty of options, especially now that PMO's debt is starting to come down to manageable levels ($1.5B is current target).
RKH have no other options available (an equity raise would struggle to raise the sort of money required and in any case would wipe out current shareholders. CBs would do much the same) and would most probably will end up having to sell the company to the highest bidder.
Without ECA funding the banks are not interested in Sea Lion. Fact. Both TD and SM have acknowledged this. The banks want to see the UK government with some skin in the game due to the political uncertainty down in the Falklands. They don't require the full $800M from UKEF, as even a gesture is probably enough for the banks to get involved.
So the gamble with RKH is not whether or not Sea Lion will get signed off.
The gamble is whether or not PMO and RKH get the ECA funding, because without this RKH are sunk.
The Ombrina Mare litigation matters not a jot either way, as even if RKH were awarded compensation at the higher end of the scale, it still does not get close to covering their share of Sea Lion.
Unfortunately the BOD of RKH gradually gave away all the upside of the original deal with PMO and are now left with SFA and have long since frittered away the $231M in cash they received back in 2012 and now have nothing to show for it.
If the ECA funding comes in though, then there is light at the end of the tunnel.
If not, things look very bleak for RKH and the best outcome for current share holders is the sale of the company to the highest bidder.
FWIW I don't hold any RKH at the moment but have held along the way and lost a lot of money. Just trying to weigh up the odds and decide whether to have a punt on a good outcome.
I wish you all luck whatever happens.
GLA.
Blades fan myself - been going for 54 years. We are the original United - but regarding trophies, don't do those LOL
Liverpool are a great side but we gave them a good game at Bramall Lane and lost to a goalie error...
Anyhow hope you rampers have got it right, fingers crossed - I'd like to see the (over-paid) numpties buy a few mind
Nigoil: told you lad....I'm a great judge of character, he's utter vermin, but you're right.... I'm going to ignore the tool from now on.