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The Latest Oil & Gas News Review
Recently the Oil & Gas media had reported, M&A activity had slowed as companies looked to preserve cash, as late as only last week we found reports suggesting the appetite for dealmaking in the second quarter, when WTI Crude prices plunged to a negative $37 a barrel one day in April, was so low that Q2 ranked as the third-lowest quarterly value of upstream deals since 2009.
Yet today we learn that Viaro Energy has announced it has reached an agreement with RockRose Energy to acquire the entire share capital of the North Sea firm. It is understood London-headquartered company Viaro Energy will acquire RockRose in a deal worth more than £247 million.
https://total-market-solutions.com/2020/07/06/malcy-talks-oil-gas-xxi/
What’s the rest of the toddler North Sea oil and gas Companies worth considering today’s events?
lonestag the whole deal stinks of stick up. It makes other NS producers valuations look ridiculous.
You should sell now if you think this will fall through due to a shareholders' rebellion. No chance of that, large shareholders will have been wall-crossed on this. No point in selling now - only change to current share price is to the upside, either by getting the sale price, or by a rival bid emerging (unlikely but possible).
Unbelievable.... so Viaro using part of Rre money to buy the company
Capital structure
Shortly after the Scheme becoming Effective and the re-registration of RockRose as a private limited company, Viaro Energy may use part of the RockRose Group's unrestricted cash balances to partially settle the Consideration due to RockRose shareholders under the Scheme or to partially fund repayment of the Facility Agreement(s), in all cases leaving an appropriate and sustainable level of working capital in the RockRose Group. Any adjustments made to the capital structure of RockRose,
Can someone please enlighten me what exactly happens now? I see the share price has moved to about £18.34. If I don’t sell right now will I be obliged to sell at £18.50 at some point?
MT Sparky,
You were valuing the company on reserves alone.
However we can add the cash, or subtract it if you prefer, given that is the method used to obtain the true enterprise value.
Therefore,
EV=MC+Total Debt-C
£240mn + £0 - £220mn
EV = £20mn
Ignoring all that and adding the cash, still has the price per barrel far greater than "12.7p"
Hi Rookie. I see you're in PMO. Will you be buying more following today?
The decoms always were holding us back and always would have, although more than manageable at $50-60 oil they would cripple us at these prices. I do think oil will recover again but I don’t think AA has necessarily sold us out. Cash was huge, but decoms were also big.
We were struggling to get II’s onboard because of the decoms,I recently read up that in the case of bankruptcy they can also be held accountable to cover these liabilities? I’m not sure how accurate this is but it would explain why our sp has really struggle to reflect anything like what we all thought fair value here.
Sasa where do you get £22 from. Per the RNS 'Accordingly, unrestricted cash balances at the same date amounted to US$ 289.8 million, equivalent to approximately 1,789 pence per RockRose Share'
My understanding is that there is no unrestricted cash set aside for decommisioning liabilities hence this needs to be factored in when looking at the deal.
Hi danawinner - well, if they have bought that crucial 15% of the float already this morning, you're ahead of me, then, so well spotted. If that is the case, then it does alter the dynamics of the situation, quite obviously... sasa.
Which makes AA et al 'U' turn look all the more unfathomable.
But on the other hand, Covid vaccine and SA et al working together to restore POO and the drop off of supply, £37/share could be on the mark again this time next year.
MISCARRY the 37 valuation was pre covid and oil price collapse?
Investor - the latest cash figure (circa £22 ps) was ex - the decom costs (known as unrestricted cash) and those prospective liabilities have been pushed out further, anyway - by two years or so, if memory serves, so that's a bit of a 'red herring' at this stage.
I think that AA's decision, as by far the largest shareholder with just under the 30% level, is borne out of frustration by him of the mkt's failure to properly recognise RRE's worth and going 'private' would nullify that handicap at a stroke.
However, selling such an undervalued enterprise at below even its cash level looks foolhardy to me, as it pays scant regard to the interests of the other shareholders. Moreover, letting it go 'for a song' affords an opportunity for a more proactive operator to step into the ring here or to prevent that happening, getting this offer upped to at least the cash level currently applicable.
Maybe, a more efficient operator like Serica could now be looking at this sudden opportunity to utilise its cash hoard after trying to find an attractive deal, on value grounds rather than simply a production boost, as they've recently re - iterated; its mkt cap is higher than RRE's, so no RTO probs if they do decide to intervene.
As I posted earlier, 'it 'ain't over until it's over' and we're a while away from that right now. Just my take on this currently, anyway - sasa.
Casually looks at GKP....has flashbacks. Pauses..ponders. Never say never.
but overall happy with the banked profit having only taken a position in March. Can understand the discontent..
For what it's worth, here is IC's view:
"This is perhaps a quicker end to the RockRose public company story than shareholders would have expected, with the company pitching itself as a future 100,000boepd producer. The cash balance - largely a product of the Marathon purchase - means the offer price is less generous than the hefty premiums indicate, but with an uncertain period ahead for oil and gas prices, we would accept once the papers arrive".
MTS,
UKCS will be fine for years to come imo, but long gone are the days of +$15/boe for 2P's. As for Hydrogen, fuel cells, batteries or other new technologies ... difficult one, as many appear to be over priced to me atm, but just seeing what happened to the DOT.com anything is possible. May need to revisit these companies again although my risk appetite has diminished recently.
atb
MTS,
Agree, with deals like this PI's never get to know the whole story. Need to follow AA to see where he ends up as that may give a clue why AA et al, think that doing a massive 'U' TURN for an offer of 1850p is acceptable. Be interesting too, seeing what NS deals are done by others in the coming months. My guess is you have not seen the last of Arab backed PE / PRIVATE companies making inroads into the NS.
aimo
We were talking about Hydrogen production Saturday. Does this deal spell the end of NS O&G equities? Fossil fuels are becoming toxic to investors as well as the environment. RRE couldn't raise equity. We should be looking at Hydrogen, fuel cells, batteries or other new technologies .
I joined for a long term hold a couple weeks ago. Never thought id be so upset sitting on a gain as quick as this. Really wanted more
Sasa. It looks to me like they have bought 15% or so of the company this morning, giving them circa 50%.
They need to get to 75% for it to be irrefutable, but unless they are planning to give some extra sweeties to their friends and relatives, in a couple of weeks, I think that it is a stick-on at £18.50 and it may or not worth be worth holding out.
Let us suppose that you manage to get an extra 15% from AA, I wonder whether it is worth the wait, imho.
I took some more Serica and TXP this morning, and they are already moving ahead, but probably a spike from like-minded reinvestors.
Good luck all, only annoyed that I top-sliced a couple of thousand last week. Bugger.
AND I missed out on a spread-bet last Friday as I was too busy. Ah well, count your blesings.
NewKOTB I just think this deal is a kick in the teeth coming today, when markets are booming, Oil up, Gas up, even Dutch TTF is up and climbing. What do you think?
"Totally agree sasa. I am not selling my 11,000 shares yet, £18.50 is a fking insult...."
Well we have a big buyer atm, able to sell my holding straight to market, no NT or need to breakdown into smaller tranches.
Investor81 the broker valuation of RRE post Marathon deal was £37/sh