Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Heritage is the state owned oil company. The taxes/royalties on these new licences are more favourable than those for existing licences, but in return bidders were required to give a carried interest to Heritage (the amount seems to vary as Trinity only had to give a 15% share on their new licence).
I had a wobble a few minutes ago and considered selling a load of my Angus shares (I was considering an opportunity elsewhere rather than experiencing a lack of faith in Angus). I was persuaded not to by the fact that my broker was prepared to quote for 3,000,000 shares. That makes me think there’s a buyer in the background, which reminds me of all those large late trades last week.
They are nearly a month into a deep well though PipeDragger: a well with a 63% chance of success and one that could, according to Cenkos, quickly add 400bopd to production.
It’s encouraging to see from the new presentation that Jacobin is targeting three levels and that it’s estimated that there’s a 63% chance of success with at least one of them.
The results of the Onshore Bid round also appear to be in the process of being announced as TXP have announced their success with one licence (Challenger, who like Trinity are also reported to have won a new licence, haven’t announced anything yet).
Simon Thompson tipped Trinity again today: see https://www.investorschronicle.co.uk/ideas/2023/06/12/an-oil-price-play-with-huge-recovery-potential/
In summary he points out that, due to lower SPT, lack of hedging and lack of provisions, 2023 should see Trinity’s profit increase to $9 million despite lower oil prices than in 2022.
He then points out the three near term share price catalysts: Jacobin and the Hummingbird deep wells; Buenos Ayers; and Galeota.
He concludes with: “Potential for positive newsflow is certainly not being factored into the current price…That’s because the £30mn market capitalisation company is priced on less than four times Cenkos’ post-tax profit estimate for the current year. Moreover, based on its 18mn barrels of 2P reserves alone, Trinity's is valued at $2.10 per barrel, a huge discount to sector peers, and $0.57 per barrel once you include 2C reserves. Recovery buy.”
And the interim accounts are due on June 30th this year too. See https://www.angusenergy.co.uk/investors/financial-calendar/
If I could delete the last paragraph of my last post I would as you’re quite right WG818 the old pipe work is still being used with a new extension, but I don’t accept that Angus’ estimate of the decommission costs is incorrect.
However, even if I’m wrong about the decommissioning costs Angus still got a great deal. Saltfleetby has plenty of gas and will be an ideal storage site when it runs out/become uneconomical to produce.
When Angus acquired 51% of Saltfleetby Energy Limited on June 19th 2019 there was no certainty that it would have any producing assets.As the RNS announcing that acquisition stated, “Angus Energy has obtained quotes… to effect abandonment (£1.75 - £2.5 million), each of which fall below the sum of the proposed payment by Saltfleetby Energy. Saltfleeby Energy has agreed to retain the liability for all abandonment costs surrounding the subsurface pipelines from the two sites to the Theddlethorpe Gas Facility together with certain redundancy costs which would otherwise fall to be treated as expenses under the JOA.”
Therefore, at that stage Angus was responsible for the abandonment costs other than those concerning the subsurface pipelines, which remained the responsibility of Saltfleetby Energy. Saltfleetby Energy appears to have estimated those further costs at £1.225 million, taking the total abandonment costs to between £2.975 million and £3.725 million (Angus’ last account show abandonment costs of £4.36 million and that also includes its share of the various oil assets).
Although abandonment costs are estimates, Angus’ accounts make clear that provision for decommissioning is recognised on full installation of oil and gas production facilities and the amount recognised is the present value of the estimated future expenditure (see page 54 of the accounts).
In those circumstances the decommission costs of Saltfleetby are unlikely to be anywhere in the region of £12.5 million.
Although the production assets at Saltfleetby were correctly re-recognised as tangible assets as the field came back into production, the two pipelines to Theddlethorpe can’t have been included in that as there’s no gas facility there anymore.
Look at note 7 on page 7 of Saltfleetby’s accounts for the period January 1st 2019 to May 31st 2020 (they were filed on July 27th 2021 and are available here: https://find-and-update.company-information.service.gov.uk/company/00953066/filing-history ). The decommissioning provisions were reduced from £12.8 million to £750,000 (by May 22nd 2022 they’d been increased to £1.225 million). That reduction has been audited. In any event, Angus’ purchase of Saltfleetby has been a success: it’s producing about 10mmcf of gas, debts are being repaid, cash is being generated, plans are being made for expansion and production is being managed by experienced people.
What’s the relevant RNS WG818? Angus put Saltfleetby’s decommissioning costs at £2.5 million at the time of the initial acquisition and had that confirmed by outsiders. That remains the provision in the accounts - see note 22 on page 69 of https://www.angusenergy.co.uk/wp-content/uploads/2023/03/Angus-Energy-Annual-Report-2021-2022-1.pdf (Saltfleetby’s total provision isn’t individually listed, but they increased the provision by £1,225,000 following the acquisition of the outstanding 49% indicating that the total is just under £2.5 million).
WG818, Paul Forrest didn’t offload anything. Some posters seem to thing that he owned Saltfleetby for some time and didn’t know what to do with it, but that’s not correct. He was clearly negotiating with Gasprom and Angus simultaneously.
This can easily be seen by looking at Companies House’s records for Saltfleetby Energy Limited at https://find-and-update.company-information.service.gov.uk/company/00953066/filing-history . They clearly show that Gasprom (which appears as the Russian Federation) gave up control on June 17th 2019 to Forum Energy. Angus then announced it acquisition of 51% of the company two days late on the 19th - see https://polaris.brighterir.com/public/angus_energy/news/rns/story/ry53g9w
I don’t think Paul Forrest has any regrets.
Gasprom paid him to acquire Saltfleetby, he handed over Gazprom’s cash and 51% of SFY to Angus, waited patiently whilst Angus developed SFY, and then sold his remaining 49% for over £14 million (since parts of the payment were in shares the exact amount depends upon the price at which he sells them - he’s done well so far selling many well above the issue price).
That said, I don’t think Angus shareholders should any regrets either. We’ve acquired a very valuable asset (gas now, storage in the future) for very little.
It’s true that Angus’ financiers will also make a great deal of money (although they got very lucky with the hedge), but then they took most of the risk. They’d have nothing if the processing plant hadn’t worked and we wouldn’t have that much, for now at least whilst the hedge is in place, if they hadn’t also funded the initial stages of the sidetrack (it’s a nuisance that it overrun in time and expense, but that was always a foreseeable risk and one that will become less important in time).
On June 1st the gas price for July was 54p.
Although the price has been turbulent since then with large day rises and falls, it’s current just over 80p (an almost 50% increase so far this month).
It’s worth remembering that June is usually the month that prices reach their year low and then start to recover. At the moment this year looks to be no exception.
Given Angus’ steady and significant gas production flows (hopefully they’ve got this months’ expected maintenance out of the way), its share price should follow the gas price up.
Perhaps they knew gas was about to jump? Of course they didn’t, but it’s just reached 74.75 - the highest this week and a 17.9% jump on the day https://www.bbc.co.uk/news/topics/cxwdwz5d8gxt/natural-gas.
From the FT: https://www.ft.com/content/f69e5069-1a00-42c1-8219-84ccd5cbbfd9
“Britain’s windfall tax on oil and gas producers is set to be scaled back as part of efforts to boost investment in the North Sea, according to three people briefed on the government’s plans.
“The chancellor, Jeremy Hunt, is expected to confirm plans to introduce a “floor” on the 35 per cent levy in the coming days so that it only applies if oil and gas prices trade above a certain level. Treasury officials are due to meet the oil and gas industry on Friday at a forum in Aberdeen.”
The Telegraph reports that the announcement could be made as soon as today (Friday): https://www.telegraph.co.uk/business/2023/06/08/jeremy-hunt-poised-ease-windfall-tax-boost-north-sea-oil/
I agree with the others who thought it was a typo - there are only two compressors and the second was only recently installed (it wasn’t a quick job either, but one that took months). I wonder whether it was Freudian typo though? Previously the next step after the sidetrack was to consider a second sidetrack to open the southern lobe, but in the recent interview Richard Herbert raised the prospect of increasing the plant capacity so that the gas they already have access to can be extracted faster. If that provides a better/quicker return on capital, it’ll be a good option.
Perhaps the planned shut down referred to in this answer:
“What is the cause of the current inconsistent flow readings, is the well cleaning up as expected or are you experiencing increased waste liquids? Are Works to the permanent pipeline causing stoppages? Are you experiencing tripping similar to when the initial wells were brought online?
“Asked on 31 May 2023
“Principally tripping has been to do with increased flow rates but also load balancing around the compressors, the control systems and ongoing teething problems with the units as the third compressor is settling in. The plant seems to have steadied now but we do have a two/three day shutdown planned for June, and will have shutdowns in future months. They do not mean that there are any insurmountable problems and we aren’t budgeting for regular outages, beyond a day a month’s maintenance shut down.”
You haven’t read last week’s Q& A Paddylogic. The company is in a closed period until June 30th which prevents the directors from buying.
“Hi, Since the most recent LSE interview, have any of senior management purchased shares in the company? Are senior management in a closed period? Thanks Asked on 31 May 2023
“We are in a close period due to forthcoming interim accounts. For general information this is the definition from the AIM Rules for Companies:
“CLOSE PERIOD (i) The period of two months preceding the publication of an AIM company’s annual results (or, if shorter, the period from its financial year end to the time of publication); and ♦ if it reports only half-yearly, the period of two months immediately preceding the notification of its half-yearly report or, if shorter, the period from the relevant financial period end up to and including the time of the notification; or ♦ if it reports on a quarterly basis, the period of one month immediately preceding the notification of its quarterly results or, if shorter, the period from the relevant financial period end up to and including the time of the notification; (ii) any other period when the AIM company is in possession of unpublished price sensitive information; or (iii) any time it has become reasonably probable that such information will be required by these rules to be notified.”
On June 7th 2022 the gas price was 136.29p.
By June 15th 2022 it had increased by 88% to 257.78p.
Angus’ share price would surely benefit from a similar increase, which would take the gas price from 69p to 129.7p, this June.
Reading through the comments on the Crowd Justice page that’s seeking funds for the judicial review against the Balcombe planning decision (see https://www.crowdjustice.com/case/stop-balcombe-oil/,) it’s interesting to see that people are willing to hand over their hard earned money without checking the facts: there are numerous references to how this “fracking” project mustn’t be allowed to go ahead.
Fracking has unfairly been demonised as a consequence of some US operators making unnecessary short cuts, but there will be no fracking at Balcombe. There will still be plenty of green fields in Balcombe (a place where, if you look on Google Maps, almost every house appears to have a driveway with a least one car parked on it; there aren’t many solar panels either and I suspect that the large sawmill means that plenty of HGVs already pass through) as the well site is very small (it’s just below the station - which has a rather large carpark even though most of the houses are nearby).