Member Info for aligator

I was impressed with this performance by AH. It is clearly the nature of the man to look down as he speaks and I do not believe he relied to any degree at all on notes to deliver his impressive repsonses to Malcy's questions. Indeed, I thought his contribution was polished and professional.
As an ex-banker, I know that the IOG story will be of substantial interest to the banking fraternity and this was evidenced by his statement that the "bulk" of the funding would be in the form of senior debt. If one assumes that bulk means more than half then we are (possibly) talking of 50-60% senior debt. AH also said that junior debt and equity would be roughly equal so let's say that, collectively, they add up to between 20-30%. That would leave contractor financing at no greater than 30% and no less than 10%.
If one assumes that the junior debt is provided by BP, this could mean limited equity dilution - possibly (including pure equity raising) in the region 10-20%. That, to my mind, would be a good result but would appreciate views.
AH's comment that they are at head's of terms with all funding parties was not lost on me as well and I take considerable comfort from this volunteered statement.
There will possibly be continued slippage in the entire timeline of this undertaking but I am content to sit on my holding and possibly build at current prices since, as I think we wall agree, funding, FID and FDP announcements should see the SP rise significantly in the short term.
Disappointing to see the share price slip below 30p today. Anyone got a view on this movement - MM shenanigans?

GG

Hockey's comment on funding was not lost on me. BP has been a "partner" since the early days and I agree that we can probably expect to see some BP funding in the mix. I am also hoping that, given Mark Routh's background/achievements and the undoubted contacts he and LOG retain with the financial world, there will be a large element of traditional bank debt in banking world - presumably project/non-recourse related. This would limit the equity dilution.

My point entirely

Nothing new but I am not underestimating the confirmation that IOG was successful in the 30th licencing round, securing all three licences it had applied for - Goddard, Harvey SE and Abbeydale. These are all clustered around PL370 and contain 224bcf of discovered 2c resources. Indeed, Hockey states that these have "added significant reserves to our portfolio". That would be a nice number to add to existing proven reserves.
Thinking laterally, it occurs to me that, having proved up the integrity of the pipeline, IOG is now in an very strong position to hoover up further licences/acreage in the whole area.
Happy days.

Hi GG<br /><br />Many thanks for this. I am wholly aligned with your thinking and had not actually thought about proving up the Harvey well (which I think spuds in January). That said, if this well delivers more than expected I guess no one will complain.<br /><br />As an ex o&g banker, I am also anxious to see how the company has put together the funding. I would be delighted to see some non-recourse financing in among the total, assuming that the banking fraternity is still lending money to the industry! Any such debt would reduce the reliance on share/option related contracts, etc. <br /><br />Onwards and upwards!<br /><br />

Not being an investment/market expert, I would appreciate any views as to what will influence the share price outside of company developments (i.e. FDP, FID, funding etc) in the coming months. Specifically, are there any perceived "market" negatives that could bring the price down in posters' opinions?

GG has previously posted that any bid for the company would probably only occur as we neared first gas (correct me if I am wrong) and I would agree to that if IOG had not been desrisked to the point it is at now. However, I can now only forsee time delays, rather than anything technical, which delay or impair the undertaking. Therefore, if I was CEO of a mid/largecap o&g company with an interest, why would I wait to make a bid when the cost of the shares would then presumably be much higher than they are now. I appreciate this is simplistic, but any thoughts would be welcome.

What has happened here? Has the pipeline failed the integrity tests? Have the reserve projections been drastically reduced. Has funding for the Harvey well been withdrawn? Has the FDP/FID been hamstrung for negative reasons?
Has the NPV of producable gas reserves halved? No to all. So why all the fuss over certain delays which, in the context of an undertaking that has been developing now for 8 years and will have at least another 8 years to run, are minor?
Talk about a herd of Springbok feeding in lion territory - one f*rt and they all run for safety! Thankfully, many of the posters to this share are knowledgeable and experienced in the industry (where delays like this are common) which provides calm and composure. This company will succeed and will handsomely reward those who have hung in through thick and thin.

chomping at the bit for RNS' in the next couple of weeks.
An interesting end to the week, share price wise. I would not have been surprised to see it drop off a little but delighted with the opposite result. It is now, in my opinio, hard to configure/comprehend a scenario which could thwart this undertaking. It is feasible that niggles and glitches could result in time delays but nothing that could not be put right. Cost wise, this could raise total expenditure but not to any great extent.
I am not an investment expert so always focus on the risks and economics of a company/share. This one is relatively easy to decipher and mid-range post tax NPV estimates of £300m plus based on ca 120m shares in issue give me a warm feeling for the longer term term. VSA Capital's revised target price of 96p could be a fraction of where this share could go. That said, I am still of the view that the company may not retain its independence before these levels are reached.

Interesting to read the earlier negative comments/views of some subscribers - hidden agendas no doubt?
Patience is truly a virtue here unless you don't believe that the undertaking has been significantly derisked and that the reservoir predictions by experts are significantly flawed.
This BoD has, in my opinion, done little wrong over the past year or so and the inherent backing/support from LOG and investment from Burgrabben provide considerable comfort for private investors.
Roll on the announcements on FDP, FID and funding. If they slip into October I am not unduly concerend. There is a tremendous amount of work to be finalised, agreed and documented. Recent endorsement from VSA with revised share prediciton of 96p welcome.

The BoD is playing this whole process exactly as I would. It is an experienced Board with significant experience in developing assets and, importantly in raising funding for such. If some investors interpret the RNS negatively that is their perogative. My view is that the BoD is working stringently to a critical path established some time ago and trying to keep investors/the market informed as regularly as possible on progress. From what I read I have no concern that the next announcements about FID, FDP and funding will follow in a measured fashion, as the BoD has done to date. If there is slippage of a week or so I will live with that.
Harvey will be transformational for the company and the estimated reserves and increased COS make excellent reading. With forward gas prices where they are and concerns over energy supplies going forward for various reasons, UKPLC will do all it can to get these reserves into the UK distribution system (via the Bacton pipeline - 100% owned!), quite apart from benefitting from the substitution of expensive foreign gas and the tax revenues from production.
This really is a win win scenario for many. Hopefully, the main beneficiaries will be those of us who showed faith in the early days.

GG and Peakview

Thanks for the responses.
I have been unable to add to my earlier post regarding a rumour that another investor was trying to surreptitiously build a sizeable stake but, even taking account of my limited knowledge of how the markets work, I am still puzzled as to what has been taking place in terms of trades and the performance of the SP over the past week.
Any further views welcomed.
ATB

How certain can one be that sells are sells and buys are buys on the screen? I find it difficult to comprehend how the large sales yesterday saw the offer rise.

Anyone able to confirm/deny market rumour of a large institutional investor looking to acquire a sizeable stake before FID/FDP/funding announcements?

As an experienced, knowledgable BOD, IOG has said that its needs ca £300m of "funding". As we all know, that can be entirely from "equity", bank/other "finance" or "cash flow" (the latter in conjunction with contractor deferrred payment deals) or a combination of all these elements. You can bet your bottom dollar that this BOD is focused on third party debt and the contribution of cash flow to minimise what pure additional "funding" it requires to get through the entire development programme. I have seen this time and time again in the small/mid cap o&g industry and it is inevitably successful. The added plus here is that IOG is pretty much a fully de-risked investment scenario which places the BOD in an excellent negotiating position.
For these reasons alone I am of the opinion that equity dilution will be modest. All to be proven of course during the course of this month and then the next 15 months but again, in my opinion, worth the long term hold.

One has to presume that the Government/OGA are keen to see this development happen (domestic production replacing expensive imported gas, etc) and will be providing as much assistance to IOG as legally possible. I therefore do not think there should be any problem in getting approval for the FDP and then issuing the FID, which in reality tend to happen in relative tandem.
The key for shareholders is the funding arrangements to finance this development and the degree of equity dilution that IOG has to accept to achieve this. Personally, I have every confidence in the BOD, who are mightily incentivised via major shareholdings, to keep such dilution to a minimum.
As one of the previous posts stated, this is a life changing opportunity for those investors who got in early and have ridden the steady de-risking path to where we are today. I agree that these opportunities are rare but, if analysis is thorough and accurate investors should be able to avoid the disasters which seem to occur on AIM with regular occurrence.

ladies and gentlemen! This was very much an up and down road in the earlier years but, bit by bit, the whole scenario is being de-risked to the point of minimal prospect of failure. And all at a time when gas prices are rising and the UK government is eager to see increased domestic production reduce expensive gas imports.
I leave it to each and every one of us to speculate on future prices but, in my opinion, it will be the mid/large cap companies who ultimately determine whether IOG is able to fulfil its maximum value by itself or whether it will be as part of an bigger enterprise. For the record, I still believe that this "could" happen before first gas. Not saying it will but if I was CEO of one of the larger guys I would be focused on this opportunity right now and trying to calculate the optimum time to strike between IOG's lowering risk profile and increasing share price.

Given the 17 July announcement, one can only assume that the BOD and senior management team are working their socks off to hit the end September announcement. They will have been working on this for many months, if not over a year, and, frankly, if they had been struggling in any way to secure funding for the development project, I would have expected an announcement of some sort before now. That is not to say that the next 5 weeks could throw up tail end challenges but I have ever growing confidence in the BOD.
I guess people will always try to manipulate markets but, in this instance, I believe that long term holders now have enough of a de-risked picture of IOG to be quietly confident about the next 12-16 months.

Difficult to comprehend the movements in the price and the fairly sizeable spread differentials. That said, 31p nowseems to be holding. Anyone got a view?

Hi GG

To my mind, the Holy Grail would be non-recourse/project related debt provided by specialist banks or other financial institutions. This could be interest only (ie without warrants/options) and repayable over the life of the produciton life of the gas reservoirs. It is not dissimilar to your bond solution. However, given the company's "development" status, such institutions may feel that the development project has not been de-risked enough at this time to expose themselves to such funding arrangements. That said, I would like to think that the BOD has been astute enough to negotiate an element of such debt. Coupled with gas offtake pre-payments and contractor funding, I also agree that dilution will be restricted.

Given the well established background and experience of the BOD and senior management, I will not be surprised if the funding arrangements duly announced for the field development programme set new standards in both the industry and the oil and gas banking/financial sector. Indeed, I would go so far as to opine that contractor funding will become much more the norm in similar projects where the risks have either been eliminated, subtantially reduced or indemnified in some way shape or form.
This is why I share the view of other contributors that, ultimately, dilution will be considerably reduced. It is difficult to try and forecast numbers, there are just too many variables, but with most of the BOD and senior management all major shareholders one has to believe that they are all focused on the minimum necessary to procure the necessary funding.
For these reasons, I would also not be surprised if the share price was considerably higher, if not a multiple, of the current figure within months - subject of course to MM activity!