Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Just wanted to share by calculations for anyone who is interested. Let me know if you disagree. Assumes 3m therms per month at £1 per therm.
Gross Gas Revenue £18m (3m therms per month for 6 months)
Less Due to Mercuria £ 5m (1.5m therms at £1 per therm less fixed rates)
Net due to ANGS £13m (£18m-£5m)
Condensate Revenue £ 2m (160 b/d x £60 x 182 days; rounded up)
Total Revenue £15m (£13m+£2m) (Excludes revenue from Brockham/Lidsey)
Cost of Sales £ 4m (£0.22 per therm [based on interims]* for 18m therms; rounded up)
Admin Costs £ 3m (based on interims plus 20%; rounded up)
Finance Costs £ 2m (20% of £9m + 12% of £12m divided by 2 to get 6 months; rounded up)
Total cost £ 9m (£4m+£3m+£2m)
Net Cash Flow £ 6m (£15m-£9m)
Senior Loan £ 2m (based on interims; rounded down)
Def Acq Cost £ 1m (based on interims; rounded down)
Bridge Loan 1 £ 3m
Bridge Loan 2 £ 6m
Total Debt Due £12m (£2m+£1m+£3m+£6m)
Over / (Under) (£6m) (£6m Net Cash less £12m Debt Due)
*cost of sales based on interims is £2.4m divided by 11m therms for the period Oct22-Mar23. This obviously includes water disposal so its not exactly correct, however, condesate sales have increased so its right to include an uplift somewhere for that.
A_D
Thanks Singhie.
How much do you estimate Non-gas sales to be?
A_D
Singhie,
Thanks for the response. Have you done Forecasts for:
1. Cost of Sales
2. Admin Costs
3. Finance Costs (Interest)
4. Debt Repayments (Principal)?
Thanks
A_D
I am putting this out there...I know many will not be pleased with it but responses will be interesting.
If gas prices remain below £1 per therm, ANGS will definitely need more money in the medium to long term. In the short term they need money as there is no way they are paying back that £3m bridge loan in Sept 23 or £6m bridge loan in Dec 23, even if gas prices are £1 per therm. These of course can be rolled as a possibility. Nonetheless, debt needs to be eventually payed down.
I have done a cash flow forecast for Jul23-Jun24 and it suggests that a placing will be necessary in the next 6-9 months. Some will argue that winter gas prices will be higher; this may be true, but I am not relying on that.
So, who thinks there will be a placing?
A_D
Bubblepoint,
I took my own advice and did a little research. The following was pulled from the Q&A:
2 October 2022 (edited) - With the current two well profile, the designers estimated about 50 bbl/day of condy from Saltfleetby. In practice we cannot advise firm liquid flow rates to the market with confidence as the wells have been shut in for so long, but for the past two weeks flow rates have been much higher. Following the forthcoming sidetrack the designers originally estimated 100 bbl/day as per our CPR ...
30 December 2022 (edited) - The designers had reckoned on about 95 barrels a day of condensate from the combined flow of 10 mmscfd. Whereas we are looking at nearer 120 bbl/day from about 6 mmscfd.
30 April 2023 (edited) - With 2 compressors now available, and taking account of the condensate stabilization capacity of the plant, there is clearly potential to produce at 8 to 10 mmscfd from the 3 wells.
31 May 2023 (edited) - The permanent flow line programme is underway but won’t in itself improve gas flow rates from the well but it will increase our room for maneouvre in terms of mixing and matching the flow from wells, as well as our ability to measure condensate flows from each, and it will reduce the monthly opex.
It seems to me all 3 wells are producing condensate per the CPR albeit the numbers are higher than the expected CPR.
Happy to be corrected here.
A_D
Bubblepoint
Thanks. How do we know its only from the A4. Was that RNSed or in the Q&A?
Sorry for the ignorant question.
A_D
One of the reasons we get surprises is that we are not doing enough research (myself included) and obviously ANGS have hid certain things from us.
I was surprised by the £3m bridge loan being rolled forward as I thought the cash position was better. With regard to the £6m bridge loan I was less surprised since they had intimated they would need financing for the £4.2m (falling to £3.5m) deferred hedge payment due in June 2023. The remainder of the loan is for SFBY working capital and the Geothermal. Again, I underestimated the cash flow position with regard to SFBY and forgot that there is no funding for any other project. It really should not be a surprise.
In any event, another of the reasons for this, is that ANGS has not told us how much the sidetrack costs. I think it was supposed to be in the region of £3m per the CPR but having seen the Interims (Cash flow statement "Acquisition of fixed assets and oil production assets" £10m) . I'm not sure if the £10m relates solely to the sidetrack but that's my guess. It may be higher since this was at Mar 23 and there was more cost in Apr and May 23.
I also ascribe some of this to my lack of knowledge of O&G; maybe if I knew better I could have envisaged a significantly higher cost for the sidetrack.
A_D
Can someone help my understanding here please. Perhaps my facts are off.
The interims (?) indicated 120 b/d of condensate. This is for 2 wells using 1 compressor producing 5-6mmscf.
After the sidetrack was brought online, 1 well using 1 compressor producing 4.5 mmscf, gives 160 b/d of condensate. This tells me the sidetrack added 40 b/d of condensate. We could ask ANGS for the split to confirm. It also tells me that if condensate increases with the age of the well/field, the sidetrack is not as far along as the first 2 wells and maybe the first 2 wells are not being run down as fast as was previously supposed.
Hoping for some added value feedback.
A_D
HITS,
We are interpreting data differently. The board wants to see a valuation of £100m, this is not unusual as a strategic goal. If they did not believe in Saltfleetby, why are they preparing planning applications?
Have you considered the board recognizes that the market is not yet convinced of ANGS potential? Someone else also pointed out that SFBY will not last forever and it makes sense to look for other assets. As I have mentioned in other posts, there are many factors to consider. Some that I can think of currently:
1. Oil and gas is taboo now to investors particularly institutional investors
2. There is less funding for E&P companies; this is not specific to ANGS
3. Money from traditional investments have gone over to crypto
4. If I am not mistaken there was a large sell off (NET) recently by one of the large investors; this was sure to push prices down
5. No news in the near future so short term traders sold and went elsewhere
We can debate at length the reasons for the company valuation, but we will not know for sure. Just because the market does not believe, does not mean the board has changed its mind.
A_D
Gallder,
Thanks so much mate. Much appreciated.
A_D
Thanks Gallder.
Would appreciate if you could share how you convert the System Entry Volume to Daily Production therms please.
Thanks again.
A_D
QQ,
What measurements are the values for the System Entry Volume? Is that cubic metres?
Thanks,
A_D
If potential investors are frightened away or buy based on some random comments on a discussion board, neither should be investing.
A_D
Malcy touted VOG and BPC. Where are they now?
Ignore him. You will be better off.
A_D
Ocelot,
Agreed. Was just making a rough estimate. Should have said "at least 4.7%.
A_D
Does that partly explain the fall in share price ? One company sold 4.7% and the the other bought 3.2%. Net sell of 1.5%.
Strange days.
A_D
HITS,
My thinking is as follows, perhaps I am interpreting the various RNS' incorrectly. The two major cash flow users were :
1. The "unfunded" hedge (Jul-Sept 22)
2. The sidetrack
Minor ones were two "loans" (£12 and £6m Def Acq Consideration).
My view is that the £7m raise was to be used to fund the sidetrack and some of the hedge. The £3m bridge loan was probably to fund part of the sidetrack over run (and boy did it over run!).
The cost of the "unfunded" hedge is still unknown, but using Gallder's figures for Jul and Aug, this is around £6m.
Then we have the deferred amount of £4m (which I believe relates to Sept 22). Total £10m unfunded cost.
The £6m is necessary to meet the £4m deferral (which they did highlight may need to be separately funded to us in advance) plus trade payables from presumably the sidetrack.
I do think the monthly revenues will be enough to pay off some of the £9m debt but can't see enough funding to grow inorganic opportunities.
A_D
HITS,
You are making a few assumptions here:
1. Sub par cash flow.
2. If the price stays below 1p - it doesn't matter if is below or above. The debt will have to be sorted either through converting the loan and if it cannot then an equity raise. Either way its dilution.
3. The debt cannot be rolled forward
4. Winter is coming up, who can say where prices will be
5. Pure speculation on my part, but Forrest will not want to see a default and the assets lost. He will help find more funding...at a hefty fee for himself of course!
6. Why would management be borrowing money to invest in storage and geothermal if they foresaw cash flow problems?
A_D
Not sure what people were expecting. The additional compressor maintenance issue was a surprise, but how would they have known about it until they did the maintenance. It is possible they saw performance issues with it and decided to do some maintenance, but that is to be expected in the normal course of business. That said, I believe this is the second compressor, so am a bit surprised something purchased so recent needs more maintenance than the first compressor that was running for nine months. Happy to be corrected here; not sure if my facts are correct.
I would also add that ANGS have previously communicated compressor capacity of 6mmscf not 7mmmscf per Bubblepoint's post. They have always ran at lower than 6mmscf despite GL's ambitions (per various interviews). production is back to where it was prior to the sidetrack.
With regard to the water cut, the condensate sales more than offset the cost of water disposal. The gas sales much more so. It is not a significant cost to the company when compared to the revenues involved; it is a normal part of doing oil and gas business to experience such costs.
Whilst the issues with the second compressor was a little surprising, I was not expecting any major updates. I am hoping a CPR comes out within the next 6 months. Even if there is good news on the legal front with the oil assets, they are going to need funding or a farm out. Don't expect much and you won't be disappointed.
Still cautiously optimistic.
A_D
I've had a quick look at "similar" companies (oil, small cap, producing) such as UJO, PTAL, TXP. They appear to be in a similar boat as ANGS. Small cap generally is struggling to find funding. Oil is taboo for investors now.
I'm really looking forward to see commodity prices skyrocket because of under investment in the next 3-5(?) years.
A_D