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HITS,
Thanks. I though so afterwards.
A_D
Have to agree with HITS here. Too many on this board overestimating the impact of revenue on the market and not considering other factors.
Even though not a disaster, cash flow from Apr - Sept 23 looks tough. At the end of March 23 they had £3m in cash .
ANGS are estimating £3m revenue per month (3 mm therms a month x £1m). Taking a conservative approach and estimating £2m per month in free cash flow. Over 6 months (Apr-Sept 23 given that the sidetrack began producing in May and rates less than £1 for a bit) possible free cash flow from revenue could be £10m (a very rough estimate net of hedge) . Assuming no change in receivables, the total £13m could be used for the following:
1. Pay another £2m on the £12m loan
2. Pay another £1.2m on the Def Acq Consideration
3. Pay down the Bridge loan £3m (after rolling for 3 months to Sept)
4. Pay the Def Hedge of £3.5m
5. Trade payables of £2m at March, plus the extra incurred up to the pipework being completed
The new £6m bridge should get them through the cash flow timings for the above. I do see Q4 2023 onwards, being better. Free cash flow for year ended Sept 2024 estimated at £24m should be enough to pay off all current debt. The major consideration is funding for new initiatives like wells at Saltfleetby, Balcombe, Brockham and possibly geothermal.
On the plus side, debt is being paid down, revenue is being generated and some cash is being used to expand into other revenue streams. Still much better than 1 year ago.
As I said, I take a medium to long term view here. Still optimistically cautious.
A_D
Highlights
Potential Future Drilling and Gas Storage
1. Engaged planning consultants to submit a further planning permission to provide the option for an expanded site at Saltfleetby to encompass a number of new wells and process plant.
2. Gazprom-Wintershall, estimated the storage capacity of the Saltfleetby Field to be between 700 and 800 million cubic metres
Geothermal - The program kicks off with further 2D/3D gravity and heat flow modelling, a comprehensive seismic survey, shallow drilling and finally a third party Feasibility Study.
Brockham - The Field has been shut in during the period, awaiting essential maintenance and overhaul of equipment. Plans are being made to restart production in the second half of 2023.
Balcombe - Judicial review in July 2023.
Revenue to Cost of Sales - 16,466 / 2,356 = 7x
Hedge Cost for Derivative (Net) for the period - 11,554
My estimate for the full cost (Gross up) so far. Assumes no rolled forward for Jul - Aug 22. (perhaps Gallder / HITS can help)
Oct 22 - Mar 23 = £11.5m
Jul 22 - Sept 22 - 3.2m therms as follows
Sept 22 (0.8m therms payment deferred to June 23) = £4.2m
Jul 22 - Aug 22 (2.4m therms x 4) = £9.6m estimated
Add back Jan 23 - Mar 23 Net inflow (843,750 x 4.38-market rate) = £3m estimated
Total = 28.3m
If there was a roll forward (of two tranches of 843,750) then £28.3 - £6.4 = £21.9.
Given the size of the Liability, I am beginning to think there was a roll forward (of two tranches of 843,750) and the inital RNS (stating this) was right, even though subsequent ones said some of the raised cash was for the hedge (which could also have been right). Interestingly, the Sept 22 accounts do not disclose any payments for the hedge at that reporting date unlike the the March 23 interims. Of the 3.2m for Jul-Sept 22, one tranche of 0.8 was crystallized and deferred, two rolled and one disappeared into the ether.
Trade and other payables up by £4m - increase in Trade payable £2.2m and Bridge Loan of £3m guessing due to sidetrack . Offset by £1.2m reduction in Def Acquisition Consideration.
Loans reduced by £2 (Original £12m)
A_D
Sorry. It's in the RNS. Lol.
Should have scrolled down.
A_D
Hi,
Can someone please help me and post a link to the Interims. I can't seem to find it for the life of me.
Thanks
A_D
Gallder,
Thanks for this. Saves me from doing a some work.
A_D
Rusty,
I am inspired for the medium term and not the short term. The recent drop is not a big issue for me. I'm thinking about picking up some more. My personal investing strategy is not to focus too much on short term price fluctuations.
The points (1-4) were to highlight what other people may be thinking. I was trying to explain buyer behavior. With regard to point 5, ab76 mentioned in their post about increased production. I was trying to highlight its only one variable and other factors such as consistent, long term production should be considered. If they were consistently producing 0.25 daily, I would be a little more bullish at this point in time.
I am reminded they are still cleaning up the well (per CEO interview?). Happy to be corrected here. Thus I hope to see stable production by the end of June (my own timetable, nothing to do with ANGS).
Hope this clarifies.
A_D
Ab76,
A few points:
1. Whether people like it or not, short term traders affect not just supply but demand of shares. With no foreseeable news flow, they headed off to the next best thing.
2. Missed deadlines can affect prospective buyers confidence (both short and long term); trust is a factor in trading/investing not just revenue.
3. Missed deadlines have also Pushed back plans / work for other assets and interests.
4. The possibility of a missed deadline for the permanent flow line, more delays with Balcombe etc could be weighing in on people's mind.
5. Production has been erratic since the sidetrack. Also, it's only been about two weeks since production started; this may inspire confidence in you but not me.
The above are just a few points and they focus on your questions / response to my post. I did not list all the reasons. For example, I did see a post by baits and yourself about shorting; I completely forgot about that as a possibility.
Fyi - I bought on the 10th, thinking the price will move with the news. I was wrong.
A_D
How many shares have changed hands since the news? Less than 5%?
Most likely traders who "buy the rumour and sell the news". Who know's, it could be Push2!!
That, combined with falling gas prices, a history of missed deadlines and no clear forward plan e.g Balcombe, SFB Field development, its no surprise the SP has taken a hit.
A_D
Per the latest RNS 2 May 2023 13:00
"The field will be operated in this mode while the new well is monitored and production stabilises and it is planned to then move to dual compressor operations and reintroduce the A4 well into production on or shortly after the 10th May. The A4 well had been producing over 2 mmscfd and the B2 well over 3 mmscfd during April to give average monthly production of 5.3 mmscfd and we look forward to reporting combined flow rates with all three wells and both compressors later in this month.
The use of a temporary flowline with additional separation permits the continued clean up of the well but avoiding wasteful gas flaring. The performance of the B7T well is expected to continue to improve with production. Construction of a permanent flowline will commence this month, with anticipated completion in late-summer."
There are 3 things here:
1. Production
2. Clean up
3. Permanent flowline
I think these have different timescales. I guess people are interpreting the interview differently. I was always expecting to see an increase in the production rates on the 11th of May. I was expecting 0.25 but was happy to see it above that.
A_D
(almost) Everyone's here to make money; although some people just show up to bash though. Nonetheless, I appreciated Push2's contributions also. I always knew he was bullish so I took that into consideration. Not sure why LTH's think they are morally superior to traders since most posts here are either ramping or deramping (imo). In the end, for me, its all about the money.
A_D
WG818,
Whilst ANGS tries to be helpful, it appears to me, many at times the communications are not very clear or misleading.
Consider the statement “Under the swap contract, AWB3 will pay METS the floating price while METS will pay AWB3 the fixed price on the sale of gas from the field”....
If no gas is produced, does this means no one pays anything?
If gas is produced but not sold (stored), does this means no one pays anything? (the term "sale" is used in the statement)
A_D
Picked up some more. I am expecting an uptick when they ramp up to full production which we will see in the national grid data so there can be no dispute.
DYOR
A_D
My analysis is as follows (as an estimate as I think it would be more accurate to do it daily since prices change daily):
Hedge 1 for 6 months for 10.5m therms gives 1.75m therms per month. Because a new hedge is in place in 2023, it makes sense to split the analysis into two quarters.
For Q4 22 we see that the gas sales will cover the net hedge payment due to Mecuria with some left over for ANGS (monthly production Oct to Dec 22 greater than 1.75m therms). This net payment mentioned above is due to Mecuria on Hedge 1 since the fixed rate is lower than the floating rate.
For Q1 23 we also have the new hedge at a different fixed rate and because this fixed rate is higher than the floating (market rate) for Jan 23 and Feb 23 the calculation needs to be slightly different. We will assume the fixed rate is higher than the floating rate for Mar 23 also.
So, for Q1 23
1. Hedge 1 will pay out to Mercuria as with Q4 22. A net payment "due for each month" (fixed lower than floating).
2. Hedge 2 will be receivable to ANGS since the fixed rate is higher than the floating rate.
3. Because Hedge 2 will be net receipt to ANGS, this extra cash could be used to fund the shortfall in gas sales for Feb 23 (1.665 gas sales vs 1.75 payment due). Or perhaps not if the net amount due is less than the gas sales.
The fixed and floating rates matter, not just the therms.
I don't see any issue with hedge requirements being funded for Q4 2022 and Q1 2023. Happy to see alternative analysis.
A_D
WG818,
There are a number of misunderstandings about derivatives.
1. All derivatives are betting instruments by nature. What GL is referring to (in the interview) is that they don't open hedges for speculative purposes; but only for ensuring a fixed revenue as required under the Loan agreement. I think this was one reason Gallder made the potato farmer comment.
2. The production / delivery of gas has nothing to do with the hedges (your comment "the original hedge must be fulfilled first"). Gallder has mentioned this on numerous occasions. Again, I think this was another reason Gallder made the potato farmer comment i.e. potato farmers don't produce gas but Mecuria would enter a hedge contract with them anyway.
3. ANGS will owe Mecuria £x based on the number of therms and the market price and Mercuria will owe ANGS £x based on the number of therms and the fixed price.
4. Following on from 2 and 3 above, there is no such thing as a missed hedge. The hedges close and payments are due. It may be that ANGS has not been able to pay hence the £4,175k in note 26 (Derivative liability line £158m [xRef note 25] = $4m+154m) that is outstanding at the financial year end of Sept 22. The £4,175k note 3.3 refers to maybe a different £4,175k from that at Sept 22, albeit highly unlikely.
You can refer to my previous posts in this thread too.
Hope this helps.
A_D
HITS,
There are too many variables to speculate on. For example, can you remember what Forward gas prices were back then or market sentiment? I can't. These new hedges could have been agreed in June 22 for all we know since ANGS was aware they would not meet the production targets for Jul-Sept 22.
With regard to the catch-up derivative payment; I'm not sure what they mean by "catch-up". I am not familiar with settlement of derivatives; I thought it was next day. By "catch up", I'm guessing its something that they missed, and the fact that its due June 23 suggest the settlement has been deferred. However, given that note 26 mentions a liability amortised at cost of £4,175k, I am guessing IT DOES relate to Q3 22 and that ANGS entered into a deferred settlement with Mecuria.
A_D
Just a guess here, but I did highlight the possibility of the new hedges being in ANGS favour.
1. The 3375k (Jul 22-Sept 22) was split into four equal parts of 843.750.
2. ANGS attempted to roll over two of these parts (which we were told initially).
3. At that time (circa Jul 22) forward gas prices were significantly higher.
4. The rollover discussions failed (which we were told later on). They eventually settled these original 2 tranches (again a guess).
5. One of the remaining two parts was either settled or cancelled. I am guessing it was settled since there was production in Sept.
6. The final part show for Sept 22 relates to the amount outstanding at the end of Sept 22 since the accounting period runs to Sept 22.
7. The balance of the hedge will change every accounting period as the hedges closed and are settled unless they are not closed and thus need to be included in the liabilities.
The only alternative I see to the about is that the hedge was partly rolled over and partly settled. Hence the new tranches and the fund raising.
One final point is that these are Audited accounts; its highly unlikely there is a typo and there are definitely no calculation errors (imo as the auditors would be all over that hedge contract due to its materiality on going concern).
A_D
I asked a couple about the hedges. They have not posted those.
A_D
apols ..."proof". lol.
We had proof ......eventually....and Push2 demolished all with experience. lol.
A_D