Member Info for BaysilHope

Last point Megla, close your short soon. GL

Why do you use the word dream? Why not use business terminology like Exuberance, or Blue Sky valuations. Megla, you look at CNE in total isolation and do not have a clue to what it could be worth to a different business, within the O&G sector, with our peers having different financial constraints and operational\ commercial challenges.
Have you ever heard of the word' Synergy'? Ever heard of the term acquisition premium Quote' Why do most acquisitions result in paying a premium?
Most companies pay acquisition premiums for two reasons: (1) to ensure that the deal gets closed and (2) because they feel that the synergies generated by the combined entities will be greater than the total price paid for the target.

What Is Synergy?
Synergy is the concept that the combined value and performance of two companies will be greater than the sum of the separate individual parts. Synergy is a term that is most commonly used in the context of mergers and acquisitions (M&A). Synergy, or the potential financial benefit achieved through the combining of companies, is often a driving force behind a merger. Substitute acquisition for merger.

All I've tried to explain (poorly I might add) is in applying these principles ( taught in industry0 is try and calculate the target acquisition benefits of say HBR or Enq T/O - so by adding $1.4bn cash to either Co , apart from saving $100 Interest it would accelerate their development plans by 3-4 years. Work on HBR getting our +50k production & $1.4bn cash, with Oil majors offloading assets like confetti - I calculated - through discounted cash flow models, HBR could double its production within 2.5 years, utilising a $1.4bncash x say 2 = a $4bn M&A war chest - therefore CNE would deserve a modest £1 premium over NAV £3.12 +£1 = an Exuberant £4/share based upon synergy - never mind the other +10 other benefits I could and have listed. So not dreamed up - I can list all assumptions and details if required. Remember - I used to financial model business for a living.

In your closeted view- CNE +$1.4bn cash has NO VALUE to HBR or ENq or any other peer and they just ignore it. And if they took CNE at your valuation and got it at £2.60, they could also book a £250m profit for Negative Goodwill. So I don't think this is a Dream, or utter fantasy as you suggest, just exuberant commercial industrial accounting principles applied to synergy benefits of an acquisition - big difference. I'm not saying this is going to happen, however as management accountant of 40 years experience - I would be advising my client on this course of action, especially at CNE's low SP and HBR's share would double quickly, even with the initial equity dilution, its NAV would increase +100%. GLA HNY

Thx triple B and PGee for your kind support, this share is tough enough fighting a market rigged stack, never mind attacks by your own PI's. GLA and hopefully the reality of value will out soon - its been a long 5 months! GN

As soon as GOI reciprocate to the IU - game over, cash can wait a tad, from an acquisition point of view game starts when legally binding debt is initiated. Within next 3 weeks. Then CNE Balance Sheet legally doubles with a £1.62 asset injection = CASH, why is the market side - lining this ???/ - they can fake GOI will not pay, after acceptance GOI fail - game over for Modi- doors open for 15 plus cases. GN GLA

No IMM, it's not when cash is received, its when it becomes legally binding, like Invoice discounting. I can sell 30 cans of beans to Tesco - as soon as that invoice is legally binding I can raise 80% of the gross value by an Invoice Discounting facility. read what I've stated - when does the asset become legally binding, 'On Acceptance of the Terms - & not the Cash Date . You know your statement is untrue.

To conclude - within Jan 22, CNE will increase its Balance size by over +100%, recognising the Contingent GOI Asset - then post acceptance GOI - realised as a receivable debt asset relating to the GOI tax refund - or +$1,060m or +£1.62 injection of real assets, creating Net Assets increasing to £3.12 per share. HBR has a NAV or Net assets as at 30th June 21 $1.736m - CNE's Net assets will be $2,068m. Comparing Balance Sheet Net Assets - CNE will be larger than HBR!!! - and would be a perfect fit to repair Enquest's finances, as they could book a $760m Negative goodwill Profit by acquiring CNE for £2 a share, when Net Assets are £3.12 . I think we are getting played here big time and the Bank SP forecasts are based on what- Pre or Post divi?? GLA

Sorry, on one today. Looking at IRS 37, when can you account for a Contingent Asset and bring it into the financial statements? just a thought - imagine (UH) I was preparing CNE's management accounts for the end of January 2022 - what about India refund? Quote IRS 37 31-35- Contingent asset - last part - However, when the inflow of benefits is virtually certain an asset is recognised in the statement of financial position, because that asset is no longer considered to be contingent.

GOI accepted CNE's undertaking 18th Nov after a 3rd Nov submission. Apply this deadline to the Form 3 Acceptance procedure. so Say 6th Jan submission allow 2 weeks plus a few days Covid and BEFORE the TU CNE should have Acceptance from the GOI of its compliance and the asset becomes crystallised and recognised in the accounts. So CNE NAV will double this month and does not have to wait for the cash. A potential predator's trigger date to start proceedings. GOI have committed and have to pay 30days after acceptance. So the target period I originally thought was 3 weeks, time from cash - to vote Divi, in reality it is 6-7 weeks, plenty of time to target the business. I'll shut up know. GLA As a management accountant I would want that asset in my Balance sheet - anytime is bonus time... IMO DYOR

In my post - what I meant was being in practice, clients, audit, tax- gets very demanding, long hours, differing businesses, different demands - but great learnings. I envy you the relative certainty of employment. In industry, as you know, companies get bought out, usually by a group , that doesn't require the in-situ accountant. I was never brave enough to local at the public sector, as I had no colleagues with experience of that environment. enjoy SAGA and good luck with Mastermind - my general knowledge is poor, my specialist subject would be 70's heavy music!

Back to CNE, I refreshed the H1 presentation on E&P opportunities and there should be a lot of developments for differing activities and more importantly production guidance for 2022 - also any M&A updates - 11 trading days left in the dark on 2022. This will be the first opportunity to update Egypt under ownership - Should be positive indeed. GL

Thx DH appreciated. Question for Bordersman, where did you play rugby with Bill G? Must have been a a very good level.

Know the firm, great training and solid reputation - Public Sector - A braver man than me - clients!!! Audit!!! Tax! - that's why I chickened out and worked for one. Good luck on here BBB, always enjoy your posts. have a great New Year.

Hi Bordersman, see RNS 3rd Nov below,
Change of Company Name

Cairn plans to change its company name from Cairn Energy PLC to Capricorn Energy PLC, effective from 13 December 2021. The LSE stock ticker will remain as CNE.

This follows an agreement at the time of the Cairn India IPO that the name would ultimately be changed.
Given the recent legislative change in India and our participation in the related tax refund process, we are now putting in place the planned name change.

The new name reflects continuity and evolution: the majority of Cairn's subsidiaries have been known as Capricorn for some time. It is an established and respected name across our global operations, maintaining stakeholder confidence in our long-standing reputation for responsibility, relationships and respect.

The CNE condition - i.e Mkt Cap 40% discount to NAV applies post divi. Net assets fall by $500m to $1.57bn and as many on here believe post divi the SP will collapse to £1.30. At £1.30 the Mkt Cap is £650m whilst Net Assets $1,57bn or £1.19bn so the discount is £540m or $710m. Cash balances will fall to $870m or £660m- still a very attractive compelling target as we are discount to cash as Mkt Cap would be at a 45% discount to Net Assets. On that basis I can't see the SP falling below 25% discount to NAV or £1.80. IMO DYOR. So IMO there is very little risk here, only if GOI fail to pay, which is outside these calcs. GLA

Hi BBB, where did you qualify and work? I was dragged through my Articles at Spices & Pegler, (showing my age), failed on 1 exam by 2% and had to resist all 5 again... painful, ended up in Coppers - which was the best experience I gained before going into industry. Thx

Completing the double entry
Credit reserves $1,060m hence the increase in Net assets to $2,068m, as there receivable was not provided for, its an add on and creates sufficient reserves to pay the $500m divi.

Apologises for the posts doubling up. GKA

Section 1 – Basis of Preparation and Contingent Asset continued
1.4 Contingent Asset
Arbitration Award Settlement Due from the Government of India On 23 December 2020, Cairn announced that the tribunal established to rule on its claim against the Government of India ("GoI") had found unanimously in Cairn's favour. Cairn's claim was brought under the terms of the UK-India Bilateral Investment Treaty (the "Treaty"), the legal seat of the tribunal was the Netherlands and the proceedings were under the registry of the Permanent Court of Arbitration. The tribunal ruled unanimously that India had breached its obligations to Cairn under the UK-India Bilateral Investment Treaty and that compensation was due.
However, at the date of this report, neither route to recovery is sufficiently well defined in terms of the timing and amount of expected settlement to provide the virtual certainty required by IAS 37 "Provisions, Contingent Liabilities and Contingent Assets" which would allow recognition of an asset on the Balance Sheet. The receivable under the award therefore remains classified as a contingent asset at this time.

if you review 2020 Balance sheet there is No Actual receivable in the Balance Sheet as above. So the receipt of Indian funds - Double entry Book Keeping
Debit Cash $1,060m

Section 1 – Basis of Preparation and Contingent Asset continued
1.4 Contingent Asset
Arbitration Award Settlement Due from the Government of India On 23 December 2020, Cairn announced that the tribunal established to rule on its claim against the Government of India ("GoI") had found unanimously in Cairn's favour. Cairn's claim was brought under the terms of the UK-India Bilateral Investment Treaty (the "Treaty"), the legal seat of the tribunal was the Netherlands and the proceedings were under the registry of the Permanent Court of Arbitration. The tribunal ruled unanimously that India had breached its obligations to Cairn under the UK-India Bilateral Investment Treaty and that compensation was due.
However, at the date of this report, neither route to recovery is sufficiently well defined in terms of the timing and amount of expected settlement to provide the virtual certainty required by IAS 37 "Provisions, Contingent Liabilities and Contingent Assets" which would allow recognition of an asset on the Balance Sheet. The receivable under the award therefore remains classified as a contingent asset at this time.

if you review 2020 Balance sheet there is No Actual receivable in the Balance Sheet as above. So the receipt of Indian funds - Double entry Book Keeping
Debit Cash $1,060m

Sorry prev post heading - should be Price paid < Less than NAV acquired = Negative goodwill.

Most acquisitions involve a premium where acquisition price is greater than the Net Assets acquired which creates Goodwill on acquisition - the standard normally appearing on most transactions.

The point I'm making with CNE - is any bid below $4 or £3.18 creates Negative Goodwill - Note CNE Balance sheet as per N Sea Sale circular = $1,008m or $2.03/share Fact Page 27.

Add India tax refund $1,060m to CNE's Balance Sheet - translates in an increase in Net Assets to $2,068m or $4.18/ share using 495 denominator - fact. Take Megla's £2 Non bid - or $2.64/share, Bid is valued at $1,306m that's a discount to Net Assets of $760m or $1.54/share Fact. Therefore the Discount of purchase paid to Assets gained creates Negative Goodwill of $760m. That is important for 2 reasons, one is obvious CNE is valued at $760m below book, point 2 - Negative Goodwill Accounting treatment.

What is the Accounting Treatment for Negative good will?

Negative goodwill, along with goodwill, are accounting concepts created to acknowledge the challenge of quantifying the value of intangible assets, such as a company's reputation, patents, customer base, and licenses. These intangible assets differ from tangible items, such as equipment or inventory. In most acquisition cases, transactions involve goodwill, where buyers pay a greater sum than the value of the selling company's tangible assets. But in rarer cases, negative goodwill occurs, where the value of the intangible assets must be recorded as a gain on the buyer's income statement.

So Any acquirer of CNE for £2/share will be able to book $760m PROFIT on their income statement.
specifically under the Financial Accounting Standards Board (FASB) Statement No. 141, regarding business combinations. If the value of all the acquired company's assets exceeds the purchase price of the company, a "bargain purchase" is said to have occurred. FASB defines a bargain purchase as “a business combination where the acquisition date amounts of identifiable net assets acquired, excluding goodwill, exceed the sum of the value of consideration transferred.”1
In the event of a bargain purchase, the purchaser is required under GAAP to recognize a gain for financial accounting purposes. The effect of this gain is an immediate increase in net income.

So would a bank finance Enquest, for example- acquisition at $760m discount to book, when book is £2/share cash.. UH let me think......... Any bid below $2068m NAV or £3.18\share creates profit for the acquirer. So why wouldn't anybody buy CNE at £2/ share GLA

Sorry EC just a recap on my last post , I'm basing my output calcs on the 25th Jan TU - 2022 guidance as per the H1 presentation with added potential and not the static acquisition baseline. Just comparing like for like, we'll know now they've had 4 months to outline a production ramp up prog with drilling on-going as of well work overs etc , just for clarification - so numb nuts can understand the logic and not me being called over again . I think there is great upside here - just to be announced. What's your thoughts cheers GN GLA

Fair enough EC what's your calcs matrix. GLA