The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Morning donalb,
I put forward a few of my ideas of potential purchasers back in December so, for brevity, will just re-post with a few additional updated thoughts as well:
From our RNS 8th March:
“The Company is pleased to announced that it has signed Confidentiality Agreements with a company based in the United Arab Emirates and an Asian exploration and production company to evaluate the exploration, appraisal and development opportunities in the area covered by the Guercif Petroleum Agreement.”
So both could very likely still be in the picture. The UAE were guests of honour at the Moroccan Energy conference earlier this year, so are likely to be a popular option with the Moroccan govt:
http://wam.ae/en/details/1395303029639
ConocoPhillips – it's likely our next door neighbours are keeping a very close eye on what’s happening with PRD.
XOM – recently sued the EU about the WFT so may be looking to reduce EU spending there and add N African assets?
https://www.bbc.co.uk/news/business-64113398
(Subsequently, this article was released on XOM in the WSJ:
https://www.wsj.com/articles/exxon-mobil-eyes-potential-mega-deal-with-shale-driller-pioneer-c48a4747?st=g8aews7nwpgzmkj
As the article says “Exxon is flush with cash” and considering deals in the $10’s of billions so $200M isn’t likely to be a problem)
Repsol – we know Morocco and Spain are collaborating on energy already and Spain recently changed its stance on the Western Sahara region in favour of Morocco’s viewpoint (against Algeria). So aligning with Spain on gas exports would be a shrewd move.
I think I then remember GRH also tweeting that we shouldn’t forget the Israelis who we know are familiar with similar assets (Leviathan) and business relations with the Arab world are much more positive these days.
(1/3)
MMR,
You mention possible court action re Ireland, and there was this section on p41 which suggest Paul may be considering just that:
“However during 2023 the Company will review the prospect of any progress in Ireland in the near-term, an outcome of which may be to seek to investigate the potential for redress given the irregularities and anticompetitive nature of the regulatory process surrounding the applications for successor authorisations.”
As for proving solvency, I’m sure you’re right here and Donal has also mentioned this issue previously. But we also happen to have very deep-pocketed partners for Mag Mell (p.49) who may well be able to stump up some cash for us:
“Confidentiality agreements have been signed with the provider of re-gasification vessels (“FSRU”) and a downstream gas trading company…” (p49)
We know from Paul’s previous comments (Proactive presentation, Sept 22) that the LNG FRSU provider is Hoegh Capital and the gas off-taker is Flogas whose parent company is DCC (currently in FTSE 100 with a Mcap of nearly £5Bn). So hopefully our well-funded and established partners will be able to make up for PRD’s lack of cash in the bank?
Re point 3 from Jimmy's post earlier today re funding for Cory Moruga deal:
p53:
“Upon consent being granted by MEEI and completion of the Transaction with CEG, the Company will have a commitment to pay CEG USD1,000,000 on Completion. The Directors have a reasonable expectation that the Consideration will be subject to new funding either at the project level via a farm-in or other form of financial arrangement for project equity or from an additional placing in the equity markets.
On this basis the Directors have a reasonable expectation that in the currently unforeseen worst case scenario that the Cory Moruga project cannot be funded, then the Company will have an opportunity to sell POGT to an existing indigenous operator in Trinidad on the basis of transactions that are regularly executed for assets onshore Trinidad, an example post the reporting period being the recent sale of the South Erin onshore field, by Caribbean Rex Trinidad Ltd for a cash consideration of USD1.5 million as announced on 14 February 2023. The Cory Moruga opportunity combined with POGT’s CO2 EOR equipment and database may be a potentially attractive proposition for indigenous Trinidadian companies.”
From p38, the section on Ireland reads as though it’s written primarily for the benefit of the Green Party and Minster Ryan in particular. In fact, you can almost imagine him, upon sanctioning Mag Mell, reading a statement to the Irish Parliament… and basically cutting and pasting from PRD’s Annual Report!
• the FSRU will be completely invisible from land
• The design for the project has focused on ensuring minimal impact on the environment relative to other energy infrastructure projects and reducing CO2 emissions. Compared to any other energy supply solution the environmental impact of this operational arrangement is minimal.
• By using the existing pipeline, terminal and entry point the Mag Mell project’s environmental impact will be minimal.
• LNG provides a substitution for carbon-intensive fuels - an energy option to exercise now.
• LNG is a bridging fuel; its use will be reduced and the energy supply diversified.
• The Mag Mell project offers near term and safe solution to Ireland’s energy requirements and security of supply, all year round.
• It will deliver energy independence for Ireland and provide a backup for renewables when the Eirgrid capacity is not met by renewables.
• The Mag Mell project is committed to delivering on the Irish Government’s Climate Action Plan objectives.
• Using existing infrastructure to accelerate the energy transition, Mag Mell provides energy with a low environmental footprint.
• In alignment with the Irish government’s policy pledge not to allow the import of LNG produced from shale gas, the Mag Mell project will source LNG from a transparent certified origin where there is no reliance on fracked gas feedstock.
• Working in collaboration the Mag Mell project will create opportunities for CO2 and hydrogen storage.
Apologies for the overlap in messages!!
Hi affc21,
Bottom of p32 with a seismic section pic on p33
Cheers
BRV
p33:
"Successful drilling and testing results would facilitate a Gas Sales Agreement with end-users in the Moroccan industrial sector based on an accelerated Compressed Natural Gas development scenario. At this point the Company may seek, if market conditions are attractive, to monetise all or part of its Moroccan asset through a trade sale of equity in the Group’s subsidiary company Predator Gas Ventures Ltd. If this scenario were to occur, and subject to independent tax advice, the Company would consider a return of value to shareholders in the form of a dividend payment."
Note: "if market conditions are attractive" - clearly Paul won't be giving it away on the cheap.
From p8:
"During the year the Company has continued to engage with potential end-users in the industrial sector in Morocco in terms of negotiating a Gas Sales Agreement immediately after a programme of rigless well testing for MOU-1 and new drilling has been completed."
So the key to testing MOU-1 (which Paul said on the SR podcast wasn't absolutely necessary) seems to be to allow for the signing of the GSA immediately after.
MOU-NE areal extent now 126km2 (a 23% increase on the previously reported figure)
That should keep The Cube happy... ;-)
TT-T,
That was also my reading of the situation, from Paul’s comments back in February.
See 10m35s onwards (Slide 6):
https://youtu.be/7xbTMWdGHtQ
So the mud system for MOU-2 (silicate Purebore) worked really well in the upper section but only hit trouble in the slump and I presume it’s this same mud system that will be used in MOU-3 since there’s no slump at that location (hopefully!). Presumably, they either have some silicate Purebore already in stock in their warehouse or it’s readily available to buy.
As Paul said the other day, to complete MOU-2 requires the same mud system that was used for MOU-1, and this is the stuff that has it taking much longer to order.
From 19m0s (Sunday Roast podcast):
“It probably comes back to using the same mud system as MOU-1. Obviously, the logistics have changed and the lead-time now for getting that particular mud, because it’s a very popular mud, has almost doubled.”
Hi GRH,
Thanks for taking the time to reply, and fully understand your wish not to respond.
Thank you anyway
Cheers
BRV
Hi Surfit,
Yep, interesting chat... though I’d have also liked to have had a few comments on SQZ!
The Q10-A production is clearly not ideal but it sounds like we’ll have to wait for the third-party review of the recent drilling campaign before AA initiates a plan of action, but the positive was AA saying:
“I think we’ve got our heads around it now. We’re about 18 months into owning it… we’ve got our heads around it.” - so hopefully it’s solvable.
From the previous RNS, it sounds like any further Netherlands drilling will be done in conjunction with the Orion development in 2024 but, as you say, at what cost? So perhaps the best we can hope for over the next 12 months is that the Dutch production at least remains stable.
As for M&A:
“We are already looking and reviewing other acquisition targets in all 3 jurisdictions that we’re currently represented in, and a couple of others.”
So my feeling is that further deals will be incoming shortly, probably in Norway. But any new areas would be interesting too.
AA’s summary:
• Very regular cashflow coming out of GLA and Netherlands;
• Exciting drilling in Benriach (“Don’t forget Benriach!” - AA seemed very animated on this!);
• Exciting upcoming FIDs for Edradour West and Glendronach;
[I actually can’t find any previous mention or info on Edradour West at all, so I’ve no idea on its size or expected
production profile etc]
• Sale-away for Balder X FPSO in 2024 with significant uplift in production to follow;
[the King prospect @60-135mmbbls recoverable (10% to KIST) in the deal for free was interesting to hear]
• Plus the uplift in horizons for being in Norway;
• ...And if no other deals, then return cash to shareholders.
Overall, pretty positive in my view.
Morning GRH,
A quick question relating to any potential deal, if you don’t mind me asking, please?
Would you expect any deal to include clauses relating to certain deadlines being met for progressing the development of the asset, including, perhaps, additional payments to PRD should these targets not be met?
For example:
- time to first gas for CNG (say within 12 months of deal completion)?
- time to first gas fed into the GME pipeline, for gas-to-power and/or export to Europe (say within 2-3 years of deal completion)?
One would assume that any in-coming new owner of PGVMB would be incentivised to expedite revenues for its own purposes anyway. Similarly, I’m sure that the Moroccan authorities would also be keen to ensure that first gas is achieved promptly in order to benefit Moroccan industry and the wider economy as soon as possible. So I realise that such clauses, at least in theory, should be unnecessary.
However, do you think it would it be prudent for Paul to insist on such clauses in order to ensure that the asset is definitely developed within a reasonable time-frame and, therefore, that royalty payments to PRD would commence within a timely manner? And that if such doesn’t occur, then PRD would be appropriately compensated?
Many thanks in advance for your thoughts,
Cheers
BRV
Morning all,
A quick reminder of Paul’s comments from 30m23s:
“After MOU-3 we’ll be in a clear position that we may not even have to wait till the ‘MOU-next well’ results based on what we have in MOU-1 and what we hope to have in MOU-3. Then this process will move very quickly because we’re creating, if you like, not a bidding war but we’re just basically saying that there are several parties who are fundamentally interested in this…”
So my only thought would be that, if there are several parties interested for what, as we all know, is an asset with incredible potential and value, then in contradiction to what Paul said, the real question for me is:
Why wouldn’t there be a bidding war?
IMO, Paul’s effectively stated that he’d be happy to accept $5M/Bcf (with 40Bcf being representative) with a 10% royalty for all future gas (and oil?) sales from PGVMB. But if there are genuinely ‘several’ interested parties then surely when the first-mover matches Paul’s representative valuation the others are not simply going to shrug their shoulders, give up and walk away. Why would they when the size of the prize is so large and making an improved offer would still give an excellent long-term IRR?
Thoughts on this appreciated…
Malcy's interview with AA:
https://youtu.be/0rp_TIInYio
Morning GRH,
Hopefully I’m reading this correctly, but on reviewing the Proactive presentation from Sept 2022, that valuation of 267p/share was based on a ‘conservative undiscounted net back of $8/mcf’.
As it’s ‘net backs’, I’d assumed that meant that costs (capex/opex) was already included in that valuation? (have I got this wrong?)
As we know, Paul has stated that he hopes to achieve $16/mcf sales for CNG, giving net backs for volumes >10mmcfgpd (which should be readily achievable) of between $9.79 and $12.19/mcf (depending on level of capex+opex).
Shares in issue at the time were 354M in Sept 22. Including shares owed to Paul, I reckon there is now around an extra 20% in shares as you say (excluding options and warrants).
https://wp-predatoroilandgas-2020.s3.eu-west-2.amazonaws.com/media/2022/09/Proactive-Presentation-Final-8-September-2022-LATEST.pdf
(slides 4 and 6)
So with net backs of between 25-50% higher, hopefully there’s room for some upside on those figures? (and apologies in advance if I’ve got this muddled!).
My simple calcs from the podcast was that Paul is hoping to achieve $5M/Bcf. Which is pretty much the figure given in your Michael Caine post re the CNG development back in March 21 (£3.88/Bcf). Plus 10% royalties for any production >40Bcf of course.
Cheers
BRV
Interview with AA inbound:
https://twitter.com/mgrahamwood/status/1650789038511517696
"I’m delighted to say that I am heading for Core London to interview Andrew Austin @kistosplc should be fun and interesting after his recent deal . Malcy"
EOG chat with Malcy, from ~6m, from today:
https://youtu.be/KQDVxG-H0O4
There's a bit of read-across to PRD during the discussion as it's mentioned that the EU is encouraging member states to bring online gas resources in the near term, and also that the Taoiseach (LV) has specifically mentioned the wider Corrib area as a potential source of indigenous gas (as we know).
(Not sure why EOG CEO thinks his company is the only one with assets adjacent to, and on trend with, Corrib though... think he might be 'conveniently' forgetting PRD!)
donalb - thanks for that heads-up.... how many of us BRVs are out there, I wonder?! :-)
(BTW, I still say I learnt everything I know about investing from watching Trading Places on hard repeat as a kid... but perhaps that's why my portfolio is doing so badly! However, it's also definitely why I love pork belly so much!!)
And Matt, I also had it in my head that Ron P was still involved somehow in Ireland. Perhaps he's hung up his boots for good?
Cheers
BRV (one of many...)
A few comments from the podcast on Ireland that I thought were particularly noteworthy:
As Paul said at the start of the podcast:
“...do not underestimate the other potential value in the company which could crystallise at any time over the next 12 months.”
Discussion on Ireland from 45m20s onwards:
“I won’t say we’re winning because you never win in Ireland, it has to be a compromise, but only last week the Minister gave an interview with the Sunday Business Post in which he talked about a 180-degree U-turn on LNG in Ireland. That’s the BEGINNING of the finger coming out of the dyke in my view, that the REALISM HAS TO HAPPEN…”
“[Ireland] had the opportunity to be the first-mover in Europe [for LNG], we gave them the first opportunity with the Mag Mell project in 2020, they turned themselves round 180 degrees to be the last in Europe. And they will move eventually, THEY HAVE NO CHOICE.”
“Gas can contribute to security of supply and ameliorating energy price rises in Ireland – they [govt] are BEGINNING TO REALISE THAT.”
[re Ram Head / Kinsale pipeline]: there’s absolutely nobody else that can say that they have some form of legal right to utilise that infrastructure…. So it puts us in a unique position – NOBODY ELSE CAN COMPETE WITH US offshore Ireland on an offshore FSRU LNG solution and that’s what we’ve been plugging away at for the last 9 months.”
I also thought that the mention of Theseus was interesting:
“There is a partner, Theseus Ltd., with 50%. That partner was created before our IPO way back in 2014/15. I own 50% of Theseus which is all declared and my partner Vivian Caston owns the other 50%, and that is obviously reversible at any time into Predator to gross the asset up to 100% and we have then, effectively, 100% of the resources.”
I can’t find too much specific information on Vivian Caston but he’s a geologist, ex-Providence resources and clearly worked with Paul during his time on Fastnet, so presumably they’ve known each other for a long time:
(see slide 6)
https://www.raglancapital.ie/wp-content/uploads/2017/05/fastnet_proactive_presentation_july_2014.pdf
https://find-and-update.company-information.service.gov.uk/officers/7N1fKO5UvT9LI76PtsidfEabUKU/appointments
And finally, while summing up at the end:
“Your market cap is always not going to reflect what the potential value of the company is… [but] it only takes ONE WELL or ONE AGREEMENT to change that value and it will be changed OVERNIGHT…”
I’ve now listened to the Morocco section three times and it’s the sheer speed of the process which strikes me the most:
(30m23s)
“After MOU-3 we’ll be in a clear position that we may not even have to wait till the MOU-'next well’ results based on what we have in MOU-1 and what we hope to have in MOU-3. Then this process will move VERY QUICKLY because we’re creating, if you like, not a bidding war but we’re just basically saying that there are SEVERAL PARTIES who are fundamentally interested in this, and just say “well, here you go”: If you’re going to do due diligence on the whole block, you’re wasting your time. Do Due diligence on what MOU-3 and MOU-1 have discovered, with the upside of MOU-2 re-entry etc and all the other prospects. And that’s what you’re basically paying for, to buy into this gas business at VERY SHORT NOTICE.”
And I liked this bit too:
(12m27s)
“Morocco’s the focus, but do not underestimate all the other potential value in the company which COULD CRYSTALLISE AT ANY TIME OVER THE NEXT 12 MONTHS…”
Very interesting few months ahead...