Member Info for Bohemia

I guess in Trinidad the productive assets would just pass to new hands in the worst case scenario: Goudron and IT would revert to Heritage. And there’s an abandonment fund covering some of the liabilities.

I’m amazed there’s no connection been made in Spain. They have a $2m+ obligation to plug 19 wells and restore a SSI in the next 2 years, and it seems rather likely they’ll default on that. And in Europe you’d think that would be more newsworthy.

Rainbow warriors had no impact on the failed well, the cost overruns or the catastrophically-poor financial clarification since P1 (or the financial black-hole that CERP has been, despite Eytan's view they haven't made any mistakes). If you'd have had the chance to sell some shares at 3p (30p new), that would just have left some other mug with an even larger % loss: zero-sum game.

Don’t worry - the gas coming out of your mouth isn’t actually hydrocarbons. Your mates are having you on.

The other reason year-end might matter is that we're still waiting for renewal of the Innis-Trinity IPSC and the South Erin farmout, together about 150b/d, otherwise expiring 31st December. Without them, there seems no hope of CEG being anywhere near cashflow positive. Yet to get the renewals, surely CEG need to be able to demonstrate some sort of financial capability to invest in lifting production. ?So CEG need cash by year-end for drilling as well as for liabilities.

If the renewals aren't coming, the creditors are better off pulling the plug than letting CEG burn away the last few $s, seeing what they can recover from an asset sale of Goudron.

Meanwhile the government have published production data up until July https://www.energy.gov.tt/meei-consolidated-monthly-bulletins-january-july-2021/ . Doesn't give a look at all of CEG's fields, but the CEBL data shows that Bonasse and Saffron-1 really have dried up to just 8b/d combined (data doesn't show S-2 yet), and now the LTL data shows - I think - that Icacos has also slowed from 24b/d last year to 7b/d in July. Lack of investment showing in the smaller fields.

In Eytan’s own words, the company needs to become debt free. That’s because there is no money available to pay debt.

There apparently have an aspiration the T&T assets will have $2m of positive operating cashflow next year. That probably has to cover $1m of non-T&T exec/PLC costs. But more importantly it has to support capex to sustain or increase production. So the pitch to a bank would be “lend us $10m and next year we can repay $1m but it’s downhill from there ... or let us use the $1m for capex but we can’t actually repay our debt”.

Remember in 2021 they’ve sustained production only by drilling a $4.8m well (which may or may not be still producing 81b/d). Even if a future middle Cruse well was $2m, they haven’t got a spare $2m/year.

https://www.proactiveinvestors.co.uk/companies/news/965390/challenger-energy-group-ceo-eytan-uliel-presents-new-investment-case-965390.html

“Trying to be completely transparent and accurate” ... so how many barrels are you now producing.

Talks about work obligations for 2022: drilling more wells and needing the money for that. How many more millions?

I make it 5 times successive times you could have lost 90% there, thinking the damage was done.

We don't know the IP rights associated with CEG's intangible assets. It is normal practice for the host government to insist that seismic and well data is shared with them and they can release the data after a specified hold period. In the UK seismic data is made publicly available before the end of the year that a licence is terminated.

The vast majority of the $110m (i.e. about $94m) is the money plowed into Bahamas licence fees, seismic, evaluation, planning and P1 drilling. It is valued at cost (until a point in time where the auditors think it can no longer be recovered in a development and therefore written down), so no upward move in the oil price is going to affect it's value. Basic accounting.

The rest is the depreciated amount of investment made in T&T, including $2m of the investment made into Saffron you claim is not included. You can argue net book value under-represents the value of the assets (good luck!) but the net book value is not based around any reserves report or oil price assumption, so no updated deck or reserves assessment is going to alter the balance sheet asset value (unless, again, the auditors get their red pen out).

$3.3m was the gross revenue for 5 months: it doesn't mirror the $2.3m net.

Yes it does . This older piece is a bit more explicit about the work required. https://www.boe.es/diario_boe/txt.php?id=BOE-A-2021-251 Plugging 19 wells plus the above-ground restoration.

I don't know when the two works period starts and ends, though since they were on site in September it presumably has started (though the preservation arguments may delay/extend that period).

P12 of the interims pdf here: https://www.cegplc.com/investor-relations/financial-reports/

Spain is right up there in “you couldn’t make it up” territory. You’ll find a few news stories on google news for “La Lora”. The $2.6m figure comes from p12 of today’s report. It sounds high but there are literally no other oil fields (and therefore oil contractors) in Iberia.

It’s an old CERP oil field. After a stall for a few years while it was possibly going to be re-tendered, CEG have been told they have to decom the wells. In the summer they started ripping out the well heads but the local community want them preserved as industrial heritage. Nevertheless CERP are going to have to plug the wells. I don’t think making the well facilities safe and pretty is going to work out cheaper for CEG than ripping them out and chucking over some grass seed.

Is this inaccurate? In April Eytan told us all that the £7 open offer / placing would fix the historic problems and reset the company to profitability. Despite the oil price having turned massively in their favour, and with the only outcome out of their control being about $1m lost revenue from S2, the financial hole has not been fixed but rather it has ballooned to $15m.

Are you telling me that in April Eytan didn’t know about Columbus’ historic liabilities, the costs of the cost-saving initiatives that he completed in May, or the future T&T obligations? Is he not responsible for under-budgeting S2 by $2m? Remember that when the begging bowl comes out again, with no doubt another promise of a successful reset, and all the blame put on the old management.

I can already tell you they have a $2.6m provision for decommissioning obligations in Spain (likely to become a cash cost in 2022) that are conveniently being ignored in today’s commentary.

It would have been better to have given up years ago once they failed to partner the well. Instead they raised and destroyed tens of millions of private investor funds. Are you going to give them the excuse it's what shareholders demanded: would shareholders have demanded it if they'd known they'd have to carry tens of millions of new LO shares during the drill and tens of millions of cost-overrun debt afterwards?

Indeed PoC, there is no conflict with what I have said there: oil reached $70-75 in June so assuming they had completed the cost savings programme, they would have reached the point of being cashflow breakeven in the period, i.e. in June.

However I'm not a fan of the version of "FCF-generative" they must be using. It ought to include some level of sustaining capex or their output and therefore cashflows will be in decline, as is the case for any oil company. Not exactly heroic making $0.2m of FCF in 2022 but investing nothing and therefore falling back into losses every year beyond.

SvS, they are claiming they will get to cashflow breakeven. The core (ongoing) elements of the profit are: Net revenue $2.3m, Cost of sales $3.1m, Admin $4.8m. Cost of sales is the cash costs of lifting/marketing oil but also the non-cash depreciation of the T&T assets: in H1 depreciation was $1.8m so the cash costs of sales were $1.3m.

If we project for H2, let's go 15% higher for oil ($75 vs $65) and therefore for net revenue: $2.6m. Generously hold the cash costs at $1.3m. And reduce Admin to $200k/m that they've given us = $1.2m. Voila an H2 cash outcome of +$0.1m.

If LO take CEG to court and through to liquidation, what will they get back. Honestly I don't think the assets would raise more than $10m in a fire sale: IT is on the cusp of expiry so only Goudron has meaningful production. SWP looks to be flailing.

So it makes sense for the creditors to behave amicably, but they aren't aligned with shareholders. The might as well allow CEG tom try and make it as a going concern, and try and raise some money. If CEG can raise $5m, that's better than nothing, and LO could settle for $1m also take $1m in new shares that would realise something. But the creditors don't care if the new shares are sold at 0.6p, 0.4p or 0.2p.

What's surprising to me is that the headlines of the interims are not unexpected. We knew they had a $15m black hole, so what's new there? But some less explicit things I spotted:

i) On page 4, they still owe $2.4m on financing instruments. I take that to mean they haven't yet fully paid off Lombard Odier. LO will have no interest in staying amicable with CEG: they'll just want their money right away.

ii) Lower on p4, "Saffrron-2 as yet has not contributed materially to cashflow". Even at 81b/d, S2 would be 20% of CEG's production and, with lower costs and royalties, maybe 30% of cashflow. If it has not contributed materially, I think it's quite possible it has watered out completely or substantially already and therefore S2 is a total $4.8m dud, even in the Middle Cruse. Of course it's ridiculous we have to guess: there should be a production update in this release.

iii) On p17 a breakdown of the shares issued this year. If you wondered how/why Gneiss bought 235m shares in the placing at 0.35p, you should note that actually the net proceeds 0.31p. But more importantly as part of the reset we were told £500k of fees were refunded for the issue of shares: now we see those shares were issued (149m and 191m) at 0.15p! So overall Gniess' average was 0.21p. They had plenty of time to start selling in May with the price as high as 0.4p and it didn't drop below 0.21p (2.1p) until July. Something similar also happened in Feb with 135m shares issued at 0.27p when the sp was >0.45p.

It will be a suspension forced by AIM, not a request. They don’t make one-off exemptions to the rules - the one month interims extension fo Covid was market-wide and granted back in January.

Having not got the results yesterday, I now really doubt they will appear over the weekend. There a small chance they are sorting out a final accounting matter that can be completed with 48 extra hours, or trying to close some financing they’d like to include in the release. But it’s many times more likely they have a serious funding issue or have simply elected to endure a suspension than disclose an operating matter at this time.

I do wonder if it could tie back to the sign off of CER UK Ltd’s 2020 accounts. If it has its own T&T debts and therefore needs a patent company guarantee from CEG, that would be more significant commitment for Eytan as the director to make in the context of UK insolvency laws (stating and accepting on CER’s behalf that CEG can underwire CER: such a statement, if not reasonable, could make the director personally liable).