Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
The BOD are meant to work for every shareholder.
When a BOD member controls 50% of the shares they already know about every offer thats made for their oilfields.
They are probably one of the people talking to the other parties either directly or at Arms length via a proxy.
In order to talk the bid up and let the interested parties know they have to come in with strong offers and not fire sale Clive phrased it like this ...
At this stage no binding agreements have been entered into and there is no certainty these discussions will lead to either a firm offer for all or part of these assets or that if they did the Board would be minded to put such an offer before shareholders.
Yep correct, but has to be for 30 days to qualify, I added a bit on for Smarty selling :)
The length of S.Y contract can also be taken as 2023, 24 or 26 depending where you read it in the acs or in the rns.
But it's all there or thereabouts.
MJF and South Yelemes - valuable and over book value will be paid - what is book value? When CASP put themselves on the market in their 2022 accounts saying all of part of any Group asset was up for sale they handily reminded everyone about Galaz.
MJF is already on a full production licence and unusually also has approval to drill another 10 wells of which 155 is the first.
MJF has a fantastic drill to production success ratio, 10 drills is 7 - 8 production wells, this can more than double the resource and using the new horizontal side track method a tree branch drilling programme can be classed as a 'workover drill' so 10 drills becomes 40 etc.
Galaz was sold for $100m, it gave them a $15m profit and left them with $33m to reinvest into BNG.
MJF and South Yelemes are far superior assets to Galaz, both MJF and S.Y require an updated valuation and probable resource.
The whole of BNG has a historic cost of $100m as at 2022, that is all of the deeps and the shallows.
This is what is meant in the 25/03/24 RNS when they say they are after assets suited to them, it means anything underdeveloped that they can add value to and sell on to enable them to move up the food chain.
They have stated in RNS 0546l 25/03/24 that they are going to apply for:
Licence upgrade.
The technical information to be collected from Deep Well 803 is expected to be sufficient together with the information already gathered at the other BNG deep wells drilled to support an application to upgrade the BNG deep structures licence to a full production licence.
This is a full production licence on SIX deep wells.
That is Baby Tengiz on its own.
Then add in the four wells on Block 8 and you have 10 DEEP wells.
Plus the only drill barge in the North Caspian Sea
They are selling the smaller assets as they feel they are now ready to move into a mid sized oil company!
Happy Easter!
To sell oil by reference to world prices requires either the Contract Area as a whole or a particular structure has to be upgraded to a full production licence. Under a full production licence there is only limited scope to develop areas not already drilled. Additionally, a significant minority portion of production typically remains at domestic prices although the majority is sold by reference to world prices.
Additionally, a further 10 shallow wells are to be drilled on the MJF structure, including a number of horizontal wells, by the end of 2026, with one being Well 155 to be drilled this year.
INTERESTINGLY then for any purchaser they can add another 10 wells ... this adds to over book value.
On 10 January 2022 Shin Seokwoo, Chief Operating Officer was granted 2,500,000 options exercisable at 5.5p and Edmund Limerick, non-executive director was granted 1,000,000 options exercisable at 5.5p per share. Both option grants being exercisable until 9 January 2032.
Long Term Incentive Plan (LTIP) scheme:On 5 June 2019 the Company made awards under a long term incentive plan. Clive Carver, Chairman, and Kuat Oraziman, Chief Executive Officer, are entitled to receive cash payments to be triggered by the Company's attainment of both pre-set market capitalisation and share price targets as follows:
Market Cap hits $800m they get $3M each!
Only a 9 bagger from here - very reachable with deeps on board!
P1 chart didn't copy and paste that well, it is in full year 2022 accounts.
In September 2016 GCA assessed the reserves attributable to the BNG shallow structures (MJF & South Yelemes). Between then and the end of 2022, approximately 3.8 mmbls of oil were produced, which under financial reporting rules are deducted from the assessment of reserves as at 31 December 2022. BNG As at 31 December 2022 As at 31 December 2021 mmblsmmbls Shallow P114.315.1Shallow P225.526.3 Despite the last external review of the Group's reserves being in 2016, the Board considers their assessment as set out in the above table to be valid.
Note we know this is now out of date as South Yelemes has oil flowing from the Dolomites at "140%" higher than previously - in typical Carver fashion there is no baseline number to check his maths to calculate current flow rates .
RNS 25/03/24 - South Yelemes Work to drill new horizontal side tracks on the four existing Soviet era wells targeting oil in the Dolomites at depths between approximately 2,200 and 2,300 meters is underway. Well 805 was the first well in the programme and now produces at approximately 140% of its previous level.
BNG CONTRACT AREA
Introduction
The Group's principal asset is its 99% interest in the BNG Contract Area. We first took a stake in the BNG Contract Area in 2008, as part of the acquisition of 58.41% of a portfolio of assets owned by Eragon Petroleum Limited.
In 2017, we increased our stake to 99% upon the completion of the merger with Baverstock GmbH. Since 2008, more than $100 million has been spent at BNG.
BNG
BNG LLP Ltd holds three contracts for subsoil use. The first is the appraisal contract, covering the full extent of the BNG Contract Area (except the MJF and South Yelemes structures), originally issued in 2007 and successively extended until 2024.
The second is the export contract covering just the MJF structure, which runs to 2043 and the third is the export contract covering the South Yelemes structure, which runs to 2046. Under the MJF and South Yelemes licences the majority of oil produced may be sold by reference to international rather than domestic prices.
Well 802 was the final deep well required under the original BNG work programme commitments.
The current work programme requires a further deep well, Well 803 to be drilled before the end of the year. The well is expected to be spudded in Q3 2023.
Additionally, a further 10 shallow wells are to be drilled on the MJF structure, including a number of horizontal wells, by the end of 2026, with one being Well 155 to be drilled this year.
Our main asset BNG has been developed over the past 15 years with more than $100 million spent and is set to be a very substantial asset for many years to come.
BNG Deeps A5,A6,A7 all have oil and all have flowed
Airshagyl Deeps 801,802 and 803. 801 and 802 have flowed then blocked?
Even though they are supposedly blocked the Company has announced that if 803 also hits hydrocarbons they will apply for an International export licence.
Other deep wells
Little was attempted in the period under review or subsequently at the other deep wells already drilled, A5, A6, A7 and 801. However, as rigs and crews become available, we intend to continue work to bring each of them into production starting with Deep Well A5.
MJF (Full production license to 2043) & South Yelemes (Full production Licence to 2044)
Following the award of the MJF export licence the Kazakh regulatory authorities assessed historic costs of $32 million against the MJF structure, repayable quarterly over a 10-year period, of which approximately $20 million remained payable at 31 December 2022.
THIS BIT - RNS 25/03/2024 Licence upgrade
The technical information to be collected from Deep Well 803 is expected to be sufficient together with the information already gathered at the other BNG deep wells drilled to support an application to upgrade the BNG deep structures licence to a full production licence.
Not BNG or North Yelemes/Airshagyl
3A Best There was little progress at 3A Best in the period under review or subsequently. The farm-out announced in June 2021 was conditional on the renewal of the 3A Best licence. We continue to work with the Kazakh authorities to renew the licence, following which we will assess its place within the Group. In the meantime, our investment in 3A Best has been fully provided for
The Contract Area, which has been designated by the Kazakh authorities as a strategic national asset, surrounds and goes below the established shallow field at Dunga, which we believe to be producing at the rate of approximately 15,000 bopd. In June 2021, we announced a farm out of 15% of the 3A Best Contract Area in return for our new partners assuming responsibility for the current 3A Best work programme commitments. However, the farm out was conditional on the deferral of obligations under the licence and the extension of the license which are yet to be granted. We also granted our new partners an option to acquire the remaining 85%, exercisable after completion of the current work programme commitments, at a price to be determined by an independent expert. We continue to work with the Kazakh authorities to renew the 3A Best licence. Until we are successful on this the farm-out will not proceed. Our investment in 3A Best has been fully provided for.
3A BestThe licence renewal at 3A Best was delayed as the result of outstanding SOCIAL payments due from the assets previous owners. We continue to work with the Kazakh authorities to renew the 3A Best licence.
The previous sole owner was Kuats FATHER, upon his death Kuat split it into thirds between him, Kairat and Roshan, Kairat sold his shares to the UAE's Al Marri family so would assume they are now the beneficial holders of 3A Best.
Indemnity receivables in relation to the 3A Best acquisition Under the terms of the SPA for 3A Best, the three vendors provided indemnities that obligations related to the period prior to acquisition would be reimbursed. Judgement has been applied in assessing the recoverability of the indemnity receivables, which included assessment of the terms of the SPA, confirmations received from the vendors and assessments of the ability to meet such payments. The Board while still seeking full recovery has made a provision for two thirds of the amounts due on the expected credit losses as at 31 December 2022 (note 16).
FRAUD
We assessed the susceptibility of the financial statements to material misstatement, including fraud. Our risk assessment procedures included:
· Enquiry with management and the Audit Committee regarding any known or suspected instances of fraud;
· Obtaining an understanding of the Group's policies and procedures relating to:
o Detecting and responding to the risks of fraud; and
o Internal controls established to mitigate risks related to fraud.
· Review of minutes of meeting of those charged with governance for any known or suspected instances of fraud;
· Discussion amongst the engagement team as to how and where fraud might occur in the financial statements;
· Performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud; and
· Considering remuneration incentive schemes and performance targets and the related financial statement areas impacted by these.
Based on our risk assessment, we considered the areas most susceptible to fraud to be completeness of related party disclosures, management override of controls and revenue recognition.
The CTS records do not allow for an easy distinction between costs for work at BNG and costs for work at Block 8, accordingly the auditors were unable to express an opinion on these amounts
They weren't allowed to get away with that so the Auditors made them split out how the $5m Bank loan had been spent between BNG and Block 8 - they finally settled on Block 8 drilling costs of $1.5M but I think you can see that Block 8 has been 'loaned' $5m from Casp and Casp has borrowed $5m from a Bank to pay for these two drills, they also had to show CTS as having received taxable income, so they can't drill on Block 8 using CTS without paying extra tax on it, unless it is inside the Caspian Sunrise tax wrapper and then Kuat can move it all about as he wants to.
The Company and the Oraziman family have entered into a loan agreement under which the Company has agreed to advance cash and equipment of up to $5 million to Altynbek Boltazhan the owner of EPC Munai LLP, and a member of the Oraziman family, to complete the work programme commitments under the existing licence. In the period under review approximately $1.5 million of the loan was drawn. The loan is interest bearing at the rate of 7% and, in the event the acquisition of Block 8 does not complete, would be repayable by the Oraziman family initially from future dividend payments.
In the event the option to acquire Block 8 is exercised, the income from the oil being produced there now and in the future is expected to cover the repayment of the $5 million loan and Block 8 drilling costs.
As disclosed in note 2.2.3 to the financial statements, the Directors have been unable to obtain reliable information for CTS LLP in respect of the timing of the costs being incurred, their allocation between different contracts with EPC Munai LLP, or whether the costs should have been allocated to cost of sales (which impacts external revenue recognised), or capitalised in the Group's Property Plant and Equipment or Unproven oil and gas assets. In addition, the Directors have been unable to provide updated budgets for estimated costs to complete. This information is necessary to determine revenue, costs of sales, advances received/ receivables, provisions for losses on contracts, property, plant and equipment, unproven oil and gas assets, related tax balances and related party disclosures and as a result these balances may be materially higher or lower than the current recorded values. Consequently, we were unable to obtain sufficient appropriate audit evidence over the valuation of the Group's external drilling revenues or the completeness and validity of its cost of sales allocation, nor were we able to determine whether any adjustments to the advances received/receivables, provisions for losses on contracts, unproven oil and gas assets, property, plant and equipment, related tax balances or related party disclosures at the current and prior year ends were necessary as a result. Were
CTS LLP, is a wholly owned subsidiary of the Group and undertakes drilling and other operational work both for the Group and third parties. In 2021 and earlier periods work for third parties was not recognised as it should have been as revenue with the associated expenditure as costs of sales but was treated in the same way as work for the Group, with the costs debited to work in progress within property, plant and equipment. While the accounting policies described in note 1.19 have been applied in the 2022 financial statements, including applying the input method of revenue recognition in accounting for revenue on drilling contracts, these accounting errors have not been corrected in the 2021 financial statements as there is insufficient data to accurately assess the timing of when the costs were incurred and the allocation between Group assets and services provided to external entities. In addition, due to the absence of detailed budgets being updated regularly since contract inception date, the directors have not been able to reliably assess the stage of completion and further costs required to complete each contract. The absence of this information represents a significant limitation on both the estimation of revenue recognised and if expected loss provisions should be recognised. Additionally, in 2021, some work on the Group's deep wells was also capitalised to property, plant and equipment, where it should have been capilised to unproven oil and gas assets. No retrospective adjustment has been made in the 2021 financial statements, and the amount has been adjusted in 2022 in notes 12 and 13. The absence of reliable information over all of these areas represents a significant limitation on the valuation of the Group's external drilling revenues, the completeness and validity of its cost of sales allocation, and if any adjustments to the advances received/receivables, provisions for losses on contracts, unproven oil and gas assets, property, plant and equipment and any related taxation impacts at the current and prior year ends were necessary. As a result, the related accounts' values for these items could be materially higher or lower than currently recorded values.
Sales of services As set out more fully in note 4 CTS LLP, the Group's onshore drilling subsidiary undertook repair and drilling work at Block 8 (EPC LLP), which is owned by members of the Oraziman family and for which the Group has an option to acquire. As at 31 December 2021 CTS LLP received US$ 2,103,000 of the advances for drilling and repair works at Block 8. In 2022 CTS has accrued US$ 3,704,000 of revenue from services to Block 8. The related cost of sales was US$ 4,083,000 (note 4). The balance of the advances received at 31 December 2022 was US $704,000. In 2020 CTS LLP conducted limited repair work at Wells P1 and P2 for a price of $757,653. In 2021 CTS LLP conducted limited repair work on Well P1 for a price of $646,373. During 2021-2022 CTS LL
While we seek to grow our asset portfolio with appropriately timed acquisitions we are also prepared and able to sell assets when their value to others exceeds the value we can see. This was the case in 2015, when, in poor market conditions, we sold our then second asset Galaz for a headline price of $100 million, which represented a profit of $15 million on our interest in the asset, and which provided $33 million to re-invest into BNG. It was also the case when we recently announced the conditional sale of 50% of the Caspian Explorer for $22.5 million.
Carrying Cost For Unproven Oil & Gas Assets
$46m minus Proven assets
* In 2021 BNG applied for the production license on its South Yelemes shallow structure. The Ministry of Energy of Kazakhstan extended the term in accordance with the additional agreement No. 1 dated June 24, 2023, until 23 June 2044. The related capitalised assets which were in total US$14,025,000 were moved to Proved Oil and Gas assets.
Add on a value for MJF ( 10 further wells allowed in 155 )
I have been through the 2022 accounts, broken assets down into different headings, will post as LSE seems to want it done, there is minimal duplication, any there is has been left in so that this can be read within its heading and hopefully convey the information without needing to cross reference into other headings as I realise there is quite a lot of info here, so that it can be cross referenced to fact check i've only used info from 2022 filed acs and the last 25/03/24 RNS.
IF you are busy please read the last para of the BNG Contract area.
- Why Sell The Shallows
- Carrying Cost For Unproven Oil & Gas Assets
- Galaz-
CTS Drilling Services
- Block 8 (EPC Munai LLP)
- Fraud
- 3A Best
- BNG Contract Area
- Both Shallows MJF (Full production license to 2043) & South Yelemes (Full production Licence to 2044)
- Options & Incentives
- Full Production Licences.
- Conclusion
They set out in the 2022 accounts that any Group assets were for sale, this opened the door for interested parties to approach to discuss.
Drilling wells at a rate faster than could be funded from oil sales, would require additional funding, as would any acquisitions to be funded by cash. Potential sources of such funding would include: further advances from local oil traders for the sale of oil yet to be produced; industry funding in the form of partnerships with larger industry players; further support from existing shareholders; and equity funding from financial institutions. Additionally, funding may be available from selected asset sales.
Should it be necessary, the Board has the following actions to mitigate any short-term funding issues · To seek additional funding from advance oil sales· To slow down the pace at which BNG is further developed· To defer the exercise of the option to acquire Block 8, as this would defer development expenditure· To sell all or part of one or more of the Group's assets· To defer further dividend payments· To seek additional equity capital· Cease or reduce the amount of discretionary dividend payments (payment of which is subject to the cash inflows outlined above).
1. Who had a clue about this ?
The Board has in recent months entered into a number of discussions with potential buyers concerning the BNG shallow structures (excluding the BNG deep structures Airshagyl & Yelemes Deep) at indicative prices potentially significantly greater than its current carrying value. Any deal at these levels because of its size relative to the Group as a whole is likely to require the approval of Caspian Sunrise shareholders.
2.Kuat can vote this on his own so the shareholders voting nonsense is just that.
£1 a Share? 2 2bn
50p a share £1.1b ,?
25p a share £550m
Sell Airshagyl deeps, 2 x shallows keep North Yelemes and Block 8.
Pay out a massive dividend then invite all shareholders in for a placing at statutory date at current holding ratio ( Kuat takes 50% ).
Placing pays to develop North Yelemes deeps and Block 8.
Kuat keeps 50% and has a lump of cash tucked away.
The Orthodox side might ... the Beards to the right less so.
Can sell a lump at 3.91.
What's happening here has this oil field sale deal been done and a big dividend is coming our way?
3.911
There's 4p...