Member Info for Corryvreckan1

Ron - Based on everything that is knowable at this time, yes. Any other possibility is supposition until proven otherwise…

I appreciate you sharing your concerns on these matters, it's a good discussion to have and I don't mind having my thinking challenged to help avoid bias. We are coming at this from slightly different angles and I feel we may never quite meet in common ground.

A good weekend to all contributors, I am now going back into hibernation until Monday.

Yes it would be an obligation for Prax E&P to pay to DCUs, but Prax E&P are not in Administration so they have no banks or hmrc queuing up for payment.

In the Feb 2024 Prax E&P accounts they had tax payable of only £33,674 which appears to be the tax on interest on their bank deposits. That’s all.

They are just an intermediate holding company through which the revenues generated by Hurricane pass on their way up to State Oil, all by way of dividends received and paid. Their creditors are mainly the amounts due to State Oil and to DCUs. There are no other wolves at the door…

Littlened – my gut feeling has always been that they would just decide to keep it running until whatever end. The cost and time involved in trying to arrange a sale, coupled with the unlikelihood of any willing buyer to offer an acceptable amount, suggests to me that continuing to generate significant cash flows is preferable.

The next catalyst will be the Sea lion FID later this year. The Administrators may even wish to hold off until then in the possibility that it may not pass, or be delayed, and the AM then stays in situ as P6 gradually runs out its economic life. Also a more willing buyer may appear at that time?

It still keeps coming back to the value of those tax credits though, hmmm?

One left field thought – if the offtake is still being sold via the existing contract with BP, could they be a potential buyer? Secure the remaining production stream and gain from the tax credits? Open question and I have no specific knowledge on the viability of this.

Thank you ronwoking, if 14:54 post was a reply to my query about who specifically “Prax” referred to in your posts. That company relationship had been mentioned here several times and is not in dispute.

Prax Exploration and Production plc are not in Administration so there is no, current, impact on DCUs.

Prax Exploration and Production plc are a subsidiary of State Oil Ltd who are in Administration, thus when the Administrators look at State Oil’s investments they will see what could be used to meet the debts of State Oil. Those investments include Prax E&P / Hurricane but any decision to sell there still does not bring Prax E&P into Administration.

If the Administrator manages to sell off any part of the wider business then the Net proceeds from that go into State Oil (in Administration) and are then available for those creditors of State Oil who are queuing up to be paid. DCUs are not and never will be a creditor of State Oil Ltd.

If Hurricane is sold as an asset then DCUs will receive their 17.5% of the Gross Proceeds, as a Relevant Disposal as defined in the Deed Poll. That is a ‘cost of sale’ of that specific company. There will be other costs involved in the sale that will also be directly met from those proceeds. The remaining Net proceeds are then available to feed upline via Prax E&P into the Administrators calculations at State Oil level. All further obligations to DCUs are cancelled at that point after the 17.5% is paid.

If a sale was at the level of Prax E&P plc then the total proceeds of that sale go directly into State Oil for the Administrators to distribute. In that situation the new owner of Prax E&P takes it away in it’s current form, changes the company names, and everything continues as it does now until the new owner decides otherwise (within the constraints of the Deed Poll etc.).

That’s my reading. Nobody is disputing that Hurricane could be sold, but the DCUs are not in any queue within the administration process.

RodneyT - I'm not ignoring you and thanks for working on this, I've just not been able to access that link which is due to the restrictions on my PC. I'll try again later.

Ronwoking – you keep repeating “Prax” in your posts, which specific entity are you referring to when you say Prax?

There are dozens of companies and divisions within the whole Prax Group that carry that name. As we keep repeating, and as the Administrators themselves have stated, only a few of those companies are currently in Administration. None of the Prax Upstream companies are.

You need to be specific here as “Prax” as a generalisation doesn’t work.

I’ve lost track of where we are with the tax credits, others will know better on that. Pages 44-45 of the Feb 24 accounts give a detailed summary at that time.

The Total deal would otherwise have been a prime use there?

Will be key to attracting potential buyers…

Littlened – the Feb 24 accounts show £20.9m paid from Hurricane to Prax E&P as dividends (“intercompany settlement”). I would suspect that process continued and accelerated last year as well as that provides liquidity to Prax E&P to pay the amounts due to DCUs and then also their own dividends to State Oil Ltd.

Otherwise the payments to DCUs would continue to deplete the initial seed money invested by State Oil who would otherwise see no return on their investment until such time as Hurricane was wound up. The cash generated by Hurricane all appears to be flowing ‘upstream’ within the Group, although that theory yet to be confirmed in the 2025 accounts later this year.

At Feb 24 Hurricane retained only sufficient cash to meet their restricted obligations and general working capital by the looks of it.

I need to clarify that in my previous posts when referring to Prax Upstream I more specifically meant Prax Upstream Limited (i,e. Hurricane) rather than Prax Upstream Division of the wider Prax Group (effectively Prax Exploration & Production plc and any other units they may have that don't concern us).

To avoid potential confusion I shall revert to calling it Hurricane as distinct to Prax Upstream Division.

Apologies if that was not clear as the treatment for DCUs will be different depending on the 'scale' of any potential sale - either at Hurricane/Lancaster level only (17.5% entitlement of proceeds applies), or Prax E&P level and above (agree with Dive on continuing to meet the original obligations to DCUs).

In the meantime nothing has changed (yet) and the whole Division continues to operate outside of the insolvency process.

The legal pathway is direct from Prax Exploration and Production plc (as the holding company of Hurricane Energy, now named Prax Upstream Ltd) to DCU holders - it does not go through any other Prax Group company.

The cash for DCU payments is based on Revenue, not Profit. The profitability of Prax Upstream or Prax E&P is irrelevant to the DCU calculations.

The Prax Upstream companies “all currently continue to operate outside of insolvency” as advised by the Administrators and noted on here several times. It will be announced if that changes and DCUs would then become unsecured creditors. There is currently no sign of that happening but we await confirmation either way.

The payments due to DCU holders are not required to be held in Escrow, nor protected or in any way guaranteed, they are just paid as a liability of Prax E&P plc under the terms of the Deed Poll and Scheme Doc when the payments fall due every six months. Nothing has changed on that and it carries the same risks as it always has.

The Administrator cannot directly channel any funds due to DCUs to pay other Prax Group debts as part of the insolvency process, the limited company separation prevents that. The Administrator might try to sell Prax Upstream, and/or other assets, to meet the wider Group obligations and we have already discussed on here that DCUs are then entitled to 17.5% of sale proceeds were that to happen.

See previous posts from several contributors starting from 30th June (page 5) onward for discussions around all of this.

Senseman – I had started a draft reply to your two specific questions but I’m happy to wait for Rodney’s input to help check any bias or blind spots I may have had in my previous posts on this, or otherwise confirm we are seeing the same things.

*bpm - no need to call nurse.

Vast - it's not against rules either there or here to quote someone else, but it is expected that you properly credit your source rather than trying to pass it off as your own research. That's called plagiarism and unfortunately we don't have medieval punishments for it anymore.

Oh dear. I’m not a member over there but their algo is showing it on the public page. I see they nicked littlened’s post as well.

Interesting to note that they chose not to include my last para warning about lowball offers on JPJ, hmm!

I’ve had people on the GAMA board nicking research off the LSE forum as well this week and not crediting source. Most discourteous :(

Anyway, I think everyone else over there will know that post for what it truly is (thank you for the alert) so my heart rate remains at a stable 48bps and I may go and make a cup of tea ;o)

The next DCU payment is still (currently) due on 30th September for the offloads in the last six months because that’s what the scheme states and because Prax Upstream is not (currently) included in the administration process. If that changes there will be a public announcement and we will all know about it then, brokers included.

DCUs will only change into unsecured creditors in the event that Prax Upstream also falls into insolvency. As yet there is no sign of that.

As already noted over the last couple of days, if the Administrators look to sell other group assets to cover the insolvent debt at Lindsey etc. then DCUs will be entitled to 17.5% of the net proceeds of any sale of Prax Upstream company/assets, payable 3 months after the end of the half year period in which the proceeds are received, as per the terms of the original deed poll for the scheme (see my post on 2/7). Were that to happen it would be in addition to the payment due in September.

Regarding sale of DCUs via JPJ, as posted by Dive yesterday it will only be possible if there is a willing buyer. That could happen on Monday or it could be months – but what offer will they now be likely to make? (rhetorical) I would suggest that people do not post on here that they may be looking to sell because that just alerts potential buyers to the possibility of a lowball offer maybe being accepted.

Eski - yes, we're on the same page, and it is revenue (or as the deed poll says for a potential sale "proceeds thereof actually received ") and not profit. I had forgotten about the tax credits being of potential advantage to a buyer so yes a potential push higher towards the DCU max may be more likely that way, lowball offers aside.

But I thought ned in the OP was indicating that the buyer would need to honour the DCU terms for a % of production revenue rather than asset sale proceeds, may have misunderstood that?

Separate dark though - might a potential buyer make a decent offer ONLY on condition of Total agreeing to complete? That might be even better for DCUs...

It's all subjective musings of course, Upstream not yet in the frame for anything different at all.

* administrator, not liquidator

Not sure we are quite alike, my reading is that DCUs would get 17.5% of the net revenue (after deducting costs) of any asset sale and then walk away, with the new owner free to then do what they like. Is that what you were meaning too?

But without GLA a potential buyer of Prax Upstream might take a quick look at the AM situation and chuck in a lowball offer that the liquidator might feel compelled to accept, they having no obligation towards DCU holders.

Thank you boxers, I had only looked at the scheme doc for my earlier post and forgot about the deed poll. Further details from there:

“Gross Revenues (USD)” means, in respect of a Half-Year:

[…]

(c) in the event of a Relevant Disposal, the proceeds thereof actually received within that Half Year (including the full value of any non-cash proceeds, which shall be determined in accordance with Condition 7 in the event of a dispute)

“Relevant Disposal”

means the direct or indirect sale or other disposal either (i) by the Company or other member of the Prax Group of Hurricane Energy, or (ii) by Hurricane Energy or any member of the Hurricane Energy Group of any Asset (or any interest therein), other than Relevant Hydrocarbons in the ordinary course of business and other than to a member of the Hurricane Energy Group"

----------

Hurricane Energy having since been renamed to Prax Upstream.

Might it actually be more beneficial to DCUs for Lancaster to be sold...(playing devils advocate here)?

But - without GLA (if it doesn't complete, and I agree the EV article is a little unclear on that) and with the risk of the AM being taken away any time next year, would they even find a buyer at this stage?

littlened - I second eski's question as I couldn't see that confirmed in the scheme doc, and it's slightly at odds with the above from the deed poll.

It might just be algo driven for month end portfolio balancing?

I'd forgotten about the ADPs, thank you, but that's a shocker. Official non farms are tomorrow (1.30pm BST) instead due to Independence Day on Friday. US markets close 6pm BST tomorrow in advance of the holiday.

Lucky - yes, that's all it is.

And Octopus extending their tentacles out further again this week...