Malcy..2 Nov 2020 15:55
Scirocco has relaunched today with a new website, a webinar to remind us of the company’s strategy and a detailed presentation setting out the focus from the board. The strategy is to build a portfolio of cash-generative assets which will allow the company to be self-funding. They also indicate that the transition energy market is going to be a core focus of the business moving forward where the Board see excellent opportunities that meet their strategic criteria.
Scirocco has a very strong board with ‘significant industry experience’ with which I concur, and the board has plenty to be getting on with. First of which is to assess what to do with regard to the Ruvuma PSA now that Aminex has completed its farm-out and that ARA has taken on the operatorship. Shareholders are assured that the board ‘will not entertain any offer that does not reflect its value’.
In a similar vein the company are keeping their options open with regard to their investment in Helium One, also based in Tanzania and with a significant strategic resource. The key factors are that it is funded for the drilling programme expected in 2021/22 and that the company plans for a listing of its own. This indicates that while Scirocco will not be putting any more money into it they believe that it is worth substantially more than current investment.
Drilling down into the strategy leads to a slant towards the European transition energy market (of which the CEO emphasised was inclusive of the gas market) which is similar to before but with more realistic gas prices and growing opportunities in cash-yielding energy assets should be more rewarding should the right target be found. Within this broad strategy it is clear that the company believe that the major changes in this market has led to opportunities being created.
Scirocco is continuing to make cost reduction a key priority and so far it has been highly successful on this front. Shareholders are aware that operating costs are low and the board has skin in the game and with options available across the board in both sides of asset transactions there appears to be substantial upside.
It is worth considering, as mentioned by the CEO today that the for sale businesses are only worth what buyers will pay for them, nor are Scirocco price takers in the process. It is also obvious to me, looking at some recent investor comments that there may be some unrealistically high expectations of what assets might realise. A guide to the difference between the valuations of Aminex and Scirocco is, on a very rough basis, the value of the ARA carry, currently c.£15m.
Finally it is an exciting time for Scirocco shareholders, a repositioning of the company should deliver significant value for them.
https://www.malcysblog.com/2020/11/oil-price-scirocco-coro-lamprell-cycles-analysis-and-finally/
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