Member Info for cyan2

Good morning Falky

You wrote;

"Argos is better investment than Rkh, the risk is the more less the same,
But the rewards can be a lot higher....IMHO"

How can the risks possibly be the same ?

Argos has not found any oil let alone fully appraised a giant discovery as Rkh have.

Argos spell it out clearly;

www.argosresources.com/perch/resources/arg-2019-annual-report.pdf
page 11
'General exploration risk'

"......no commercial volumes of oil or gas have yet been discovered and there is no certainty that such discoveries will ever be made."

What really irritated me was how our management portrayed the sale of the Egyptian oil assets . They were NOT up front, at the time, about the real reason; it was a forced sale because of those GIANT pre-development bills.

In the last presentation MOODY finally revealed the truth; we couldn't pay those bills; it was a terrible time to try and fund raise AND they really wanted to keep the Egyptian assets, if they could.

Anyone who took the time to crunch the numbers could see the truth BUT their lack of candour left the field open to crazy theory peddling on ADVFN; that the sale was forced by the Egyptians because of our Israeli company farmin proposal. Oh dear.

I want frankness from management and not disingenuous spin.

Good afternoon Anth72

You wrote; "....let bor go bust, we then lose our licence resulting in another company picking it up for nothing."

Look at Shenandoah ; Navitas paid only $1.8 MILLION for that field from bankrupt Cobalt energy.

See here; https://en.globes.co.il/en/article-navitas-jumps-on-positive-shenandoah-report-1001264557

They are now spending $1.8 BILLION developing;

https://middleeast.in-24.com/News/194649.html

Looks like Navitas are 'very interested' in Sea Lion at the moment. How will that play out for RKH which I hold?

I think that more questions need to be asked about PMO management and their profligate spending.

ROSE was interviewed in very early 2018 suggesting sanction would be by the end of that year. That suggests almost all was in place and ready; what needed to be spent, had been.
So, I would like to know where our 'pre-development' cash went in 2018 and 2019; $11m in 2018 and $19.3m in 2019. If RKH were being billed by PMO for their 40% of 'costs' ; it suggests approaching $50m was spent by the partnership in 2019. That is crazy money.

Looks like PMO management had awful cost controls. I think PMO's general mismanagement of the project finances is where we should be probing. Might have a better case against PMO's guys than ours; were we over billed by a desperate PMO.?

Good afternoon Nastynick

I think that most everything that could go wrong has ,so being pessimistic is understandable . I like to think I am realistic. Yes; things could all fall into place quickly... but is it realistic?

We have to learn from history and just how long the processes can be ; agreeing new terms and lasting to a pay day.

Time and money are things RKh does not have in abundance.

Good morning Godders99

After so many years of waiting on PMO we just have to wait a couple more months before we hear how HBR intend exiting. Once that is clear we will have a better understanding of how we can proceed. Which will come first ; OM award news or HBR revealing their plan to exit.
You are right to highlight our dire financial position. To be very blunt; I am struggling to see the Italians paying up actual cash in time to avoid a fund raise; that's IF we have won a decent amount; if we lose; its really grim.

Sam must know that actually getting hands on a cash award will likely be difficult and drawn out UNLESS the Italians are up for a negotiation and we are prepared to take less for a fast cash payout.

In my opinion; our management will rush to fund raise soon after the hoped for announcement that we have 'won' the arbitration. A decent reported win number should lift the share price and THAT is the best time to equity fund raise.

Its hard to find anything positive to say about our situation. The obvious pluses are the high price of POO and Navitas still being 'very interested' .

Good evening hydraides

You wrote; "I know RKH had some oil being produced from the meditterean/Egypt a few years ago, is this still the case?"

The best of our other assets were the Egyptian oil fields. All had to be sold because of giant Sea Lion pre development bills. Remember $19.3m was spent on those hills alone in 2019.

What we are left with is toxic junk in Italy. Gas assets nearing end of life with $13.561m decommissioning liabilities. The income they produced in the last 6 months was a pathetic $300k.

If a large OM award does not drop in time we will see an equity fund raise because I do not see anyone BUYING a stake in SL within 12 months.

Naviatas and their connections are the last credible hope for SL development, imo.

Even at this late hour, we MIGHT be surprised by a quick settlement BEFORE the panel issues an award.

It all depends on what the Italian's lawyers are saying to their client. IF their judgement was that it looks all but certain Rkh will 'win' and win BIG; then they may suggest a quick settlement before the panel publishes the award with wide ranging implications ; a case likely to be cited by other claimants.

Everyone knows that Rkh's cash position is dire and that gives leverage in a cheeky discounted settlement offer. But, would our lawyers insist on going for a possible larger prize?.

Of course, this could have been settled ages ago . On balance, it appears likely the Italians are going to resist to the very end.

Its unfortunate; but the numbers tell the story; Rkh MUST receive a large cash injection within the next 12 months, max.

The only way to avoid a likely equity based fund raise is to actually receive cash in the bank from an OM award.
There are other possible ways Rkh could raise cash BUT without certainty regarding SL's development we are only left with a highly dilutive issue of shares.

And there lays a whole other can of worms. Will the Italians roll over and quickly write a cheque, IF we have won?

I very much doubt it. I recently posted a link to the arbitration rules and what MIGHT happen after an award in our favour; there are ways for the Italians to potentially keep on arguing and delaying enforcement by 3 years.
The arbitration rules are listed here.
https://icsid.worldbank.org/sites/default/files/ICSID%20Convention%20English.pdf
Page 25 onwards covers The Award and what can happen next.

That's why I think that its prudent that we quickly engage with the Italians after a hopeful award in our favour. A negotiated haircut on agreed terms will be a smart move , imo, to receive some vital cash promptly.

I would not be surprised if our management actually opts for a quick fund raise on the back of an announcement of an award 'win'. Although Sam said he did not see difficulty in enforcement; he must recognise that time is not on our side.

Good morning happyInvestor100

The judges in our case have to properly apply the law applicable at the time in our case. They also have to present the reasoning followed to reach any award.

Your link form 1st June is about emission targets and Dutch law;

"The court found that Shell’s policy is inadequate to meet the requisite standard of care under Dutch law, and ordered that the carbon emissions of the Shell group’s global activities be reduced by 45% by 2030 relative to 2019."

I do not see a read across for our OM arbitration case. The panel can not simply retrospectively make up new international law to reject our claim.

I do agree that a lot of our shares price is supported by the belief we will win a decent award and that a failure to win will very badly impact the share price.

The arbitration rules are listed here.

https://icsid.worldbank.org/sites/default/files/ICSID%20Convention%20English.pdf

Page 25 onwards covers The Award and what can happen next;

Worth reading , imo.

Good evening HappyInvestor100

You wrote; "Cyan do you think a new partner will give RKH a free carry to first oil? It is reasonable to assume that RKH will have to raise funds to cover its share of project and commissioning costs to get to first oil."

RKH WILL require carry and loan support which I should have made clearer. My £65 m is enough argument ,does rely on terms like Navitas had already agreed in the proposed farmin with PMO;

"Premier and Navitas will fund all of Rockhopper's project development costs (excluding production area licence fees and taxes) from 1 March 2020 to Phase 1 Project Completion (estimated to occur 9-12 months after first oil) through an interest free loan ("Loan"). Funds drawn under the Loan will be repaid from 85% of Rockhopper's working interest share of free cash flow.

An additional standby loan ("Standby Loan") will be available from Premier to cover Rockhopper's share of production area licence fees and any Capital Gains Tax liability. This new Standby Loan will attract interest at a rate of 15% per annum and will be repaid from Rockhopper's residual share of Phase 1 free cash flow."

I should have included this in my prose as an example of the support required.

Lets hope that counting our chickens before the eggs have hatched does not disappoint.

IF we have won a cash award; what sort of money are we talking?
We have to start with the oft reported details of our OM claim; 275 m Euros PLUS interest.
Its elsewhere recorded as $325m USD.

Lets assume, for the sake of argument that $325m is the same as 275m Euros plus interest.
$325m Today equates to about £237.75 m POUNDS STERLING .

There has been discussion surrounding whether any award would be reduced based on the argument that we knowingly bought a blighted asset and that , in other blighted cases, awards are halved.
Lets assume the worst; we get halved.
50% of £237.75m is £118.875m.

Lets assume there is also a rounding down in a dispute as to the lost profit element.
In my opinion ; we could be left with a gross award of £100m BEFORE our lawyers deductions.

If we were to end up with £65 m, I think that could leave us reasonably comfortable surviving to potential first oil in 4 or 5 years.

In the 4 or 5 years to first oil ,( yes , I know, another assumption Sanction is achieved in a reasonable time), we will have basic G & A bills to pay.
At least $4m USD per year will be spent ; total $20m USD or £14.69 m sterling

We have decommissioning liabilities which I think we need to provision in the sum $16m or £11.75m Sterling

There are unknowns. MOODY mentioned another historic FIG tax bill that may drop. Lets provision $2m £1.47m

The BIG unknown is the dock decommissioning for which we have a 40% liability.
Maybe prudent to provision $10m ( Just a guess) £7.35m

Running total is now £35.26m

I am also making an assumption that the deferred CGT bill no longer applies.

Now we come to the really difficult potential costs;
Sea Lion pre-development costs.
These costs have been HUGE in previous years; RKH's annual spending on predevelopment costs was $6.7m in 2017, $11m in 2018 and an eye watering $19.3m in 2019!

Can another deal be struck where RKH is carried by interest free loans to only be paid back from production revenues?

To Summarize;
All these my numbers suggest to me that its unlikely there to be a BIG distribution from a wind up; if any; and what if the award is smaller than £100m?

The big prize is reaching first oil WITHOUT a fund raise on route.

There are so many variables. Lets hope I am wrong about a possible 50% haircut and we get paid in good time.

Listen to Sam MOODY here;

hTTps://secure.emincote.com/client/rockhopper/retail-investor-presentation/index.html

from 9mins 48 secs

He too thinks that the tax liability should disappear.

A complex issue. I agree with rpoodle; we paid tax on the cash we actually received.

MY understanding ( could be completely wrong) is that the further part of CGT the FIG are looking for was the value of the development carry.

Now the old PMO deal is not going ahead; one has to ask how can the FIG tax a benefit we did not receive; its irrecoverable

Its interesting to note that RKh , in their latest report, do not quote the irrecoverable provision as they did here ;

hTTps://rockhopperexploration.co.uk/wp-content/uploads/2019/09/Rockhopper-Interim-Report-2019.pdf

note 8 extract

"The Tax Settlement Deed confirms the quantum and deferment of the outstanding tax liability and is made under Extra Statutory Concession 16. The Outstanding Tax Liability is intended to be binding and final except, subject to the satisfaction of the Falkland Islands' Commissioner of Taxation, Rockhopper shall be entitled to make an adjustment to the Outstanding Tax Liability if any part of the Development Carry from Premier becomes "irrecoverable"."

This is the crucial bit; " if any part of the DEVELOPMENT CARRY from Premier becomes "irrecoverable"."

There was a bit more to interest in MOG when we took them over. Apart from OM there was an offshore drill ( Hagar Qim off Malta) with Genel (GENL) on going and I recall there was a conditional payment to be made if the drill was a success.

It was, I believe, also targeting circa 250 M barrels with a 20% COS. It was a failure unfortunately.

I have previously highlighted the historic connections between Genel's management and Falklands oil companies.

I have also wildly suggested Genel ( I also hold) as a company who might cast their eyes over SL.

I doubt very much that Genl would come aboard as they are VERY VERY careful with their capital.

Just let my imagination run riot out of desperation; lol.

Monte Grosso is/was a gamble ; an exploration 'punt'

This what RKH has on their web site;

"Monte Grosso
23% working interest
~250 mmbbl oil prospect (resource)
23% chance of success"

And;

"Monte Grosso, Italy (23% working interest)

Rockhopper transferred the operatorship of the Serra San Bernado permit (which contains the Monte Grosso prospect) to Eni during 2016. Since that time, options for the design of a well on the Monte Grosso prospect have been explored and work undertaken to secure the permits and approvals required to drill a well.

In February 2019, the Italian government introduced certain further changes to oil and gas law through the “Sustainable Energy Bill”. These changes include, amongst other things, a temporary suspension on exploration activities including the drilling of exploration wells. Discussions are ongoing between the Serra San Bernado joint venture partners to agree a forward plan."

This is what I previously wrote;

This is a very deep, challenging target; circa 6,800 metres; a previous attempt to reach target depth was abandoned by British Gas years ago. Its not a cheap drill and its estimated would take well over a year to reach the target; (I have seen an estimate of 415 days).

Good morning Godders99

Regarding Monte Grosso and your question ;why didn't we take legal action legal action.?

We transferred operatorship to ENI and we only have a 23 % interest in a prospect with a 23% COS.

Its just an expensive to drill prospect; its not like OM where we have a PROVEN asset.

How do you value a prospect; there may be nothing commercial there? Legal action looks like a non-starter to me.

Good afternoon IAmNotAnAnalyst

I take it that the 'no response to proposals' refers to the 28th September Requisition request .

Having read the proposals myself and noted the recent amendments to remuneration ( likely provoked); it appears that the resolutions on pay could save an extra $1m over FIVE years. That equates to about 3 months of very basic company G & A costs which have been reduced to circa £4m per annum.
Five years to first oil is a possible time frame.

I will ignore the extra (hopefully trivial) costs of the new NED ( just 'reasonable travel and
subsistence expenses')

Regarding the proposal to appoint a non executive director from the group; who is proposed? It would be nice to know the name and their qualifications. Otherwise; who from the shareholder group would chose the suitable candidate?

I respectfully suggest that there be should be a named NED candidate .

I just think this is all a bit too late to have a significant positive impact on Rkh's chances.

Good afternoon Glenrothes1969

You wrote;
"CEO must respond quickly to helpful shareholders. "

I note other posters have directly e-mailed MOODY and received replies. Any novel brainstormed idea , maybe should , in the first instance, be e-mailed to him .

Lets see if he responds constructively and quickly.