Member Info for cyan2

PMO hedging numbers

H1 2020 40% production at an average of $64
In H2 14% at an average $63

Good evening muzzletoff

You mentioned; "Falkland Islands Govt, who are due a heap of deferred tax.."

Since the new deal with NAVITAS has emerged; our old enormous carries from PMO have gone. It follows; subject to FIG approval of the new deal' that the 'gain' has gone and any tax is irrecoverable as per this passage;

"Outstanding tax liability amount may be revised
downwards if the Falkland Islands’ Commissioner
of Taxation is satisfied that either (i) the Exploration
Carry from Premier is used to fund exploration
activities in the Falkland Islands license areas; or
(ii) any element of the Development Carry from
Premier becomes “irrecoverable” "

hTTps://rockhopperexploration.co.uk/wp-content/uploads/2016/05/RKH-Report-to-31-December-2014.pdf
p16

A decent RNS from PMO today. The commitment to SEALION is there , but the financial guarantees rely on PMO completing its announced corporate actions. One would hope we would be able to move forward after the 17th March court hearing.

Quite a lot on SEALION in the PMO results. This is the important bit;
"The critical path item to sanction remains securing senior debt support for the project. In 2019, Premier completed a Preliminary Information Memorandum supported by a comprehensive set of independent expert reports on the project. These formed the basis for the financing guarantee application process for the senior debt component of the project financing. While engagement with senior debt providers is constructive, feedback received highlights the need for Premier to complete its announced corporate actions and extension of its credit facilities to provide certainty over its medium- to long-term funding position before financial guarantees for the project can be provided."

Earlier in the results there is this passage;

"The Court Schemes of Arrangement (the Schemes) required to implement the announced acquisitions, related funding arrangements and extension of the Group's credit facilities commenced post year-end. The requisite majority of Premier's creditors approved the Schemes in February and the court sanction hearing is scheduled to commence on 17 March 2020."

One must hope that court approval will open the way for the SEALION financial guarantees

Good morning BigBear2
I agree; a sustained period below $50 would likely put the project back ; however the Golmans guess is $53.

hTTps://oilprice.com/Energy/Oil-Prices/Goldman-Slashes-Oil-Price-Forecast-By-10.html
Extract;
"Goldman has doubled down on its bearish oil take and has cut its oil price target by $10 to $53 in Q1 through the end of the year, as a result of what it now estimates is a loss of as much as 4 million barrels per day out of China."

I see POO is now $52.74. Even down at this low price; its still enough, imo, for a SEALION go decision. Of course,the important assessment is what POO will look like in 4 years .

The smaller SEALION project with a break-even of $45 and PMO's project 'go' price was $55; that figure giving them their minimum desired profit margin.

The enlarged SEALION project has a lower break-even of $40. Its not unreasonable to assume that the minimum 'go' number may also have reduced.

Lets see what happens tomorrow with the OPEC decision. I note that some think a million barrel cut would lift POO to $60

Good evening Tuggy.
I sincerely hope there really is serious interest in the NFB again. The evidence is less than convincing and lets not forget that Noble despite being "very excited" walked away from a very sweet deal (for them) with Arg.
Anyone wanting to drill exploratory wells again is going to have to have deep pockets . At circa $35 million a drill (figure extrapolated from recent SEALION costings) its not a cheap game. It does not stop there , for IF a drill is successful many more appraisals would be required. Basically you are looking at a seriously wealthy oil company.
Then I look at the only partner PMO and RKH could attract; NAVITAS who got a great deal but are virtually penniless and we just have to hope they can fund raise. My suspicion is they were the only interested parties for surely PMO would have preferred a rich, bigger partner?
Just have to wait and see if the 'interested ' party statement actually brings forth a partner for ARG.
Logically thinking; IF there was a rich oil company out there looking seriously at the NFB; then why did they not outbid NAVITAS.? For a couple of hundred million dollars they could have snaffled 150 million barrels as their share of a field where $1.1 billion had already been spent on appraisals. Why gamble elsewhere when you have a certainty at a discount price.?
Just have to wait and see what happens and hope OPEC on the 5th march lifts POO , for all our sakes.

Good afternoon Tuggy.
You wrote; "the Chatham and Tyce fields flow into PL001 territory and the Johnson field is one third in that same licence so in effect there is considerable value "

Johnson is, imo, a useless GAS discovery with, imo, absloutely no hope of being monetized; Shell found it and abandoned it in 1998. Am a bit confused by your references to Chatham and Tyce fields.

Argos has a prospect called TYCHE which is given a 18% risk factor on p77 of the ARG CPR here;

hTTp://www.argosresources.com/docs/ARG-CPR-JULY-2013.pdf

Note; Rhea is given a 38% risk factor

Chatham is another prospect refereed to by EDISON in July 2015 as a secondary target in a planned drill on the RKH licence that did not take place due to rig issues;

hTTps://www.edisoninvestmentresearch.com/?ACT=18&ID=14662
p10
"Chatham – gas-cap appraisal and deeper exploration
The Chatham well (14/10-10) is primarily an appraisal of the western flank of Sea Lion to determine the presence or absence of a gas cap in the SL20 sands. This is of importance as if no gas is present in the well, around a further 65mmbbl can be added to the Sea Lion resources (if the well does encounter a gas cap, the location (though not the well) could instead be used for gas reinjection during production if required). The well will then continue on to the deeper Chatham exploration prospect (GCoS 17%),..."

Two important points to note; firstly The vast bulk of the Chatham prospect is in RKH license and secondly it was given a low Gcos.

One can not ascribe "considerable value" to either Chatham or Tyche because nothing commercial has been found yet and Johnson is a gas discovery with very little chance of monetization, imo.

p11 of the last Argos annual report spells it out clearly

www.argosresources.com/perch/resources/arg-2019-annual-report.pdf
General exploration risk
Whilst results in the surrounding area are encouraging with respect to the oil and gas potential of the area and interpretation of the seismic data has indicated extensive prospectivity within the Argos Licence area, no commercial volumes of oil or gas have yet been discovered and there is no certainty that such discoveries will ever be made."

Good afternoon Tuggy
You wrote;
"Rhea and the three other prospects are owned by a company who has been in the FI for a long long time and of course have a very successful fishing business and property interests on the island itself,"

For absolute clarity; that statement reads like you were saying Argos Group Ltd OWNS the licenses which Argos Resources Ltd operates. In effect you were saying Argos Group Ltd owns Argos Resources Ltd. That is not correct . They are separate LTD companies ; one AIM listed with shareholders and the other evidently private.

Their respective financial successes or failures are entirely independent of each other. The fact that there are characters in both companies makes no difference.
Argos Resources Ltd has to rely on ether a new partner injecting cash or otherwise raise funds which will be via the issue of new equity.
The mention of fishing fleet and other property assets held by Argos Group Ltd confuses the issue at hand.

Godders99 ;The reason Shell left in 1998 was that POO slumped really badly to $11.91; inflation adjusted to today equals $18.86

As for financing the SEALION project with already have agreed Vendor financing. We will just have to wait and see regarding senior debt.

SEALION is a robustly economic project with a cash break-even of $40

Production costs are really competive ; "$25/bbl life of field opex + lease"

(source; p.14 https://rockhopperexploration.co.uk/wp-content/uploads/2020/01/Investor-Presentation-Navitas-HoT-7-Jan-2020v3-1.pdf )

Read this story from 29.1.2020
hTTps://en.mercopress.com/2020/01/29/guyana-rapidly-becoming-an-oil-major-16th-discovery-in-four-years-of-exploration

"With estimated production costs of US$ 46 per barrel, well below current oil prices, its production is highly competitive with shale and other leading deep-water areas."

These guys should have farmed into SEALION. Our production costs are much lower.

POO is now just above $50
We have to remain conscious of the POO as regards PMO's minimum project 'go' number.
Under the old plans the break-even number was $45 and PMO stated their minimum price to give a satisfactory profit margin was $55.

After advice, the economics of the field was improved by increasing the number of producing wells; adding four to the south of the field. That caused break-even to drop to $40.

I think its fair to assume that PMO's 'go' price will have dropped too; maybe even to $50.

I think that if the Saudi's get their way this Thursday with their reported wish to see a million barrel cut in production; we could see POO back over $55 in a very safe project 'go' place

Hi again Godders99

The BOD gave their best estimate on the information they were given. The arbitration result could be announced this week; lets see.
The virus crisis is grim but for SEALION development the critical event is the OPEC meeting on the 5th.
We are intensely focusing on very short term events when the potential SEALION financiers have to guess what POO looks like in FOUR years when we could be pumping first oil.

What I am saying is ; things can change fast; Look back 20 months to when POO was pushing $80 and TRUMP was moaning that POO was too high?

Good morning Godders99.

Its hard to guess how long the virus crisis will impact. It could cause delays to FID. Near term we have the critical 'extraordinary, OPEC meeting on 5th March to discuss recommended production cuts. IF in the following days POO goes to $55 plus again , we could be back on Schedule for FID by year end.
As for the arbitration; you wrote "Italian case to be delayed for another 6 m plus."
I think the DECISION will come pretty soon BUT ; any award given allows the Italians 240 days to pay up.

Good evening falklandinvestor.
Let me make a few things perfectly clear to you;
1, I have an interest in all Falkland oil and gas activities.
2. I hold RKH shares only
3. Tuggy raised RKH here AND dropped my name here making comments that deserved a response to and clarification
4 This is a discussion board open to all; not just rampers who are trying to encourage people to buy this stock so they can dump it on them and run away.

Hope these links help Tuggy

An "Argos Group Ltd" story;
hTTps://en.mercopress.com/2018/12/07/falklands-fishing-fleet-latest-incorporation-f-v-argos-cies-open-day

"The F/V Argos Cies is named after the Argos Company, which has been involved in fishing around the Falkland Islands since 1988"

Argos Resources Ltd...the oil company under discussion here was formed in 1995

hTTp://www.argosresources.com/the-company.php

Good evening Tuggy

You wrote; "Rhea and the three other prospects are owned by a company who has been in the FI for a long long time and of course have a very successful fishing business and property interests on the island itself,"

I can understand the confusion. Argos Group Ltd are a separate Limited company with a fishing fleet. They are separate from Argos Resources Ltd.
There are characters involved in both companies BUT they are separate LIMITED businesses; Argos resources DO not have an fishing fleet assets.
Have a read of the Argos Resources accounts as to their assets. Note these two extracts;

"Administration expenses were $433,000 in 2019"
"cash in the year decreased from $788,000 to $768,000."

Its clear a fund raise is required in not very distant future.

Thanks for the link luckyman2.
Am not so sure it has much impact on the moving forward of the SEALION development plans as , my understanding is, the ZAMA proceeds will be used to address PMO's debt and are not earmarked for SEALION expenditure.

That's the sum of it; RKH had burnt through an enormous amount of cash and the tank was nearing empty.

The good news is PMO did the decent thing; took pity on us and gave us a little carry and a deal that MIGHT, if goes ahead, see us through to first oil. Came at quite a cost though.

Good night all.

It was predicted by EDISON in there earlier report that RKH would have a cash balance of between $25 and $30m depending on the cash/equity split in the UOG deal..

Without the UOG cash its clear RKH were NOT going to survive 4 years to first oil on maybe $15 m; that's discounting any more PMO bills too!

2nd April last year gave the clear warning on their vulnerable cash position;

"Under the base case forecast and the downside scenarios run, the Group will have sufficient financial headroom to meet forecast cash requirements for the 12 months from the date of approval of the 2018 financial statements. However, beyond the 12 month going concern assessment depending on the timing of sanction for the Sea Lion development, in the absence of any mitigating actions, the Group may have insufficient funds to meet its forecast cash requirements.Potential mitigating actions could include non-core asset disposals, collection of arbitration award proceeds, deferral of expenditure or raising additional equity."

The cash crisis came quicker than they expected and no arbitration proceeds were in the bank. They HAD to sell a non core asset; its was about the only thing they could sell!

The cash numbers tells us what was driving the Egyptian sale; RKH could not pay its way and last to first oil without raising cash . Look at the cash pile; the on going bills from PMO; the $5.4 million per year just to keep the business ticking over and the at least 4 years to first oil. There's the empirical evidence.