Member Info for cyan2

Steptoes wrote;

"What I can definitely tell you is that we aren't going to be needing equity based funding of £25m and more (3b shares Lol), as BackwardsBrailey and his band of numpty followers ludicrously claim. Unless maybe they think we plan to buy out BP?

Of course, there's a risk it could all go wrong. Sanderson could be hit by a bus, there could be an accident on site, the company could run out of cash and be unable to raise more. Nothing is ever 100% safe."

The UKOG RNS had this passage;

"Therefore, the Board seeks approval to increase its authority to allot and issue shares so that it can act swiftly to establish Production via an ability to fund the Company's Horse Hill FDP and to ensure that the Second Deferred Payment can be satisfied."

"to ensure that the Second Deferred Payment can be satisfied."

Isn't that UKOG admitting it can not pay its way; It will HAVE TO issue shares ?

Further to my last on the big bonuses; Read and weep; Big bonuses for just getting a CPR done; what!?

Report & Accounts for the year ended 31 December 2016
Annual bonus
In respect of the financial period, the Committee agreed that the executive director annual bonus opportunity would be up to 100% of base salary and that the executive directors would be treated as a team for the purpose of objective setting. The following objectives were agreed for the financial year:
(i) Bringing an additional paying partner into the Sea Lion Development Project
Farmout discussions had been pursued with a number of parties but, as no deal had been agreed at the year end, the Committee agreed that this target had not been achieved.
(ii) Completion of a Competent Person’s Report (CPR) that meets specific objectives set by the Board
The CPR had been completed in accordance with criteria laid down by the Board and had raised the technical profile of the Falkland Islands. The Committee agreed that this target had been achieved in full.
(iii) Achievement of production related targets
The production target for the Company’s existing assets had been achieved and the acquisition of Beach Egypt had brought in additional production. The Committee agreed that this target had been partially achieved.
(iv) Achievement of specific milestones for the Final Investment Decision (FID) for the Sea Lion Development
There had been further progress towards FID with completion of the project definition for Phase 1 of the Sea Lion Development, completion of an updated draft Field Development Plan and Budget and good progress on FEED. The Committee agreed that this target had been achieved but that, as overall progress to FID had not been in line with expectations, this should be recognised in the percentage of this target that was considered as having been achieved.

The Committee agreed that a final bonus of 42.5% of basic salary should be paid to each of the executive directors in recognition of the extent to which the 2016 corporate targets had been achieved. An interim bonus had been paid during the year to S MacDonald in recognition of his work on the acquisition of Beach Egypt. "

hTTps://rockhopperexploration.co.uk/wp-content/uploads/2017/05/2016-RKH-Annual-Report.pdf p.42

Bonuses for just doing your jobs. This year just gone we have to factor in the fire-sale of those all important Egyptian assets; anyone going to take a pay cut? Don't hold your breath.

Good afternoon Surfit
You wrote "has Moody ever given himself a pay cut"

MOODY's basic pay in 2018 was £373k ; total package £539.7K
In 2017 his basic was £362.1k; total package £525.1K
In 2016 his basic was £362.1K total package £581.8 K Must have been a big bonus, but for what?

The next report will be interesting reading

Good morning Surfit,
You wrote "I for one am not expecting the SP to really move until sanction is granted." Actually I think the arbitration has the potential to really move the price. Its so hard to predict; could be nothing or a sum equal to our market cap. The balance of opinion seems to be that we have won the argument and its all about 'how much'. Nothing would be a serious downer imo; $20 m USD i think would be rather low . Its not too long now before we know.

I really do want to see management getting a grip on the excessive admin costs. We have 14 staff and are spending $5.4m p.a on G & A. Its too high. No bonuses this year and a 25% cut in these costs required. Either people take a 25% pay cut or we shed staff. We have sold Egypt so the workload must be reducing.

The interesting question surrounds NAVITAS and their ability to fund. Its a bit of a chicken and egg situation. The FIG have to be convinced that NAV can raise. No doubt NAV will point to the recent Shennadoah project;

"Navitas jumps on positive Shenandoah report"
hTTps://en.globes.co.il/en/article-navitas-jumps-on-positive-shenandoah-report-1001264557
12.12.18
"Navitas and the operator believe that commercial production in the project will commence in 2023. Navitas's share of the development costs will be $184 million."

(contracts for the 'trees' was announced in October 19)

"(Navitas's shares is 65 million barrels)"

The FIG are going to have to be pragmatic and agree to the new partnership terms and accept that the deferred £59.6m CGT on the old giant carry's is unrecoverable now. The alternative will be risky; a possible failure to develop which I am sure PMO will highlight.

I think there will be plenty of news flow to keep every-ones interest. Most notably ; any day now or at the latest by the end of February, we will hear the result of the arbitration. This has the possibility of being a very significant sum of money; that would lift the share. We will have announcements the new partnership signings the approval by FIG; confirmation of finances and UKEF support too. Next few weeks look potentially exciting to me.

Good evening Surfit

There are a lot of ducks to line up before FID. The timings are difficult to judge because we have to twiddle our thumbs while waiting for others decision making processes. The FIG have to approve the new deal. Worth remembering that new deal does away with the giant carry's and thus has implications for the deferred CGT. The FIG were hoping for £59.6 m.

The completion of the huge finance package is another critical stage ; approval timescales are unknown. At some stage; logic suggests AFTER the FIG agrees NAVITAS partnership; then NAV have to arrange their finance.; they can not attract investment capital without the guarantee that NAV are allowed to enter the partnership; this needs FIG approval.Everyone has to be confident that all the party's have the necessary resources to proceed. If we get FID by end of November I will be pleased.

Good evening greenspot.
You wrote; "FID by end of March.."
That is not possible if the partners timescales are to be believed;
I translated from Hebrew a PDF from Navitas website dated 7th January;
"2.1.3 Signature Deadline - The Parties will act to sign the Transaction Agreements by February 28, 2020, or Until a later date to be agreed by the parties."

Only once that's signed off will the FIG be sent the proposed new partnership terms.

The FIG have to approve the new arrangements.

Our RNS of the same date gives us an estimation of how long FIG approval may take;

"Finalisation of a Sale and Purchase Agreement is expected during Q1 2020 ("SPA Signing") with completion subject to satisfaction of certain conditions including regulatory approval, expected in Q2 2020 ("Farm-in Completion")"

So its April to end of June before we may get FIG approval.
The Navitas document has these useful comments;

" Final Investment Decision (FID) for 1 Phase Development - in accordance with information provided to Partnership by Existing partners, such a final investment decision is expected to be made by the end of 2020.
This is after the financing outline for the development of this phase has been completed."

" Production start - according to information provided to the partnership by existing partners, start of production
The oil asset is expected during 2024."

Good morning Phil164
I wrote ; "The other issue I think is POO; its not really high enough. BOR never manged to complete a farmin when POO was over $100; so what chance now with POO $40 cheaper?"
POO had an enormous fall. POO, if memory serves me correct; hit $115. As I said BOR could not complete a farmin ;for whatever reasons . Yes, things can change but, one has to look at the evidence of an oil market in surplus with a growing pressure to decarbonize .
The present POO is supported by hard fought agreements by OPEC to cut and manage production. It seems the consensus of opinion is that around $65 is the ballpark producers are content with. I think the days of $100 oil are long gone.
There has been a huge recent discovery with Iran announcing a 50 Billion barrels find adding to their enormous reserves.
www.nytimes.com/2019/11/10/world/middleeast/iran-oil-field.html
Pressure on POO will really grow if the Iranians get to export in quantity again and OPEC can not agree to manage production.

But, as I say, there is empirical evidence of a real lack of interest; those Argentinian wildcat licenses preferred by big oil ahead of BOR's known discovery and the difficulty RKH and PMO had attracting a strong, rich partner.

If SEALION achieves FID there will likely be a lift for BOR shares offering a trading opportunity for the nimble; but will it last.?

Hello again ivans
The problems BOR has attracting a deep pocketed partner are significant. First the size of the investment; I reckon you are looking at a minimum spend way over a billion dollars; SEALION cost is $1.8 billion.
BOR's asset is in truly DEEP water circa 2000m and the costs of every drill are twice that of in the NFB. Years ago a North Falkland basin drill cost about $50m a shot; the SFB was $110m. Now its said costs have reduced but the differential remains which makes the NFB more attractive for development and exploration; the water depth is about a quarter of BOR's asset. The other problems are linked to politics. Argentina has a tendency to blacklist any oil company investing in the Fi's. That will put off an awful lot. As evidence of 'big' oil's lack of interest in BOR's proven discovery you just have to look at the recent auction off of Argentinian EXPLORATION licenses , off shore. Looks like big oil would rather spend cash gambling on a hit rather than buying into BOR's certainty.Certainly no appetite for ANY more exploration in Falkland waters. The other issue I think is POO; its not really high enough. BOR never manged to complete a farmin when POO was over $100; so what chance now with POO $40 cheaper?. It is looking odds on now for SEALION but its been a close call and still may end up undeveloped if fate throws curve balls at the partners. RKH were lucky to hook PMO with a deal that now looks , and proved, unaffordable. If it not for the enormous amount already spent by PMO and the catastrophic hit on their accounts (SEALION valued at circa $700m in their books); I think they would have walked away. Time is not on BOR's side with climate change the big issue and they really need to do a load more appraisal work anyway.
. BOR will stagger on because it has circa £4m in cash to pay directors who will continue to put a brave face on for investors. I note your line ;
"PMO may still farm in to BOR and then subsequently seek other richer partner and farm down further, like how they did in RKH.
PMO can not afford to play with BOR. The debt holders would likely block any more borrowings.Please research NAVITAS. They are NOT rich they are VERY new with little cash. There remains funding questions. I really wish PMO could have attracted another rich major to turbocharge development, but, it looks like Navitas were the the only interested party.
Good luck

Good evening ivans
You wrote; "perhaps PMO will be looking at BOR next after RKH."
PMO have debt issues. They could not possibly finance the development of BOR's discovery which needs more appraisal drills anyway. The cost would be huge. BOR say they can breakeven at $40 a barrel; multiply that by the numbers of barrels BOR believe they have ..

Review the SEALION position. PMO could not afford to develop SEALION anymore without bringing in another partner to share the costs. PMO gave up 20% of SEALION for , effectively, a couple of hundred million just to get the project over the line.
For 30% of SEALION NAVITAS are on the hooks for $180 million as their share of the partners $600m commitment to the package which it appears will comprise $400 vendor finance, $800m senior debt and $600 m from the partners. They will also help with a loan to RKH.

PMO are over stretched and the debt holders would baulk at more giant borrowings.

Good morning Surfit .
I agree entirely regarding bonuses;
Something to look out for later; an enormous bonus on 'sanction',
"A one off special bonus of between 100% and 200% of salary will be payable at project sanction with the exact quantum of this bonus at the Committee's discretion."
p.47
hTTps://rockhopperexploration.co.uk/wp-content/uploads/2019/04/RKH-Annual-Report-2018.pdf

I want that bonuses payment condition ammended to after first oil. We frankly can not afford bonuses now; actually I want to see a 25% reduction in the $5.4 m Per annum admin costs; they're just too high.

I hope MOODY & MACDONALD do not to get bonuses for last year.

Good evening redon. You wrote; "Interestingly, It mentions, as most of us know, that oil is now being produced in the North Sea for around $15 per barrel as opposed to the $25+ allowed in SL estimates."

IC have the numbers wrong; SEALION per barrel cost is $23 per barrel

I repost my comment on the ADVFN;

I have just found the IC article; talk about rot.
If people are going to publish a critical story GET THE NUMBERS RIGHT.

IC quote OPEX and Lease costs totalling $25 per barrel. That number is from page 6 of the March 2018 Premier Oil data book;

$15/bbl (field opex)
$10/bbl (lease rate)

If they troubled to look at the latest data book from September 2019 they would have read the up to date numbers;

$13/bbl (field opex)
$10/bbl (lease rate)

Its now $23 per barrel

For comparison PMO's latest data book gives the numbers for their two other major North Sea FPSO operations;

PMO's CATCHER North Sea OPEX is shown as $6.1 per barrel and FPSO lease $8.9 per barrel

PMO's North Sea HUNTINGTON OPEX $17.7 per barrel and FPSO lease $21.3 per barrel

The most up to date FINANCE comment I have seen comes from a NAVITAS PDF on their web site published on 7.1.2020;
Translated; it reads,
4. Financing
As of this date, the existing partners are in advanced stages of completing a 1 Phase financing outline, including through Banking and / or bond financing, most of which will be secured by the UK Government or by government credit institutions

Strange prose;
"Premier Oil and Rockhopper Exploration have mandated lead banks for the ECA-backed financing of the $1.5 billion Sea Lion oil field development off the Falkland Islands in Argentina. "

How old is that article? SEALION costs have been $1.8 billion for months now; NOT $1.5 billion.

Just to provoke argument; look at PMO's outstanding NS buys;
For , what appears, to be a total remuneration of $871 m (£666m) , PMO add 82 mmboe to their assets

We have 30% of circa 550 million barrels ; 165 million barrels

Makes you think what someone would pay for our 30% once infrastructure is in place and we are producing.

Even if we were only offered the same £666 million for our 30% that equates to circa

145p per share!

There is nothing wrong with anyone reminding everyone that we are not home and dry until the deals are signed off. I welcome NAVITAS involvement and their cold headed number crunching and frank disclosure. FID expected by the end of 2020 does cover a multitude of possibilities; I would be delighted if we are home and dry by , for example, November.
As the year goes on we will, hopefully, complete further steps on the road to FID,which I would hope, lift the SP.
If you look at what NAVITAS are NOW effectively paying for their 30% of SEALION; I reckon anyone wanting to buy us out will be looking to pay 40p plus.
Would anyone take that, if another party offered that next week?
Obvious ,imo, that the long term , producing value per share would be higher.

IA couple of other NAVITAS sections translated;

"Production start - according to information provided to the partnership by existing partners, start of production
The oil asset is expected during 2024."
and
"2.1.3 Signature Deadline - The Parties will act to sign the Transaction Agreements by February 28, 2020, or
Until a later date to be agreed by the parties."

Well NAVITAS seems to think the finance will be found, but the uncertainty will remain until we hear its all been signed off.

https://ir.navitaspet.com/wp-content/uploads/2020/01/07.01???????-?????-???-30-????-????????-??????-Sea-Lion.pdf

a couple of relevant sections translated;

"? Final Investment Decision (FID) for 1 Phase Development - in accordance with information provided to Partnership by Existing partners, such a final investment decision is expected to be made by the end of 2020, "

"4. Financing
As of this date, the existing partners are in advanced stages of completing a 1 Phase financing outline, including through
Banking and / or bond financing, most of which will be secured by the UK Government or by government credit institutions"

Good morning Fernan10

Its a point worthy of clarification as I suggested. A conference call would be useful.

Good morning BlooBird.
You wrote;
" PMO never fully paid for their 60% in the first place (now that the £750,000,000 carry seems to have disappeared) so, in effect, it is RKH who are giving it away to Navitas."

I will ignore the potential $48 m milestone payments and will point out that we will be better off by $318 million over five years with the removal of the quarterly guarantee payments required under the old deal. That's a lot of cash that will remain in our pockets.

I remind all of this extract from the 7.1.2020 RNS;

"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.
NAVITAS and PMO have been fairly considerate. Note the 9-12 months after first oil . It appears to me that they are giving a 9-12 month period when we actually receive full revenues from our share of the growing production. I think there was a recognition that RKH will be very low on cash by first oil and that RKH needed a time to boost their coffers BEFORE the 85% deductions start. They could not factor in the arbitration ; they had to assume nothing as that remains a possibility (although unlikely imo) . Maybe RKH will clarify things and confirm the position. I would like them to hold a conference call.

We have to be grateful for what we are looking forward to because the alternative was unthinkable.