Ryan Mee, CEO of Fulcrum Metals, reviews FY23 and progress on the Gold Tailings Hub in Canada. Watch the video here.
Thanks Latics.
DEM
No.
DEM
I think pre2rcd is correct. The Harbour Energy advert in Penguin News on Feb 25 for a contractor to maintain the (Noble) Temporary Dock Facility – does seem to indicate that HBR, RKH, NAV and FIG have come to an agreement to keep the TDF - certainly for the next few months, maybe a lot longer.
No idea what compromise has been reached between HBR and RKH as regards decom costs – I think HBR probably wanted a clean break from the FI with no ‘legacy’ financial commitments, whereas RKH will no doubt be happy to see this potential bill delayed for a couple of years and/or perhaps shared with NAV.
It is quite possible that RKH & NAV may wish to use the TDF for Sea Lion related berthing etc if the new Stanley Port project is delayed. FIG itself may also need the TDF, as the old Port structure (FIPASS) will have to be removed before the new Port - which will occupy the same footprint - can be completed. This may result in a 'capability gap' of several months.
So, I regard the retention of the TDF as a 'good result'.
One final thought - whilst Argentina may not be ideal neighbours, thank God the Falklands are several thousand miles from Russia or China. In fact their very remoteness and isolation now makes them a compelling investment location IMHO.
DEM
“Disappointingly, poor stakeholder engagement combined with a weak EIS “ Do they mean PMO/RKH engagement with FIG ?
I'm sure you will be relieved to know that the answer to your question is - No.
All major construction projects require a bespoke Environmental Impact Statement (EIS). The Sea Lion Phase 1 Development EIS runs to 1,577 (!) pages and was praised for its extremely detailed coverage of all all relevant aspects. Seems like the New Port EIS prepared by BAM Nuttall was less comprehensive.
Nuttall were bought out in 2020 by the Dutch company Royal BAM Group, one of Europe’s largest construction companies, with a Mkt Cap of £7 billion, 20,000 employees and an excellent reputation.
I'm certain that the new FI Port contract went to BAM Nuttall because they are already implementing the massive five year Antarctic Infrastructure Modernisation (AIM) Programme on behalf of the British Government's 'Natural Environmental Research Centre (NERC)'. The contract covers providing new ports, docking facilities, buildings, air strips etc etc to several of the British Overseas Territories in the South Atlantic and in Antarctica. Value of contract is around £700m for infrastructure and for specialist vessels. The 15m video clip in this link is excellent
https://www.bamnuttall.co.uk/case-study/aimp/
So, I think that BAM Nuttall probably know how to compile an appropriate EIS for projects in environmentally sensitive areas. The opposition appears to be mostly coming from the Green Lobby and the concerns raised by the Planning Committee seem to relate to mostly minor detail – now overruled by ExCo.
Construction of the New Dock is vital for the economic future of the Falklands. FIPASS is around 40 years old and in dire need of replacement by a larger modern structure to service the important fishing industry, the growing Cruise market and for the planned hydrocarbon developments in the NFB.
Another box ticked !
DEM
"I have thought the same, why would anyone keep RKH on board, why not just take them out, however, RKH have been around a long time and Sam has the ear of FIG, so it would be silly to get rid of them IMHO, for now at least".
LTT - I think there are a couple of barriers to any opportunistic take over bid. As far as I am aware, the 'Tax Settlement Deed' is still in force and Rockhopper is obliged to maintain a minimum 20% interest in PL032 and not to make dividends or distributions. Any change of ownership in the company would trigger immediate payment of the tax - currently c£60m. In any case, even if RKH was bought out - FIG could still refuse to transfer the licences to the new owners.
See Note 7 to the 'Notes to the Condensed Consolidated Group Financial Statements for the Six Months ended 30 June 2021'
DEM
Commiserations on your rotten luck in losing money in so many of your equity investments - over £200,000 lost on SOU and £100,000 on ECHO, according to your posts. Really quite embarrassing as you have apparently been working in the O&G sector for over 25 years and currently work for a Super Major. Perhaps Premium Bonds or a Post Office savings account might be a more sensible home for your remaining savings ?
BTW In an earlier post you commented 'I work for an oil and gas super major and the top guys do not get anywhere near MH £500,000 per annum'. I think you will find that most of the 'top guys' in companies like Shell & Exxon are on seven figure salaries - perhaps you work for one of the state owned companies like Gazprom or Rosneft ?
Please clarify which 'Super Major' you work for and in what role, in order that we can derive the maximum benefit from your technical skills and know how ?
From Energy Voice:
It is understood that the decision to step down was Mr Kirk’s, and not pre-planned as part of the creation of Harbour.
Harbour Energy is not expected to replace Phil Kirk in his role.
DEM
Intriguing news this morning from Harbour - wonder if the FI decision had anything to do with Capt Kirk's departure?
Harbour Energy plc
Board Change
2 February 2022
Harbour Energy today announces that Phil Kirk has notified the Board of his intention to step down as Executive Director, President and CEO Europe, with effect from 28 February 2022.
Phil Kirk commented: "It has been an honour to be part of the Harbour Energy story and, as I depart to consider other business opportunities, I am very proud of what we have achieved. Harbour has a clear strategy and focus and, as a shareholder, I look forward to supporting its continued evolution and growth."
Linda Z. Cook, CEO of Harbour Energy, commented: "Phil has been instrumental in the building of Harbour Energy over the past years. I thank him for his dedication to the Company and the UK oil and gas sector and wish him well in his future endeavours."
R. Blair Thomas, Chairman of Harbour Energy, commented: "I have worked with Phil for over 18 years in multiple successful ventures including Harbour Energy, and have admired his entrepreneurial spirit and leadership. On behalf of the Board, I thank him for his many contributions to the Company and wish him all the best for the future."
Thanks for the compliment JPDM.
Much appreciated and valued !
Very good to hear from you once again.
Hope you are keeping well.
DEM
There are three existing port / quay facilities in the Falklands.
FIPASS - due to be removed and replaced with a new port (see next post).
TDF - due to be removed but probably not for 12-18m.
Mare Harbour – the military port which was upgraded and enlarged in 2018 (see next post).
So, whilst we wait for further news, a few background notes & photos which may be of interest. First, the two existing civilian structures.
Falklands Interim Port and Storage System (FIPASS)
FIPASS is a floating steel structure in Stanley Harbour consisting of six pontoon open deck or warehouse barge units and one Ro-Ro pontoon unit, which also serves to connect the barge units by way of steel modular causeway to the shore. The facility offers some 300 metres of berthing space and was constructed and installed by the UK Ministry of Defence in 1984 and was sold to the Falkland Islands Government in January 1988. Some idea of its size can be understood from the photos in the links.
https://www.atlink.co.fk/
https://www.thinkdefence.co.uk/2021/09/a-new-port-at-port-stanley/
Temporary Dock Facility (TDF) aka the ‘Noble Frontier Barge’
The TDF is approx. 250m East of FIPASS and the single barge & causeway is only approx 15% of the total size of FIPASS. It was installed by Trant Engineering at a cost of £4.5m and its dismantling and removal should not be a massive task. I recall that one of the RKH Directors commented that the total cost would be less than £1m and as Harbour will presumably still have to pay 60% of the cost, thanks SB for the reminder – RKH’s contribution could be around £400k.
In reply to one of my questions, Sam said at the Investors Day at Salisbury that he was in discussions with FIG to see if the barge could be dismantled and removed by BAM Nutall at the same time as they dismantle FIPASS in 2023.
In the meantime, for the next 12 months, the barge can still be used by any vessels involved with the Sea Lion development. In fact, as the barge is not in the way of the new port and provides useful extra cover whilst FIPASS is removed – FIG may be happy for it to remain in situ for 2-3 years until the new port is completed in 2024.
If the barge removal takes place after the Farm In is signed with Navitas – I assume the cost will be funded out of the Navitas interest free loan. So, whilst there may be one or two possible ‘worries’ about the Sea Lion project – the future cost of the barge removal is not one of them IMHO. In fact I would regard it as a useful Asset not a liability.
If you type ‘FIPASS Port Stanley’ into the search box of Google Earth Pro – you can zoom into both structures.
DEM
https://www.trant.co.uk/case-studies/international/temporary-dock-facility-falkland-islands
From discussions with Sam Moody and also other Directors since 2017, they have indicated that if the award is c$50m then the Harbour Litigation fee will be c.50%, if the award is c.$100m then the fee will be c. 40%. If the award is c.$150m then the fee will be 35% or less, reducing on a sliding scale. (Caveat: All figures are indicative only and may be more or less).
Rockhopper plc has 458m shares in issue. So every £4.58m net to Rockhopper should add 1p to the share price + whatever value the market places on Sea Lion.
The Harbour Litigation web site details how: ‘We can also purchase prospective claims, judgments or arbitral awards in exchange for an upfront payment. You can remain involved, in which case we can continue to make additional payments to you over time, but you can also withdraw entirely from the case if you prefer’.
Bottom line is providing Rockhopper win the case – it can be monetised at any time. However, RKH would doubtless prefer to stay the course as Harbour will require a large cut.
RKH is a UK listed company, currently debt free, probably with a Mkt Cap of £100m post Award, and a substantial holding in a 500m fully appraised oil field, hopefully to be farmed out to Navitas Petroleum. Surely a modest £10m Bank loan to cover various expected costs over the next year, secured against a £50m ICSID Award – should not be too big an ask.
Alternatively a 20% discounted RI would not be the end of the world.
Ombrina Mare will of course still be owned by Rockhopper and should have a value. It is possible that Prime Minister Mario Draghi may be more inclined to grant a new production licence - probably to an Italian O&G company (possibly Eni) – given the soaring cost of energy to Italian citizens and business.
Also in Italy, Rockhopper still has a 23% working interest in the Monte Grosso field – the operatorship was transferred to Eni in 2016. Monte Grosso has a prospective resource of 200 mmbbls and is claimed to be one of the largest remaining onshore prospects in Western Europe.
DEM
I have also heard the same thing from two separate sources.
When I spoke to his PA last week, she said he was due back - presumably in the office - tomorrow.
DEM
The 2022 Italian presidential election will be held in January 2022. The President of the Republic will be elected by a joint assembly of 1,009 voters composed of the Italian Parliament and regional representatives. The election process will start on 24 January 2022 with the First Ballot. Presumably a result by the end of the week ?
https://en.wikipedia.org/wiki/2022_Italian_presidential_election
Surprisingly, the process seems to be rather complicated - although I don't think any white smoke is involved !
DEM
Lots of interesting posts.
On page 122 of the 'ICSID CONVENTION, REGULATIONS AND RULES' Rule 48 Clause 4 states: '(4) The Centre shall not publish the award without the consent of the parties. The Centre shall, however, promptly include in its publications excerpts of the legal reasoning of the Tribunal’.
https://icsid.worldbank.org/sites/default/files/ICSID%20Convention%20English.pdf
As any Award in favour of Rockhopper would create a valuable precedent for other parties considering legal action against the Italian State - it seems very likely that Italy will refuse consent for ICSID to publish the Award. Whilst RKH will be required to issue an RNS informing its shareholders that it has won the case might it be a redacted version of the Award with the financial details omitted?
One other point. Assuming that RKH win the case and the Arbiters agree that there should be compensation for lost profits – the quantum will hinge on several variables of which the most difficult will surely be the price of oil over the next 20 years. In Q1 2020 around the time a decision may have been made, RoI would have probably argued that the price of oil was under $20 and clearly in terminal decline. RKH would have argued that it was simply a low point in the cycle. A compromise may have been struck to take an average in the price of oil over the next 24 months - which might account for the inexplicable two year delay. By Q4 2021 with the price of oil soaring over $80 – RoI panics and instructs their lawyers to have another attempt to challenge the jurisdiction of ICSID - which might account for the Eleventh Hour last ditch attempt to derail the case.
Just a thought!
DEM
Italy has two problems - the likely payment to RKH of a substantial sum as compensation for OM costs and lost profits + setting a very expensive precedent which other energy companies may use to win similar claims.
However, IMHO Italy does have an alternative option, which I hope RKH has discussed with the other side.
Italy to pay RKH $150m. Immediate payment with no delays. This would be sufficient to cover all RKH Non SL costs (say $25m) + payment to Harbour Litigation (say $50m) with remainder ($75m) to strengthen bank balance*.
Italy to grant with immediate effect Drilling / Production licences to RKH for Ombrina Mare and Monte Grosso.
Italy to 'Suggest' to Eni that they might like to purchase all of RKH's Italian licences (incl OM, MG, Civita etc) for say $150m - payable in 12m.
There could even be an opportunity offered to ENI to join the Sea Lion JV, as part of the deal. Eni SpA is one of the seven global "supermajor" oil companies with a MC of $36bn with 30% of the shares - incl a 'Golden Share' - owned by the RoI.
Ensure there is a clause in contract which voids Agreement if RKH has any change of ownership in next 12m.
Benefits:
RKH gets $150m with no delays or costs for enforcement + further $150m lump sum in 12m to pay share of Sea Lion costs + poison pill to discourage any short term predatory bids.
Eni get two excellent Production licences (Eni already has 77% of Monte Grosso but no current share in Ombrina Mare) + other 'Research' licences, with nothing to pay for 12 months.
Cost to Italy is only $150m with no precedents set, so substantial future savings. Italy gets two large O&G fields into production to ease domestic energy crisis + related tax income.
Mario Draghi can blame RKH for forcing Italy into a corner. Green lobby will hate it but it will save Italian taxpayers hundreds of millions, by avoiding future payments based on precedent.
DEM
*Sufficient to fund $25m dollars ‘loyalty payment’ payable to Long Term RKH Shareholders !
Morning Cyan
Thank you for the clarification re Turkish Non Exec Directors not being Kurdistan nominees. I stand corrected.
It still concerns me that Genel is an Anglo – Turkish company with operations in Kurdistan, which is itself not a Sovereign State but is a territory encompassing SE Turkey, N Iraq, NE Iran and N Syria, according to Wiki. I would not personally regard either Turkey or Iraq, Iran & Syria as model democracies where the Rule of Law could be relied upon to prevail.
Any decision to change the Sea Lion JV Partners and vary the Licences and Operatorship will need to be agreed by FIG. I am 100% certain that FIG will be guided in this by the FCO. As a British Overseas Territory, the Falklands have internal self-governance, and the United Kingdom takes responsibility for their defence and foreign affairs. This would certainly include which companies are involved in the long term development of the multiple off shore oil fields beneath the waters around the Falklands.
In an earlier post you comment that Genel becoming a third partner is ‘an outside chance, maybe’ – IMHO I think that is a very optimistic assessment. But who knows – stranger things have happened in Heaven and Earth !
DEM
https://www.youtube.com/watch?v=GO_FiLt0q_U
Genel has many attractions – 32,000 bopd, $200m free cash flow in 2022, £425m MC. However, all the production is in Kurdistan (Iraq) which reminds me of the old trope – Never invest in countries which end in ‘stan’. I note that at least 3 – possibly 4 – of the Non Execs are from Turkey and are presumably Kurdistan nominees.
I am very doubtful that Israel or FIG (or FCO) would be comfortable with Genel as a JV Partner. I can think of a few alternative candidates.
Delek (Israel) – Most of the Senior Mngt of Navitas previously worked for Delek – one of Israel's largest companies, a conglomerate with investments in upstream and downstream energy, water desalination, power plants, insurance and financial services. Assets include the two massive gas fields with 33TCF in the Eastern Med. In 2017 they bought Ithaca Energy and then used the company as a vehicle for buying Chevron's UK North Sea business. Apparently excellent access to finance.
Repsol (Spain) – In 2012 President Kirchner proposed the expropriation of 51% of Repsol shares in YPF. Long court case ensued and eventually Argentina were compelled to pay $5bn compensation.
https://www.forbes.com/sites/afontevecchia/2012/04/18/us-condemns-ypf-expropriation-as-spain-argentina-trade-war-nears/?sh=316fb9127352
Hess (USA) – US major global independent energy company, still run by the Hess family (one of the leading Jewish companies in NY). Never forgiven Argentina for the Hercules incident in 1982.
https://www.nytimes.com/1982/06/09/world/tanker-attacked-in-south-atlantic.html
Cairn (UK) – often cited as the underbidder to Premier. About to receive $1bn + tax rebate from India, which even after a generous Divi. will still leave plenty for a Farm In.
DEM
ps There does seem to be a natural progression of RKH Directors moving across to Genel – surprised Sir Michael Fallon somehow missed RKH off his CV. I note that the Esa Ikaheimonen (Genel CFO) has recently resigned and leaves shortly – now I wonder if the Genel Directors know of an experienced FD (ex RKH) who is available and eager to progress his career !?
From 2014 - useful reminder of facts & figures.
https://rockhopperexploration.co.uk/wp-content/uploads/2016/05/Acq.-of-Mediterranean-Oil-Gas-Pres.pdf
DEM
Mogger – thank you for two more outstanding links. May I also thank you for the numerous other high quality ‘technical’ articles you have tracked down, several of which I have quoted in recent posts. Much obliged.
The Duane Morris article is reassuring – in short ICSID trumps ECJ when it comes to ensuring adherence to Global Treaties (ECT). RKH has always said that it is extremely unlikely that the Award would be presented in an EU Court. As ICSID is part of and funded by the World Bank headquartered in Washington – the USA always seemed the most appropriate jurisdiction to serve the Award. Failing that Canada, Australia and numerous other States would be fine.
I am intrigued by the Abruzzo Web article – seems that the small RKH teams in Italy and Salisbury have been busy. Also, the first time I’ve ever read a sympathetic comment about Ombrina Mare in the Italian press:
“Faced with the predictable counter-offensive of the pro-drill front, the minority environmental front is now in great difficulty, the same that after years of battles managed in 2017 to wreck the construction of the Ombrina Mare 2 oil platform off the coast of the Trabocchi, in the province of Chieti”.
DEM
Thanks MAM for your comments – appreciated and helpful. Agree that the interest element may be key but the ICSID website bars access to the section on interest calculations.
https://icsid.worldbank.org/search?f%5B0%5D=languages%3Aen&search=interest+
There are a couple of recent articles by Aceris Law which I found helpful – it would seem that the interest rate methodology is far from simple! I would be very happy with your suggested 7%.
https://www.acerislaw.com/interest-in-international-investment-arbitration/
https://www.acerislaw.com/calculating-interest-in-international-arbitration-how-is-interest-determined/
“There is no uniform practice on awarding interest in international investment law.[8] Thus, the tribunals may use a number of methods in order to determine the applicable interest rate:
- a borrowing rate approach, which relies on the interest the investor had to pay on borrowed funds.
- a host State rate approach, which uses the statutory rate in the host State as a ‘helpful benchmark’, since it is the legal minimum recognized by the State itself.
- a ‘coerced loan’ approach – under this method, the investor is turned into an ‘unwilling lender’ to the State, and therefore is entitled to interest equal to ‘the State’s short-term borrowing rate’.
- an ‘investment alternatives’ approach, which reflects the additional sum that the investor’s money would have earned, had it been reinvested each year at generally prevailing rates of interest. When applying this approach, tribunals often award interest at a rate equal to the short-term United States Treasury Bills or US six-month certificates of deposit or at the LIBOR rate”.
DEM