Member Info for DeusExMachina

Mogger
A quick browse through Leo_IX posts has this link from August 2022:
https://www.energychartertreaty.org/cases/list-of-cases/

Assume this is where he compiled the data from ?
I have not attempted any analysis.
DEM

"Rockhopper themselves admitted last year that they now owe money to the lawyers for a successful arbitration outcome, and they do have limited funds despite the placing last year". (PD)

With respect, I don't think this is strictly correct.

1. All legal fees incurred by King & Spalding etc up to the Award, have been paid on a regular basis by Harbour Litigation. Harbour get their share of the Award monies as and when do Rockhopper. To repeat, all legal bills have been paid by Harbour as they fell due. This is how Arbitration Litigation works and is why Harbour get 20% of the gross amount.

2. In the RNS dated 31-10-2022:
"The third-party funding agreement does not cover any costs arising past the date of the Award (23 August 2022). Having anticipated Italy might attempt to annul the Award, Rockhoppper has a non-binding offer in place to fund both fighting the annulment and enforcing the Award if required. The Company will now consider this along with other funding possibilities. A separate success fee of approximately £3 million is due to the Company's legal representatives on establishing liability and an award requiring Italy to pay over €25 million in damages. This amount is not covered by either funding agreement. Given Italy's request for annulment, the Company is in productive discussions with its legal representatives as regards to this payment".

So, almost certainly sorted !

3. In any case, in the 'Blocklisting Interim Update' RNS of 8th Feb had 56,430,551 Ordinary Shares not yet issued out of the original 60,917,237 under the Warrants Scheme. At 9p each that equals £5.1m which RKH should receive by the year end. Not a Kings Ransom but more than enough to pay the K&S bill for the 18m period post Award (24-08-2022) not covered by Harbour Litigation. (Just in case Rockhopper lose the Annulment and get Zilch out of OM - all very unlikely).

4. If necessary, part of the Award might be monetised at a discounted rate eg a sale of say 10% of the Award at a 50% discount would raise £10-12m. RKH was approached by more than one interested party at the time but I'm fairly sure Sam would much prefer to avoid this option if possible.

5. Finally, great RNS yesterday - rather like Budgets, I think certain elements came as no surprise. Nothing not to like and Onward and Upward with both Ombrina Mare and Sea Lion.

Just to clarify one point. The confirmed Phase 1 total capex cost of $1.8bn will mean that Rockhopper's contribution will eventually total $54m. However, on the projected Pre first oil Capex of $1.3bn, Rockhopper will only need $36m. Or, in real money £29.5m pounds sterling - an amount easily covered, I think, by whatever is the eventual OM Award.

DEM

"has anyone done a dcf on ombrina mare to see what the total could have been?" (p777)

See pages 87 to 100 in the ICSID Award doc for a detailed description of the various potential ways of calculating the value of Ombrina Mare. Discounted Cash Flow (DCF) was actually Rockhopper's preferred method. Not too surprising when you see the calculations below !

"218. The DCF method values an investment based on the stream of future cash flows that the investment is expected to generate, “discounted” to a present value to account for the time value of money and the riskiness of the forecast cash flows. It is the Claimants’ preferred approach.

219. The Claimants (RKH) primarily advance a claim of EUR 275 million as the value of the loss of their investment, with at least EUR 6,675,391 in decommissioning costs, and interest on both figures at 9%, compounded annually. The interest – calculated to 4 February 2019 – would add another approx. EUR 83.8 million, bringing the total relief requested to approximately EUR 365.4 million."

The additional interest which would have been earned 2019-2023 would have added another c£60m = EUR 425m total.
If RoI challenge the basis of calculation, I do hope the ad hoc committee switches to the DCF methodology.

DEM

"In practice, where a partial annulment is ordered (which is more common than full annulment), the tribunal’s damages analysis and jurisdictional findings are more likely to be annulled than findings on liability"

Source - page 5 : EMPIRICAL STUDY: ANNULMENT IN ICSID ARBITRATION by Baker Botts
https://www.biicl.org/documents/10899_annulment-in-icsid-arbitration190821.pdf

So, if "the tribunal’s damages analysis" is the Achilles Heel of ICSID judgements, most likely to be to be challenged to obtain a Partial Annulment - it seemed a good idea to re-read Professor Pierre Dupuy's minority report. Fortunately - thanks to Mogger - we have a copy of this six page document buried in the 223 page full Award.

The following quote from the last para of Prof. Dupuy's minority report (INDIVIDUAL OPINION BY PROFESSOR PIERRE-MARIE DUPUY) suggests that RKH might have been awarded far more, if the Tribunal had not opted to use a "rather modest value of the Ombrina Mare field at the time of Rockhopper's investment in 2014, contrary to the proposals put forward in this respect by the Claimant which were in my view inequitable".

"6. With regard to the calculation of the compensation due by Italy to Rockhopper, one could certainly have had some doubts about the appropriateness of using the DCF method insofar as the exploitation of the Ombrina Mare deposit has never begun. There are, however, several precedents in the same direction and the use of the DCF method is still considered, including in the field of oil exploitation, as the reference method. What was most important, however, and allowed me to agree with the solution proposed in the award in terms of compensation was that the baseline used in the award for the calculation of compensation was the actual rather modest value of the Ombrina Mare field at the time of Rockhopper's investment in 2014, contrary to the proposals put forward in this respect by the Claimant which were in my view inequitable".

I find this last para very reassuring. If the RoI's own nominated Arbiter considered the baseline valuation of the Ombrina Mare field to be "rather modest" - it seems very unlikely that the ad hoc Committee will disagree.

I have also attached the link to the full version of the Award. Note that the Award comprises several different documents - each with its own pagination. The 'Individual Opinion' is about 60% of the way through the Award - you will need to slowly scroll through to find it or better still, use the search facility ('Find on page') in the Settings menu ('three dots' icon).

https://files.lbr.cloud/public/2022-11/2022%2008%2023%20%20Rockhopper%20v%20Italy%20-%20Award.pdf?VersionId=jCPV978neEZ9LYnhwgTrt5yBQwzf0NEQ

DEM

"thanks DEM - any findings on length of process across the cases?" (p777)

Sorry, the Baker Botts report has little to say on the 'length of process'. Only reference is on page 16:

"THE LENGTH OF ANNULMENT PROCEEDINGS VARIES
The length of ICSID annulment proceedings varies greatly. The applications in Astaldi v Honduras, Burlington Resources v Ecuador, Joy Mining v Egypt, KT Asia Investment Group v Kazakhstan and Levy v Peru38 were all resolved in less than a year. By contrast, the longest proceedings were in LG&E v Argentina39 which lasted approximately six and a half years".

Judging by the speed with which the ad hoc Committee is rattling through the various stages (eg just over 4 months from Commencement to Hearing - compared to 21 months for the Original Proceeding to reach the same point) - I think that Sam's guesstimate of 12 to 24m may be about right.

DEM

Thanks Mogger for posting up the link to the Baker Botts Analysis from 2021. The last time this doc surfaced I did a short one page summary for my own reference - thought it might be of general interest to anyone lacking the time or inclination to plough through the 60+ pages of the full Analysis.

KEY FINDINGS:

Possible grounds for Annulment:
a. The Tribunal was not properly constituted;
b. The Tribunal manifestly exceeded its powers;
c. There was corruption on the part of a member of the Tribunal;
d. There was a serious departure from a fundamental rule of procedure;
e. The award failed to state the reasons on which it was based.

Three most commonly invoked grounds are b, d & e.

Out of 355 ICSID Awards up to 2021, 156 (44%) are/were subject to Annulment proceedings.

Of those 156 cases, 121 are completed and the remainder pending.

Of the 121 completed cases, 89 decisions were rendered by the ad hoc committee and 32 proceedings were discontinued (ie claimants on ‘fishing’ expeditions).

Of the 89 cases where a decision was rendered, ad hoc committees upheld the underlying award on 70 occasions. Nineteen awards were annulled in part or in full.

Of these 19 cases:
6 ICSID awards have been annulled in full (1.7% of total)
13 ICSID awards have been annulled in part (3.7% of total)

In partial annulments, the tribunal’s damages analyses and jurisdictional findings are more likely to be annulled than findings on liability.

Source:
EMPIRICAL STUDY: ANNULMENT IN ICSID ARBITRATION by Baker Botts
https://www.biicl.org/documents/10899_annulment-in-icsid-arbitration190821.pdf

DEM

Q. "DeusExMachina, I was wondering how you could make such a big mistake there". (buzzthomas)
A. Very easily !

I could claim that I had heard of the Shenandoah National Park and the river - both in Virginia, USA - and assumed (wrongly) that the oil field was in the same area, but I didn't. It was just a careless error.
DEM

Correction
In the second paragraph I stated that Shenandoah is onshore. This is complete rubbish!
It is located in the deepwater Gulf of Mexico, US. Apologies to all.
DEM

"I think Navitas movement on Sea lion was dependent on freeing up capacity in their team that were working on Shennadoah field". (p777)

Apart from both fields being large and acquired by Navitas with no legacy costs (ie low break even point) - as Shennadoah is onshore but Sea Lion is clearly not - I imagine that they may require rather different skill sets? Also, whilst the former is a couple of years ahead of SL - it is still very much WIP.

With the exception of Chanan Wolf who was responsible for raising Navitas’ $1 billion financing for Shenandoah and has/will be relocated from the US to London to be Sea Lion Project Director and head up Navitas Falklands - the first three members of the team are all new hirings, having previously been employed by Murphy Oil. They seem to be exceptionally well qualified and are a good indication IMHO as to how seriously Navitas is committed to the project.

Ian Ramsay - Chief Operating Officer - Sea Lion Project
Ian was VP for Murphy Oil Corporation and led the corporations Global Offshore Development Portfolio from Discovery through to Production. Over 30 years of experience in managing oil and gas operations and delivering new developments. Ian graduated from Napier University, Edinburgh with a BEng (Hons) in Engineering with Management and from Heriot-Watt University, Edinburgh with a MSc. in Subsea and Petroleum Engineering.

Thomas Stensgaard - Development Project Manager - Sea Lion Project
Role includes leading all front-end engineering design (FEED), bidding of the project, and execution of the development. Over 30 years of experience in Gas, Petroleum, Oilfield, Pipelines, and Offshore/Onshore Operations. Has a BSc (Hons) in Mechanical Engineering from South Dakota School of Mines and Technology. Strong leadership and project management skills with an MBA from Rice University.

Aleks Armstrong - Vice President Subsurface – Sea Lion project
Aleks leads the Reservoir and Geoscience functions. He began his career in Subsea Engineering, before pivoting to Reservoir Engineering where he specialised in Field Development Planning and Reservoir Management. Over 26 years of experience in oil and gas operations. Aleks holds a BEng (Hons) in Mechanical Engineering from Nottingham Trent University, an MSc in Petroleum Engineering from Imperial College, London and an MBA from Edinburgh Business School.

DEM

My thanks to jockosjungle, for posting up the full text of the FIG Press Release which does of course totally validate Market-Dealer's original post of the 4th March. I do not regret my 'Provenance' post seeking clarity as to the source of the information - it was a reasonable request politely asked IMHO. However, I am sorry that M-D's diligence in reporting an important news item was rewarded with 350+ posts over the next 10 days, many attacking his honesty, integrity and motives.

Whatever Garbled may have been guilty of in the past - in this particular case he was 100% accurate. Mea Culpa for setting that particular hare running.

I do regard the Press Release as extremely good news. As Sam has remarked several times 'It's a very complex deal with a lot of moving parts'. Well - the parts now seem to be coming together and the series of meetings between FIG, NAV, RKH and the FI business community - with the Deputy Director of Overseas Territories at the FCDO also present - would indicate to me that the blue touch paper has been well and truly lit.

The Navitas Chair, Gideon Tadmor - who by all accounts is a 'force of nature' not to be trifled with - met with FIG representatives last year and now again in the FI. The Chairman of Premier, over ten years, never got within a thousand miles of the FI.

Sam has travelled to the FI twice so far this year. I would imagine that whatever matters were discussed and agreed - the decisions taken between the FIG and the JV partners will need to be reported back to the full Company Boards for ratification and then codified into legally binding documents.

Over the previous 7 years there had been considerable work carried out on no less than six different versions of FEED (Front-End Engineering and Design). After six months of intensive work by Ian Ramsay and his expert team, building on their 'predecessor’s high quality work,' we are now almost certainly at the point where FEED is oven ready. The Heads of Terms (HOTs) between RKH and the Contractors must be close to expiry and this may be a significant incentive to NAV/RKH to expedite the FEED review in order to be able to lock into the pre-agreed contractor’s costs at 2019 prices.

FID is a firm decision taken in the Boardroom to proceed with the project – subject only to closing the finance and gaining Regulatory Consent. Once the finance details are all sorted and Regulatory Consent obtained – Project Sanction can take place provided NAV and RKH can demonstrate to the Senior Lenders that they are fully funded up to Project Completion.

Sam has never used RNS' as a PR tool - so whilst there will no doubt be RNS' once MOU, FEED, FID and Sanction are signed off - I doubt that we will get interim progress reports. I would expect that a full description of Sea Lion 'Lite' will be provided at the AGM in June.

In these uncertain times I'm sure both the UK & Israel will welcome First Oil.
Increased holding by 20% in recent weeks. Onward

Investegate has free registration and provides a very efficient RNS service.
In the My Alerts section you can list up to 50 companies - Investegate will email RNS' within minutes of release.
https://www.investegate.co.uk/about.aspx

DEM

Good Evening Market-Dealer

A rare honour to have you posting on the RKH Board, after several years of talking up your substantial ARG and BOR holdings, under your various previous monikers.

It is widely known that both Navitas and Rockhopper have been very busy travelling South in 2023 and no doubt multiple meetings have been held with Teslyn Barkman, Andy Keeling and others.

For the avoidance of any doubt can you please clarify whether you were actually present at the meeting you so eloquently describe - or was it an account provided by a third party? Or, perish the thought, was it a skilful piece of creative writing of a meeting which may or may not have taken place?

Whilst the statements attributed to our Israeli friends may well be quite plausible you will appreciate that they will carry more weight if uttered by Gideon Tadmor than imagined by Garbled.

DEM

Que?

DEM

Good Evening SecretBlueprint

I was sorry to read your post of yesterday. The 2010 ii Cohort never really migrated across to LSE and there are few left from the 'good old days'. I always felt that the 'villains' who used to post on ii and the various other private boards were more akin to loveable rogues, whereas today I think that even the second word in the epithet would flatter most.

IMHO anybody investing in AIM should be prepared to speak to the Directors 1:1 and undertake research using source material. With many AIM companies - the deeper I research, the less I like the company. With RKH the opposite is true - I firmly believe that the pace has quickened since the arrival of Navitas and there are multiple elements which are being progressed at speed. (SM will only ever RNS definites and will rarely report on possibles, maybes or WIP).

Your penultimate paragraph made me flinch. I firmly believe that the acceleration of time as one ages is an as yet unrecognised element of the Theory of Relativity. With parents who were fortunate enough to reach the ages of 95 and 93 - I hope to enjoy the sunlit uplands of all three phases of Sea Lion in full production, despite having reached the Biblical allotted span.

Always enjoyed and respected your posts - invariably well informed, written with both wit and logic, and never afraid to call out those with a dubious Agenda. Thanks also for the support on those occasions when I have talked myself into a corner. Hope you will perhaps retain a few RKH shares in your Non Trading Accounts and will occasionally visit the Board as an Honoured Visitor.

Live long and prosper !
DEM

'Good riddance to bad rubbish,'
On 6 December 2022, she was sentenced to 6 years in prison for corruption. The failed assassination attempt in September due to the gun jamming may or may not have been a genuine attempt. Her health is also not good. Kirchner is nearly 70 and whilst she may avoid prison, surely her political career is over.

Maximo Kirchner - son of two Presidents - is 45, politically active and probably a bigger threat.
DEM

Hi Mogger

Whilst the ICSID text is reasonably easy to read and understand - I will be spreading the detailed line read over the next few days. Too much excitement in one go could be dangerous and like you, I have no desire to have to repeat the exercise. Will post up anything which I find of interest but as you comment - nothing so far which might give the Respondents any hope of a happy ending.

My initial Skim Read turned up the following:
Para 307, Page 110
In its Post-Hearing Brief, the Respondent writes in a footnote that “sovereign debt bears more default risk than ICSID awards, and Dr. Duarte-Silva thus concludes that that [sic] the appropriate rate under this hypothetical would be at most the rate on the sovereign debt of the Italian Republic.”148

Which if I understand this Clause correctly, suggests that RoI are saying that ICSID awards represent a lower risk of not being paid than Sovereign Debt. An interesting admission !

DEM

II. PROCEDURAL HISTORY

Para 5, Page 1
The Tribunal wishes to record, at the outset, that this arbitration is not, nor has it been concerned with whether or not the Ombrina Mare oil and gas field should have actually proceeded to a production stage from the completed exploration stage.

So, RKH winning the ICSID case does not necessarily mean that OM can or will be developed.

Para 7, page 2
The Claimants have never sought, through this arbitration, to overturn that ban (re offshore production close to shore) and force Italy to permit oil production in Ombrina Mare. (Their) claims are solely directed towards the securing of internationally mandated compensation.

So, nobody is attempting to overturn 'Green choices' made by RoI.

Para 19, page 5
witness statements from Ms. Fiona MacAulay, Mr. Roberto Leccese, Mr. Samuel Moody, and Mr. Stewart MacDonald; and expert reports from Richard Boulton and Mr. Peter Velez.

All acting for RKH. Para 43 mentions second witness statements of Mr. Stewart MacDonald, Ms. Fiona MacAulay, and Mr. Roberto Leccese; expert report of Mr. Tim Chapman and second expert report of Mr. Richard Boulton.
See Paras 30 and 51 for RoI witnesses.

Para 57, pages 12/13
The Hearing was held at the World Bank offices in Paris from 4 to 8 February 2019. The following persons were present throughout the Hearing:

There were over 50 individuals present for the entire 5 day hearing - representing the Parties involved. Apart from RKH and RoI the list also includes the entire legal teams, all the expert witnesses, representatives of Harbour Litigation, interpreters etc. Must have cost several million.

Para 68, page 15
The Hearing on Post-Hearing Briefs (“October Hearing”) was held in Paris on 30 October 2019. The following persons were present throughout the October Hearing:

'Only' 17 present at this second 'in-person' meeting.

Paras 75/76/77, page 17
75. On 8 June 2020, the Claimants (RKH) submitted an inquiry to the Tribunal regarding the timeframe within which the Tribunal anticipated issuing its final Award.
76. On the same date, the Tribunal communicated to the Parties that it was too soon to forecast when the Award would be finalized, given the difficult circumstances presented by the worldwide COVID-19 pandemic.
77. On 19 October 2020, the Tribunal informed the Parties that deliberations were advancing steadily, and the Tribunal hoped to be in a position to indicate soon whether the proceedings were to be closed. The Tribunal provided further updates on 30 March, 13 May, and 1 July 2021

I know that over the past two years several posters have been snapping at the heels of SM to try and speed up the process. The above confirms that ICSID were aware of the pressure.

Para 80, page 18
The Tribunal refers to the Respondent’s application to add the CJEU judgment (and Opinion of the Advocate General) in C-741/19 to the file of this case,

But, the Tribunal allows only 5 days and 5 p

So the award is pre-tax and might be 111m euros after tax it seems?

You refer to Para 268 on page100, I think. The following Para 269 states:
Claimants request an award on a pre-tax basis, and make their claim for compensation on pre-tax, fair market value for Ombrina Mare. The Claimants write that “taxation on profits in Italy and taxation on any award in Italy are broadly commensurate” and Mr. Boulton writes that “Rockhopper would be able to deduct or offset certain amounts from its tax liabilities, which further renders appropriate a damages calculation on a pre-, rather than post-, tax basis.”

The Half-Year Results published on 29 Sept 2022 also states:
"Further analysis is required to establish the tax treatment on any payments related to the award".

So, whilst RKH may be liable for tax on the Award - we are probably some way from knowing in which jurisdiction the tax will be paid, how much and when.

When RKH eventually are in receipt of their €194m +€36m interest - I think I can live with Harbour Litigation being paid their 20% share and probably HMG a similar amount. Nice problem to have in a few months time.

DEM

Thanks Mogger - first with the news as always !
Too wet for sweeping leaves - so I think I know what I will be doing today !

DEM

SpaceHoppa
I suspect that Arbiter Dupuy and the RoI legal team are under no illusions as to the futility of the case and understand only too well that further delaying tactics will be increasingly counterproductive. However, such is the churn rate of Italian Governments - even a delay of just a few months will ensure that it is the next PM who has to take the blame and not the present incumbent. Senior Civil Servants will also be anxious that the €250m payment is not made on their 'watch'. Meanwhile, Prof. Maria Malaguti will continue cracking the left wing doctrinal social responsibility whip.

If the RoI lawyers were retained on a No Win - No Fee basis, I think the towel would have been thrown into the ICSID ring a very long time ago. However, as Government employed Advocates they will be happy to continue picking over the entrails of the case until all possible delaying tactics have been exhausted. The penalty interest payable is probably of only minor consideration.

For the same reasons, I think it extremely unlikely that RoI will either make or consider accepting any type of 'deal' - even if common sense dictated otherwise.

DEM