Member Info for DevonianExile

Just another thought regarding the current daily bout of large sells.

The Hope issue was probably triggered sometime after between 12th September when the YA “default” letter was received and 11th October when the injunction etc was lodged. In that timeline Outrider did something that provoked a major Boardroom row, and at that point FRR would have asked all sorts of questions - including whether or not Outrider had recently bought/sold FRR shares.

The Outrider Masterfund was domiciled in the Caymans as recently as 23rd April 2018 – though I am not sure what to read into this. However we all know that there are different rules for reporting company holdings when based in the Caymans.

My point is that just maybe FRR discovered that Outrider not only held around $21 million of original 2020 loan notes (bought for a fraction of this valuation), but had also been dealing in FRR stock. Now this would be a major issue – simply because Hope is a director and under AIM rules any share transaction by a director is reportable. Outrider transactions would class as a related transaction, and AIM rules absolutely prevail in the case of directors.

Hence Outrider – having been caught – would have to offload and Hope would be hugely compromised. The offload would be in a way that FRR could live with. All pure speculation but a clear possibility. Also interesting to note that the Outrider Masterfund is a very small hedge fund, around $150 million under management at the end of 2016, and less than 100 investors. Minimum buy in is $1 million.

Food for thought

Dougal - not sure why you say "not in 2018". Nothing has changed since the Q&A - apart from YA being put in a box and Hope being challenged - neither of which would impact a deal.

Obviously no guarantees here but the degree of risk that Zaza took in stating this year - at least 3 times - plus even more strongly in the informal chat - was pretty remarkable. We all know that things take time or could go wrong, but for me the message was pretty clear - no more technical updates until this is sorted. My guess is also that Niko will be wrapped up in the outcome. Zaza also favours the operational joint working which seemingly does not require formal GOGC approval (which a farm out would)

My point. This is now likely to be the absolutely classic "wake up in the morning" outcome. No more informal updates, no RNS clues, no advance notice of any sort. As Regdik stated 2 announcements either together, or within minutes of each other, one form Company X and one from FRR. Very few would have realistically expected October but November is my be. And I believe the announcement will be closely followed by an AGM - again to take place before the end of 2018.

Just IMHO of course

A good ChampionWonderhorse post on ii included this paragraph from the 2016 court proceedings - albeit in a different court:

“Frontera asserted claims in the Adversary Proceeding against the holders of the largest outstanding group of Notes, Outrider Master Fund LP and Outrider Management, LLC (collectively “Outrider”), contending that Outrider was complicit in a scheme to misappropriate the Company’s confidential information and trade secrets on a number of occasions in 2014, 2015 and 2016, and through those actions interfered with Frontera’s financing efforts and ability to capitalize on financing and development opportunities that were then available to Frontera.”

Now the outcome of that lot was of course the agreement to the in non- convertible 2020 notes, and Hope going on the board, plus the notes assigned to Frontera International - not FEGL. LTHs will of course recall reading the files and how at least 2 hedge funds (the other was Lothian) were caught miss-using confidential information. I would bet my bottom dollar that one argument the FRR lawyers will use in the Grand court will be "Look m'lord - he's done it before. He's a serial offender!". In legal speak of course.

As others say the stars are lining up here

Guys when you see these new posters check their posting history!

There are a series of dormant poster names out there - brought back into action by you know who (the SP cabal) when they see the slightest opportunity.

These days I always check posting history of anyone new. And ignore if it looks suspicious

Zaza has 1.041 billion - 6.6% of stock (the LSE figure for some reason misses the 26 million)

SN has 1.711 billion - 10.8%

I think we can say they are fully loaded

Just chipping in on this one. I did ask the Nomad for clarification some time ago regarding potential deals and closed periods.

The view expressed was that if the general prospect of a deal is in the public domain then not a problem. However as soon as the company enters detail commercial and contract discussions then a closed period would apply - so there is a bit of a grey area. The Nomad would be consulted anyway - and would be the arbitrator.

As others have said - given the size of Zaza's holding - I think it is a bit academic anyway. I feel very comfortable that his interests and mine are aligned in principle if not in scale

Cheesie - fancy meeting you here!!!

Rufus now getting very wised up. Yesterdays teaser and today's news suggests a bit of plan to get this back to where it should be. Well done sir

So a £5 million cap company now has orders that should eventually deliver getting on for £10 million in sales plus around £1 million in profit (ish). Plus a power plant project.

Only wish I was getting in at these prices

Some good posts today folks. Just to add another dimension to the YA saga cast your minds back around 12 months.

We had conversion notices on 7th July, 19th September, 28th September, 4th October, 6th November etc. The dates were all over the place - and the one on 19th September was late - due to Zaza trying unsuccessfully to get YA to delay the August tranche (and of course the price that went with it). Two things were learnt here.

First, it was blindingly obvious that YA were forward selling - and I think the issues over the 19th September 2017 release crossed a red line with Zaza. He never forgave them for that action.

Second, the dates were all over the place and I know a number of us contacted the Nomad about the appearance of there being no predictability here. Jo informed that the contract was open to some interpretation on timing - but nevertheless there would only be one a month at the end of the process. I posted on ii about this at the time but of course the ii revamp succeeded in wiping out posting history

I suspect that the timing issue is still not 100% clear, and of course the table has turned with FRR wanting to exercise the option to settle in cash. We all assumed certain dates - I assumed around 16th in the month - but my guess is that the contract just refers to the "month". So probably FRR wanted to leave the cash payment option to the last minute, but YA jumped the gun and to add to the problem were caught red handed forward selling. Hence the stack up this week.

Will be one for the lawyers and I suspect Zaza wants to play a very hard ball. And of course the prevarication then gives FRR more breathing space to get the cash flow moving properly.

Just a theory but very likely in my view. Roll on the next two weeks.

Tsbs. Depends. If you were managing someone else's portfolio you might want to manage risk - if you had sells - some at say 0.6, 0.5, and now - you would be looking pretty good as an investment manager. Plus your client might simply say I want to raise x thousands of cash in September from a portfolio. If you were a wealth manager you have a) done very well and b) will follow client instructions. All sorts of reasons to raise cash - including tax bills

The 500 million placing here was also managed by Cornhill - but rest assured I am sure SN/ZM will have had some knowledge re who - given the size of placing. Can't rule out some element of transfer as well.

As Mole says these are in fact really small amounts being released in modest tranches whilst volumes are low. The way I look at is that most days 15.7 billion or so shares stay in place - and sales of say 50 million a day mean that over 99.7% of the stock has held firm. On many days the sales of course are less than this

I don’t normally comment on day to day share dealings – but there clearly is a regular seller operating at the moment. People sell to manage risk, to crystallise profit or in some cases to enable shares to transfer. Usually impossible to tell which – but there are clues.

Regarding the current sells they – in my view – could still be some vendor activity simply to raise cash. Possible, but I prefer another explanation – so I go back to an RNS issued just over one year ago:

“Frontera ……………announces it has raised (before expenses) £500,000 by way of a placing ("Placing") of 512,820,512 new ordinary shares of US$0.00004 each ("Placing Shares") with various investors at a fixed price of 0.0975 pence per Placing Share………….Concurrently with the Placing, directors of the Company, Mr Steve C Nicandros and Mr Zaza Mamulaishvili ("Directors"), have subscribed for £250,000 in total comprising 40,207,166 and 216,203,090 new ordinary shares of US$0.00004 each respectively, ("Subscription Shares") at a fixed price of 0.0975 pence per share ("Directors' Subscriptions").”

Now this was just after the lowest point in our cycle, and with hindsight clearly an exceptional deal for all concerned. “Various investors” bought over 500 million shares at below 0.1P. This investment would today be worth £3.5 million – and at our 12 month peak around £8 million. I suggest that any sensible investor would manage this profit over time – and of course it could just be one of the group crystallising a profit.

In other words they are probably doing no more than you or I – but just have a different starting point

‘Tis the real thing - for better or for worse! Also should add that Mole is of course spot on - a reserve declaration of even a modest amount deals with the issue. But as Hope has never bought shares - at least directly - I think we can assume a return paid annually on around 6 times or more on the original investment is a return that is very much worth protecting! I suspect he would actually be happier if a viable FRR wanted to extend the arrangement (for the technical guys out there just do the maths on yield) A real cash cow for his fund I think

Well my calculation is that the very latest date for the next YA payment is Monday 16th September - I think we can assume this is being looked after.

Re the 2020 notes I am not concerned at all. Those concerned might be interested in a post I put on ii a few weeks ago. Goes roughly as follows:

"There have been recent concerns mentioned on LSE re the 2020 notes, and particularly he Outrider debt. I recently had a conversation with someone well versed in the debt commodity markets. He had no knowledge of FRR, but made some interesting comments when I explained the background. So a few observations:

As of year end the total 2020 note debt stood at $30 million. All non-convertible – interest in a 10-12% range. I seem to recollect Outrider’s share was around $22 million of this – the rest a smaller investment company plus one of SN’s own vehicles.

The fact that Hope - of Outrider - is an FRR non-exec was of course part of the deal that led to the roll over and move away from convertible debt

My contact says such an arrangement – ie a seat on the board – is not uncommon, but usually either leads to a bust up fairly soon, or quite a constructive relationship based on mutual benefits.

The best way to look at this is from a balance sheet perspective. On the FRR balance sheet we have the debt of $22 million - ish. But on the Outrider balance sheet it will be somewhere between the purchase price and the FRR balance sheet figure. We believe that Outrider purchased the debt for around $5 million – from the original distressed Hedge Fund, now bankrupt. So if true it could sit on the Outrider sheet at anything between $5 and $22 million.

The ongoing valuation will in part be confidence in FRR viability and in part how Outrider wish to add value to the long term balance sheet – ie to crystallise their investment

As this is a cash only valuation – accruing annually - it is highly unlikely that anyone would want it to rise or reduce the balance sheet figure too quickly. And if FRR are viable in the long term – ie paying the debt back at least in part – then this becomes a sort of cash cow to the Outrider fund. And tax might also determine how quickly or slowly they may wish to adjust the valuation or convert the asset into cash.

The important thing is that from an Outrider perspective the return is far far higher than 10-12%. In fact it is potentially 100s of %. And if that is the case – and we have a viable FRR entity – then worrying about 2020 is simply not an issue. Re-negotiating and extending terms would have huge benefits for Outrider if FRR cannot pay off in full.

Well, amongst all the angst we currently see I for one find this both interesting and reassuring, Cut short – it is in Stephen Hopes interests to help achieve FRR viability – and in many regards to maintain the debt on conditions similar or better than the current terms."

A conversation that changed my perspective

In interesting link below - regarding the huge issues around closing off depleted offshore oil and gas fields:

https://www.thetimes.co.uk/edition/business/the-last-storm-is-building-for-oil-and-the-north-sea-3t20dmqlk

I suspect decommissioning costs have not been anwhere near fully factored regarding whole of life costs - and some of the huge numbers are currently coming home to bite a few big names

Yet another reason why decent onshore fields have to hugely attrctive to the majors

Duster - if they informed any deal would be off the table the next minute. These things are hugely political and very price sensitive. Similarly if a supplier leaked they would be in big trouble - so the NDAs will extend to any organisation who is likely to come into contact with the counter party,

The counter parties will be absolutely insistent here. They will not under any circumstances want their competitors to know that they are involved in these discussions - for obvious reasons. And the reason for holding back on EWT data will be the same - so as not to alert competitors. All this makes me think these guys have been involved for ages - and have to some extent dictated the testing all the way through. Quite possibly UD2 as well.

The intriguing piece is whether the two majors know about each other, and if so are they looking at some sort of four way deal - even a consortium arrangement (four because you have to add FRR and GOGC). If that happens and it all progresses, then the most likely route is to form a new company, with each player ending up with a percentage of the shareholding. Or even FRR selling off all interests in - say Tarabani and MK - and moving on to develop the rest of Block 12, Moldova and Ukraine.

So many possibilities here - will be a very interesting next shareholder meeting. We need to let Zaza do what he has to - this stuff is very complex and will take quite a few twists and turns before the end game.

Just add on this permissions aspect. I am very sure that permission will have been sought and given for 2 reasons:

First any counter party would want to understand why and to then agree in writing to this - even if the name is held back. They know speculation would be rife, but Zaza would have explained the pressure he was under to reveal EWT data to the market. Am sure a sensible conversation would have ensued, hence today. And Zaza will be absolutely paranoid about doing this correctly

Second - NDAs are usually between the two companies - not individuals - but they usually define the type of employee who would need to know (and there would be quite a few). The employees involved would then in turn be asked to sign individual NDAs, and this I believe would extend to GOGC and government (who must know about this). Someone somewhere will keep a register for each party - Lev in FRR;s case. Of course to release an RNS Zaza will have had to show Cairn the evidence - and very specifically. The counter parties would have therefore had to agree to extend the list of who knows.

I have to say sometimes I wonder how any of these discussions remain confidential. The number of people involved escalates hugely as work progresses - especially when site visits take place. Even if dressed in in non branded kit.

Anyway what a change in mood from last week. Posts of the day for me are Mole's long one and Regdik's excellent morning comment

Yu really do have to wonder at the motivation to pretend to be someone else - especially when you have been caught out!

The real Symore is of course pretty hacked off with you - and he dearly wishes that you had paid for the shares he bought this week.

A wolf in sheep's clothing - but the clothing is a bit like the emperors coat!

Mole - agree with all of that.

I think it is not a case of "not caring" about the current SP. More about frustration plus anger at some of the more extreme antagonists (the malicious brigade). But as you say he will - in my opinion - be also saying that to himself that they are progressing the agenda and that he will follow his timeline and not that of onlookers. The challenge for us of course then becomes some sort of act of faith when news is thin

So the question is quite simply either you run with that or run for the hills, as a few have. But I go back to my 13 billion shares in free circulation. The vast majority of those shares have clearly stayed put, but the market of course reacts to relatively modest volumes and to short bursts of sentiment.

Totally agree Freeatlast. And that coincides with conversations quite a few of us have had with Zaza.

Dirk - it wasn't the Nomad - it was YJ who are FRR's Comms/PR team. They organise these events, and usually the Nomad attends - at least in part.

We will have to see whether Tim Thompson was right - but I am sure he would not say anything without a clear steer. And given that we are fairly close to the timeline for an AGM I wouldn't be too surprised if it turned out to be just that - an AGM. One advantage with that is that only genuine shareholders can get in, and of course resolutions are normally proposed and voted upon. And need to be passed.

Whatever - I would be very surprised to hear that Zaza would start to plan for this without a high degree of confidence regarding progress. Otherwise a big tin hat plus some very big whatsits would be required.

I remain of the view that we are in the process of seeing a major re-financing of some sort in order to take the Field Development plan forward, based on results that we have yet to see.

Zeps - for what it is worth I had a long conversation with the Nomad just after the U2 RNS (it is the Nomad who has prime responsibility on advising on reporting accuracy)

He was quite happy to talk it through - and I did post on this conversation. Basically that they had run into issues with the cement wall but went back in quite a number of times trying different approaches in different places. Each of course had to be pre-planned. Eventually they had to call it a day - the gas in the main diffusing into the wrong side of the wall. The first podcasts took place two days after my conversation - with pretty much the same explanation

Am sure the decision was not made the day before the announcement - and no doubt there will have been a good degree of pragmatism involved. However what do people think if it was reported without the T39 news ? It would have been just as bad - probably worse - and a far steeper fall. But this stuff happens in exploration and development all the time

Me? I remain in very positive territory but accept that everyone will have a different take until real clarity emerges. I have also been pretty consistent that EWTs need to be sufficiently long enough and detailed enough to allow third parties to make calculated assessments on long term prospects - particularly if they might be about to invest money into the next development phase.

Just my thoughts