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Re: "I’m sure Shell agrees to pick up 75%............how can anyone not directly involved be sure, Abatt? Did you mean: "I'm sure hopeful Shell agrees to pick up 75%"? :-)

It was stated in the RNS: "Shell will pay a share in the proportion of 1.5:1 of the cost of an exploration well and the well test subject to an aggregate cap of USD$25,000,000". This would indicate to me the above are the terms relating to cost sharing. CLNR then adding: "Shell would therefore pay 75% of costs up to a total of USD$25,000,000" seems to me to be adding detail to make it easier for the 'hard of thinking' to understand.

It would make quite a difference, so it isn't a trivial matter.

I hope it is 75% but if it was, why not just say: "Shell will pay 75% of the cost of an exploration well and the well test subject to an aggregate cap of USD$25,000,000"? Looks to me as if no-one was really concentrating on P2437 because there's two and a half months left to sign an agreement.............. which would tend to support my "nominal up-front option payment" theory. The P2437 farm-out seems to me to be a long way from sealed.

I am not trying to cause harm; transparency and reputation are important. I have a few million reasons for wanting CLNR to succeed. I hope CLNR will explain what the terms attaching to the P2437 option actually are, including how the $600k "consideration" is to be divided. If it is explained it would have to be in an RNS, which would amount to a waste of valuable cash because issuing an RNS isn't cheap.

dyor

Is it possible that CLNR might be become subject to takeover – possibly sooner rather than later? Any bid would have to find favour with AC himself, however, because (as I read the situation) he and two other shareholders most people think he introduced to the Company (Messrs Dorfman & Spencer) can effectively block a hostile bid. So a bid would have to come at fair value, which imo is a lot higher than Friday’s closing price reflects.

Maybe I’m on a different planet, but I see a couple of pointers to the above in the (relatively) recent changes to CLNR’s board and in the way the farm-out to Shell has been structured.

When AC announced he would be giving up his executive duties and stepping up to ‘non-exec’ chairman so that he could spend more time on his charitable activities, he was keen to say he would remain closely involved in CLNR’s affairs. But his choice of CEO was unexpected (by me at least). I am sure Graham Swindells is extremely capable, but his background is in accounting and finance and he doesn’t have any previous experience of running a company. One would have expected an ‘oilman’ to take the helm and CLNR has just such a man (Andrew Nunn - COO). So why was he not chosen?

One possibility is that he didn’t want the job (!) but another is that the areas in which the greatest expertise were thought most likely to be required in the future were finance, accounting and legal – all of which GS has a lot of experience in, but not AN.

Re the Shell farm-out, I was expecting CLNR to have to part with 80% of the licence/s to achieve a farm-out. But I was also expecting CLNR to receive a cash sweetener and to be carried on its share of development costs, including the first exploration drill. This didn’t happen and some people on here (maybe they'll be proved right?) immediately saw problems ahead for CLNR in raising the funds needed to meet its share of the drill costs. Maybe it's not intended to come to this?

Perhaps it was thought better by AC to offer a mid-cap bidder (with cash to spare) a bigger % of the licence/s than a smaller % with a carry built in? I’m just guessing. It wouldn’t surprise me if AC had a particular bidder in mind. It would have been nigh on impossible for anyone to make a move before now. Farm-out efforts have been going on in CLNR for nearly 2 years and the “egg on face” potential for a mid-cap CEO in completing a takeover then immediately failing to get a farm-out would have been just too great. ”Do a decent farm-out of one of the 28th round licences and then we’ll talk”. Algy and colleagues landed Shell.

I can think of a NS midcap with cash, that’s looking to grow.

I might be up the creek with my thinking. Just wanted to offer something a bit different to: “Boom…….this baby’s heading for the stars”

jmofwiw

dyor

..... I disagree. I believe it IS relevant. A minnow successfully farms out to a supermajor. One of the licences farmed out to Shell was awarded in the same round (28) as P2170, which shows how well JOG has done to get P2170 (Verbier) as far as it has done so quickly. Underpins a strategy that might be applicable to JOG if it decides to bid for licences in the current and upcoming rounds. Shows that licences awarded to small caps can be successfully progressed in the right timescales and is an endorsement of the OGA's MER strategy, which bodes well for the future as far as small caps are concerned.

Thanks for clarifying the tax situation, noir. Much appreciated.

If JOG had more free cash CLNR might not be a bad addition, given the deal announced today and the fact CLNR has another 5 licences awarded in the 30th round still to farm out or be progress in other ways. JOG has the proven skill and experience. JMO.

Someone else will probably acquire CLNR first, assuming Algy wants it to happen (he and a couple of others control enough shares to block a hostile bid). Market cap is still only about £20m.............for two licences with real drill prospects (one partly carried) and 5 others prospectively holding a few hundred million boe?

Price is what you pay. Value is what you get.

Urraca, I explained the basis for floating £43 as a speculative longer term 'target'. £43 was TRAP's IPO price in 2011, after adjusting for the 1:100 consolidation in 2015. There's no real science behind it: eg TRAP's holders only got 27% of the enlarged share base when JOG came calling. JOG was a private company formed in Jersey about a year earlier which changed its name. TRAP was then renamed JOG and was shown to have 'acquired' the privately owned company, which was principally owned by Messrs Benitz, Lansdell and family/ies. This was set up as it was to retain TRAP's listing and preserve its tax losses.

There was an immediate placing at 22p to raise about £850k for working capital (TRAP had paid so much into Ithaca's fabled escrow account in advance of Athena decommissioning it was on the brink of insolvency). The new JOG was owned by:
Shareholders in (privately owned) original JOG: 27%
TRAP holders: 27%
Subscribers to the placing: 46%

Based on the 21.8m shares presently in issue (ok - this will probably increase) a price of £43 a share would give JOG a market value of almost exactly half a Dana Petroleum. I'd prefer a whole one - get moving, I don't want to die first.

"Patience is bitter, but its fruit is sweet"...............

I make no recommendations.

DYOR

MadCrann - sounds good to me, although I don't intend to use any energy fighting GB. I've begun to understand him a bit better and don't think his writings are intended to cause anyone harm (hey GB - glad you seem to have survived the Hungary lake-sailing experience - how about Siberia next time; it's more of a challenge :-))

Without seeing the Athena agreement, no-one can definitively say what's in it. But I doubt very much there's a significant liability that's unrecorded. The agreement was intended to cap TRAP's liability at an amount that wouldn't put off a potential new owner. JOG wouldn't have reversed into TRAP unless it was satisfied a cap was in place. Due diligence will have been carried out before this happened (it was presented as an acquisition of JOG by TRAP in order to preserve TRAP's tax losses).

PMG may see further potential in Athena but clearly the operator (Ithaca) didn't when the decision was made to decommission the wells. If PMG is interested in what robs12 has alerted us to I am sure there would be ways for the remaining partners to help it achieve its objectives under different arrangements that JOG wouldn't a be party to because (as I understand the situation) TRAP gave up its economic interest in Athena when the agreement was signed. I was wrong to think it would remain responsible for a share of the losses arising in Athena after the date the agreement was signed. Its liability was capped at its 15% share of the decommissioning costs and no more.

Therefore (as far as I can tell, having thought about it some more and having consulted on the matter) there is no substance to the notion that JOG would be legally obliged to contribute to the cost of further exploration/development of Athena - even if Ithaca and the other partners decided this was appropriate.

Oil shares adversely affected by the Petrofac news today: https://www.ft.com/content/11b156e2-2ab7-11e9-88a4-c32129756dd8

I doubt robs12's views are responsible for JOG's SP fall. Buy on the dips...............??

dyor

robs12 - you are correct in saying no-one on the outside has seen the actual "settlement agreement" (as you call it). The whole idea behind it was to cap Trap Oil's (TRAP'S) liability in respect of the field, so that TRAP's potential liability for future costs didn't prevent a company "reversing" into it for its AIM listing, its tax losses and any assets it owned. As it happens, it owned Licence P2170, which is why the issue you have flagged up is relevant.

You have clearly researched the subject thorougly and I commend you on this. I can understand the points you're making. I had some of the same questions myself, which is why I asked JOG. I don't believe I was self-contradictory in reporting what I was told because I didn't name any individual and in any event I was only seeking clarity on a matter potentially affecting the published accounts. I wasn't after sensitive information.

It was recognised and accepted when the agreement was signed that the Athena field was rapidly approaching the end of its life and production ceased in January 2016. If the consortium were to decide at some future time to cancel the decommissioning programme (is this what would happen?) and drill one or more wells in the "Athena field" it is reasonable to assume that the consortium would be incurring costs in expectation of significant returns. In these circumstances it is logical to assume TRAP's 15% interest would assume a significant realisable value. It wouldn't be 'dead money'. This assumes TRAP would be legally obliged to meet its 15% of the drilling and other infrastructure costs.

We are both hampered by not knowing what exactly is provided in the agreement.

It does not surprise me that TRAP paid £14.3m into the escrow account. As I have said before, there's a long story to tell about the conduct of TRAP's directors towards the end. It is not one I want to go into. Suffice to say I was disappointed MS & SRB came as "part of the package" when JOG's highly competent team took over. I am being kind in saying that imo they didn't deserve to.

Why do you conclude the £14.3m is "long gone". Ithaca used a decommissioning cost estimate prepared before the price of Brent crashed - when UKCS costs were a lot higher than they were when the bill landed in TRAP's letter box. They're lower still today and only phase 1 has been completed, so why would more than £60m have been expended to date?
https://www.investegate.co.uk/trap-oil-group-plc--trap-/rns/update-re-athena-decommissioning-costs/201410161458495267U/

I'm pretty sure any liability above the £9m would be to cover the consortium's operating losses after the agreement was signed until decommissioning started.

tbc

My suggestion was a serious one, MadCrann. What is to prevent you taking responsibility for helping others better understand their investment in JOG by clarifying what someone else has written that scares you (and possibly others)? Why did you automatically assume that what was written was factually correct?

I was short with Ajax because he put his own interpretation on a written response (to an email he had sent him) from JOG's CEO, without having told him in advance he was going to do so. And he didn't post a copy of the email he sent asking the questions. This just isn't done. I have had plenty of conversations with people in JOG but you will NEVER find an example of me quoting what was said to me. I don't believe I have ever received information that would not openly be given to others if they asked, but that is not the point. It is a simple matter of consideration for the position of others who might be placed in a difficult position were there to be any misinterpretations. I don't expect you to understand this.

I'm sure Ajax's actions were well intended and hope the hatchet has now been buried. I agree my posts were over the top but I was irritated that he had also contributed to something like 27 posts on the board in one day talking about bench pressing, which turned JOG's board into a joke. I don't do joke investments. In fact I generally respect Ajax's enthusiasm and overall contribution to the forum; he comes across as a decent individual.

The same cannot be said of you, MadCrann. What I did for a living qualifies me to have views and opinions I hope most can see are based on something more than just hoping the share price will go up. I have never been Mr Average and hope I never will be. Not everyone gets my sense of humour although the cleverer ones usually do. Unsurprisingly you don't.

I resent it when people like you, who have nothing of value to offer, graciously say they find my posts informative and then go on to analyse my character about as badly as they'd analyse anything to do with JOG were they to be capable of doing so. The latter requires a degree of experience and intelligence you clearly don't have. Other than that I expect you're a good bloke and your mates like you.

I (and no doubt others) look forward to learning what JOG has to say about Athena and the extent of its residual liabilities. I'm sure your call (or visit - it would be sensible to make an appointment in advance) will be courteously received.

dyor

Not sure what you motive is in posting what you have done, robs12. Much of the information you provide in connection with Athena is inaccurate and the rest of your book is hypothesis. You've managed to scare MadCrann, but probably not many others.

What you fail to say is that the last estimated cost of decommissioning the existing well (or should that be wells - not sure if the was more than one well) prepared when costs in the North Sea were about twice as high as they are now, was £60m, of which Trap Oil was responsible for a net £9m. At least this much was paid into an escrow account (it's still there) before JOG came onto the scene - it was this that finally crippled the already weak TRAP. What I understand JOG remains liable for under the agreement is its shares of any losses borne by the partners before decommissioning started and its share of the decommissioning costs themselves.

Nothing is "hidden" anywhere. It's all set out on JOG's website - before you even get to Verbier.

Since when was Parkmead operator of Athena and made the decisions? Ithaca is operator. I think you're suggesting that Trap Oil (now called JOG) has signed up to an agreement that would make it responsible for 15% of the costs of drilling new wells - and everything else that follows that - for ever in the future, when someone else would get all the future revenue, assuming there was any. Don't be daft.

I know, because I spoke with one of Parkmead's senior people in advance of TRAP's 2015 AGM (at which I caused trouble) that PMG sees potential in other parts of the Athena field. But that's a different matter. He told me the field had originally been "cluster drilled" ie the exploration drills and subsequent wells had focused exclusively on the 'hub', to the exclusion of other parts of the field PMG believed might be productive. His hope was that PMG might eventually be in a position to drill exploration wells in different parts of the field but didn't expand on this. If it does, it won't be using money provided by JOG.

No-one in their right mind would sign an agreement obliging them to pay someone else's development costs of a field they were not going to benefit from. JOG has agreed, in certain circumstance, to pay unprovided net operating costs up to the time they ceased, plus decommissioning costs not already in escrow - all plus a premium of 25%.

When I asked someone in JOG in a position to know what the maximum liability might be in the event of cash being realised from Licence P2170 before decommissioning of Athena had been completed, his answer was that it would be no more than £5m. It's possible decommissioning will be finished by the time JOG either sells its interest in P2170, or starts collecting money from oil production.

MadCrann - why not contact JOG (as you find rob's post scary) and ask for their take on the situation (01534 858622). Then you can let everyone know what the real situation is. I'm just guessing :-)

dyor

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