Member Info for dickupham

scooby - it wasn't intended to come across quite as "schoolmasterly" - hence the :-)

The whole debate about RNSs was silly but I didn't intend to cause grief with a post that was clumsily penned.

Put it down to age. Thanks for calling me 'middle-aged' btw. I don't have anger management issues - I just get a bit impatient when I read misleading posts written by people who claim expertise they don't have.

Apologies, scooby - hope you have a truckload of shares in CLNR and make a stack sooner than later.

GL

A listed company doesn't have to provide information in a RNS about commercial discussions taking place in the normal course of business, whether they're exclusive or not.

The reason CLNR made the public announcements it did on 28 Nov (which have been added to since) was because CLNR was up against a wall of 30 November, which is the date it had told the market its Southern North Sea Licences extensions would expire (not sure what happened to the 'drill or drop' provisions).
https://www.investegate.co.uk/cluff-natural-res--clnr-/rns/continuation-of-southern-north-sea-licences/201805310700057606P/

Not to have told the market by the end of November in a RNS what was happening would have caused a sharp fall in the share price. The Company would then have been obliged to issue a RNS stating if it knew of any reason for the fall, in which it would have been obliged to disclose the facts in the interests of transparency.

That's how I understand the situation anyway.

dyor

........."I believe people in here are safe with or without you"............

........fair enough MadCrann - I'll leave it to you to fill any perceived void. I don't gain anything from posting and could do without the hassle.

Over to you.

.........why would I have picked up on Rover's post, MadCrann? Good luck to him on his gains - as you say, his timing was excellent.

If there was anything to criticise about his post, it was that he didn't say how many he bought at 8p in Jan 2016. Or indeed at other times before the Statoil farm-out came into view.

Ref people like BB, I have never liked people who try to influence others by peddling lies. It is my prerogative to say so. My comments are intended to help stop others from being sucked in by false information.

Ref yourself, I wouldn't object to your criticisms if you had ever made a SINGLE POST that conveys information that is in any way useful to others in forming views about JOG as an investment (or trading) proposition. I suggest you apply the filter to me then you won't be offended by what I write. In the meantime I hope JOG will provide you with the returns you seek. I promise I won't be jealous.

imo
dyor

.ramptastic - the bench presser's back. How many have we got this time BB? 1m? 2m? Topping up at 50k a pop, eh?

D220 - an important comparison to make is the volume of gas reserves, or in other words the number of years' production there's expected to be from each field. We've only looked to date at current production. I understand Rhum has been producing since Dec 2005, so output by might slowly be in decline. Laggan-Tormore has only recently started producing (or so I understand)..

As I now understand the situation, the R3 well (which would have a high infrastructure cost before it could be brought into play) would produce from the same reservoir as R1 & R2, so R3's primary purpose would be to accelerate reserves recovery from the reservoir. It won't add to SQZ's reserves.

So there's more work to do before one can make a valid "read-across" comparison between Laggan-Tormore and Rhum.

Over to someone else to do it. I'm suffering from word blindness and my calculator's broken.

dyor

........should have corrected earlier language used today - the Total deal isn't announced yet so no certainty it will complete, even if it's expected to. Apologies.

D220 - your numbers added a lot to the general point I was trying to make when I first posted my thoughts this morning. Thank you for putting some valuable detail on the comparatives: it shows why Rhum is such a valuable asset - let's hope R3 doesn't take too long to be brought into play.

I'm certainly glad BP chose SQZ when it decided to distance itself from a political hot potato! By way of "independent" corroboration of value, using price vs earnings (p/e - although p/e isn't always the best way to value oil & gas cos because reserves are finite and income tends to arise on a diminishing scale) Sasa has it spot on when he reports that in his view SQZ's shares trade on an unsustainably low multiple of earnings.

A generally accepted way of valuing an O&G company is NPV10 (where the '10' is a commonly applied discount for risk). I ran some 'back of an envelope' DCF projections to get to NPV a while back that showed SQZ as significantly undervalued at the time, but I had to use too many estimates and there were too many uncertainties to give me any real confidence in my numbers. Much has changed since then (all for the good) and I was at least happy my NPV value was conservative, so I'm petty sure a more accurately prepared NPV would confirm what a number of investors believe - which is that SQZ is 'worth' a lot more than its SP says it is.

A method commonly used (albeit a bit rough and ready), which is benchmarking the value of a company's production and reserves, using most recent evidence of completed transactions with a 'read-across' in important respects to the subject company (in this case Laggan-Tormore vs BKR) will do for me for now (when and if we find out the allocation of the consideration applying to L-T). I agree it seems likely it will be a big percentage, D220.

I'll be interested to learn the views of others when they turn their thoughts to matters that don't occupy most people on a Sunday. Everyone's circumstances are different. Not having worked (in a conventional sense) for nearly 20 years, I find I prefer days the market is open to those they're closed. Not having that many pressing engagements these days (my choice) I've no doubt I'm in the minority. Plus ca change there - I've always been in the minority (TG).

My wife tells me a woman's just had a baby on "meet the midwife" - must go now :-)

dyor

..........seems to be a difference in terminology.

The Telegraph article talks of UK 'supply' (do they mean production or do they mean consumption?) whereas SQZ's RNS talks of UK 'production'. We know there is a deficit in UK supply (or UK production) vs UK consumption and that the UK is therefore a net importer of gas.

Probably doesn't warrant animated discussion. All I know is it points to SQZ being fundamentally undervalued, particularly when one takes into account its likely trading performance from now on, its other producing (or soon to be producing) assets, its prospects for materially increasing its production and reserves in the short to medium term and by no means least least the calibre of its management.

dyor

........"On 21 November 2017, Serica announced its agreement (the "BKR Transaction") to purchase interests in the Bruce, Keith and Rhum fields in the UK North Sea from BP. These fields together produce up to 5% of the UK's indigenous gas production".........

https://www.investegate.co.uk/serica-energy-plc--sqz-/rns/update-on-bkr-transaction--us-sanctions-and-rhum/201805220700077948O/

"who would be your major if you were to have a wish list?"...........

..........Spirit

Thanks for responding, Exploration. I'd (just about) followed the way EMV is calculated, although your example using a dice and a coin helped clarify the theory and practice.

My point, however, was that whilst the EMV is all attributed to CLNR in Xodus's analysis, in practice a significant percentage of this would be transferred to a farm-out partner on an agreement (or agreements) being signed, in return for a free carry on the exploration costs to be incurred by that partner in the common quest for a discovery. Sometimes a 'cash sweetener' is paid to the smaller company - how each agreement is structured depends on a farming out company's individual situation and is down to negotiation.

Smaller entities can't generally raise the money needed to drill the prospects identified in the licences they hold and in any event the risks would be too high. One dud well and it could well be curtains. So the risks get shared, Better to have 20% of something than 100% of nothing, kind of analogy.

How much of the 'action' a small company looking to farm out a licence to a bigger player (to which the cost of exploration is more easily manageable) manages to retain on farm-out is down to many different factors, not least skill and experience around the negotiating table.

It has yet to be seen how badly someone wants a crack at P2252 as operator and how good Mr Swindells is at poker. The same applies to P2248.

We live in interesting times.

dyor

D220, I couldn't find a split of the reported consideration of $1.3bn (£1bn) when I read the article yesterday (internet sleuths plse get busy!) but might what is allocated to Laggan-Tormore be a pointer to what Rhum 3 is (and could be) worth to a buyer at some point?

Am I right in thinking Rhum is said to account for 5% of current UK gas consumption? If so, there would be an interesting read-across from what's just been announced. The Laggan-Tormore gas field (which I understand has only recently started producing) is said in the article to be "capable of supplying 8pc of the UK’s gas". What has just changed hands is 20% of the field. Total owns 60% and has sold a 1/3rd interest - or in other words an interest "capable" of producing 1.6% of the UK's gas.

If Rhum produces 5%, SQZ's share of this is 2.5%.

Is my thinking along the right lines? If it is, it would be interesting to find out how much the private equity firm was willing to pay for 1.6%. Might make SQZ's present market cap of £372m look a bit on the low side.

Then of course there's Rhum 3..................

imo
dyor

Thanks for the info, Exploration. All interesting stuff. Am I right in thinking the EMV is the total and a percentage of this would belong to the partner in a farm-out deal? The 'value adding' events to me come on farm-out announcements, followed by exploration drills (and the anticipation leading up to the them) then (hopefully) commercial discoveries.

Don't know if people have seen this on the Company's website (which I see has been brought more up to date - it wouldn't have done CLNR's 'visibilty' any harm for it to have been done a lot earlier):
https://www.cluffnaturalresources.com/wp-content/uploads/2018/06/Corporate-Presentation-June-2018_FINAL.pdf

Nothing's ever certain in oil & gas but just one or two of the prospects and leads coming to fruition would have people scratching their heads wondering why they didn't back up the truck when the SP was so low.

That's as I see things anyway. If anyone's interested in looking at what can happen when a smart farm-out is executed, the most recent example I know of is JOG's to Statoil in late 2016. Some people spotted it early that year, languishing at 8p on the back of negativity about the price of oil which, somewhat perversely, was in JOG's favour based on its declared strategy at the time - the farm-out changed all that. At 8p a share its market cap was about £650k. Silly, even bearing in mind it was pre-Licence P2170. A significant holding could have been built up at prices below 25p and no doubt someone did. A significant advantage of investing in JOG was and still is the low number of shares in circulation (8.4m originally, now increased to 21.8m following placings and an offer to raise cash for asset advancement).

But the key metric is market cap. CLNR has what it has and looks as if it might take a significant step forward soon. The market still thinks it's only worth about £15m. Time will tell if the market's right, but my money says it's unlikely to be in the longer term, given the number and value of CLNR's assets.

Happy days..............win or lose. It won't be over if there's disappointment next week. It will just take longer and won't be as easy.

It would be great if you'd post more frequently on here, Exploration. Your knowledge and understanding of the industry (and the detail behind everything you cover) way exceeds that of anyone else and we could all learn a lot more as a result. Don't be shy!!

I AM giving it a rest for a while now. I can't really add any more at present.

GLA

dyor

Mike - I wish it was that easy!!

A company' s market cap is simply the result of multiplying its share price by the number of shares in issue. It is not always (ever?) a true measure of value because share prices are set by supply and demand (subject to the odd bit of manipulation by MMs). Clearly if a company is seen by most to be performing well, demand for shares will increase and MMs forced to increase the offer price to tempt holders into selling so that the demand can be met.

Valuing companies (and therefore shares) is more of an art than a science. I did it for a living (although it did not occupy all my time) and found that no two cases were ever the same, even though the same general principles always applied There were many different factors to take into account in each individual valuation.

In the oil & gas industry the method most commonly used to arrive at fair value is NPV10. It's a bit complex for most to understand but NPV is short for 'net present value' and the '10' stands for 10%, which is the standard discount rate applied to the DCF projections used to get to NPV.

So, what's the theory? It is that any asset held for commercial return can only have one value, which is the sum total of the cash that investment will return during its lifetime, with the cash reflected at today's value - ie its buying power today - next year £1 will buy you less than it does this year. The 10% in the O&G case is a reflection of risk, not money cost, and a further discount is usually applied to reflect the diminishing value of money (in simple terms: inflation) over time.

To get to NPV, a company uses "discounted cash flow" (DCF) projections of the cash it will earn from its operations in each year in the future and it deducts from this the cash it will spend in realising that revenue, including cash spent on infrastructure and the like (ie capital items). It is the net figure that is then discounted to get to NPV. A weakness in using the DCF method is that assumptions have to be made and used and these all relate to the future. Some (in O&G) prefer to work with simpler methods, including assessing a company's reserves (boe) and multiplying them by a calculated ppb. Rough and ready but a guide nonetheless.

CLNR will eventually provide shareholders with NPV10 numbers. There's too much uncertainty about the future to make any sort of projections worthwhile now. What we do know is that the Company has 8 licences with prospective reserves of 4.3TCF, which is a giant number. If it manages to farm-out the majority of these to bigger players who then go on to discover reserves of a fraction of this number (and CLNR has managed to hang onto, say, 15% of the action, we'd be looking at a fair value of many multiples of the present market cap.

I made up all the above. Scoobydoo5 can tell you the real situation.

I'm giving it a rest for a while.

dyor

.........lots of definitive reasons given today by all and sundry for why there's a 7 day extension - all just guesses. The exclusivity agreement remains in place and 28 Feb is still the final date for legal completion. The balance of probability is that agreement will be reached and a farm-out will result - no change there. The deal might also still fall down - the possibility cannot be ruled out.

Most people seem to think it's all about just the two parties to the proposed agreement. But third parties will have been involved and these won't necessarily have been as concerned about time limits as the parties themselves - or CLNR's shareholders and the day traders who emerge when they smell a quick profit before moving on to their next certainty to get them their target returns. No criticism of short term traders implied - takes all sorts to make a market and everyone knows the rules. Anyway, it would seem all external info has been obtained and next week is about pulling together the remaining threads.

No-one's mentioned this from the 28 Nov RNS :

"Following a request for an extension to the Initial Term of both the P2252 and P2248 licences, the UK Oil and Gas Authority ("OGA") has confirmed that it will allow the Initial Term of both licences, in which the Company currently owns a 100 per cent. interest, to extend for a period of six months until 31 May 2019, subject to further work programme commitments being made. These commitments are that, for P2252, by 28 February 2019 the Company commits to a seismic and well work programme on the Pensacola Prospect".

CLNR's counterparty won't have just guessed how much a well programme on the Pensacola Project is likely to cost. On top of all the work its in-house team will have completed it has probably approached a few rig owners to establish the likely cost of hiring a suitable rig that's available, possibly later this year. Costs for such a programme run into tens of millions. Then there's the OGA to keep on the right side of by involving in the process. Much of the above is not under the direct control of the parties to the proposed agreement.

It's no real surprise that pulling all the above together, before finalising the agreement and then handing everything over to lawyers to complete, has taken so long.

The indications are positive, but we're not there yet. It may have gone unnoticed but in the 28 Nov 2018 RNS there was said to be a preferred bidder for Licence P2248 and that work in connection with getting an early farm-out of other licences was already underway.

Maybe Mr Swindells will spring a surprise and the RNS next week will contain positive news about more than just Licence P2252. Stranger things have probably happened at sea - not sure about the North Sea though.

GL
dyo

https://www.erce.energy/graph/uk-natural-gas-nbp-spot-price

GL LtdAxis - fingers crossed for a good outcome. Please - no more delays.............

Hope you have a relaxed journey home (assuming the UK is home) and arrive back a lot wealthier than when you left!

I'll stick to what I stated earlier:

"It now seems likely we'll find out tomorrow one of the following:
1 That an agreement (subject to contract) has been signed (and the terms of the agreement)
2 That the exclusive negotiation period has been extended
3 That the parties have agreed to terminate discussions"

The purpose of issuing RNSs (articles published by the Regulated News Service of the LSE - commonly called Regulated News Stories) is to accurately inform shareholders and the Market of certain key events affecting their company. Companies are obliged to issue RNSs covering a range of important subjects and the information contained in each RNS has to be accurate and true.

The following was stated in a RNS issued by CLNR on 28 November 2018:

"Following discussions with multiple data room entrants, the Company has signed an exclusivity agreement (the "Agreement") on Licence P2252 with a major international oil and gas company (the "Counterparty"). Exclusivity has been granted to the Counterparty subject to a definitive farm out agreement being entered by 31 January 2019 and completion by 28 February 2019.
Given the exclusivity arrangement, discussions and negotiations with other potential partners on the P2252 licence have been ended and the P2252 data room closed while the Agreement is in place.
Despite entry into the Agreement, no assurance can be provided that a commercial transaction will ultimately be concluded with the Counterparty. The Company will provide further updates in due course".

We haven't heard anything further since.

People can put whatever interpretation they like on the above and on what is happening, but it's all conjecture. What was contained in the RNS was written in English and seems reasonably clear to me. CLNR must tell the Market tomorrow what the outcome is of the exclusive discussions with the Counterparty because the deadline is today and the whole issue is market sensitive. News of a successful outcome would cause the share price to rise, whereas a failure to say anything - effectively confirming that what was stated in the 28th Nov RNS was untrue - would cause it to fall, probably significantly. As indeed would news the discussions have ended.

Don't forget to set your alarm. Don't blame me if a RNS doesn't arrive; blame Mr Swindells, although I doubt very much you will have to. Whether or not he's any better than Theresa May at doing deals remains to be seen.........

dyor

Ah - thanks for that, noix - I thought I was going mad. I was certain I'd read about the Buchan area licences opportunity and that they were current. I should have looked harder - I was surprised the 31st Round had come and gone (subject to bid results). The next Round is for "mature prospects", which I took to include the Buchan licences, but doesn't open for while yet.

They're in a sneaky "supplementary" Round. Well spotted. Let's hope JOG participates and is awarded what it bids for (if it does). JOG appears to be quite good at farm-outs........................