Member Info for dickupham

contd.......

Just to illustrate the point I make, you say:
“oil up $5 since end of September……. what is the October oil price move worth per share...172m barrels of proven resource (we'll ignore the rest...) - assume 50% of the project goes to a farm out partner. Assume 30% tax (taxes are going up...). Translate into £ and divide by 32m shares. £7 uplift”.

No oil is projected to emerge from Buchan before 2025/26 at the earliest, so this immediately has to be factored into any thinking about the current value of JOG’s 2C resources. As does the fact that, in the first full year of production (maybe 2026/27) a maximum of c.13MMboe is likely to be extracted (est 335 days’ @ 40kboepd). It would not be right to think the remaining 157MMboe is worth the same as the $13MMboe coming out in year 1. This is just because of risk and inflation. I’m not saying the price of BC doesn’t matter – of course it does; it influences everything. But no-one would pay today’s BC price for barrels that won’t be lifted for somewhere between 5 and 35 years in the future. And even then, no-one’s going to pay today’s full value of an asset in cash, up-front or in any other form (eg via farm-in) because that wouldn’t leave any scope for the acquiror/farminee to make any profit in the future. That’s possibly why it’s said that the right price to pay for an asset is one that leaves both parties feeling dissatisfied – one because he think’s he’s sold too cheaply and the other because he’s paid too much.

I’ll cut to the chase. In practice, as I see things, oil changes hands at a price per barrel that varies according to any number of different things, ranging from industry sentiment, political posturing, Brent Crude price pb to a host of other things that mostly specifically relate to the asset that’s up for sale (in one form or another). NPV is important, because it is commonly regarded as the best guide to what a specific project is fundamentally worth. But it’s only ever a guide. The norm is for a ppb (price per barrel) to be paid for a producing (or likely to be producing in the future) asset, that takes into account all the variables. Both parties will put a different slant on the numbers and if there’s consensus (in the GBA case that the oil is actually likely to exist in the stated volumes) then it comes down to how well the deal is negotiated as to how much the asset fetches or, of more relevance, on what terms a farm-out partner is taken onboard.

tbc

Health warning
What follows (in 2, maybe 3 posts) may cause lasting mental damage to anyone with a low boredom threshold who reads them. Be warned. Apply the filter now.

A thoughtful post, Eruditepenguin and I can understand where you’re coming from. The point of what I say below is not to score points. We're both singing from the same hymn sheet, just in slightly different ways. I thought some might find it helpful to get a slightly different view of what a potential suitor (of some kind) might think JOG is worth, so here goes.

I know you’re working within wide parameters in the numbers you put forward, but it’s important to bear in mind that long term projects such as the GBA development are always valued on a NPV (net present value) basis, using DCF projections to arrive at NPV. An ‘industry norm’ 10% discount must be applied to each year’s net cash outcome in the DCF projections (to reflect ‘general’ risk – hence NPV10, which is how NPV in the industry is usually described). And in addition, further specific known risks should also taken into account by applying an appropriate discount rate. A further discount is then applied to reflect the cost of money in each year covered by the DCF projections – inflation in common parlance. A reasonably clear explanation of the logic behind this method of valuation and how it works is provided by Investopedia: https://www.investopedia.com/terms/d/dcf.asp.

When oil and gas interests (working or operated) change hands, there’s generally reference to the ppboe (price per barrel of oil equivalent) paid by the farminee or acquiror for the relevant oil (or gas). This will usually be related to – but not necessarily driven by - the perceived NPV of those same assets.

The Investopedia article won’t be that easy for most to understand, but it’s worth spending some time trying to gain some kind of grasp of the fundamentals, because DCF modelling (the DCFs projected each year over the life of the project are added together to arrive at NPV) is commonly regarded as the best way to arrive at the fair value of an asset that’s likely to provide revenue (and incur costs whilst ‘earning’ that revenue) over many years into the future. The main weakness in the method is that it’s veracity is reliant on the accuracy of various different assumptions that have to be made about the future (although what method of valuation doesn’t involve some kind of assessment of future circumstances in order to arrive at fair value?).

tbc

"Macropedia and Simply Wall St"..........

.............I meant: Stockopedia

Why bother to post c.rap such as that published by the likes of Macropedia and Simply Wall St (inter alia). The following is a profile summary of SQZ according to the former; really on the ball. Organisations like the two specifically mentioned should be shut down - they're dangerous to inexperienced people's wealth:
"Profile Summary
Serica Energy plc is a United Kingdom-based oil and gas company. The Company has exploration and development activities based in the United Kingdom, Ireland, Namibia and Morocco, and an economic interest in an oilfield offshore Norway. The Company's segments include UK, Ireland and Africa. It holds licenses in the Central North Sea and the East Irish Sea, which includes the Columbus Field. It holds Frontier Exploration Licenses for Muckish, Aghla and Derryveagh, and Liffey and Boyne Prospects. The Company also holds interest in Blocks 113/26b and 113/27c, including the Doyle prospect. It holds interest in Block 113/22a, which is operated by Zennor North Sea Limited. The Company has interest in a Petroleum Agreement covering Blocks 2512A, 2513A, 2513B and 2612A in the Luderitz Basin, offshore Namibia in partnership with other companies. The Company has working interest in the Sidi Moussa license. The Company has an economic interest in the potential development of the Vette field".

Curiously no mention of Bruce, Keith or Rhum fields.

Utterly crass

imo/dyor

That was an English group called "The Beatles". They were quite popular here - and in the US and elsewhere - at one time.

I don't think any of them were share traders but could be wrong. None of their songs was about the stock market as far as I can recall. Or indeed auditing.

dyor

..........at $84.50 as I write.

One would think this would strengthen our hand. All JOG's projections assumed a mid-range price of $62.5

https://www.youtube.com/watch?v=UVKU6SevefY&ab_channel=TheBeatles-Topic

dyor

I've spoken to AB a few times since the leak and he's fanatically determined there won't be any repeats. Ever. I've always found him to be as open as he can be during our conversations. I have always made it clear I'm not trying to pump him for information that's not available to all other shareholders and he doesn't give me any. He's never gone remotely close to making me an insider. Ditto Ron Lansdell and Vicary Gibbs. The point of me keeping in contact is so that I can out my views forward; it's up to them if they want to consider them. By asking, I improve my knowledge of the industry, the 'technicals' that underpin it and what certain expressions and language used actually mean in layman's terms. I have experience (gained at the right level) about all forms of business - particularly regarding valuations of businesses of all types and sizes. My knowledge of the oil and gas (to a lesser extent) industry has improved greatly over the 6.5 years I've been invested (and in TRAP before JOG backed in).

All JOG's senior people are consummate pros for whom I have the greatest respect. My view is that they are people of both ability and integrity. They are determined to succeed in everything they do and have worked tirelessly over a long period towards the achievement of their ambitious targets.

Re the leak, I was effectively told about 7 months ago that it would be difficult for JOG's senior management to answer any questions at all as they were at the start of what would probably be a long period of extremely sensitive discussions (ie don't phone or write because were keeping a tight lid on these discussions so just let us get on with it). I have accordingly restricted my contact to a very limited number of phone conversations and emails in which I have tried to get across how shareholders are feeling in the absence of any real information about progress - ie I've had a good moan about the status of discussions and the complete inability of shareholders to predict outcome. These moans have been very well tolerated (I'd have told me to go do one) to the extent I have almost immediately regretted being such a whinger - let's face it, the ones who will benefit the most from a successful outcome to the discussions that seem forever to be ongoing are AB and RL (they have options as well as shares) so they're bound to be giving it their all. The cost of failure will be higher to them than to me.

So, Millario, no I don't expect to hear any rumours in advance of the real news we're waiting for. That said, JOG is in an exposed position (as are all listed cos) because they're totally reliant on the honesty and professionalism of certain key advisers outside the Company and imv integrity in the City has all but gone. If anyone in the loop outside JOG whispers advance news to a contact there's not much JOG can do about it.

There's not much more I can say except "I'm in". If I lose then that's life.

GL
dyor

From the Interim Results announcement 22 Sept:

· Farm-out process ongoing and engaged in discussions with both industry parties and potential infrastructure funders

· Regional electrification collaboration within the Central North Sea is building momentum amongst industry parties, with the GBA ideally located to be an integral part of this initiative.

Chairman: "In Q2 2021 (Q1 actually - keep up), we launched a farm-out process seeking to secure an industry partner in this early phase of the GBA Development to join JOG in unlocking the considerable value that we believe exists in this project. This process is ongoing, and we will be updating shareholders as soon as we are in a position to do so".

CEO: "Our primary focus is on securing funding and a partner(s) for our flagship GBA Development project, but with increased activity and some motivated sellers, JOG is, nonetheless, reviewing a number of potential acquisitions and/or opportunities for possible business combinations".

"(we are seeking) the right industry partner(s) and funding to join us in unlocking the considerable value potential of the GBA Development. The project is ambitious and will be a major long-term capital commitment for our industry, and the rewards and expected rapid payback serve, in our opinion, to make it a very compelling investment proposition"

Red faces (more than) if they fail to deliver. Who loses the most if they do? AB and RL (and Jim - how do you read things, Jim?). I bought my ticket a long time ago and don't intend to miss the bus.

dyor

..............funny how these 5 EU countries weren't calling for averaging when the gas price was in the gutter and gascos were all fighting for air.

Ditto re the hideously unfair hinted-at so-called 'windfall tax' on gasco profits. Where were the 'windfall tax credits when the boot was on the other foot last year?

Politicians are the lowest of the low. Anything to gain votes, regardless of fairness or effect on UK plc and its shareholders.

The scenario I present is looking forwards to the period immediately post FDP approval.

Robsroom, can you explain what you mean by: "who would spend 200 million to enter a partnership with a lean ‘operator’ with the remotest likelihood someone else would be spending their money?"

JOG might still acquire a WI in a (probably) late-life producing asset to provide cash flow as Buchan moves towards first oil , but it's pretty clear monetising the GBA licences has progressively become JOG's raison d'être. The ranch has been bet and - like it or not - JOG's entire future depends on raising the funds needed to develop its only real asset.

I trust JOG's people to bring home the goods but can fully understand that others might not. None of us has a crystal ball and therefore projecting the final outcome is simply not possible. What I would say, however, is that JOG's CEO seemed confident enough of success in attracting a partner of the right calibre when the price of oil - and confidence in the future of oil in the CNS - was a lot lower than it is today. With OPEX extraction cost at less than $10pb and with Brent Crude at $82, it seems to me JOG has a lot better chance of signing up with the right sort of partner/s than it did 7 long months ago.

dyor

......"Someone else can extrapolate the numbers and SP effect"............

........as it doesn't look as if anyone else is going to put forward any numbers, I might as well instead.

85MMboe @ a conservative (say) $10pb = $850m
$850m = £625m
Shares in issue (fully diluted): c.35m
Price per share: £17.88

As I said earlier, everything is hypothetical. Step 1 is to sign up a partner to provide most of the funding to production - the rest should follow, assuming JOG's directors are looking for an exit that provides shareholders with returns the vast majority would regard exceptional. The road to production is littered with the corpses of junior oilcos whose directors got ambition mixed up with ability, HUR being one such oilco; XEL was another - there are many others.

Cash is king. Show us the money (please).

dyor

Legal agreements don't just 'fall away' in the light of subsequent events, PC01.

My view (fwiw) is that the most likely outcome (and the one that's possibly best for everyone) is for JOG to farm out a percentage of the GBA licences (there might or might not be an infrastructure funds provider involved - ie the farm out might not be just to one party). Thereafter - with funding assured - we could expect steady progress towards FEED/FDP/FID. My thoughts are that the optimum time for the founder directors (and other LTH) to claim tangible significant reward for all their efforts/patience would be to sell the Company as soon as the FDP has been approved. An acquiring oilco/PE firm/other institution would take ownership of JOG (from existing holders) and management and operations could carry on exactly as before, (or not, if the new owners want change) except in regard to who owns the shares in the Company.

The reason I have formed these views is that JOG can't legitimately call its 170MMboe of 2C resources in the GBA "reserves" until the FDP has been approved. What 2C resources fetch on a sale is very different to what 'reserves' fetch. JOG's 2C resources are valuable, but what they fetched if put up for sale would be adversely influenced by the buyer's knowledge that JOG wouldn't be selling them if it had other options (ie the buyer would know JOG didn't have the funds in place to take the project to first oil). Your guess is as good as mine as to what JOG's GBA resources would sell for. Somewhere between $3 and $5 pb would be mine (still valuing JOG's shares at multiples of today's price, although I'm sure other difficulties would arise if JOG tried to sell its 2C resources before they could be called reserves).

Pre-covid, 2P reserves in the the UKCS were changing hands at anything from around $7pb to $18pb (apparently mostly dependent on funding to production and °API). Brent Crude has now fully recovered (and more) so JOG's situation is positive, if it's able to sort out the funds needed to get to production. Whilst it might have to 'give away' a hefty chunk of its oil resources and prospects to a JV partner/s, it would still be left with (I'm guessing) 85MMboe that, in my scenario above, might be worth as much as $15-$20pb, plus whatever value was ascribed to all the GBA prospects.

It's all hypothesis at this stage but is certainly not beyond the realms of possibility. Much clearly still depends on convincing a potential JV partner the oil is there and accessible in the stated volumes. Someone else can extrapolate the numbers and SP effect.

If anyone from JOG is reading this, get a move on would you? Shareholders don't live forever and at some point before they go they'd ideally like to have a **** of a lot to spend on frivolous things

dyor
GLAL

........for the avoidance of doubt the £43 was written in jest (as was the 10p). It's impossible to make any realistic assessment of future SP, given the lack of reliable information on JOG's future structure/direction. We don't know if there'll be a farmout, merger, sale or something different. In the circumstances it's probably best to be guided by the 3 brokers covering JOG, who have near term target prices of between about £6 and £8 a share, which they reckon is conservative based on their estimates of fair value.

We shouldn't have to wait too long now to learn our fate. I remain cautiously optimistic.

Thanks for the various messages of support, which are much appreciated. I'm on unpleasant monthly injections and 3 monthly blood tests and this regime will continue for some time to come. I'm cautiously optimistic on this front too.

Onwards and whatever............

GL

Are you sure there'll be a farmout and not a sale?

£43 soon (if our luck continues). 10p (if it doesn't).

HLIAPOS? (the last word is "string")

:-)

"I'm all for a special dividend"........

.......so am I. And I'd go for an annual dividend that produces a decent long term yield . This would attract income-seeking investors whilst also providing the opportunity for growth, the result being a more stable SP through a more diverse share register, producing increased general demand for the shares. Very substantial profits (converting readily into cash) are forecast for some years to come, as a direct result of a deal with BP that can never realistically be repeated. So why not?

Looking to make big acquisitions with ACW aged 78 and MF aged 61 seems too risky to me. Compelling reasons are always put forward in advance as to why a particular acquisition makes sense, with the synergies and future profit growth potential "bigged up" to levels it would appear insane to challenge. I can't tell you the number of times acquisitions I was involved with (most frequently on the due diligence side, although I also advised vendors) that haven't produced anywhere near the synergies shareholders were definitively told would arise. Integrating different businesses is always difficult.

Warning signs are evident to me in recent communications from the top table. Whilst I have nothing against him, why after 17 years doing a perfectly acceptable job as group financial controller, is it suddenly deemed necessary to make Andrew Bell - aged 69 - CFO and promote him to the board? No doubt his pay was increased accordingly and we'll soon learn that he, along with a number of others on the board, have been awarded more soft options, and sizable bonuses for their sterling efforts (for which they're already paid generously). The real value was delivered when the BKR deal was done a few years back; let's face it, BP was desperate to put as much distance as it could between itself and Iran as it tried to rebuild its name in the US following the Macondo spill: https://en.wikipedia.org/wiki/Deepwater_Horizon_oil_spill). That SQZ was selected as the recipient of incredible largess on BP's part was our good fortune and I take nothing away from SQZ's board (ACW in particular) in saying I have no idea why SQZ was chosen to receive what it did; the simple fact is that it did - completely transforming SQZ's future at a stroke - all (relatively) risk-free.

It's difficult to see how Mr Bell's appointment as CFO makes sense. It puts a potential hurdle in place in the event of a bigger fish looking to acquire SQZ - another expensive employee to pay off; who needs two CFOs? It also smacks of "jobs for the boys". Rewarding someone using other people's people's money is an unacceptable use of such funds. It was also less than impressive imv to put so much emphasis "investing in our assets" in the recent results blurb, when it's clear we dodged a bullet with the Rhum 3 re-entry, which was badly misjudged in advance.

I'll finish off in a later post. btw I'm not 'anti' anyone or anything except as stated

dyor

Ernest - the recent modest rally from about 107p to today's 176p close followed some interesting M&A activity in the NS, supportive comments by the OGA re regional electrification, the release of JOG's results for H1 2021 and most recently some very positive commentary about JOG in Investors' Chronicle (motto: "do the opposite of what we suggest and you've got a chance").

Today, JOG is still only valued by the market at just over £50m, which would be peanuts if the gate to production in the GBA were to be unlocked by means of a farm out, or some kind of merger/collaboration with a more powerful ally. All kinds of arrangements are possible with the oil price as strong as it is, with most pundits seemingly believing it's unlikely to drop significantly in the foreseeable future. An announcement could come at any time, with the farm out process having been going on since early March.

All the above doesn't mean that there won't be a spell of profit taking by those who have ridden the recent small wave. It just means I won't be selling any of my shares. Plus ca change.

A number of encouraging comments were made in the results announcement by both the chairman (sorry: "chairperson" or "chair", although I've never encountered a chair that can talk or write) and the CEO. In particular: "...we are excited to seek to bring in the right industry partner(s) and funding to join us in unlocking the considerable value potential of the GBA Development. The project is ambitious and will be a major long-term capital commitment for our industry, and the rewards and expected rapid payback serve, in our opinion, to make it a very compelling investment proposition. As we continue to progress our farm-out discussions, I am particularly grateful to our shareholders for their ongoing support".

What also interested me was the CEO's comment: "Our primary focus is on securing funding and a partner(s) for our flagship GBA Development project, but with increased activity and some motivated sellers, JOG is, nonetheless, reviewing a number of potential acquisitions and/or opportunities for possible business combinations". No-one can have been expecting JOG to be making an acquisitions with so many other things going on. So why say it? The "business combination" bit I found interesting and might be a clue as to what to expect.

The results announcement was followed by bullish updates from the three brokers that cover JOG, with target SPs set in the 600-800p range and fair value somewhere close.

I can answer your question, Ernest ("any thoughts what have caused this SP rise and any idea if we will go down again?") although you might not find it all that helpful. The answer is: please see above. In my view this is marginally better than "how long is a piece of string"

dyor

..........I wasn't being entirely serious about JOG presenting at COP 26, btw..........

..........but you never know.

I blame the medication.

..........it's all in the stars.

If JOG can wrap up a deal quickly, maybe they'll be given a slot at COP 26 ("in partnership with Italy" - God help us - what's THAT all about? https://ukcop26.org/) to tell everyone how to go about 21st century extraction in ways that get politicians votes and people like Greta a sainthood (ie by pretending humans have the power to change nature to any significant extent; keep drinking the Kool Aid).

Does anyone know how all these people are travelling to Glasgow?

dyor

vc......perhaps the advice you give (ie: sell) is sound if you're focused only on short term price movement.

From a longer term perspective, it would be such a pity to have sold one's holding, only to read one morning not long after (before the market opens) that the event everyone has been waiting for these past nearly 7 months (be it farm out, merger, sale or a combination of the three) has finally come to pass.

See if the recent 60%increase can still be called spectacular when/if that happens. It'll be pedestrian by comparison. And try jumping back in at anything like a sensible price when the news is out. You're likely to be disappointed.

I retain my faith in JOG's team to deliver to LTHs the value they've undertaken to

jmofwiw
dyor

.....any idea what's going to win the 17.30 at Wolverhampton, Enrico? You seem really switched on - how much should we all invest?.

Do you think IGas having the word "gas" in it has made any difference? Does iGas have anything else to recommend it or doesn't that matter?