The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Nothing concerning me in those numbers. £5m funds available.
£3m in stock that will generate more cash in H2.
Still running a negative operating cash flow but with H2 set to bring in twice the revenue that H1 did then this should lead to a first positive operating cash flow. That's a huge milestone. It's whether enough FCF can be generated to avoid the 2nd drawdown. We still need to invest to grow so the uncertainty will be holding the SP back for now.
Overall, the business appears to heading in the right direction. GB seems confident he'll still hit at least £18m despite the current macro situation and with only 3 months left of the year I'd expect that prediction to be pretty solid.
It would be nice to get another update on the STC numbers. Been saying over £1m for a few months now.
Freds, the hedge is clearly flexible as you have stated but I doubt Angs will see any upside from flexing. It is more of a safety net if they are potentially missing the required volume. I seriously doubt Mercuria would let Angs defer some units to allow Angs to benefit from higher gas prices.
Gallder, it's a fair shout tbh. It's another theory alongside mine. I did find this statement from Note 24
In the event that the Group does not meet its producOon Ometable, the swaps will crystallise as a liability at
the dates at the proposed periods of gas producOon in the swap agreements.
Crystallise to me says the value of the swaps is calculated for Jul and Aug into monetary terms which is then crystallised as a liability on the balance sheet. So using your example £7m would be owing to Mercuria. Now that's technically a loan which GL would have agreed to pay back in Q1/Q2. To pay it back he needs to build funds between now and then which will only sufficiently come from exceeding the hedged production.
It isn't clear whether GL and Mercuria have agreed to defer the units or the monetary value but what is clear is that Angs will need to produce more than 5.5 to hit it's current obligations.
I don't know why some here are disputing this. That's the only point I'm making. Yanis says 5.5 is more than enough, I and the numbers appear to say it's not. It's not a deramp, it's fact in my eyes until someone can disprove it.
I'm invested here because I believe they will surpass 5.5. It's likely to me that the 2nd compressor will be installed this year. This will allow us to reach the full potential of our 2 wells 7-8mscf/d. Hopefully during Q1 we'll have a sidetrack installed allowing us to max out both compressors.
At this point we're now derisked and producing 10-12mscf/D. That's 3-3.7m therms per month. So now cash is inflowing assuming high gas prices. So let's say 2m therms per month unhedged at £2.50 each = £5m cash inflow per month.
With the cash we can now pay off any outstanding debt and start work on a 2nd sidetrack and probably 3rd compressor. Again increasing flow to now 17-18mscf/D.
We may win some more licenses, we may choose to start advancing our other assets helping to reduce our effective tax rate.
The main point is. Until this all plays out and it may not play out like we all hope then there is no point spewing out 10p, 20p here we come. This will all take time and there is still risk and unknowns involved here.
I do get that rampers like to float off into the sky where the sun is always shining and its tranquil and peaceful but I'm just trying to keep this real because back down on earth which is where we are the weather is still good but there is a little noise and a few things we have to negotiate through.
One small step for Angs is like one giant leap for the rampers
Gallder, I'm not sure your right with your interpretation, can't say your wrong either at this point but either way, it looks extremely likely that the required flow rate will be more than 5.5.
Asher, we're talking about Q1 and Q2. I stated earlier that I agree 5.5 will cover Q4. Not convinced it's comfortable but it'll cover.
I'd agree if you were correct Yanis. The facts are all there so not sure why we can't simply conclude the matter.
10.5m required Jan to Jun23
2.2m deferred into Jan to Jun23
So 12.7m therms required.
Jan to Jun23 is 182 days
So 70,000 therms per day.
Even using Angs 10,800 conversion it's still gives a required rate of 6.5mscf/d.
Help me. Where am I going wrong.
A lot of been waiting for the placing. Me included. Once they've churned then I can only see the fundamentals and SP getting better here.
All O&G companies will have their tax accountants working overtime trying to establish the most efficient way to reduce the effective tax rate come year end. The main way is by spending big on capex so I'm just holding on in anticipation for an update from AA. Let's not forget AA has a pretty decent stake in KiST.
BV, I've seen the update. I was looking for clarity on what you actually meant regarding the hedge not being set in stone. For some reason rather than just saying 'because we can roll it over' you decide to take the high road and start slandering me.
By the way, you don't need to watch the video to know the hedge can be rolled over, just reading an RNS from 2 months ago would tell you that. I thought you'd noticed something on the video I hadn't. Well now we know that's not the case.
It's frustrating that that could have all been sorted in about 2 posts but your arrogance dragged it out muuuuuccchhhh longer. As I said, sometimes not the best place to come for stimulating conversation
BV, when have I said Angs won't meet payments. I know the hedge can be rolled over. It already has been and GL stated he has a good relationship with them and I'm sure if the need arose they would be willing to flex it again to some degree.
I haven't said Angus aren't making money. They are selling gas now so obviously they're making money now. I said that they aren't make bucket loads like the rampers say.
Have you been arguing with me thinking I'm someone else? Jeez, you pay absolutely no attention to who saying what on here. I'd certainly recommend thinking before speaking.
BV, I'm more than comfortable with my understanding of the hedge. Your comment left me questioning your understanding so I challenged you on it and you failed miserably. Im not familiar with your history here. Not sure if you're just another ramper or indeed as you say a 'balanced viewer' but your lack of willingness to engage screams someone who isn't that confident in what they speak.
Thanks BV, if I want stimulating conversations in future I know where not to go.
I'll watch the video later this evening and we'll pick up our conversation tomorrow. Just thought it would be quicker if you just said it on here as seen as you were the one that brought it up but never mind.
Yep, it all needs signing off still and I'm sure they'll be more clarity to come but the uncertainty is killing the KIST SP. We could probably do with a little news re investments to contain the demise.