Member Info for DRB83

Trying to understand today's market reaction to the news.

Is the market seeing this as kicking the can another 60+days down the road. Potential is great but it's not a done deal.

What have we learned today. AA are our preferred choice. A large equity placing is off the table. We know the general terms of the potential agreement but not the specifics. Until we see the revised capex/opex plan then we don't really know if more funding is needed although I believe the $10m loan, $5m prepayment and $5m equity will be sufficient to get us to cash generative. The rest we'll fund from that cash creation.

AA can still pull out, that's the problem with potential. I suspect the market is reflecting this risk in today's price. They have 60 days after receiving our Base Case Financial Model. You can bet that document will be produced very quickly. Early September I predict.

We must have a high degree of confidence that AA won't pull out as it could be November before a legally binding contract is signed. If we had to go back to the drawing board at that point that would not be great so we can be fairly optimistic that AA and UFO will be partnering going forward.

Good read and thanks. Showcase is ahead of the market by the looks. Long hold

If it was that clear easy there wouldn't be a case

NBP back up today but no rise in sp. Maybe just a cooling off period or maybe the uncertainty around what countries will do regarding high energy bills for consumers. Either way, I'm thinking the SP downturn is temporary

Yes Nap, still lots of news to come in September.

We've had the renegotiated deal for Hammersley. Now this potential funding arrangement.

Next up:

Confirmation of 90% Hammersley deal done
More results from Han****, expecting a resource upgrade
Update of scoping study with revised capex, opex etc
Update on Han**** approvals

Today was just to wet the appetite.

It was said that nominations will only be made when flow rates are stable so not sure what's happened there. Anyhow, it only has to be stable for at least 8 hours so could have an RNS anytime this week.

Stockbob. This well will hopefully generate 1.5m therms per month which will all go towards the 42p/52p per therm hedge. We are not in the realms of producing our mcap just yet. Wouldn't want you to be disappointed when you see the H2 results. Its certainly progress though.

Thanks Nap. Would have preferred a straight up loan but guess no lender would have seen the benefit to such a short term loan. Also, maybe Bill and Rod are looking at a bigger picture in terms of what AA can offer us going forward.

I can't find the reference but I certainly recall something about early works costing us $15m capex. I'm assuming that is made up of $10m loan and $5m equity. Did AA what UFO to commit to a equity round so they can come in and buy a load of shares too? I wonder.

24 month royalty could be expensive but it's irrelevant really as we'll be generating significant profits in 9 months.

3 year 100% offtake - does this include any increase in resources I wonder. Never happy to have all my revenue with one customer but by the time 3 years is up, Brockman and Vivash will be producing so we'll have ample opportunity to diversify out sales.

A huge benefit will be the hedging. We may lose we may win but what it will do is lock in a price that will help us calculate a cash flow forecast. We probably won't hedge it all but some is better than none.

Btw. The interest rate on this loan doesn't matter at all imo. It could be 30% for all I care. Even if we had the loan for 1 year that's $3m interest which at $100/t iron ore is 30000t. We will be extracting 100kt per month so the $3 interest literally amounts to 10 days of sales. You can also bet that we won't need the loan for 12 months so 10 days becomes less. It's nothing compared to what we get out of it.

I remember reading somewhere that $15m capex was needed for the initial phase of works. The other $15m could therefore quite easily be covered with the cash from the offtake.

We go what we wanted Aliens. Debt financing and offtake. No equity although I do note this line from the RNS:

new equity raised by Alien, and evidence that such amount has been utilized for Han**** in this case, of US$5 million;

Maybe the agreement will require UFO to fund $5m of the remaining capex through equity. You can bet AA will be all over that raise.

Smiller, with so much exploration to do on all our world class projects and with so many being so close to production it's very difficult to value UFO so it would be almost impossible for AA to acquire UFO for a fair price. It would be a four figure % premium and it just isn't going to happen. We have to get there organically which is great.

All gas oil and gas stocks I'm in or watching got tanked today and I can only assume it's due to the EU threatening to take action which in turn puts pressure on the UK to do likewise so indirectly affects SQZ. Strangely enough the tff lost 8% today Vs UK therm price down 30%. Huge disconnect again between the 2 prices. What will happen tomorrow? Let's see

Extract from article

The European Commission will launch an impact assessment in the autumn and we can expect a proposal by the start of next year,” he said.

https://www.google.com/amp/s/amp.theguardian.com/business/2022/aug/30/wholesale-gas-prices-tumble-as-europe-prepares-to-intervene-in-energy-markets

Well if it's going to take several months for any action then today's drop was certainly overdone. Hopefully back on the up tomorrow. Still generating £5m + cash everyday currently. I know it won't last forever but £150m a month, £600m in 4 months that's our EV in 4 months. Crazy.

Fixed for less than 12 months I believe. Hopefully the cost of energy will be a lot lower next summer

BV, I bought in today after a brief research session. Should have been more thorough but I'm in for a swing trade. What don't I know. Is what I'm saying about tax and dividends wrong? If you're here for dividends in the next 12 months then you'll be disappointed. You disagree?

BV, Yes

Tygra, I'll check the video but we're those comments made before the 25% tax hike? That would have a significant effect on the dividends decision. Why declare a profit and give 65% to the gov when you can reinvest it to grow profits and pay next to nothing in tax. I'll check the videos later.

Thanks chaps, I don't think HITS was bashing. It is fact that we are now obliged to provide the 52m therms on our own.

Tygra, it's too expensive currently for Angs to pay dividends imo. 65% tax + whatever comes out next week. The incentive of reinvesting profits is too great to miss. Angs is a growth share not a dividend share. When gas prices settle and Angs run out of investment ideas then dividends will come but certainly not expecting them anytime soon.

Howey, that would be great news if they do. We need that 2nd well as without it we are just selling therms for 40-50p. Let's hope it's a relatively quick turnaround to get the 2 wells and sidetrack flowing sharpish.

Thanks Hamster. News of the first well is great. Hope to here about commercials this week. B2 will deliver a profit in H2 but it won't justify the prices being spouted on here (5p, 10p 15p). A4 coming online in Q4 will be significant as most of that flow will be unhedged. If we can churn 3m therms a month by end of year at an average of £2/therm (50p hedged + £3.50 unhedged) that's £6m revenue p/m. Costs will be minimal but tax will be significant unless we reinvest it. Reinvest it we will so I'm not expecting dividends anytime soon here but SP growth should be significant over the next 6-12 months.

Yes but that's at 42p per therm not 420p per therm that everyone else is getting. The big cash will start arriving when the 2nd well is flowing. Do we know when that will be?

How shortly is shortly?