Member Info for EM202020

Interesting RNS today. Whilst good news to all other shareholders in Fenikso, why would someone sell 39m shares at 1.55p each unless they had to, didn’t believe or care they were worth substantially more or this was just an aggregation of many small buys other the last few months being held by the Broker and then sold back to Fenikso as part of an agreed umbrella trade?

Indeed - I have had specific, various and relevant experience personally investing in Nigeria oil E&P - strange things can happen for a variety of controllable and uncontrollable reasons - I simply prefer actual cash in my bank rather than the prospect of future cash in my bank regardless of the contract terms so I will always apply a discount for receivables (as Fenikso does) to arrive at its current NAV. No doubt, others will have different views on that specific risk and will apply a different discount rate to their valuation.

S

Thanks Tim00 - so from my perspective, I think of this equity investment as a maturing bond with a current value today of (say) 2p per share and a final value of (say) 6p per share at the end of 2029 ( assuming, and once, the receivable has been fully collected). The risk is really a) Lekoil Nigeria willing AND able to keep meeting the agreed 8-weekly payments and we cannot disregard Nigeria country risk, and b) the Fenikso insiders behaving themselves, not embarking on a new fanciful strategy for the company and also, not extracting / skimming egregiously over the next 4.5 years to full monetisation. There is very little liquidity in the shares because a significant % of the shares in issue is held by the insiders (who are not selling) and so whilst we all benefit from the value accretive nature of the share buy-backs from small packets of sellers, the ever decreasing pool of people selling means this is small beer and a distraction. I would rather sit tight, stay patient, accept the inherent risks and see what happens over the next 3.5 years. Of course, if the insiders want to make me an offer, then I would consider it along that spectrum of 2p-6p versus my considered view on value versus risk along that spectrum at that time (like cashing out early on a football bet that is in the money but before the final whistle has been blown. To extend the footballing metaphor, we are probably in the 80th minute of the game and we are 3 up.

Tim000 - after taking admin costs of running the company into account for the next few years whilst the Receivable is being collected - assuming it is collected at par / nominal value - and those admin. Costs have ramped up for no discernible reason), I am hoping to exit north of 5p sometime this decade. Thoughts?

Yes - Lekoil plc is now Fenikso Limited - you can trade them on the Aquis stock exchange - shares are currently going through at 1.7p to 1.9pm with no real liquidity other than the broker mopping up any sales (probably on behalf of Fenikso itself which has been buying back its own shares) but could be worth more (or less) going forward. Personally I think they could be north of 4p within 24 months but we shall see. All depends on Lekoil Nigeria continuing to lift oil and actually paying Fenikso its agreed percentage of those oil revenues which seems to happen every couple of months. Nominal NAV is in excess of £25m and current M/C being ~£9m. Check out the RNSs for details. DYOR

No one selling so nothing for the Company to buy. We will need to wait for the Board’s next move, the AGM and the accounts. But I am now at a north of 5p per share (hopeful) realisation from this investment following the buy out of the loan from Savannah sometime over the next 3-4 years. More likely to be a deal with Lekoil to sell the receivable back to them at a discount to par to accelerate our monetisation.

Maybe. We will probably find out soon enough.

To correct, I think the discount rates used to calculate the Net Present Value (NPV) of the future expected cash flows has actually increased year-on-year due to higher global costs of capital/risk generally as well as maybe specific micro risks. However, because we are one year nearer to cash flows and because amounts have been actually been received during the year, the nominal value of the discount has gone down on both the long term receivable and the long term payable.

I expect the Board to present a plan next quarter at the AGM as to how they are proposing on getting value back to us shareholders in a cost effective manner. In the meantime, risk on future receipts of repayments from Lekoil remain elevated given the nature of the risks around oil lifting in Nigeria, getting it to the terminal and then getting paid for it by Shell Western. Continued patience, whilst frustrating, is required I feel. I think we are in a much better place than we were say 2 years ago thanks in no small measure to the actions of the current Board but everyone entitled to an opinion.

Agreed Tim000. US$32.9m of nominal NAV that should be fully converted into cash over 4-6 years at the current rate. You can currently buy these shares at a M/C of cUS$7.5m so in theory a > 4x from here (as there are corporate running costs eating into the NAV over the period until all cash has been returned).

I anticipate the Board saying something soon about their proposed options or strategy in how to accelerate getting value back to the Fenikso shareholders when they present their 2023 end of year accounts and report.

I have plenty of these shares already so won’t buy anymore but perhaps a punt for some others but only with money you can afford to lose as the realisation of cash to Fenikso is totally dependant on receiving cash from the oil liftings that Lekoil is undertaking in Nigeria so doesn’t come without risk.

DYOR.

Completely agree. I bought my first batch yesterday at 74p and will continue to add from time to time. The last issued NAV for DORE was 118p and even assuming it has come down since then, that is still a big margin of safety at these prices. Other than the yield curve moving down, you have to believe that with these discounts to NAV (throughout the Investment Trust Sector), the smart money will attempt to take these Trusts private and capture some of that discount or there will be consolidation within the sector. DORE being one of the small players ought to be a target.

Nothing from the latest RNS or the delay in receiving the ‘monthly’ loan repayment instalment from Lekoil has altered my view. As of today, $29.9m of net receivable ($43.5m gross and $29.9m after taking into account the SAVI loan balance of $13.6m, payment of which is conditional on actually receiving money from Lekoil) and $3m of cash gives a nominal NAV of $32.9m. Take off that number the costs of running Fenikso (which ought to be small) for the period before either the remaining loan balance has been fully received or a corporate event of some kind, all means to me that there is value available in excess of the price which you can buy these shares in the market. However, things are not guaranteed so caveat emptor and we will find out in due course. The end of your accounts will be helpful when they come out in the next month or so and if/when the Board presents its revised strategy of how it intends getting value back to us shareholders.

The price at which individuals are prepared to acquire this share continues to go up. However, in order to manage people’s expectations, the Nigerian economy and currency are really struggling and dollar generating businesses operating within Nigeria are probably economic targets for a government seeking dollars to help mitigate the ongoing Naira depreciation. The risk of seeing a multiple of your money from this point forward is centred around Lekoil’s ability and willingness to lift oil, get it to the refinery, get paid for it and for a percentage of those proceeds to get into Fenikso’s bank account. Whilst I remain bullish that this will end up at a 3.5 - 4.5p moneitisation event at some stage in the next year or two, there remains real risk for Fenikso that can’t be easily mitigated and where Fenikso is completely dependant on others. This is not a one-way bet and certainly not for widows and orphans!.

I don’t read too much into the irregular trades; just people who got bored or institutions cleaning house. I can’t believe there is much free float left for the market-maker / broker to buy up. I’m personally just looking forward to see what the Board has to say (maybe Q2 2024?) about how the monetisation of the receivable will be achieved and the plan to get the value (my view >GBP25m, note will need to be discounted back for time value of money and risk of non-receipt) back to long suffering shareholders of this stock. I still think it is 3.5-4.5x from here so will continue to hold my 2.5m shares to see but it is risky so not going to accumulate more. But DYOR and formulate your own view.

Per the 22/12/23 RNS, a further significant amount collected on the LOGI receivable. These payments are being received by FEN with increased regularity. The net assets by my calculation remain at the GBP25m level with $2m of that in cash on the FEN balance sheet, a reasonably low level of SGA (hopefully) and no other liabilities other than the SAIL loan (payments on that are contingent on FEN receiving payments from LOGI itself).

Perhaps the Board will manage to waste that ever increasing cash pile and/or the payments from LOGI may dry up - no guarantees. I anticipate the Board saying something about their plans in Q2 2024. Up until then, I too am sitting tight with my fingers crossed.

A few chunky trades going through on Aquis which I can only presume are individuals or institutions that have to sell, have just got fatigued, have no faith in the current Board and/or no confidence in LOGI continuing to be able or willing to continue to make instalment payments. We shall see.

Today’s RNS, is further validation of the hold and wait strategy and I am awaiting with anticipation for further news on what the Board will do next year to monetise the net receivable. With GBP37m of cash and receivable on the balance sheet less about GBP12m owed to SEIL, a net circa GBP25m of net assets. I’m hoping for a some form of corporate event so that we don’t have to wait 4-6 years to collect in the rest of the receivable. As always, DYOR and respect the cash collection risk this entity is exposed to.

Prep today’s RNS, further progress towards the monetisation of the LOGI loan and corresponding settlement of the SAVI liability. In theory, the Board should be coming forward in the next 3-6 months with a plan of how they intend returning excess cash to shareholders. For a company with net positive assets in excess of $30m and a reasonable track record of converting those assets into cash every 6-8 week s or so, I think there is a reasonable prospect of shareholders seeing some cash back next year or alternatively, some form of corporate action. DYOR

On the basis of today’s RNS, $47.8m owed to FNK by LOGI and $[15.4]m owed to SAVI by FNK (note - most of the payment of the SAVI liability is conditional upon receipt of funds by FNK from LOGI so a matching asset/liability - a net $32.4m owed to FNK. Costs of running FNK should be less than $[0.5]m per year. Time to collect from LOGI say 5-10 years. Apply a discount rate for the time value of money it will take to monetise that $32.4m net asset less annual operating costs and then take a view on the difference between the price you can buy these shares on the market now [market cap $5m] versus their inherent discounted value. DYOR and caveat emptor.

LEK changed its name to Fenikso and ticker code code to FEN when the settlement with Lekoil Nigeria was agreed Jan 2023. Fenikso ended up with 1 single asset - a $52m or so loan to Lekoil Nigeria who have been repaying that loan since then every 4-6 weeks out of proceeds they receive from Shell on their oil lifting. There is limited Fenikso shares being traded on the Aquis stock exchange. I am anticipating some form of corporate action and a monetisation event next year but all dependant on the oil lifting continuing and minimal shut-ins in the Delta (but please DYOR and make your own call).

Further evidence today on delivery of the revised plan by the current board / management with confirmation of the share cancellation. Hopefully, we will be seeing an announcement of cash back to Fenikso shareholders or a Fenikso share buy back programme in the coming months. Whilst there continues to be not insignificant risk around cash coming our way out of the LOGI oil lifting going forward, I see no point selling now unless you have to but please DYOR.

My understanding is that the 108m shares (previously owned by Lekoil Nigeria, Associates and Affiliates) are in the process of being cancelled.

With a remaining loan balance to be received of $48.5m less say $16m owed to Savannah, taking into account future costs to run Fenikso, and assuming 500m shares in issue (post cancellation) maybe a market cap of $30m or 6 US Cents per share versus a current price being traded of circa 1 US cent. All predicated on cash flow from LOGI continuing to flow our way. Maybe worth a further punt now? Views?