Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
@broomtree
Assumptions exist on both sides of the isle:
For deal assumptions are:
- DCUs can be put into ISA/SIPP: This is far from certain, as multiple posters have given conflicting views from brokers (and nobody has been able to get ahold of HMRC for a full answer)
- That the DCUs will actually be fully paid before 2026... I don't see this as a bad assumption though
Against deal assumptions are:
- Well 6 is not going to immediately fail anytime in the next year or so - I think a fair assumption given it has been going for years already
- Contingent reserves can be realised: again, with funding I think a fair assumption
- The BoD will be removed: I would be surprised if they were allowed to stay on after the deal
The real thing that makes me go against the deal is the lack of tax transparency and the low ball offer... if the DCUs were offered up to 17p instead of 12.5p, I would probably take the punt. But the fact is, in my view we would be better off going our own way and taking time/new investment to fully realise the tax credits and opportunities Lancaster holds... it is a risk, but if it comes off we could be sitting on literally billions of dollars of oil, making hurricane worth 20p+ per share.
Think of it this way: Even just the mention of a £300m investment would likely send the share price soaring (and allowing any investors who don't like the risk to get out at a higher price than Prax are currently offering).
@broomtree:
"The 3.2p payment which is still in place if a takeover doesn’t happen, reduces your free cash flow by half" - True, and to be honest in a well run company the dividend probably shouldn't be happening. Once again, I believe this is bein driven by CA's desperateness to return immediate profit.
"as things stand the Tax Losses become worthless": True... if we just run P6 to completion. My gut instinct is that the board would simply be sacked and replaced by Albion, who have indicated they wish to raise £300m to spend developing Lancaster further.
@broomtree:
"you can literally do anything with statistics" - what do you mean by this? I posted numbers, not statistics
"if the deal fails and they revert to divi/RC payment of 3.2p that stands all your figures on their head" - How is that true? Do we lose the tax credits, the free cash or the oil in the ground if the deal fails?
"fact is outside the deal HUR becomes very oil price dependant ": How does it? What about the value changes to make hurricane oil price dependent? Do any of the numbers I've already listed change, or is there some further element I haven't considered?
"you can negate the Tax Loss value completely as they won’t be using them": This is true, currently with P6 alone we will not be able to use all the tax credits. However, this deal was primarily driven by CA's desire to sell quickly rather than a lack of opportunity. A fresh BoD and more reserved outlook from CA would likely help in this regard, both of which I believe will happen should the deal fail - of course, this is only my opinion and I may be wrong.
Oil prices are somewhat irrelevant to hurricane at the moment because it is deleveraged from oil price risk already. Let's look at each piece of value hurricane own:
1) Tax credits: $300m+ of tax credits are not affected by oil price.
2) $150m+ free cash: Also not affected by oil price.
3) Oil in well 6: 6m barrels of oil, about $30-35 profit per barrel instead of $40-50, which of course oil prices DO affect. In a worst case scenario, the difference between $50 pb and $30pb is a drop from $300m to $180m.
Even if we say "Tax credits are worth only half", that still leads to somewhere between 1/2 - 2/3 of hurricane energy's value being completely irrelevant with respect to the oil price.
@Kever, for what it's worth while I disagree with the sale I do also believe Prax have every intention of paying the full 12.5p at some point over the next 3 years through likely acquisitions as they need to follow this strategy to fully utilise the tax credits.
However, the problem I have with the deal is precisely Prax's plan. They are planning to use our own money and tax credits to buy/utilise more oil fields - why can't we do this ourselves?
An energised, experienced BoD with this much free cash, tax credits & contingent reserves would likely make Hurricane worth 20p+ per share within 2 years.
Fundamentally, Maris was a COO before Hurricane. He is not good enough to be a CEO because he has no experience in growing companies.
It was vaguely suggested that there would be some vehicle to trade them set up by Prax, but in reality nothing has been set up to date.
It's saying that 6.02p will be paid out as dividends (I.e., the SD won't be added to the DCUs but instead paid out as a dividend).
It's irrelevant to me though, I was expecting this as we haven't even had a lifting below 450k barrels. The trouble is that the deal is a load of ****. Let's look at what that RNS is not telling you (The modern day version of lying is after all simply not telling all truths):
- $150m+ in FREE CASH that any normal BoD in this situation would be using to explore/build on Lancaster.
- Speaking of exploring Lancaster, well P7 expected to bring in $200m revenue, dropped by the spineless BoD because they could not "get comfort" from the NSTA AND still further contingent reserves on top of this (Off the top of my head, I think of the sandstone reserves expected to contain 20m barrels of oil).
- $300m+ in tax credits that we can fully utilise ourselves if we bothered to drill the oil.
- Money in escrow to deal with the most LIKELY cost outcomes, i.e. that well 6 pumps until 2025/26.
- NSTA APPROVED increased well pressure which materially changed the P6 reserves by 3m+ barrels... Why couldn't we do this again if/when the well pressure lowers further?
"Prospects of further exploration(s) and/or acquisition(s), ensuing more riches"
I think this is a major point that is not being discussed enough. The contingent reserves at Lancaster weren't even mentioned by Maris & co. with regards to Prax's offer.
I would be extremely interested to hear Albion's plan regarding those...
@Kever, I suggest you carefully read the terms & conditions of your account with HL to ensure that the information they have sent you is legally binding. Can you post what they have exactly said here (Of course removing any personal information first)?
And multiple others have not. And none of them really have the power to say one way or the other because they are not the HMRC.
Let's hope we get Chancellor Palpatine out of office at last.
Once again, this shows the conflict between different brokers. Thanks for posting, this helps stress the points made before that a tax exempt status on DCUs is far from certain.
Also my apologies, I misspelled his name... Franco Caselli*
It's a fair point that I might be lying, feel free to contact Albion Energy directly (What I did) and I'm sure you will get a similar response to myself: https://albionenergy.com/contact/
I would like to confirm @Johns..'s statement regarding Albion Energy. I also emailed them, and Franco Castelli himself confirmed that Albion are still very much interested in the deal.
Kever had a phone call with Richard Bernstein of CA, and we all know that he would have no agenda/reason to deceive Kever.
The Dutch only own 2% of the vote. It doesn't make no difference, but it also doesn't make much.
Why are we giving back any money at all? We could be using it to develop new fields and get 100% of our tax credits back.
Why haven't Hurricane Energy included the contingent reserves in the valuation? It's a total farce of an offer.
HL, nor any other broker, has the power to say that. Others (@asimpleinvestor if I remember correctly) have stated that their broker/tax advisor stated the complete opposite.
The only party worth listening to is HMRC, all others are playing guessing games.
2 RNSs relating to how great the deal is, and unsolicited calls from 3rd party agents to individual shareholders.
You know, I get the feeling that if this deal doesn't go through someone's going to be fired...