Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
"Prax have numerous producing assets ready to be bought once HUR deal is done. They can then use the HUR tax credits."
Why can't we do this?
It wouldn't even be legal for CA to sell their 29% stake on the market. But they would nonetheless likely have to sell it at a discount to an II outside the market.
Thanks @senseman, forgot to include the ISA/SIPP implications.
It strikes me as very suspicious - the board must've known at least a month in advance when Prax were likely to win the bid or were in the shortlist. They could've raised questions with HMRC then, but instead left it until they announced the deal (Essentially no better than me asking HMRC myself).
Why would the board make such an obvious oversight? Best case scenario, a lack of care/thought about PIs, and worst case scenario some nefarious knowledge that they know would make PIs vote against.
Just to answer my own post, I believe the chief reason for all of this is CA. I think it's a case of them wanting to sell out due to the wind-down coming in 2024 and to focus all efforts instead on De La Rue.
If they were forced to sell only their (just under) 30% stake, they would likely get a much lower value for it. Despite what fluff has been spouted this morning via RNS, I wouldn't be surprised if Prax tried to work out some separate deal for remaining shareholders after buying out CA and Kerogen.
As to why Kerogen are selling? I literally have no idea.
@littlened, let's take a look at the numbers:
- 6.48p per share in DCUs equates to around £129.6m, or alternatively $161.3m.
- We would receive 17.5% of oil revenue as per the terms of the deal.
- At $80pb, that equates to around $14pb.
- This means Prax would need to drill 11.5m barrels for us to get the full DCU amount, assuming no trickery such as selling the barrels to themselves at a discount, meaning they would need to find around 6m barrels of oil outside of Lancaster by 2026.
- Our tax credits are currently worth $300m+.
For me it begs the question, why are we not doing what Prax are? Are we really unable to get bonds to buy up oil fields ourselves to utilise the tax credits? It's my belief that this is what Albion would've planned to do, which I would be much more onboard with.
@asimpleinvestor: " We know that for every vote above that number we need 3 to vote no to cancel them out."
Shouldn't that be the other way round, i e., for every 3 yes votes we need 1 no vote to cancel them out since 75% have to vote yes for the deal to pass?
Even then that would be incorrect due to the irrevocable undertakings. 46% of the vote is already voting yes, in fact it would need to be 25/54 votes to vote no in order to block the deal.
Regardless of whether the deal passes, I think there will be plenty of time to get out post vote. The rules of the scheme state that it becomes effective weeks after the vote, and by no means will the share price automatically crash to zero if Prax's offer goes through.
The bigger likelihood is that the price will rise to about 8p per share if the deal goes ahead thanks to companies like the Dutch who will be happy with a small but guaranteed pay out over the next 3 years (As 9p per share would be "guaranteed" by the board's calculation on well 6, with a good chance for 12.5p if Prax make an early acquisition).
Chances are the current share price is being weighed down by the prospect of a no vote, rather counter intuitively - if you look at the prices just before the deal, they were lower than where they are today because the likes of the Dutch weren't providing a floor price (where as now the price doesn't seem to drift below 7.4p).
It makes sense to me that they would try a two stage approach:
1) The current scheme, which if it fails then...
2) A traditional buy out - if you look carefully at the scheme documents, there is a clause by which Prax keeps the irrevocable undertaking of both CA and Kerogen in the event that they wish to make a standard offer.
Just using logic here: $300m+ tax credits, a cost of £250m means they essentially get well 6, along with all it produces, and all the cash we already have, for free!
Something else to bear in mind: Make sure to ask your brokers what they would do if the DCUs cannot be kept in an ISA/SIPP wrapper.
The nasty feeling I have is that if the DCUs cannot be kept in an ISA/a SIPP account, brokers may "automatically" sell them off at the "bargain price" offered by Prax. Be aware this will be a bargain price for THEM, not for YOU.
The ISA/SIPP treatment remains the most pressing question. Speak to your brokers beforehand to ensure that they will transfer any DCUs into a regular investment account rather than automatically sell them. That way at least it seems you'll only be hit by CGT.
Alao worth noting their lack of guidance over ISA & SIPP holdings.
This deal stinks, and I don't trust it one bit. Crystal Amber are just getting desperate to get out; and that's fine - but sell your 30% separately, don't flush us down with you.
For the record, I think earning 25% of your current value in a quarter is pretty damn good. We currently hold over 90% of the company's value in free cash - sadly, bereft of ideas from the board and motivation from the largest shareholder, the price is stagnant.
Sorry, that should be at most 4p per share, equating to $80m*, still well below the value of those credits
I can't speak for Kerogen, but it makes sense that CA want this deal to go through.
Consider that they are planning to end their fund by the end of 2024. This is the sale that lets them do so within the times specified.
As much as I believe this board to be full of snoozers, they even referenced that the reason they are not considering further field developments is due to CA wishing to sell.
Rather than bowing down to the almighty RB, consider the following instead:
- We have around $140m in cash, more than enough to develop new fields.
- There's around 20m barrels of oil sitting in a sandstone deposit which should be relatively easy to access compared to the current basement fractures.
- Albion Energy, chaired by oil tycoon Tony Buckingham, seemed confident that they could raise a further £300m to develop the oil fields further.
- Add to that the fact we have well over $300m in tax credits, which if fully utilised would alone match/exceed the maximum possible value of Prax's offer.
Or, ignoring all of the above, simply ask yourself the following question - why not run well 6 until it is almost uneconomic, and then sell the tax credits to Prax (which is the only reason they wish to buy the company)? What is the big rush? Because after accounting for the value of the oil remaining in well 6, Prax are paying AT MOST about 3p per share for those tax credits (Which equates to only £60m).
"However, should anybody vote for the deal those shares need to be matched share for share."
...or rather, need to be matched share for 3 shares
To be fair, you would also need to include the EPL (Which we cannot use tax credits for, so minuses 25%). They've also claimed it could take up to $120m to close the company down... but to me it all just seems to be a massaging of the figures to make Prax's deal look worthwhile.
I mentioned this in an earlier poster - if it is purely CA + Kerogen + board vs PIs, we will only need 15.4% of all shares to stop the sale.
I've bought in at an average of around 8p, and I'm still buying in more below that as my old workplace pensions are filtered through into my sipp.
I will still be voting no because I believe the company is worth considerably more than 12.5p per share. If the company is sold it's still not the end of the world for me, but to suggest it is a foregone conclusion is interesting to say the least.
Yes, 46% of the vote has already been cast - but it only takes 25.01% of the share of votes to reject the bid. That means as little as 15.4% of the total shares in circulation is enough to reject the bid, well within the shares owned by PIs.
If this bid was really a foregone conclusion, then explain why the board threw together the Q&A and are responding well to questions given to them - clearly they are eager to get PIs on board!
Added 14. to @senseman's edits:
1. Will DCUs remain under ISA or SIPPS umbrella?
2. Why were not higher Brent sensitivity figures included in the cash production P6 standalone figures estimates?
3. Would Messrs Maris & Chaffe explain why their 2022 AGM comment that P6 catastrophic failure risk was minimal has NOW mutated into being major risk?
4. On 27th March, Hurricane communicated to a shareholder that up to another $60m would be needed in wind down costs on top of $60m already escrowed, leading to only 0.83p expected dividends per share in 2024. Can the board explain the reasoning/cost breakdown for the new $120m wind down figure?
5. What is current OPEX April 2023 also projected 2023 OPEX average?
6. In the Scheme Q&A, HUR stated it would not buy other assets because CA would not support this. If such were not the case, please outline what your future plans would have been, and how much we could expect to see returned.
7. Is there opportunity to develop the Lancaster sandstone reserves of 20m barrels of oil? If not, why?
8. Which party was the principal insistor on the Irrevocable Undertakings? Prax, HUR or CA?
9. Having restated in recent RNS it has no confidence in HUR BoD, have CA stated what action it will take if 25% vote NO?
10. Will the CEO, CFO & Chair resign if 75% YES is not achieved?
11. What are HUR's expected FSP total costs?
12. What confidence can SHs have in HUR's risk assessment & P6 standalone cash production figures when, following the 2021 failed High Court 95% restructuring application, one year later at bond repayment date, it's risk assessment proved dramatically overstated, & and cash projections understated by circa $150 million in a single 12 month period?
13. Prax question. Why do you have confidence in, and plan to retain, HUR's CEO & CFO, in light of Q12 above? Also & in addition, when their relationship with the NSTA is toxic?
14. In the last 2 ERCE reports published, the 2P level of oil in well 6 has effectively increased by around 3m barrels (I.e., it has not materially dropped despite oil being extracted for the last year). As this is vital for finding the lifetime of well 6, has any investigation been carried out to ensure this won't happen again in the future, and if so what were the findings?
1. Will DCUs remain under ISA or SIPPS umbrella?
2. Why did HUR cite cash production standalone figures based solely on $80 Brent? Why were not higher Brent sensitivity figures included in the estimates?
3. Would Messrs Maris & Chaffe explain why their 2022 AGM comment that P6 catastrophic failure risk was minimal has mutated, for deal justification purposes, into being major risk?
4. On 27th March, Hurricane communicated to a shareholder that up to another $60m would be needed in wind down costs on top of the $60m already collected, leading to only 0.83p expected dividends per share in 2024. Can the board please provide the reasoning/cost breakdown for the $120m wind down.
5. What is current OPEX April 2023? What is projected OPEX average for 2023?
6. In the Scheme Q&A, hurricane stated that they would not buy other assets because Crystal Amber would not support this. If this were not the case, could you please outline what your future plans with the company would have been, and how much we could expect to see returned.
7. Is there opportunity to develop the Lancaster sandstone reserves of 20m barrels of oil? If not, why?
8. Which party was the principal insister on the Irrevocable Undertakings? Prax, HUR or CA?
9. Having restated in recent RNS it has no confidence in HUR BoD, have CA stated what action it will take if 25% vote NO?
10. Will the CEO be resigning if the vote does not reach 75% yes vote vote as so much time and money has been wasted?
11. What are the expected total costs of the FSP
12. What confidence can SHs have in HUR's risk assessment and P6 standalone cash production figures when, following the 2021 failed High Court 95% restructuring application, one year later at bond repayment date, it's risk assessment proved to be dramatically overstated and it's cash projections understated by circa $150 million in a single 12 month period.
13. Prax question. Why do you have confidence in, and plan to retain, HUR's CEO & CFO, in light of Q12 above? Also & in addition, when their relationship with the NSTA is toxic?
14. In the last 2 ERCE reports published, the 2P level of oil in well 6 has effectively increased by around 3m barrels (I.e., it has not materially dropped despite oil being extracted for the last year). As this is vital for finding the lifetime of well 6, has any investigation been carried out to ensure this won't happen again in the future, and if so what were the findings?
1. Will DCUs remain under ISA or SIPPS umbrella?
2. Why did HUR cite cash production standalone figures based solely on $80 Brent? Why were not higher Brent sensitivity figures included in the estimates?
3. Would Messrs Maris & Chaffe explain why their 2022 AGM comment that P6 catastrophic failure risk was minimal has mutated, for deal justification purposes, into being major risk?
4. On 27th March, Hurricane communicated to a shareholder that up to another $60m would be needed in wind down costs on top of the $60m already collected, leading to only 0.83p expected dividends per share in 2024. Can the board please provide the reasoning/cost breakdown for the $120m wind down.
5. What is current OPEX April 2023? What is projected OPEX average for 2023?
6. In the Scheme Q&A, hurricane stated that they would not buy other assets because Crystal Amber would not support this. If this were not the case, could you please outline what your future plans with the company would have been, and how much we could expect to see returned.
7. Is there opportunity to develop the Lancaster sandstone reserves of 20m barrels of oil? If not, why?