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"Also I'm sure that CA would have guarantees on their deferred payments, not available to PI's."
Is this legal to do? That's a very bold claim - and I expect that it would have to be labelled as such in the Scheme document to be released next month (Upon which the deal would fall through, because there's no way any other shareholder would vote for a deal that gives one side special privileges).
I get the feeling there's more to this than meets the eye. I expect Prax are in advanced talks with other oil producers at the moment, I just can't see why CA + Kerogen would be so keen on the deal otherwise.
I wonder if promises have been made by Prax regarding a quick expansion so that the money is effectively paid back within 1-2 years? They have a $10b revenue, and the $300m tax credits will probably help them to be competitive with acquisitions (Rather ironically considering the lowball offer they have got away with here)
:'(
The minimum we could get is roughly 9p rather than 12.5p... the 12.5p offer will only come about if Prax succeed in increasing their oil production SIGNIFICANTLY, which they plan to do competitively taking advantage of Hurricane's tax credits
Well, it's a Friday and usually for Maris that means a steak for lunch along with a bottle of his favourite red, followed by a quick glance through the FT before an afternoon nap.
In the report at least, that's not what was implied. Instead, Maris implied that Prax would be using Hurricane as a shell to buy other upstream oil operations (Which would make sense, as it likely makes the tax credits a lot easier to utilise).
Realistically, unless Prax are already in advanced talks with other companies, I can't see Prax owning anything other than Lancaster until at least the end of 2023 - meaning it's highly unlikely we would see more than about 6.5p returned this year.
The shiftiness of this deal is frustrating, but I believe I somewhat understand how it will play out. So provided the deal passes, here is what I can make of the timeline:
Dividends: 4p at least, up to 6p provided the April uplift has 450k+ barrels of oil - I see no reason why this wouldn't be the case given previous uplift volumes, however if not Maris has stated we will be paid as much as legally possible from the 1.87p, with the remainder added to the deferred consideration units (DCUs).
With regards to the DCUs, it looks as though we will receive 17.5% of all Prax upstream revenue until either the DCU has been paid, or seemingly until 2026. Maris has stated that at $80pb, 5k bopd equates to roughly 1p per year.
The WORST CASE scenario is that Prax buy no new fields, meaning we are left puttering with Lancaster until it becomes uneconomical sometime in 2025. At current volumes we would receive about 1.5p per year, but this will likely go to under 1p in 2025.
Overall, Maris calculates that if no new oil giving acquisitions are made upstream, then the shares will have effectively been sold for 9p each.
However, every purchase Prax makes which delivers 5k bopd will get us 1p per share. An article online I saw said they are hoping to get to "50k bopd... in the medium term". I take this to mean they plan to get up to about 50k bopd by 2025/6 (2-3 years), which would give us 10p per share at current prices (Meaning the DCUs would be paid off to the full amount).
So it all comes down to confidence in Prax's upstream operations expansion plan (Ignoring the fact that 12.5p is fundamentally a crap offer).
"Board are paid £900,000 upon completion and £3.5 million at end, they win either way so what incentive would they have?"
To clarify, the board are paid £900k if the sale is agreed and £3.5m if the DCUs are paid in full (I.e., if current shareholders receive the full 12.5p).
I get the feeling that the board, CA and Kerogen have some guarantee over the DCUs being paid in full. It would be nice if they shared how they plan to do this with us, although who knows - maybe it's not possible because Prax are in late stage discussions with other sellers, and to say anything would be counter to their strategy?
The problem with this deal, on top of the shadow tactics, is the price. 12.5p is just fundamentally a poor price.
I don't believe so... please someone correct me if I'm wrong, but I thought I remembered seeing the share going private once the dividends were given
There's actually a few bits of light I can see in this offer which gives me a LITTLE more confidence...
Let me be clear here: By confidence, I mean the likelihood of us receiving 12.5p, NOT of 12.5p being a good bid.
1) CA + Kerogen have both voted in favour. I'm not sure what "dodgy dealings" could be performed here, it will really depend on the scheme document.
2) The hurricane board have bonuses linked to the amount of money we receive... from the RNS, I quote:
"14 Management Transaction Bonus
In accordance with the terms of the management transaction bonus scheme approved in July 2022, the Hurricane Board (excluding members with an interest) has resolved to make a payment of £0.9 million in aggregate to the executive directors and staff, conditional on the Scheme becoming Effective. In order to align rewards under the management transaction bonus scheme with the deferred element of the Acquisition, a contingent payment of up to £3.5 million in aggregate, will be payable in full only if the full consideration envisaged by the Deferred Consideration Units is ultimately paid. Prax has consented to these arrangements pursuant to Rule 21.1 of the Code."
Still doesn't exactly leave me brimming with confidence, but what I believe has happened is that the board, CA and Kerogen are confident that Prax will be able to utilise enough of the tax credits to fulfil the 12.5p offer.
But there are surely many other institutional investors with 25% of the vote? We still only need to convince a couple of major shareholders as we only require 25% to reject the vote
Hello board,
I believe this deal today is a complete load of twaddle. As such, given CA's and Kerogen's irrevocable voting, I am wondering if we can reach out to other major shareholders to let them know why we believe it's a bad deal in order to guarantee the 25% vote to reject the offer?
Does anyone know who the other major shareholders are?
Because the market is not thick. This is an incredibly crap deal.
Let's look at the facts:
- $120m cash in the bank, worth about 6p per share
- $300m+ in tax credits, to the right buyer easily worth another 6p per share
- $200m+ oil in the group, worth another 9p per share
12.5p as a straightforward cash sum would already be a bad deal. Now they're proposing to pay half of it in advance as 6p of dividends using our own money broken up into chunks, delist hurricane as a stock meaning you won't be able to sell out AND still keeping you stuck in their new, private company for 3-4 years paying you out a pittance of about 2p per year until you reach 12.5p - which by the way, we would reach just pumping oil some time in mid 2024...
It's a very crap deal.
Update to my earlier message: I would like to place in a giant asterisk around banking. But if it's any consolation, a banking collapse will destroy pretty much any long investment.
Opinion not advice: I wouldn't be so confident that there will definitely be a dividend or buyout by the end of March.
I do however still think this stock will return a profit... at some point, which is why I still own it, either through repeated dividends over the course of the next 1-2 years or through a sale.
I can't imagine someone at Stifel is wasting their time selling tidbits to be honest... whatever trading you see is likely from their clients, and in this case, I do believe they are using different departments which are not speaking to eachother.
A quick wikipedia search says they had 8600 employees as of 2021 - they are monsters, there is no way teams are communicating meaningfully.
I wouldn't be surprised if a "discussions are ongoing" + operational update comes out on 31st March...
Not calling Oldman a liar here, rather Maris making promises he cannot keep.