Chris Heminway, Exec-Chair at Time To ACT, explains why now is the right time for the Group to IPO. Watch the video here.
Much,
Ignoring for a second that the $1.2bn in your example would be an undiscounted revenue number, not profits (strange mistake for a banker to make), you're right. We have no idea what underpins that c$300m number, but my guess is that it wouldn't simply have been the spot price on the day the claim was filed. Equally, no-one here is an expert on the arbitration proceedings, but the fact the number has been quoted a number of times, suggests it is perhaps what is being claimed. Whether you can subsequently revise your assessment of damages/lost profits once the arbitration claim is filed, I do not know. Mention those kind of numbers to SM though and I'm sure he'll laugh them off.
Biffa. As an aside, King & Spalding are interested in whether there is a high chance of recovering their fees and any commission amount. They are paid first from the pot. In this arbitration there are clearly a wide range of outcomes and many of those would lead to a good payoff for them without RKH necessarily receiving all that much. Hopefully they will.
It's been reasonably well published a number of times that the scope of the claim ranges from about $30m (costs) to about $300m (lost profits). How the latter number was arrived at I have no idea, but again it has been quoted several since since the arbitration process began. Without being privy to the documents it's impossible to tell, but somewhat unrealistic to start suggesting $1bn+ is now potentially on the table. It isn't. Meaningful nonetheless.
Where has all this nonsense come from? If you want to look a precarious license situation look at ARG, but there is no read-across to RKH. The SFB licenses are worthless so their retention is irrelevant. I imagine RKH will gladly hand them back if they can keep the tax losses and avoid whatever fees might be involved in retaining them. The NFB licenses are not going to lapse. There is no "perceived" issue. I wouldn't expect PMO to do RKH any favours, but are certain individuals now suggesting that PMO is somehow going to cause delay specifically to cause RKH's license to expire? Don't they realise PMO's license would also expire? Its the same license. In fact, any deadlines (not to mention the risk of rising costs, etc.) may actually well limit the time PMO can actually turn the screw on RKH.
Silly season today.
If you think FID (or more importantly sanction) will be delayed to an extent which makes RKH a poor investment today, then whether or not in continues to hold licenses in the SFB is utterly irrelevant.
Absolutely zero value is attributed to the SFB by anybody...anybody...with the possible exception of ex-FOGL or current BOR shareholders. Most of the reserves/resources in the NFB are attributed little value, let alone distance prospects. At the time of the FOGL bailout SM said that they would likely be shortly thereafter written-of or relinquished and I'm surprised they haven't already been. There only value was/is in providing tax losses which could be offset against profits from the NFB and that required some corporate restructuring/tinkering. Perhaps that process is still ongoing.
Blue. Any Solan impairment will have zero to to do with Sea Lion FID. Any mpairments also tend to happen at full year (most often) or interim results when financials are audited.
Much,
FID on 15 Nov would be great, but I think it's unfortunately too early by a sizeable margin to be expected. Commentary has moved From "FID by year end" to "Sanction mid-2019". Now that doesn't necessarily imply FID won't happen by year-end, but it would imply that PMO is less willing to nail its colours to the mast for year-end than it was some months ago. Much of the processes going on behind the scenes are clearly not expectable simply by virtue of the recent run-up in oil price. We've kind of been here before, but when/if it happens it will be a big (probably single) announcement that is unlikely to be wed to any scheduled trading update. Everything up to that point (subject to this or that..., progressing steadily..., etc.) has typically received a muted (if not negative from those expecting more) reaction.
I hope you prove me wrong.
Blue,
That's certainly possible. Or perhaps, they are interested in Argentinian deep-water/shale and this gets them a seat at the table? Many possibilities. Just in terms of ARG shareholders today, I can't think of a good one.
Worth noting that this was with oil projections at $85/bbl (possibly real), not in the $30's.
You can find what there is at http://www.fig.gov.fk/minerals/licencing/production-licences#.
In theory ARG need to have a well drilled and a development plan in place by December 2019 to move the license into a 10-year phase 3. The current period (expiring December 2019) could be extended by another 3-years, but that would require additional commitment beyond what wouth otherwise have to be completed by December 2019. Clearly, this is something more tangible than merely a hope/an intention of finding a partner to provide the required capital.
Of course that is what is written today. The Falkland's is an ever-developing region/regime, so nothing is set in stone.
The company might have lost a 5% royalty but now it has 100%...
http://www.argosresources.com/perch/resources/arg-egm-presentation-2015-05-04.pdf
Wasn’t the company claiming that the 5% royalty was worth more to them, even in a successful scenario, not to mention without the downside risks, and before any far greater dilution that would now result from the lower share price in the calcs, etc..?
3) is important but don’t the others risk missing the wood from the trees? 1) surely has to be what happens to the license in December next year? One could do worse than read http://www.fig.gov.fk/minerals/licencing/production-licences# and the extension framework linked to at the bottom to get a possible feel. The license has already benefited from a 3 year extension without additional work commitment (which hasn’t been fulfilled). Further extensions would in theory require further commitments beyond that under such framework. All well and good saying a small placement could cover corporate costs for a few more years but of little consequence if the only asset (license) lapses.
Would any third party really be that desperate that they couldn’t wait a year until ARG presumably has to relinquish the license and take it completely for themselves? It’s potential after all; not proven barrels. Bargaining position seems non-existent. Would FIG want the license to stay in the hands of what is essentially a holding co? They would surely rather have the chance of someone coming in with the actual capacity to generate tax dollars, free and umencumbered of any dilutive interests. The alternative is presumably ARG raising capital itself but that is clearly going to be massively dilutive for current holders. Really surprised this is only down 30%.
Found it. End of current period is November 2019. So basically need to find an interested party (who isn’t prepared to simply wait) or some capital that’s interested in real frontier drilling. Can’t imagine this is worth anything to current shareholders.
Is there any drilling requirement on the license?
An issue here is surely volume. Always a little sceptical of the "buys" and "sells" talk, but more specifically we're only seeing about £450k of shares trade hands each day. It's a reasonable rule of thumb that it's extremely difficult to pick up more than 10% of ADV consistently without influencing the price, so what that means is that any serious (read institutional) buyer would be looking at building a position at <£50k a day. A worthwhile position would take months. As a consequence, I suspect the price is largely at the whim of retail investors for now, and ones that are largely fed-up at that. Concrete news, euphoria, a level-up in volume, and then the big boys arrive is how it could well play out. I'm imagining that many are casting their eyes of RKH now, but it currently just isn't investable for most.
Separately I really don't think the oil price has been holding up FID/sanction for some time now. It's clearly sanctionable at a price well below where we are now. Yes, there is some benefit to PMO from higher-oil prices, but it's heavily hedged so between now and the middle of next year I anticipate only a modest benefit, and it's too soon from when the price was in the 30's to expect decisions makers to suddenly extrapolate $85+ forward with confidence.
Maybe I'm alone, but to be honest I wince a little every time I see the oil price creep up or rally. The biggest risk to sanction is (and has been for some time) any sort of economic collapse, recession, etc. Anything based on conflict, uncertainty, etc. is a concern. I'd much rather have oil at $70 sustainably than boom and inevitable bust.
It's 100% to do with the deferment of taxation from the farm-out which will be paid at time of first royalty. Basically FIG have a certain element of control to ensure RKH doesn't do anything underhand (transfer out assets, etc.) that would impact its ability to pay the royalty.
Think of him as a younger/slicker Malcy.
The usual combination of supposed "insider information" or "good authority" and a supposedly impeccable track record, focusing on a particular period of investment. He may well have been saying "buy" at the bottom as he claims several times, but a quick google reveals he was also saying "buy" much earlier.
https://www.*************.com/views/9861/chris-oil-s-shares-tips-of-the-year-2015-no-2-buy-rockhopper
He may well be correct this time, but I wouldn't apportion any more credibility than anyone else. Unfortunately the reality is that in thinly traded AIM stocks these "public" figures can have an impact, but for that reason I would be thinking twice about any ulterior motives.
The sanction (or not) of phase 1 is clearly critical to unlocking everything. If commercial interest from third parties/financing bodies is verified, I find it highly doubtful that the development timeline (beyond phase 1) will be anything like currently laid out. All else being equal, would it really be 10 years before parties would seek first oil from phase 2, or 13+ from phase 3. Whether RKH would still be involved, who knows? And much can happen over that period of time. What's clear, however, is that the phase 1 decision will likely have a domino effect.
Much, I didn't say there wouldn't be any appraisal/exploring drilling (including of Isobel). I feel I was quite clear in simply saying that any such activity is not included within the current $1.5bn capex number for phase 1.