Adam Davidson, CEO of Trident Royalties, discusses offtake milestones and catalysts to boost FY24. Watch the video here.
Why keep posting stuff from 2016?
GS
A low ball takout of RKH will only happen if RKH runs low on cash. Then it will be sold as being neccesary for survival, and most likely to PMO.
H1 results show we shouldnt reach that point until possibly the middle of next year.
That gives time for an OM ruling and hopefully SL FID.
Next thing to look out for is OM post-hearing briefs which will trigger the clock on a decision on the merits.
GS
You can for a while until your can't.
In fact, in hindsight it's quite easy.
Plenty of momentum "traders" who claim to be gods gift to investing. Then you stop hearing from them.
Some will have got lucky, got out due to nothing other than good fortune, and be sipping mai tais on the beach. The vast majority will have lost most, if not all.
GS
Nice copy and paste from 2016...
GS
The vast majority of the $5.8m Admin and miscellaneous line is a working capital reversal. It was clearly stated previously that the 2018 YE number was ~$5m articifically high due to to working capital timing.
As I previously indicated, the Edison sponsored report was already as good as guidance for the 2019 YE cash number - $27m according to "them" back at the beginning of August. The guidance today shouldn't surprise anyone.
All in, I'm slightly more positive, given that there is now visibility of a reasonable cash underpin to at least Q1/Q2 next year. It's all still "binary", but the chance of actually having those events play out, for better or worse, looks reasonably good.
GS
Industry averages mean nothing in this business because they are exactly that; averages. The different in the circumstances of each case can lead to vastly different valuations.
Determining a nominal value of Sea Lion Ph.1 (today or at some point the future) is at least conceptually possible (analysts spend their whole days doing such things), but again massively dependent on the variables, so when in comes to E&P companies, pick a value you want and then justify the assumptions that get you there.
Then you have that nominal value, but what does that mean per share? That depends on the number of shares clearly. Will Sea Lion Ph.1 happen, but RKH goes bust beforehand, or there is a major dilution? Alternatively, will RKH get a massive payout from OM and buy-back 90% of its shares?
Of course, you also have the fact that there are "known unknowns" like a farm-out and a final negotiation of the terms, that could materially impact even those variables we know about.
So, to cut a long story short. If Sea Lion Ph.1 goes ahead and RKH avoids and dilution prior to this point, the shares should almost certainly be a good multiple higher than they are today. Trying to be any more precise than that is pointless.
GS
Nigoil,
Making an acquisition has been a stated comp target of the BOD for the last couple years, so it wouldn't exactly come as a surprise. To date they have been remarkedly restrained.
That said, make an acquisition with what? And how does the Egyptian sale meaningfully help exactly? You sell one producing, albeit small, asset for what's likely to be less than ~$10m in cash consideration that won't be received until year end to buy another producing asset?
Egypt was sold because it was a failed roll-up going no where and frankly the cash would help to hopefully a point of re-rating.
Any meaningful acquisition in the short-term, with the only currency RKH has being equity (its shares, or interests in the Falklands) being valued at their lowest ever levels, would be dilutive in the extreme. To the extent they can ride it out they would be better advised to do so.
I thought a Monday RNS was nailed on for you. Did I misread..?
GS
If this drags on past a point that is the inevitable conclusion, but as Ovets mentions, if it were a near-term catalyst that was driving the share, they would have risen, not fallen. What some/most consider as a opportunistic and derisory takeout would still be at a premium to recent prices.
The biggest struggle PMO would have getting this done, is that PMO effectively holds the key to unlocking the value of RKH. Unless they were to write up the value of any RKH acquisition considerably from todays market cap which makes it hard for the parties to argue that any transaction is at a fair value, they should surely have to write off a large chunk of the Sea Lion asset on their own BS. Obviously if RKH runs low on cash it becomes all a bit of a moot point.
PMO isn't going to give either SM a job, so that should provide some incetive to stand firm. I'd be more concerned about the motivations behind a management-led buy-out.
GS
Interesting to note the cash and cash equivalment YE number in Edison's recent report. Yes, Edison are a paid research provider, so much of what they say qualitatively should be taken with a pinch of sale, but quantitatively their near in numbers have historically been pretty good and have come before the equivalent guidance from the company itself. They will almost certainly have been signed off as "reasonable" by SM before publication.
Ultimately, it provides a degree of comfort to myself that RKH can be signed off as a going concern through 2020 which is very important. How times have changed when that's the ambition!
So either EC funding comes through and this thing re-rates, or PMO picks us up with a contingent right on the OM arbitration.
If I was Italy (and thought I might lose), I might consider a relatively low-ball settlement offer as RKH would probably be pretty receptive to a cash inflow this side of Christmas. Potentially not a possibility within the litigation funding structure though.
GS
The reason for the drop, or shall we say lack of re-rating is threefold.
Firstly, submission of the PIM was widely commented on and expected. Submission of PIM, despite what many would have you believe, isn't the same as financing being approved, so doesn't provide much additional certainty. The language of the release, though I don't think much more could have been said, nonetheless, only served to reinforce this view of those that hold it.
Secondly, RKH and PMO have said so much with respect to progressing Sea Lion over the last couple years that the majority of investors are prepared to put very little behind what they're told. Anything short of actual sanction is going to be very heavily discounted. Much more so than for a company that hasn't spent recent years overpromising and underlivering.
Thirdly, and most importantly, the elephant in the room continues to be RKH's current (not prior year-end) cash position and outlook. Until that is commented on, and some reassurance is potentially provided that RKH can get to thet other side of sanction without any dilutionary action, investors and going to continue to be hesitant.
GS
Civita was almost disposed of in 2017 along with a payment in exchange for removal of the decommissioning provisions, but it fell through. So yes, clearly available for sale, but don't expect any cash sum.
GS
Fox, not May, has been the kingmaker.
GS
Marunam2,
Thanks for the reference. Worth keeping in mind the taxation in Egypt and capex, a good proportion of which to date has been spent on sustaining, rather than growing, production.
The assets in Egypt were initially acquired with the intention of being the first step in a roll-up. For various reasons (out-bidded, etc.) it hasn't happened so remains sub-scale. Personally, I wouldn't be at all surprised if the Egyptian assets are sold and an extra $15-20m (or so) might potentially come in very handy and translate into value far in excess of that if, e.g. it prevents a placing. Every little bit of additional production would help with the valuation.
GS
Marunam2,
Where do you get a 315bopd increase net to RKH from?
GS
Surfit,
No BOD is going to give advance notice of a rights issue/placing and RKH didn't break from that practice at the AGM.
You need to make your own assessment of its likelihood and timing.
GS
sabyam,
On the realities of buying and selling we can beg to differ based on our own respective experiences, but if you think the FCA are going to show any interest in this I'm sorry to say you're deluded. This is AIM. I'm not saying that's how it should be. I'm telling you how it is.
GS
Sabyam,
I agree with you that, all else being equal, a rational, efficient or normal buyer would seek the minimise price impact, although it's worth noting that that can be hard in iliquid stocks and to be frank some buyers may not really care about 1-2p either way at these levels and with the possible outcomes.
What I am saying is that being irrational, enfficient or not normal isn't itself a crime. It might of course be used as evidence of a crime being committed, but that's at a later stage, and as far as I can see there has been no dump or positive catalyst yet.
It's like reporting a murder when no one has been killed.
So any reports or claims at the moment I'm afraid will fall on deaf ears.
GS
sabyam,
I'm afraid you'll be wasting your time. Buying or selling shares (however) inefficiently isn't an offence. I'm not even really sure what's particularly got you riled up about the last couple days. Sure, if tomorrow there's a positive announcement yesterday might look a little suspect, but even still the chance of any sort of report being actioned (or even read) would be remote. Without that, you basically seem to be complaining that there was a buyer of shares that made the price go up a bit...
GS
Seriously; the amounts in £ that have changed hands in recent days is neglible. Trading volume is pretty much non-existint for anyone other than kids looking to spend their weekly pocket money on something other than the Beano. Part of the reason why if anything every does happen with this company that the reaction will be big one way or the other.
Are AIM shares manipulated and subject to trades based on inside information? You bet they are.
Will the FCA do anything about it, or even look into, anything but the smallest minority of cases. Afraid not.
GS
Re Cove example, not familiar with the situation at all, and everything's different, but first Google hit shows this was pretty much a 100% premium..?
https://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/9402552/Shell-abandons-race-for-Cove-paving-way-for-1.22bn-PTT-sale.html
GS