Adam Davidson, CEO of Trident Royalties, discusses offtake milestones and catalysts to boost FY24. Watch the video here.
Mogger is spot on. The amount of the success fee will be based on any amount that is actually awarded; not the amount that RKH claims, or some hypothetical amount that RKH might have received had it not done X, Y and Z. I do rather feel that that arbitration blog post that we frequently see links to is being treated a little to much like gospel (not necessarily Fibonacci).
SBM was dropped because they weren't willing to provide (or changed their mind about providing) the vendor financing element. BW obviously also scores well on delivering well on Catcher, but I don't think that was honestly the main reason for the switch. Could be wrong.
A small placement wouldn't necessarily be a bad idea in my mind, and I'd do it if we see any point of strength. Not a lot, but enough that basically says, we're not going to be drained dry by the process dragging, whether at PMO's behest or not. OM is almost certainly going to be a big swing factor and has gained a lot more importance than I'd rather have hoped it would.
I'd say one other frustration is that we seem quite often to be getting these timelines clarified or updated in the press and elsewhere rather than at the events one would expect. Last question of yesterdays results call, TD skirted around the issue of whether FID would still be in 2019. Then today you get a titbit in the Times inferring an EC decision (obviously how that relates to FID is not clear) could take 6 months. Wouldn't it have been more appropriate to say that yesterday when answering the question?
Thanks rpoodle. On one hand it would will be a positive to have the timetable in some respect driven by an external process (some evidence of tangible progress, because frankly no one believes what the companies say anymore when they give dates), assuming the correct decision is ultimately reached. On the other, it's really quite hard to reconcile these timetables with the situation into the back half of last year when we were told FID was only a few months away, but FEED was still ongoing and EC hadn't moved on from informal talks. If we're talking about 6 months for an EC decision, then time for third-party financing negotiations, then time for equity partner negotiations, there's still a lot of road to travel.
Nigoil,
"FID and project management of Sealion 2018"
You mean sanction and 2019 right? Easy to get confused, but I think there might be a glitch with your copy and paste button :-)
Keep in mind that when the original deal was last renegotiated, but possibly before the equity contribution reduced so significantly (it's hard to keep track of the iterations!), that the parties essentially created a "guarantee fee" that basically translated into RKH repaying part of the carry post first-oil such that the NPV of Phase 1 was split 50/50 at the time of the sanction, presumably determined on an agreed set of assumptions. It has also been said a couple if times that while the final commercial agreement will likely change again a 50/50 split is probably a reasonable way to think about it. And that's before any equity partner.
So what might that all mean? It's quite possible that if any upfront carry requirement is reduced by the structure of any financing that the guarantee fee could simply reduce. There already seems like a possible mechanism to deal with this.
I'd like to think that RKH was in a position to make PMO liable for pre-sanction costs, but I don't think they are. Will be interested in any response you get.
Nigoil,
Thank you for your informed contribution to the debate. I certainly feel much safer with my holding now that my downside has been completely de-risked by your analysis.
GS aka boiler room scammer aka boiler room boy
Hi Fernan,
OM could give rise to some liquidity, but obviously on the conditions that the arbitration is successful, that it is successful enough to result in a sufficiently sized payment to RKH, and that amount is either received or can be factored in the same way as receivables often are (depending a bit on finality I suppose). So it is possible for sure, but there are some ifs.
Re the second part, I completely agree that RKH has been taken for a ride my PMO each time their original deal has been renegotiated, but from what I understand there is no mechanism within this to revert somehow in RKH's favour if the conditions or economics that existed at that point of renegotiation change. PMO very much holds all the cards and it owes no duty to RKH shareholders. So RKH might have an "equitable" claim, but that's about all in my opinion. Anything else is wishful thinking.
How predictable Nigoil.
As I quite clearly said, I'm not trying to convince. That's the downside case I see and I want to be convinced why it's wrong, if indeed it is.
Nigoil,
Tell me where I'm wrong. This is what was referring to yesterday about testing the downside. The upside is plenty obvious enough for everyone to see. Let's have some intelligent debate.
- Cash at YE 2018 was around $35.
- Cash burn on pre-sanction activities was around $8m I believe in H2 2018.
- FEED rolls on and financing with it. These processes aren't cheap, so that cash burn may well continue through 2019 at a similar rate. As it currently stands, RKH's commitments aren't covered until sanction date. TD wouldn't be pinned down on FID by end-2019, let alone sanction which could be several months after.
- The whole "costs covered by Egyptian production" doesn't cover Sea Lion pre-sanction activities or GM drilling I believe for that matter.
- RKH isn't going to wait until it reaches $0 in the bank before seeking any financing. Any sensible business would do it well before this and as a shareholder you'd hope they would or you'd get massively diluted if financial peril is perceived. My experience would suggest to me that much below the $20m mark would be uncomfortable. This also feeds into "going concern" sign-offs in the accounts (2019 FY being most relevant), etc.
- Any announcement re Ombrina Mare could be around September this year. Even if we assume it's positive, RKH may well not get their hands on actual money for some time after that.
I think that pretty much covers it.
The price of any financing will massively depend on the situation at the time, but you can see what the market currently thinks. If you think there won't be any though in the next 24 months, subject to OM depending on how quickly they might receive any award (and yes I know that is seen as a dead cert by some, but lets no bet the farm on it), you're away with the clouds.
Doesn't make it a bad risk/reward but don't approach it with blinkers on.
*H1 2019 should say H1 2020.
Pretty important for RKH, subject to OM, and even then, is if they can reframe the agreement with PMO to stop the bleeding before sanction. Otherwise, if we're now talking about FID maybe around year-end, there's going to be a placement around the end of the year would be my guess, the price of which would depend a lot on any catalyst that are publicised along the way. Again, subject to OM, there's probably going to be one in H1 2019 regardless in my view, but if that's the other side of sanction it doesn't bother me.
Much,
Neither PMO, nor Apollo, has denied interest in North Sea assets, including Chevron's. Quite the opposite.
So whatever you meant, or thought you meant, neither makes sense!
Much,
I was listening to the webcast. I was responding to your theory earlier this morning that Apollo weren't interested in North Sea assets, rather Sea Lion. Basically the press had added 2 + 2 and got 3. You stated that Apollo had said they weren't interested in the former as the basis for this when in fact they appear to have said no such thing. In fact quite the opposite if anything.
For those interested,
FEED to be completed around Easter (21 April).
FEED to be used as basis for ECA financing. Application expected to be submitted late April/early May.
PMO remains very keen on equity partner, but will not advance discussions until after ECA decision.
Timing of ECA decision and ultimately FID not clear at this stage. TD side-stepped question of whether FID would happen by end-2019, saying timing depends on progress of lenders.
Much,
I mean where Apollo declared they were not not interested in north sea assets? "No immediate comment" is a very long way from "not interested". In fact, it very often means the complete opposite. Thanks.
Much,
Can you link to this RNS (I'm guessing from Apollo). Thanks.
Ovets (not Nigoil),
One would have assumed that you would have recognised by now that with every insult, every prompt to "prove it, prove it..." you only serve to further my point. But then maybe that was the point.
Ovets (not Nigoil...),
So basically because this release isn't a disaster you are taking it as reason to be more optimistic. But you weren't expecting it to be a disaster, because you were already optimistic that it was going ahead. PMO are "going to make it happen" by applying for funding which we already knew they were doing and many thought they had already done.
Hopefully the call at 9.30 (not 9 as I previously stated) will put some more flesh on the bones. I'm sure the debate will continue.
Nigoil, is you name also Ovets?
"Jam on what Ovets?"