George Frangeskides, Chairman at ALBA, explains why the Pilbara Lithium option ‘was too good to miss’. Watch the video here.
WRITE UP PART 4
Strong resilience and perseverance which is very important. You have got to a stage now where it looks like you are discussing various opportunities. Can you tell us about your JV agreement for a second asset in the Congo?
Certainly. It is not only in the Congo. This transaction through various articles and rumours has become quite popular in the area and everyone speaks about the attacks against Zenith and eventually Zenith taking revenge and winning. This has given empathy and even confidence to various other entities in Congo and elsewhere. In Congo we are already discussing our second and possibly third and fourth assets. We have also recently received emails from ministries of other countries congratulating our success and saying “please come to visit us”. So while 2020 has been a very bad year for everyone because of Covid it has been especially bad for us as we have had every sort of ex-employee, ex-manager, ex-shareholder and ex of ex (joke) which have attacked us as they were jealous of how big the Tilapia opportunity was and they would all list only a few of the advantages that we have got.
The advantages are:
1) We bought the asset for a minimal price.
2) Attached with this we have $5.7 million receivable from the state oil company which I am sure will be paid.
3) The goodwill. We are not taking a fresh opportunity but rather a ripe opportunity that everybody would like to have because with small drilling activity we can go into a successful large production. Of course, there is still the mystery of the underground and nothing is done in oil and gas until you have the flow in front of your eyes. So we cannot count 100% on success but the percentage of probability is hugely increased in this case compared to the average situation.
You mentioned the repayment of the $5.7 million – when are you expecting that and what would you use it for?
We would use the money for general company purposes but probably in our African activities to reduce our need to raise capital by issuing shares. As you know this is something that we were quite bad with in the in the first months of 2020 in the middle of Covid but then we have been very good in the second part of the year and up to now because there has been is a long period where we do not make private placements and everyone is quite impressed with this new attitude from Zenith.
WRITE UP PART 3
Can you expand a little more on the process of getting the license and what did you go through?
The past has been terrible. Since we made this acquisition of the Congolese subsidiary (of AAOG) we have had all kinds of competition and all kinds of challenges and all kinds of bad-mouthing and I have never seen such a ferocious challenge to a small cap company’s aspiration. We have faced all kinds of defamation, blackmail, false emails and letters to the government of the Congo. So we have been very robust in staying in Congo and by this the management presence showing who we are: morally, internationally and institutionally supported and we have convinced the govt of Congo that despite all of the negative messages received from our competitors we were the right candidate for the license. This is all happening now but it has been practically 7 months work from April to November to get here. We have seen the light in December with the news release that has re-established our stock price. However this price is still much below what it deserves to be for shareholders who have seen their stock deprived of its real worth between March – mid December. The negative comments and defamation did damage us but in the long run we have beaten them. So I am very proud of our resistance, our stamina and also of our true values that eventually emerged to the Congolese authorities – who I would like to thank for their investigation and understanding to uncover the truth in this case.
WRITE UP PART 2
What are the next steps for achieving the 25 year license?
After the approval of the IPU the license should then proceed to the signing of a Production Sharing Agreement (PSA) and then the PSA goes to the cabinet of ministers to be ratified and then after that it goes to parliament for the final ratification and to be passed into law. In the meantime while these bureaucratic steps are fulfilled, we are preparing to send our own rig into the Congo and then preparing to drill as soon as we are officially operator.
The history of Tilapia is that we made a deal for it in 2019 and it was immediately challenged by many others who had become aware of the beauty of this opportunity and challenged us for it. This is because the well is nearly drilled – only a few hundred meters still to drill so there is the need for completion only. But the (Djeno) structure is extremely promising as nearby all over the area of Point Noire this structure has produced 1,000 bopd everywhere it has been drilled.
Everybody knew what the potential of Tilapia was but for some reason the lack of success our predecessor had with their drilling put a cloud over this opportunity. People did not know that there had been a series of technical mistakes made in the drilling as AAOG would not discuss them because nobody likes to talk about mistakes. Now we understand that there were only accidental mistakes or procedural mistakes we are very confident that by doing the right things we can succeed in this well.
How do you intent to deploy your drilling equipment and start drilling operations with the well in a way that is going to be successful and different from your predecessor?
We believe in the theory that the drilling company and the operator should work hand in hand. This rarely happens. Many times the drilling companies have their own selfish purposes and methods and in many cases they disappoint the aspirations of the operator. So being under the same hat (with Zenth owning their own rig) but with different backgrounds and methodologies and technical expertise we still believe that they can co-operate in a way that is best for Zenith.
WRITE UP PART 1
How did the visit go?
The international delegation came over to assess the financial and technical abilities of the Zenith group. We took them over 1000km to show them the many activities of Zenith in Italy for a complete financial and technical visit. We visited two sites – one producing gas and one producing electricity.
Zenith’s approach to Tilapia is very different to AAOG’s. We are taking a new license for 25 years whereas AAOG PLC took a license for the tall end of the last four years so it is a totally different concept – we are marrying the Congo for this field and for other fields because the (IPU) visit will permit us to apply for different licenses on top of Tilapia. So this was a very important visit. On top of this, the people who visited us will be our counterparties in the daily running of the operation – filing, accounting, cost of oil capex etc. So all these meetings were in preparation for cooperation for 25 years.
Please give a summary of Zenith Energy
Zenith are the only London-based company that is operating in the French speaking countries of the Congo. We are concentrating on brownfield (production) and specifically on the Tilapia license which is a fantastic license that currently only produces 30 bopd. However we have a nearly completed well (number 103) which has been drilled to 80% of the depth and there only remains a few hundred meters to drill before we can go into production. The Republic of Congo is 90% focused on oil and a little bit on gas and it has a strong history in oil so they have the necessary services in the town of Pointe Noire so we can conveniently develop the Tilapia field using our own rig to produce up to 2,000 / 3,000 or even 5,000 barrels of oil per day.
I was listening to this interview yesterday (yes I know I am quite late to it) and I wrote up a precis of it so that I could go back and review it easily. It is remarkable how much information has been shared there and how significant it is to telling us what happens next after today's news. Suffice to say it is all looking incredibly good for Zenith now. I think that it is worth sharing it here.
AAOG peak market cap was £29,447,256 on 4th January 2019. The share price closed at 16.55p and there were 177,929,038 shares in issue.
This is more than double our market cap today on a 4 year license...
I don’t know if anyone noticed but there was the confirmation of the new Tunisian cabinet yesterday where the Tunisian Parliament voted to confirm Prime Minister Hichem Mechichi's 11 new ministers to the cabinet including the new minister of energy and mines Sofiène Ben Tounes. It is notable that he used to work at General Electric, Schlumberger and Total and his full biog can be seen here. www.tinyurl.com/nn2pxv7j
I imagine that part of the reason for the very significant delays in getting the approval for Zenith’s Tunisia licenses is due to the fact that Tunisia has been a total mess recently. There have been politically paralysing disagreements between the Prime Minister and the President and also street protests from mostly young residents dissatisfied with the way that the economy shrunk by 8% last year and debt rose to more than 90% of GDP.
Hopefully the fact that these ministers were approved by Parliament – and Sofiène Ben Tounes was approved by 131 votes for to 52 against with 2 abstentions www.tinyurl.com/hknjoyis means that this decision making crisis might finally be coming to an end and we will hopefully get approval of our assets and all of the $1.5-$2 million in cash that goes with this approval fairly soon.
One Dyas and Helium One
One Dyas – They pulled out of the One Dyas deal on the basis that (as they said in their March 2nd 2020 RNS)
- European gas price for calendar year 2020 reaching unprecedented and historical lows having fallen from above €17.2/MWh in October 2019 to current trading at €10.2/MWh for the 2020 calendar year futures contract;
- The target assets being subject to increases in both forecast opex and capex numbers, during the interim period between 9 October 2019 and now, as well as into the future; and
- Political uncertainty during the fundraising period, including the UK General Election and Brexit and, more generally, uncertain macro-economic conditions which negatively affected equity market sentiment.
However, when bigdouble mentioned that “as prices have already increased and are now at the levels they were in April 2019” and asked “Why did the Board not take a longer term view or were there other issues shareholder were not made aware of” instead of just saying that they made a mistake they actually had the gall to turn around and blame the market and shareholders by saying that “Shareholders, and the market more broadly, would not have been happy with the valuation they would have been paying to conclude the deal”.
You could not make this sh*t up. Once again it is our fault and not theirs! You can see it again in their comments on the value of the Helium One shares. With this they “ask that you and other LTH appreciate that this investment was made by the previous team and was not the responsibility of this Board. “
However, at the same time they also say that: “The stock has performed well since listing, an event enabled by significant support and input from SCIR, and we would expect it to continue to perform well in the run up to the well. Any further dilution is not in SCIR's control.”
There is a real pattern coming out here. Any success that comes they are willing to take all of the credit for but any failure belongs 100% to somebody else – whether that somebody else is the previous board or their own shareholders.
As I said at the beginning this lot are just totally untrustworthy and need to be gotten rid of sooner rather than later. We need to keep the pressure on or they will simply revert to their previous ways and continue milking Scirocco and it's shareholders for every penny that they can.
Directors Stock Options
To be honest, I am not sure about the answer to this one as I have not looked into It in detail. BigDouble, who has clearly looked into this area in more detail than I have has suggested that they have granted themselves more than £1 million worth of shares and options in salary for 2020 when they have claimed to be saving us money.
In their response, the board have denied that the numbers are correct but confirmed that all directors are having their fees paid in nominal cost options (essentially shares). They have also mentioned that the 51 million incentive shares that they have issued the five directors would generate £668k in subscription price if exercised. This deliberately glosses over the point that the options will only be exercised if the value of the options is in excess of the strike price.
They have also said that the 7.5million worth of shares issued to Alistair Ferguson were to pay for outstanding wages. This is totally fair enough if those wages were still owed and I have no problem with it – although if the company has really not paid one of its executives a penny in cash for nearly 18 months it really does raise some flags about management.
It is also worth noting that with if you add up all of the shares and options owned by the board as per the figures in bigdouble’s email then you end up with a total of 132,946,553 shares which is 18.365 of the shares in issue. Having that amount of shares onside would be very useful if you had to win an EGM vote on, for example, what price to accept for Ruvuma. This may be overthinking the matter but when you have a board that appear to routinely lie to shareholders then it pays to be cautious.
Scirocco Corporate Governance
The corporate governance at Scirocco is rotten to the core. The fact that Gneiss Energy are allowed to bill the company such enormous amounts of money with no detail about what the billing is for revealed when when shareholders request it only occurs because Gneiss Energy is owned by Fitzpatrick.
Until 11th November 2019 Jon Fitzpatrick was Chairman of the Solo audit committee so essentially he was in charge of deciding whether it was ethical for him to be employing his own company to provide unspecified services to Scirocco at extremely high rates. Unsurprisingly he found this perfectly acceptable…
However, this is just the tip of the iceberg. According to the 2019 Annual Report he remuneration committee is composed of Alistair Ferguson (Chairman), Fitzpatrick and Nicolson. They have decided that it is ok for Doug Rycroft our COO to be employed not by us but by Fitzpatrick;s company Gneiss Energy. As shareholders we do not even know what salary Rycroft earns as he does not work for us. All we know is that his loyalties are to Gneiss and not to Scirocco.
The same remuneration committee has also decided that it is acceptable for our CEO Tom Reynolds to be paid £52,000 for his part-time role (his words in his linked in profile) at Scirocco. However he has also been allowed to bill us a further £53,000 for the “provision of management services” via his limited company “Quixote Advisers Ltd” (see page 76 of the 2019 annual report). Now call me naïve, but I thought that if you were the CEO of a company then providing management services was what you did as part of your PAYE job not something you billed as an extra through a services company.
This should never have been allowed to happen by the remuneration committee and it is a symptom of how little oversight that there is at Scirocco that it has been allowed to happen. I am no tax lawyer but I am willing to bet that a CEO billing more than half of his salary through a limited company is something that HMRC might be pretty interested in as I cannot think of any reason why he would not take his full salary via PAYE.
Gneiss Energy Accounts 2
The other very interesting thing to note is that when you look at the history of employees in the Gneiss Energy accounts then you see the following:
1st November 2016 – 31st October 2017 – the only two employees were Mr & Mrs Fitzpatrick
1st November 2017 and 31st March 2019 – there were 8 employees including the two directors
1st April 2019 – 31st March 2020 – there were 11 employees including the two directors.
In short, it would appear that Gneiss Energy was largely unsuccessful for it’s first year of trading only being able to employ Mr & Mrs Fitzpatrick. However, as soon as Jon Fitzpatrick managed to get himself appointed as a director of Solo and then get Gneiss Energy providing “management services” to his new employers at £763,000 for the year, then Gneiss’ fortunes changed dramatically.
It went from a business that was solely made up of him and his wife to one having 6 additional employees in 2019 and 9 in 2020.
Like I have said before, once Fitzpatrick got himself appointed to the board of Solo/Scirocco everything started working out very well for him and Gneiss energy, even as the fortunes of Scirocco itself took a massive nose dive and the administrative expenses went up from £1.2 million a year (2017) to £1.9 million (2018) and £2.5 million (2019).
Make of this what you will…
Gneiss Energy Accounts
Steve58 uncovered some very useful information about Gneiss that he posted in the “Where have all the finances gone” thread. It involved looking at the Gneiss Energy accounts and looking at the money paid to and from the directors and matching it to the money paid to Gneiss by Scirocco. After reading Steve’s comments I have done a bit more digging and it makes for “interesting” reading.
According to the filings at Companies House:
2017 – Directors owed the company £222,335 https://tinyurl.com/y5bf7qme
2018 – Not available as they changed their accounting period
2019 – Directors owed the company £633,641 https://tinyurl.com/yxzyy8w8
2020 – The directors repaid the company £1,333,641 leaving the company owing them £239.924. https://tinyurl.com/y3g9lya8
It is worth noting that the only two directors of Gneiss Energy are Fitzpatrick and his wife, so the money is clearly going two and from the pair of them: https://find-and-update.company-information.service.gov.uk/company/10186928/officers
I find I interesting (and highly suspicious) that in the April 2019-March 2020 tax year Fitzpatrick and his wife at one point owed the company £1,093,717 (the £633,641 from between the long tax year of 1st November 2017 and 31st March 2019, plus the £460,076 that was taken between 1st April 2019 and 31st March 2020) yet in the same tax year they also repaid the company £1,333,641 leaving a balance owed to them of: £239,924.
We do not know exactly where they got that money from as the accounts do not say but we do know that between Jan 1st 2018 and Dec 31st 2018 Solo paid Gneiss Energy Ltd £763,000 for “provision of management services” and Jan 1st 2019 and Dec 31st 2019 Solo paid a further £538,000 to Gneiss Energy Ltd for “provision of corporate finance advisory”. The total of this adds up to £1,301,000 – a sum incredibly similar to the amount of money paid by Fitzpatrick and his wife.
It could be a coincidence but the “Occam’s Razor” rule says that it is unlikely to be…
Gneiss Energy
The Gneiss Energy question is a perfectly fair one and one that all shareholders would like to know the answer to. Their reply that the Gneiss fees are perfectly reasonable is nonsense. No companies that I know of pay their advisors fees of £1.3 million over two years. None whatsoever.
Their refusal to reveal a breakdown of that the fees are for shows that they are aware of the fact that they are unreasonable too. In normal circumstances if the company advisors were a wholly different company then the argument about commercial sensitivity may hold some weight, but when the same person runs both companies, it is blatantly just hiding behind the fact that Gneiss are a private company to avoid showing that we are massively overpaying Gneiss for everything that they do.
Fitzpatrick is rinsing all of us for our money and laughing at us as he does so. The way the payment setup is structured means that he uses Scirocco as hie personal piggy bank and none of us can to a damned thing about it.
Of course the board are very cognisant of the common director – the transfer of money from a public one with regulatory accountability to a private one with no accountability provides a very convenient way for the pigs to feed at the trough unseen.
So, I have had another look at the email response to bigdouble’s questions and it is another pretty much lie to your face answer. They only answer the questions when they can brazenly blame someone else and their refusal to meet in person simply screams out a set of directors that have more than a little to hide.
I wholly respect what bigdouble has achieved in the past in bringing the previous board of directors to account and I appreciate the fact that he is very busy with other things at the moment, but I do not think that this should let the directors off the hook.
It is good that they know that the shareholder’s spotlight is on them at the moment but now is the time to up the vigilance and increase the pressure on them, not to let it stop. We should, at the very least, take a sounding to see who will be on board with pushing for an EGM at the end of H1 this year – or potentially earlier when the next set of accounts come out.
Obviously, you don’t have to agree with me, but I feel very strongly that if we do not keep holding the feet of these directors to the fire then they will continue what they have been doing for the last two years and that is bleeding the company dry through advisor’s fees and delivering no value whatsoever to shareholders.
I have very major issues with the answers that they gave in their email and I will go through them section by section in the following posts.
Apologies in advance because this is going to be long…
First of all bigdouble, thanks very much for taking the time to write the email to them in the first place and to publish their reply. However, the BS response that they have given just further shows what contempt they hold us shareholders in.
In essence, they have answered the questions where they can blame other people for the failures and have refused to answer those where the blame would lie with them.
I will go into this in more detail later, but this is a quite pathetic response.
Cperkin. You may not literally have said "free carried" but you did say:
1. "in effect carried"
2. "effectively carried"
3. "also carried"
4. "fully carried"
All of these are basically the same thing and all of these are untrue. Scirocco are simply an investor in the drill and without anyi nfluence on the running of the company so that they are no different to any of the rest of us.
What I will say is the following.
Scirocco is an investor in H1 and as with all investors pre and post-IPO they can expect that the company are telling the truth and have the money to complete the work program that they have proposed.
Scirocco’s equity shareholding in H1 will not be diluted as long as the company do not (a) hit unexpected problems with their drill, (b) decide to pay directors or suppliers in shares (c) issue warrants to directors, suppliers or others ( e) raise any money via a stock issue (f) raise money via mezzanine debt or debt backed by equity.
However as others have pointed out Scirocco have massively overpaid for their equity holding compared to those who have invested in H1 both pre and post IPO and the company are underwater with their investment until approximately 14p which we will almost certainly never see as we are highly likely to be required to sell the stake in order to maintain our 25% position in Ruvuma before H1 comes close to getting us back to break even.
This is yet another disastrous decision by the BoD because if they had believed in the project they could have bought in at the IPO and massively reduced the average to a more sensible and lucrative level.
Anyway, this is a cul de sac conversation. If you wish to continue believing that Scirocco are “fully carried” with H1 then please feel free to. You will continue to be wrong but I am not wasting any more energy talking about this when there is so much more wrong with this company that does deserve discussion.
I didn't say anythign about through to production either.
For clarification:
SCIR ARE MERELY AN INVESTOR IN H1 - THEY ARE NOT FREE CARRIED FOR 2D OR 3D OR DRILLS. THEY ARE NOT FREE CARRIED ON ANYTHING.
You appear to fundamentally misunderstand what a free carry is. A free carry is when you have a share in a license and your costs covered related to that drill. You also have a say in what happens in the operation (albeit not one that the operator has to agree with but they do have listen to).
When you are just an investor in a company none of this applies. Scirocco are just another punter in H1 with no say in what happens. IF the costs in any are of the project go up then H1 will raise money and SCIR will be diluted unless they put in more money. This is not a free carry.
No, I am telling you that if H1 need to raise additional funds for their drilling program then Scirocco will either need to put in more money to maintain their 4.29% shareholding (4.5% is an incorrect number) or they will be diluted down.
This is not a free carry. A free carry would be that the SCIR stake stayed at 4.29% no matter how much the drill program cost.
Scirocco are just shareholders in H1 they are not partners in the drill.
AA - I never said that he was not qualified to make a prediction. What I said was that since he is not a member of the Scirocco board then his prediction was irrelevent.
The supposedly highly qualified BoD did not believe in the project enough to have protected the Scirocco stake in it and so once again cost investors a lot of money through their own incompetence and have now left us under-funded for our Ruvuma obligations.
Everywhere you look, everything that they have touched has turned to a disaster and what I think is both misleading and financially irresponsible is those on this forum who pretend that their stewardship of the company has been anything other than an unmitigated disaster.
Interesting Ariel Arrow - you are criticising mrc for saying today that
"IPO was what 2.5p?? Whoever took part in it has made a killing? Why did our BOD not use SCIR FUNDS TO MAINTAIN OUR STAKE???"
by posting a post of his from 4th December when he said: "If they really like this asset they would have protected their share at the IPO.".
You have completely proved his point. It is totally reasonable for him to not believe that the share price would go up as he is not a member of the BoD - it is on them to have protected the stake if they believed in the asset and they didn't so SCIR was diluted down from having a stake of 12.03% of H1 to a 4.29% stake in H1 (those are the real percentages no need for Chris).
Yet another total c**k up by the BoD.