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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.

But our Helium 1 stake is just an equity stake. We do not hold any of the licenses. In fact, we are no different to any of the posters on here - just on a larger scale. It has a value if it goes up, but only if we sell it.

cperkin - sorry to interrupt your conversation but I am not quite sure what you are saying. Are you saying that the value of the H1 holing will free carry us for Ruvuma of have I completely misunderstood you?

ArielArrow - glad to you admit that it is not your board, but I am afraid that you do not always post the truth do you?

For example, you posted earlier today when you stated that the only reason that Fitzpatrick had not purchased more shares in over a year was because he was "not allowed to". This is not the truth is it? It is an outright lie, the only question being whether it is a lie born of your own incompetence or a deliberate attempt to mislead others. Either way it reflects very badly on your research or your character.

Cperkin - thankyou for your very civil response. I do not agree with it, but it is New Year's Eve and we can pick this conversation up in 2021. I genuinely hope that you and yours have an enjoyable celebration tonight and a very happy and healthy 2021.

Cperkin, just like Ariel Arrow, you are posting falsehoods and having then masquerading as facts and I will not apologise to you for pointing this out. Ruvuma IS NOT fully funded and the company’s own statements makes this clear. No amount of you claiming anything different will make this fact change.

1. The funding required for Ruvuma in 2021 is between US$22.8 million as stated in the recent Aminex RNS and $40 million as stated in the Aminex annual report.

2. This means that the Scirocco share of this is between $5,700,000 and $10,000,000 which will be required in short order.

3. The company has said that it currently has $3.6 million in cash and near-term equivalents and also has access to another $1 million which means that they have $4.6 million available.

4. They have then said that they have access to “a further undrawn US$3 million UNDER CERTAIN CONDITIONS”. This makes it very clear that they do not have access to this funding now.

5. In conclusion, they state in their own words that they currently only have $4.6 million available at this point in time so they are $1.1 million short o f the minimum cost of the drill and $5.4 million short of the higher end.

6. If they can access the additional $3 million (and there is a very real risk that they may not be able to be because this will be linked to the volume of shares traded which at the moment is very small) then they will have $7.5 million available less a minimum of “£500k excluding exceptional expenses and contingencies” (US$700,000) corporate expenses = $6.8 million.

7. $6.8million available would allow Scirocco to limp over the line at the smaller price as long as there was no increase in costs and assuming that they were able to access the additional $3 million which they admit is not available at the moment. However, it would still leave them $3.2 million short of the higher end figure.

In short, by the company’s own admittance in the RNS today they are NOT fully funded for Rumuva next year and require the following things to happen for them to cover the costs:

a) The cost of the works needs to remain at the bottom end estimate and not increase at all.

b) Their corporate costs need to remain at their most recent estimate of £500k as opposed to the £2.5 million that they were in the last set of financial accounts. They also need to not incur what they call any “exceptional expenses and contingencies” whatever they are.

c) They need to achieve whatever mysterious criteria they are not currently achieving in order to access the additional US$3 million of incredible dilutive funding.

These are just facts in the company’s own words. As of where we stand today the company are NOT FULLY FUNDED FOR RUMUVA under any criteria.

Ariel Arrow, earlier today you were claiming to another poster that the only reason Fitzpatrick has not bought more shares in Scirocco / Solo is because he "has not been allowed to since August 2019". This is clearly a lie and one in which you were caught out.

Stating this is not a personal attack, it is just a fact. This is not your board and you do not get to make up lies without me calling you out on them both now and in the future. Get used to it.

mrc - he won't answer because he is a board stooge. The same way that he is totally ignoring the post I put up before Christmas and today explaining how, despite his lies, we are a long way from being fully funded from Ruvuma.

The irony is he is now crowing about Helium 1 being fully funded for their drills which is great for our 12% holding but is embarrassing in that is just shows how a decent board can actually get things done - unlike the one we have here..

The facts show that the less our board have to do with a project the more likely it is to succeed.

But the drilling is not fully funded and as things stand SCIR do not have enough money to hold onto their 25% share of ruvuma.

I pointed this out to you pre-christmas cperkins but you seem to be ignoring facts in your desperate ramps so here it is again:

Even with the PB/Bergen facility the company has only got two thirds of the money it will imminently require to cover the costs of the amended work programme.

This work programme has already been significantly reduced from the budget that Aminex proposed in the chairman’s statement from the annual report of April this year where they said that they had a “budget of approximately $40 million for Ruvuma PSA. The programme includes the drilling of the Chikumbi-1 well and the acquisition of an extensive 3D and 2D seismic survey over the Mtwara Licence”. This would have meant that Scirocco’s share would have been $10 million. The discrepancy in the two budgets does also suggest that $22.8 million is not going to be enough and the costs are likely to increase and possibly almost double.

However, even if the costs remain at only $5.7 million, we still don’t have enough money for them. We have administrative expenses of £2.5 million per year (according to the last annual report) which means costs going out of over £200,000 per month and this will also have to come out of the $4 million…

It is all well and good being bullish on the value of Ruvuma but we have to be realistic about things as well. Having access to a drawdown facility of $4 million is absolutely no good when you have £200,000 per month going out of the company on paying fees to the directors and their companies and $5.7 million required in short order to keep hold of your asset.

I am not anti-Scirocco but we need to be realistic about the situation that we are in and pretending everything is fine when it quite clearly isn't does not help anybody.

Why are we paying Gneiss Energy between £500k and £1 milllion a year to arrange “funding” for Scirocco when they are constantly delivering nothing and charging us a massive premium for it? As was pointed out by highlandmatt last week with Fitzpatrick and Gneiss Energy “we pay a director who then outsources his work to his own company at a much increased fee. “

The board cheerleaders here bang on about Gneiss Energy being experts at delivering funding to oil companies but so far they have delivered nothing here except rubbish death spiral funding that does not even deliver enough money to cover our obligations re Ruvuma.

As others have said here today we are going to have to sell Ruvuma as we cannot afford to keep it and the money that we get from it is likely to be less than we have already put in.

This board of directors look like they are simply asset stripping the company and paying themselves vast amounts of money for doing so. The worst thing is that they are not even doing it pro-actively, they are just hoping that someone comes on with an offer and they will take whatever they can get as they are incapable of doing a deal.

Ruvuma is a world class asset but are we as shareholders going to benefit from it under this current group of blood suckers? They won’t get top dollar for it anyway and whatever they do get will be swallowed up in fees from Gneiss Energy and the directors. How much are they going to take in fees from any money we get from selling Ruvuma? 50%? More?

We didn’t benefit from the Horse Hill money did we? That all went straight into their pockets. What on earth makes you think that it will be any different this time?

Alistair Ferguson at first glance looks like exactly the sort of man that we would want on board with all his BP experience but actually he seems a bit of a paper tiger. There are many of his sort around, they look competent enough when working alongside all of the firepower of a supermajor but he was only ever really middle-management at BP and so when they are on their own in a small cap they are bereft of ideas. Really he is just a standard non-exec type who companies appoint to their boards to make them look good but without expecting them to do anything. He had a pop at the executive role, totally screwed up the One Dyas deal and is now not interested in taking Scirocco any further forward in my opinion.

Don Nicolson is a wholly unnecessary appointment. He was appointed in November 2019 by Alistair Ferguson because “his experience at BP will be highly beneficial to the company as we further develop the Dutch North Sea assets that we are in the process of acquiring” (from One Dyas) but now that the acquisition of these assets ended in disaster it seems a totally redundant role.

So in total the company has two executive directors -one of which is part time (and this is the CEO for Christ’s sake) while the other is not even a company employee but instead is an employee of one of the non-executive directors who pays him out of the £750,000 his services company charges Scirocco per annum.

Then we have three non-executive directors, one of whom was brought on board specifically to develop the assets of a deal that never went ahead and the other two who have been rinsing money out of the company for years in wages and consultancy fees. They are also the two puppet masters to whom everybody else reports.

Can you really see a company run by this lot actually acquiring new assets and developing any real value going forward? I can’t, but I hope that somebody can explain to me why I am wrong.

Fingers crossed...

Fingers crossed it hints at good news for us.