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Interesting concept and easy to administer.
You create two share classes “A” Ordinary Shares and “B” Ordinary shares.
The existing “A” Ordinary Shares are then Converted to “B” Ordinary shares and the Articles are amended to show the gas price calculations and calculated payments to this share class.
The Purchaser can then use the “A” class to create whatever ownership structure they like and dividends payable after the “B” shares have been dealt with.
Would need the usually protections for both share classes in the event of a change of ownership, cessation of business etc.
There are a number of ways to crack this nut
Jack
Good to see the recent acquisition announcement of Avantus, which is earnings accretive, and the $45M new contract win.
The mission statement below will propel QQ into the FTSE 100. As at end July 22 QQ was in position 159. With a SP of £3.86 the Market Cap is £2,236M.
Since end of July QQ have moved up 4 places to 155. Britvic and Rotork are within 4p of being overtaken.
The story continues
Jack
"Building on our track record of growing the company by 75% over the last six years, we are targeting to deliver a further 75% growth over the next five years, with revenues of more than £2.3bn by FY27. More than 50% of this growth will come from AUKUS countries (Australia, UK and US) with a shared defence and intelligence mission, achieved through both organic growth and strategically-aligned acquisitions."
Lenin
The table below was sourced from Corallian notifications of Capital as per link to Companies House.
https://find-and-update.company-information.service.gov.uk/company/09835991/filing-history
All Corallian Shareholders expect a return on their investment, and I was highlighting what would be “sufficiently attractive” for the Corallian Shareholders who bought at £2.20 ?
NPV10 at 50p a therm is history, as the price per therm has been over £1 for the last 12 months and today is £3.58, so I expect both parties want a fair deal.
Remember that Corallian Shareholders, of which RBD own 49.99%, would need to ratify a Share Purchase Agreement and the Purchaser would not want to get into a bidding war once the purchase price is in the public domain. This is a possibility if the proposed price is to low.
It’s tough sitting on your hands but slightly easier when you are sufficiently attractive in the current market with many participants that may bid.
Jack
SM,
Exactly. Buying and Selling businesses is not a 2 minute job and until such time as a RNS is issued the deal is still in play.
"The Corallian board of directors currently considers the offer sufficiently attractive for all shareholders to commence a sale process."
The total share subscriptions, plus the C Loan converting at £3.20, =7,935,249 or £12,190,196.
"sufficiently attractive for all Shareholders" must also include the Shareholders who joined the party at £2.20
Par Price..........Shares...............At Par..............@£3.20..............@£6.40.........@£12.80
£1.00...............1,225,000.......£1,225,000.......£3,920,000.......£7,840,000.......£15,680,000
£1.35...............1,917,771.......£2,588,991.......£6,136,867.....£12,273,734.......£24,547,469
£1.50...............2,257,665.......£3,386,498.......£7,224,528.....£14,449,056.......£28,898,112
£1.54...............1,089,155.......£1,677,299.......£3,485,296.......£6,970,592.......£13,941,184
£2.20...............1,051,095.......£2,312,409.......£3,363,504.......£6,727,008.......£13,454,016
TOTAL.............7,540,686.....£11,190,196.....£24,130,195.....£48,260,390.......£96,520,781
C Loan...............394,563.......£1,000,000.......£1,262,603........£1,262,603........£1,262,603
TOTAL..............7,935,249......£12,190,196......£25,392,798....£49,522,993....£97,783,384
and whatever price is achieved 50% goes to RBD !
Jack
Rather than focus on the 31 Aug 22, I have looked at the £1M Convertible loan note issued on 24 Feb 2021. Interest accrued daily at 15% per annum and the conversion ratio was dependent on either a corporate action or 21 months, whichever occurred earlier.
If the Corporate action was above £3.20, the loan and interest converted at £3.20 or if the corporate action was below £3.20, the loan and interest converted at the valuation price.
If a Corporate action was not completed within 21 months (24 Nov 22) then the conversion of the loan and interest would be at £1.50.
To put some numbers to this:
£1M over 21 months at 15% = £1,262,603
At £3.20 the number of additional shares issued would be 394,563
At £1.50 the number of additional shares issued would be 841,735
Therefore, there is a TIME penalty of approx. 5.3% on Corallian Shareholders (Excluding RBD) if the deal is not done by 24 Nov 22 and clearly, it’s in everyone’s interest to get the VALUE in excess/multiples of £3.20 up to that time point.
Pity for Corallian Shareholders that the ceiling of £3.20 was set 17 Months ago, as if the Convertible Loan deal was done more recently then that ceiling could have been set much higher !!!!
Jack
Nic62
There is a non binding offer being explored but there is no time line for completion of the Potential Sale of Corallian.
The extract from the RNS below states that the Acquisition (6 North Sea Licenses) is conditional on the Potential Sale (Corallian, the Company) and NSTA approval.
If either of these things don’t happen by 31 Aug 2022 both RBD or Corallian can pull the Acquisition of the North Sea Licenses.
There is no deadline set for the Potential Sale but the below is intended to focus the mind on 31 Aug 2022.
A play on words?
Jack
“The Acquisition is conditional, inter alia, upon (1) Corallian receiving notice from the purchaser that the Potential Sale may proceed to completion and (2) approval from the North Sea Transition Authority. If the Acquisition does not complete before 31 August 2022, either party may terminate the SPA and Corallian will be required to repay the Cash Consideration to Reabold within 90 days.“
5th May, Sachin's footnote to the Victory RNS, "We look forward to providing further updates in the weeks ahead, as the price per therm today is £1.60 and in the NPV it’s 50p”
10th May Crusty Oil Exec “ It’s been 50p for the last 10 years and NPV is always based at that level”
15th May Sachin “actually it’s been over £1 for the last 12 months. A new norm ? Let’s agree on 75p
20 May Crusty Oil Exec “I’ll take a few weeks to think about it, and get back to you”
22 July News Flash “UK gas hits a high of £3.35 per therm in inter day trading and settles at £3.12 due to threat of Nord Stream 1 output being lowered to 20% and the threat of Russia switching it off it the winter”
Crusty Oil Exec “ F****** Hell !
Jack
My take on the 4th May RNS, was it set out a four month window to 31 Aug 22 for either RBD or Corallian to withdraw from the acquisition of 6 North Sea licenses.
The acquisition was conditional on:
1. Approval from authorities to acquire the 6 licenses, &
2. Unconditional offer for Victory.
If it takes the full 16 weeks to secure a very good deal, then I am happy to wait.
No RNS to date, means the negotiations are ongoing.
Jack
Watts
Total agree with your comments.
Government and Industry need to start to look at this problem with pace. Even the Germans admit a lack of strategic focus with their policy makers over the last 20 years, that has essentially backed them into a corner.
Government need to start to accelerate our commitment to UK energy sources and ensure that suitable tax breaks and funding are in place.
Jaxk
UK Natural Gas currently at £2.96 per therm this morning.
The “new norm” ?
Jack
=============================================
UK natural gas futures briefly crossed the 300-pence-a-therm mark before falling 10% to 240 pence on Thursday, as news of the restart of the Nord Stream 1 pipeline calmed fears of an energy crisis in Europe, while lower temperatures in the UK also weighed down on demand for cooling. Gazprom restarted shipments through the key Nord Stream 1 pipeline after 10 days of a maintenance-related shutdown. The pipeline was working at 40% of capacity, the same as before the maintenance works commenced but still well below levels seen earlier this year. Still, demand from EU clients remained elevated, which is keeping pipelines connecting the continent and Britain working at maximum capacity, as the UK uses its excess regasification capacity to import more LNG and resell it as natural gas to Europe.
============================================
Britain's largest gas storage site is a step closer to reopening after regulators approved a new licence, boosting Western efforts to cut reliance on Russian gas.
Centrica has been approved by the North Sea Transition Authority to store gas at the Rough storage site off the coast of Yorkshire, five years after closing it down because it was uneconomic.
There are hopes the facility could be reopened as soon as this autumn, but ministers are still in talks with Centrica about possible financial support to help it reopen. That could see a levy added to consumer bills, deepening the cost of living crisis.
Efforts to reopen the site come amid concern over gas supplies this winter as Russia restricts flows to Europe.
The EU yesterday told member states to cut their gas demand by 15pc in a bid to avoid rationing and blackouts this winter.
Moscow restarted flows through the Nordstream 1 pipeline on Thursday after a shutdown for maintenance, dismissing fears that it would not restart.
The latest figures showed Russian gas was flowing to Germany at about 40pc of capacity between 7am and 8am, roughly the same as before the maintenance work began.
However, German network regulator president Klaus Mueller wrote on Twitter: "In view of the missing 60% and the political instability, there is no reason yet to give the all-clear."
European Commission President Ursula von der Leyen on Wednesday said a full cut-off was "a likely scenario" at some point over winter.
The UK gets little gas directly from Russia but is exposed to knock-on effects from Europe's market including soaring prices.
The Rough storage facility sits 18 miles off the coast of Yorkshire and can hold up to 100bn cubic feet of gas. Before its closure in 2017, Rough accounted for about 70pc of Britain's storage capacity.
The NSTA says the Rough project will require further regulatory approvals before it can re-open.
Impressive first quarter update.
“ In all of the markets in which we operate globally Governments are seeking to enhance their defence and security stance against the evolving future threats, with rising defence spending in all of our three home countries: UK, US and Australia. “
Hold onto the above statement as we climb towards FTSE 100 status
Jack
CB
Your maths is about right.
The 2020 Victory presentation had max flow of 70mmscf per day to minimise sand production
Moving on two years and the EIS on page 78 & 79 has much higher peak flow rates as per Nigel’s energy voice article (148mmscf) in year three. Life of field has also been extended from 2020 report.
It’s well worth studying this document, as it highlights key facts/decision points. For example, Project Development is fast with a forecast 52 day drill and 6 months for the sub sea work, so rapid pay back.
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1089579/Corallian_Victory_Development_ES-2022-003_06Jul22_Redacted.pdf
Just proves the substantial work effort to get to where we are today and irrespective of lack of SP movement the “boys” (lol) have not been sat on their hands
Jack
CB,
Well done - Positive, out of the box thinking.
Some “Strategic Investors” felt that shelling out £500k could create significant value.
I would like to see the horizontal well drilled first, but maybe the lack of active is due to interested parties?
Never say, never
Jack
The strategic investors have indicated their support of an initial public offering ("IPO"), reverse takeover ("RTO") or similar for Corallian, which is in line with Reabold's strategy of clearly identifying monetisation opportunities across its portfolio.
The strategic investors have also signalled their intention to support Reabold in facilitating further potential strategic value creation opportunities across the wider Reabold portfolio.
https://www.lse.co.uk/rns/RBD/partial-sale-of-convertible-loan-notes-i4i67ovt2wky3uv.html
CB
I think your words were much better than mine.
“increased gas price has a "disproportionately" beneficial impact on the projects NPV as the fixed costs to develop the asset are already accounted for in base NPV calculation and are independent of the gas price.“
However the sensitivity analysis in 2020, long before the gas price movements of the last year, clearly show the impact of a 30% swing in gas prices (35p and 65p) produced a -/+ 85% NPV variance.
I can see smoke coming off the calculators !!!
Jack
PS Your numbers also look good , which just goes to show the deal makers have a difficult task to finalise.
Slide 17
https://reabold.com/wp-content/uploads/2017/10/Reabold-Victory-Presentation-FINAL.pdf
Odins
See my post of 11 May, where I was looking at the deal from Corallian Shareholder perspective.
A 4 fold return = £55M
I think that leaves to much on the table for the Purchaser, with an NPV 10 at £193M using 50p a therm less £55M = Purchaser pure profit £140M.
During the last 12 Months the price per therm has always been above £1, with a high of £5.37 and currently at £2.40.
The basis of using 50p a therm as the long term historical average, has been resigned to……well history.
What with Russia using Oil/Gas as a tool of war and the recent events in Norway (3rd largest gas supplier - See below) it’s all about energy security now.
My 11 May post estimated medium term gas per therm will stead in the £1.4 to £2.2 range. The new norm.
So even taking £1, the NPV 10 would be well north of £400M as the gas price per therm is the deciding factor as all other costs in the model are fixed/semi fixed.
If pushed I would like to see a 4-6 fold return for Corallian Shareholders plus a long term royalty based on production flows and gas sales prices.
IMO £55M to £77M plus the royalty.
Jack
=============================================
Natural gas prices in the UK consolidated around 240 pence a therm, following news that Norway has reduced capacity at several facilities amid an incident at the Sleipner field. Norway is the world's third-largest exporter of natural gas and the UK's primary gas supplier, exacerbating already supply tightness on the back of reduced shipments from Russia. Supporting prices further was greater demand for cooling as the weather turned hotter in the United Kingdom.
RPS estimates a total Victory field 2C or best / mid case technically recoverable resource of 179bcf dry gas1. This estimate represents a 14% increase over the previous interim CPR completed by SLR Consulting in December 2020 of 157bcf of technically recoverable gas. Corallian's updated 2C economic valuation (NPV10) of Victory, based on an historical average gas price valuation of 50p/therm, has increased from £146 million to £193 million.
Odins
The £11M is the total Shareholders have put into Corallian as per their latest Balance Sheet.
https://find-and-update.company-information.service.gov.uk/company/09835991/filing-history
If I was a Shareholder I certainly wouldn’t just want my money back after 7 years.
Maybe 2 thirds upfront with a third pegged to milestones but that would have to include a level of upside dependent on how the assets performs.
Not a bad idea all round considering current environment.
Value is interesting but WHO is also the interested party.
The line up of the Corallian team shows 4-5 of them with a past Chevron (Texaco) relationship.
https://corallian.co.uk/team
Then there is the GLA partnership and Kistos might show interest. Then there is Shell and Exxon who were divesting in North Sea assets but prior to latest Russian issues. I think JP Morgan we’re saying if Putin turned the oil off into Europe then oil prices could reach $400 per barrel, similar rises for gas and ensuing deep recession.
Without doubt other parties would be waiting to see, what the deal is, before showing their hand.
Still waiting…….
Jack
Mr. Christopher Harborne ( AML Global Ltd) still harvesting between 23 June to 11 July. Interesting that £3.80 appears to be hard to breach despite 5M buys to 2M sells today, a ratio that has been common of late.
Judging by last year, the First Quarter Trading update is due next Thursday 21st July which will be good to see progress made in current environment.
Date for the 5.0p final FY22 dividend is 29 July (579M shares = £29.5M total Dividend, 3M for AML). Nice graph in the last annuals to see the 6% full year dividend increase to 7.3p and the historical record.
All this stalling at £3.80, when the strategy is there to propel this forward. With a Market Cap of £2,190M, QQ would effectively need to double the SP to be well within the FTSE 100 automatic entry position. Let's see where we are on the next quarterly review of the FTSE on 31 Aug 22.
Before anyone says, it's not wishful thinking as all the basics are there for the taking, and we enjoy a progressive dividend policy whilst we wait.
Jack
Mr. Christopher Harborne ( AML Global Ltd) is not letting up and has increased holding to 9.33% between 01 to 23 June.
Black rock also increased to 7.4%
Current price movement is accommodating!
Jack
Selfish,
Just being pedantic :)
The 17 Jan RNS tabled out Gas and Oil Month 1 production quantities, with the Oil noted as bopd.
The RNS did go onto say:
“The liquid hydrocarbons had measured API gravities between 45.9o and 49o pointing to a very light oil or condensate.”
The recent RNS IMO failed to clearly iron out this point, calling it a pure gas development.
The result is further unnecessary ambiguity in the news flow.
I know the conceptual development was mindful of progressing the project in a step by step fashion to minimise cash calls, but again why flag up “Subject to Funding”, which is such a generalised statement and would obviously have a detrimental effect on the SP.
IMO the WN conceptual development plan could have been announced once we had a firm commitment on Victory.
Further smoke and mirrors, which starts to grate with Long Term significant Shareholders.
Jack
I’m wondering how RPS can go from “1,000 bopd of oil” stated in Jan 22
https://www.lse.co.uk/rns/RBD/west-newton-flow-rate-update-341ogisugq5c1te.html
To “Small volumes of associated liquid”
https://www.lse.co.uk/rns/RBD/west-newton-conceptual-development-plan-5rl6iyh5x54ydzb.html
On this occasion I feel that the recent RNS did us no favours and called into question both RNS above.
Equally why state “Subject to Funding”, when we could be 8 weeks off a Victory sale. I do not understand the strategic sense in not coordinating news, when it is in the BODs gift to do so.
Either that or Victory is way below expectations
Jack