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Well done Alma!
And Chess ... I don't know why you are acting like you do. It couldn't hurt pointing out something like this. Better be safe than sorry. And your negativity about FIG is also strange. During some earlier AGM it became clear that it's extremely unlikely that RKH will have to pay taxes on something that they didn't receive, but that it does reduces the chance of a hostile takeover. Sam has great connections with Fig and I'm confident that they take great care in the timing of certain events.
As always, great find Mogger.
It seems like they are drowning in work over there. For those who don't want to read the entire report, here are the most interesting parts:
- 7.6 One of the high priority projects is the Offshore Minerals project, which is not yet planned or quantified. That project is likely to take several years to complete
- They propose to prioritise Oil readiness legislation (including Oil Pollution Preparedness, Response and Co-operation Regs and Petroleum Valuation).
- There are two legislative drafters that are dedicated to the entire Programme of which one is already working almost entirely on the Offshore Minerals Programme.
- Offshore Minerals and Telecommunications remain MLAs’ top priorities
My take on this is that it's Navitas business model to reduce risk significantly by investing in projects that are already discovered. This way there is not really a risk in IF it get's developed, but only in WHEN and if it will be on budget. What I also like is that Gideon is someone that delivers time and time again. If we take his word, this will mean that Sealion will definitely be developed (otherwise Navitas wouldn't even have participated) and that it will be very likely that it will be on time and on/under budget.
Part 4:
That you encounter what you expected to encounter because with the ground it's very hard to influence everything else can be arranged why run to additional projects because in the end a company or a partnership in this case like Nevitas is built from a portfolio of projects that's exactly what I did also in Israel there was Yam Tatis people like you asked me why are you going to Tamar isn’t Yam Tatis enough if we hadn't gone to Tamar where would we be today as a country why after Tamar are we going to Leviathan isn’t Tamar enough what was your reach to some limits to exploit our relative advantage to think outside the box which is a cliché but in our case let's mark it I can tell you that around the world we are seen as a company that is a kind of magic but what’s important the ability to do it again and again the other important thing is the right timing of the projects not to cash too much in investments in a project until the project is not ripe and that's something we did in the past and we are doing it today in Nevit that’s another advantage that the institutional bodies told me before a conversation with you that you manage to achieve financial closure before before the initial investments the investments are actually already closed in advance how do you do that against the I'll show you it was very very challenging especially with Shennanduah in 2021 when ESG someone remembers those three letters ESG once were very relevant recently less popular but people refrained from lending bodies banks filled up from raising for a fossil project because of the ESG today that has changed I can tell you that all the bodies all the bodies even those that previously refrained today are sitting in Nevitas both in equity and in debt it gives us tremendous power without the Israeli equity market we wouldn't be able to I see it generally as a partnership between us to the capital market in Israel without them we wouldn't reach where we are arriving and we specialize in financial closures of project developments and in 20 21 when there was the greatest difficulty we managed to close the funding for us and for our partners for the project Shennanduah I commend you continue success well done on the entrepreneurship and I think the letter of course that happened deserves to you with grace well done thank you very much and I also want to wish everyone a happy and kosher holiday and may we all know good news and the chair of Elijah the prophet that we always keep just in this case I think it's the chair of the captives and the abducted that we all hope will return in bitterness.
Part 3:
I did a very rough calculation at the bottom line there will be half a billion at the minimum even a bit more we're talking about close to two billion shekels the value of the partnerships is 4 billion shekels what are the investors missing see I think there's a process that we see it you talked about the dramatic rise right that happened this year we went up on the stock exchange by 85% this year we went up by an order of magnitude of 20% so eventually here the market matures to recognize the economic potential and the realization of the economic potential and that's the strength of entrepreneurs by the way there were entrepreneurs here before me who really established here a magnificent industry and they also saw before the market so in a sense we see before the market but I ah that's apropos whether to sell or buy tomorrow morning so as you see me I run for long distances I don't run for short distances so I take a long-term view I very much believe of course in Nets as I believed before in what I did in Delek in Avner and in Delek Drilling at the time what is called today Vament so I think that this potential we are definitely able to realize again in a very unique tag in the world not of renewables here most of the income was from renewables but in the old good fossil world which by the way will remain with us for many many more years and I think there are tremendous opportunities there a value of 10 billion shekels for Nevitas within two three years are possible in your opinion I don't give forecasts but I say again we publish numbers and numbers based on reports done by third parties our task is to realize them but as you said assuming those numbers materialize then the arithmetic is very very simple dividends to investors we said that in our opinion when we are very close to the start of the operation of Shennanduah we will definitely publish a dividend policy as we think we are definitely moving from a phase from a certain company to a company that also knows to distribute dividends so this is definitely something that is in our work plan what risk could there be that the oil production of the project I don't see a risk that will prevent the production but as I said in mega projects always there can be time delays and there can always be additional costs but you have to remember that this project is almost there we have already invested 70% of the money so it is a project that is already in very very very advanced stages of ripening and the biggest risks always are underground and we in this drilling have already drilled three out of four development drillings and this is the risk that always worries me the most when you drill a development drilling.
Part 2:
So wait so let me return to the numbers with your permission the numbers say something like taking the profit and actually valuing it today as Gideon said there is risk there's a development risk still existing but if you adjust it with an interest rate of 10% it reaches values of billions of dollars the part of Nets will take the financing take the funding take other things you still arrive at a value that is dramatically higher than the current value despite a rise of 2.5 times in the stock price it's not a recommendation of course there are risks a small risk realized recently yes there was an accident during the construction of one of the facilities supposed to be part of the project we reported that it's not significant and also reported on a slight delay in the start of production but these are mega projects and mega projects have their complexities but the important point is that there is certainty that Shennanduah will be developed there can always be delays there can always be additional costs although all the projects I developed or was involved in including Tamar including Yam Tatis including Leviathan and also a project in Caskin of Nevitas abroad finished on time and on budget so I'm very good in this regard but anyone who renovated a bathroom at home or I would say a kitchen knows there can be such and other issues but if you take first-line contractors these projects end and end successfully it's like building a power station okay the end is supposed to be in 20-25 the start of production from Shennanduah which is our flagship project the start of production is supposed to be in the second quarter of 2025 okay the year of full production is supposed to yield with the current oil price over a billion dollars in revenue all Nets with the start of production from Shennanduah all the parameters any parameter you choose the production per day the revenue all parameters you choose will be multiplied by about 10 times 10 the moment Shennanduah starts to produce and we already have the project after Shennanduah which is the Silyn project which is the next big thing you’re not resting why rest so many partners on entrepreneurship really but just to understand what the market is missing if at all because usually the market is correct we have a year full of production revenues of a billion.
Here's a translation Part 1:
Inviting Avishai Ovadia for a discussion with Gideon. Tadmor, the founder and head of Jets Tadmor, who was in management under the management of Delek Group during the discovery of gas at Tamar. He established Nevita which purchased drilling rights worldwide and enhanced them, this is reflected in significant value creation. The stock has risen by 2.5 times year-over-year to a value of 4 billion shekels. Where do we go from here? Hello, how are you? Thanks for coming, I'm glad you’re all settling into the chairs here, it seems to me, Tzachi, that’s you, Gideon. I want to start with a question to the audience. A theoretical question: You invested in a stock that rose by 150%—do you think the chance of staying with it is high or low, and in your opinion, high? Good, you know what I’m aiming for but the natural choice, let’s call it that, of investors after a stock rises 150% to 200% is to cash out, and rightly so it usually means there are usually drops after rises, right? If the value has already increased then why keep holding? There are other things I'm saying this without necessarily giving advice or stating anything, but I’m saying it in continuation to the fact that last night I read the reports of Nevitas. Ah, and about a year or a year and a half ago we followed them and saw very significant potential especially in one of the largest drilling projects we of course, we write what we believe in, it has risen since and I told myself last night for sure it’s nearing its peak but I keep reading, and not just reading, there are very significant tables that speak of very significant saturations. Okay, I will do it very roughly take the expected profit if and when the partnership reaches the end of the drilling in what’s called Shennanduah. Shennanduah, I keep getting it a little wrong I'm dyslexic, I understand you’re promoting now you’re encouraging, ah so it’s not a drilling it’s a project and it needs explaining because it’s very important it’s part of our strategy we’re not looking for oil we develop and produce and therefore it’s not theoretical the challenge is to develop which is the non-binary challenge it’s about finding but the challenge to develop is much less challenging in that sense if you take financing for it maybe one of the arbitrage situations known to them the ability actually to go to the Israeli capital market and bring from it both equity and especially debt for the development of projects that have already been discovered that’s what we know how to do by the way it’s a strategy I think is unique in the world in this upstream sector so these numbers actually represent the NPV.
I wonder what will happen in the unlikely event that the Annulment procedure reached it's end already next week and RKH is awarded everything. Will that mean that the cash deal will be renegotiated in such a way that RKH gets more out of it?
there are two articles posted on the same day (see below). the first article is about the port and the second one is for "the fabrication of large structures with a global oil services company" and the first order seems to be related to specialized parts for an fpso and should be completed in 18 months (i.e. end of 2025). it has already been speculated that this might be for sealion. having this published on the same day as the fig port combined with the sealion timeline only strengthens that sus****ion. the costs for the port are around 100-120 million pounds and for the specialized equipment it's 3 million.
combine this with navitas seemingly being in the falklands right now, it seems likely that they want make sure things are set in motion there too. two weeks ago they should have received all the offers for building the facilities. i can imagine that they will make sure that they can start with that right away.
the last piece of the puzzle are the corporate bonds of 929 million shekel, which seems a strange number until we transform it to british pounds (i.e. 200 million pounds). this suggests that the bonds are related to pounds, which would mean it is for sealion. assuming this is all related, navitas has already collected part of the money to be able to set things in motion and pay for the port, specialized equipment, the build of the facilities and probably also (part of) the pfso.
it's a lot of speculation, but if i'm correct it can't take very long until we will see an rns!
https://www.harland-wolff.com/news/harland-wolff-preferred-bidder-to-provide-new-port-facilities-on-the-falkland-islands/
https://www.harland-wolff.com/news/harland-wolff-signs-contract-bringing-five-year-subsea-infrastructure-fabrication-programme-to-arnish-yard/
The analogy of a volcano seems fitting here. Godders, you keep saying it won't happen and that the current share price "proves" that. This is a flawed, but unfortunately common way of thinking. For years, a volcano in Iceland was about to erupt. It was forbidden to go near it. Just because it hasn't erupted yet doesn't mean it won't happen soon. In this example it's the opposite. Because it hasn't erupted, it's even more likely that it will happen soon. With RKH it's the same. One small step after another has been taken. All relevant parties involved want to see this happen asap and many of the risks have already been dealt with. And we shouldn't forget that RKH is a small, unknown company that has a potential to produce something. As soon as this potential becomes a financed plan through FID, I expect real changes. Until then it will probably slowly go up with some smaller dips and maybe also greatly influenced by market makers. Based on what I've learned in the last decade or so when I first thought RKH would erupt soon, I still think RKH will erupt soon ... really soon.
I'm expecting a gradual increase of the share price in the next weeks/months where people/institutes that monetized quite some warrants at 9p are slowly taking some profits. I'm also expecting that most current PI's are already fully loaded up and would be happy to sell a part of their holding when there is a sudden spike after some news. On the short term this will probably result in a less than expected revaluation, but after that will slowly correct itself the closer we get to first oil. I do expect a big jump once either FID is announced or when news comes out that makes this as good as certain, thus attracting new interested parties. Personally I would be disappointed if it's below 30p at the end of the year.
Too bad that there is no news. There is no news about bonds being announced by navitas to probably already have all the finances fixed before FID. There is no news about the vessels that have already been selected/shortlisted. There is no news about accommodations that need to be operational by q4 2025 for 400+ people for which Falkland companies have until the end of February 2024 to enlist. No news was published in January about the Sealion contingunt resources and discounted cashflows (https://navitaspet.com/wp-content/uploads/2024/02/NSAI-Sea-Lion-2023.pdf). I totally agree with you Godders that it is really demotivating that nothing is happening.
I am aware that the warrants have been converted to shares. The private and institutional investors might still want to cash in those new shares in the near future. This is what I meant with the 'warrants' pushing down the share price.
There are 60 million warrants that are holding the share price down, of which probably many will reach the market in the coming months. This needs some time to rebalance because everything above 9p is profitbfor those who bought the warrants.
Tried finding more info on the bond offering, but apparently not as good a detective as Mogger.
They need $1.2 billion pre first oil. They will probably use some of the cash flow from shenandoah. Any guesses how much they want/need through the bonds?
Just stop twisting words and spreading doubts! Who is paying you to do this?
There is a difference between an announcement, chartering and adjusting an FPSO to make it ready for Sealion.
The way this news seems to me is that they want to have the vessels ready for drilling in the Falklands at the end of 2025. That's it! Nothing else!
They could just as well announce tomorrow that they got an FPSO and that they are making it ready to be in the Falklands a few months after the drilling starts. What we know is that they plan the FID for 2024, they have identified a potential FPSO and first oil is planned for 2026.
Gross profit doesn't say that much. Nett profit is more interesting.
Capex + Opex = $8 + $17 = $25
If I remember correctly, the royalty was 9% and corporate tax 26%. I believe royalties are a percentage of the price per barrel. If we look at possible oil prices of $60, $70, $80 and $90, the royalties are respectively $5.40, $6.30, $7.20 and $8.10 per barrel. Adding the costs per barrel it comes to a pretax profit of respectively $29.60, $38.70, $47.80 and $56.90 per barrel and a nett profit of $21.904, $28.638, $35.372 and $42.109.
The 55,000 barrels per day is probably unrealistic to achieve as an average. I have no clue what's achievable, but let's say an average of 45,714 (which is 16,000 for RKH's 35% share). This would mean 5,844,000 barrels per year for RKH.
If the company is worth 10 times more than the yearly nett profit (common in the oil industry), than only this part is worth the following:
$60 oil = $128 million (£1.57 per share)
$70 oil = $167 million (£2.05 per share)
$80 oil = $207 million (£2.55 per share)
$90 oil = $246 million (£3.03 per share)
Note that debts, current cashflow and other assets still need to be taken into account!
Assuming FID and a positive OM outcome, my calculations end up at 121p, but because so far things have always taken longer with RKH, I'll add a 50% discount. Put me down for 60.5p for the end of this year.
Oh, and latic thinks it will be 15p