The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Part III
OTHER PLAYERS
SpotOn does have interests in providing well design and drilling project management, reservoir and field management services, as well as having an interest in the Odfjell Drilling company and Awilco Drilling, which owns some semisubmersible rigs. These are all minority investments. SpotOn also notes an association with the Norwegian engineering firm, Aker Solutions, which specialises in low-carbon emission designs, but again works with a lot of other players. The agreement Linn drew up with SpotOn in April last year offered it “exclusivity until October 31, 2020” to assess the potential of the Barryroe field and agree farm-out terms. The key to this, obviously, was funding, which would make it easy to find a service company and drillers to do the job. By the end of October, however, SpotOn had failed to deliver so Linn allowed a further one-month extension but even by then thegoods had not been delivered. Despite this, Linn went ahead and agreed a 50% farm-out deal with SpotOn, which presumably provided evidence that it was close to securing funding. This reduces Providence’s stake in the field from 80% to 40%. What is understood is that Pareto Securities, a Norwegian investment bank, has agreed to lead but not underwrite the raising of a $50m 10-year bond to partfund the project. On foot of this, the big French bank, Société Générale, is considering a $35m 10-year loan and the Norwegian government will provide a $45m export credit guarantee on the basis of using Norwegian drilling and service companies.
DEFERRED FEES
On top of this, SpotOn says that its consortium partners will defer part of their fees to the tune of $35m. This appears to bring the total inferred funding to the $165m that SpotOn signed up to. What investors need to ensure is that the key initial $50m bond is in place at the end of next month. With oil prices recovering to $60 a barrel, prompted by the rollout of vaccines worldwide and the predicted economic recovery expected to follow, the odds of this bond being put in place have decreased. What is exciting about this is that according to SpotOn’s feasibility study, the estimated breakeven point for Barryroe is $25 a barrel. This means that with 350 million barrels recoverable, the profit on the field could be of the order of $12bn, leaving the value of Providence’s potential profit share here at close to $5bn. Providence shares are currently trading at 7c, which is 99% off the €7 they traded at back in 2012 when the exploration company had just completed its last successful drilling. The current price values Providence at €50m, which is about 1% of its potential profit share from a successful development on Barryroe. This makes Providence shares look like the most underrated share on the market and they are likely to fly on the back of any confirmation that the $50m bond is actually in place.
Part II
Providence has one significant asset – its now 40% stake in the Barryroe oilfield, which has 350 million barrels recoverable and has flowed on oil on test the five times that it was drilled, most recently in 2012. While Linn is right to focus on Barryroe, it is hard to justify the dumping of all Providence’s deep water Atlantic margin licences simply in order to save money. Linn has no experience or background in the Irish offshore resource sector and as a chemical engineer does not have the academic training to fully understand the rather complex Barryroe field. This helps explain the decision to farm out the development of this field to a third party with more knowledge and experience. It was, of course, Plunkett who was in situ as chairman when Providence raised €70m in a share placing back in June 2016 at a price of 16c and then signed off on the disastrous farm-out agreement with the Chinese Apec consortium. A more obvious choice for Plunkett to have picked as CEO is Steve Boldy, the current CEO of Lansdowne Oil & Gas, Providence’s 10% minority partner in the Barryroe consortium. Boldy worked as a petroleum geologist in the Department of Energy and then spent 19 years with Amerada Hess (now Hess Corporation) as its UK and international explorations manager. In 2013 Boldy joined Ramco, which developed the Seven Heads gas field off Co Cork, just above Barryroe, before moving to Lansdowne in 2006 where, for the last 14 years, he has been studying the Barryroe oilfield. Presumably he could have been poached from Lansdowne, where he is on a salary of only €70,000. SpotOn’s own website asks if you are “looking to sell or farmout your off-shore oil and gas field for development?”. The Norwegian entity claims to have “a new approach to cost-effective offshore oil and gas field development”, whatever that means. CONSORTIUM SpotOn boasts of working with “a consortium of world leading service providers”. One of them we now know to be Schlumberger, an American oil service company that works with an array of operators so the tie-in is far from interesting. SpotOn also claims to be working with the Norwegian oil services investment company, Akastor.
Part I
Providence shareholders prepare for bond boost
IT WAS reported in the Business Post recently that Providence Resources’ farm-out partner, SpotOn Energy, had approached the Irish exploration company about a potential merger. This was not too surprising as Providence’s chairman, Pat Plunkett, and CEO Alan Linn had previously outsourced the job of finding farm-in partners to SpotOn rather than doing it themselves. The good news for investors is that the expected €50m bond placement at the end of next month could set a fire under the shares. This would not be surprising given that the company is currently valued at about 1% of its potential €5bn share of the profit from any successful development of the Barryroe oilfield.
SpotOn injected £0.5m into Providence last year courtesy of two placings and, in response to press speculation about a merger, Linn issued something of a nondenial denial earlier this month: “We are not currently involved in any merger discussions with any party.” He went on to add, however, that “we will continue to work closely with SpotOn Energy to deliver the necessary funding to develop the world-class Barryroe asset”. Linn did not say Providence has not been approached by SpotOn, simply that he is not involved in any merger discussions. Reading between the lines, if SpotOn can deliver the “necessary funding” for the agreed early development programme (EDP), then it might see little purpose in having Providence just sitting there as a sleeping partner. Rather, it would make sense to merge with Providence and run the whole show. At that stage, Linn would have no obvious central role to play despite being on a generous salary. Linn finds himself tied into SpotOn, much like Tony O’Reilly Jnr and John O’Sullivan were to Apec three years ago, which was supposed to come up with $200m funding for a five-well drilling programme, instead failing to pay even the initial $5m. Plunkett eventually pulled the plug. Why Plunkett chose Alan Linn as the new CEO remains something of a mystery. He is a chemical engineer by training, rather than a geologist or geophysicist. While he did work for major operators like Exxon, Lasmo and Cairn, it was not at a really senior level. In 2008, Linn joined Roc Oil as COO and rose to CEO in 2010 but in 2014 Roc Oil lost €31m and was subsequently suspended from the Australian Stock Exchange.
Linn then opted to jump ship and became CEO of the distressed African oil and gas company, Afren, which went into administration in July 2015 and was delisted from the London Stock Exchange. In 2017, Linn moved to Third Energy as COO but “following a strategic review of the business, the decision was made to divest the offshore business and focus on the onshore”. Linn ended up as CEO of the offshore business in July 2019 but exited six months later to join Providence in January 2020.
1) I think an update could have been expected that there was a hitch in execution of the transaction before 7 months had elapsed.
2) regarding the 21p price, I assume this is between OF and Tosca? Is there a rule to prevent Tosca from completing the transaction below the current price? Either way, it doesn’t bother me and, in particular, I’m happy that this is the dilemma rather than what happens if the price had dropped to 14p.
https://www.nytimes.com/2021/01/20/business/energy-environment/suriname-oil-discovery.html
Irish
I’m a bit puzzled by the faith in Cope. She seems to have been a crucial part of the old regime and I recall several knowledgeable posters here gleefully nominating dates by which she would be booted out by the new regime.
19. Lansdowne Oil & Gas (LOGP): The Barryroe Bond
We have another “waiting game” opportunity here at Lansdowne Oil & Gas, where the hope is the multi year story of the Barryroe oil and gas field offshore Cork, Ireland, should soon reach its denouement. Having already been kicked and punched by the slings and arrows of the Green Lobby, red tape and multiple parties being involved, shareholders in Lansdowne, as well as Providence (PVR) and San Leon Energy (SLE), are all waiting for a decent conclusion. This optimism took a dent at the end of November when the “signed farm-out agreement” turned out it was missing the bond financing requirement to get the show on the road. However, given the way that the SpotOn consortium should have deep enough pockets and / or rich enough friends to find sub £100m financing against a rising oil price, a happy end to this painfully long affair should be in sight for 2021. Given that Lansdowne shares are trading below their enterprise value and have flushed out carpet baggers in what was a very crowded trade ahead of the farm-out news, even the whiff of a bond deal should lead to a decent reaction in the stock.
About not hearing from Irene!
Me too; I blocked her months ago but she still seems to appearing a quarter of the posts!
From this week's edition:
The Omanis are also 29% shareholders in Kenmare (KMR).
"A rather more interesting proposition would be for Kenmare to take out Aminex, which is at a development crossroads. It
is about to drill a significant third well to prove up its one trillion feet gas discovery, which has a gross value of $3bn at the current market price. Aminex is currently capitalised at only €15m and would need only $100m to fully develop its onshore gas discovery, with the pipeline in place. Coincidentally, the Sultanate of Oman also has a 29% shareholding in Aminex."
It would be interesting to hear from some of the seasoned contributors on this board a considered assessment of what can be expected in terms of events and prospects in the short/medium term (including from Drewky if he might make a return!).
SkyR
You’re not asking for much, are you!
OTOH, the plan is the deal that Spot On are trying to put together; if achieved and good, the rest is the easy bit.
As the poet said: “That’s all ye know and all ye need to know!”
Fortunately I didn’t come in at 18p but unfortunately I did come in at 10p with expensive consequences! I have gambled (no other way to describe it!) with the new outfit and will get my money back if it hits 2p so even at these levels I can get quite impressed with a few 60% increases, particularly if they hold! ;-)
Of course, everyone is free to spout as they like about politics and, at one time or another, most of us do.
That said, I would caution anybody not familiar with Irish politics to ignore the rants on here which purport to predict or explain what’s “really going on”!
On Yahoo/Finance it’s PZQA.IR
It’s up to date with the usual delay.
Assuming the apparently certain, that forum want their money back and/or make a profit, can any of the more knowledgeable posters identify potential traps for PIs?
For example, in reversing in an asset/project can the price be such that there is heavy dilution and a depression of the share price which would still allow Forum to gain simply because they have multiples of their current shareholding and don’t need the price to go above 0.5p in order to profit.
Is this scenario possible?
Real-time prices (free??)
Has anybody found a source of real-time prices; even WeBull which had r/t price graphics has discontinued recently?
Barnyards
“any money borrowed during this attempt will have to be paid back and it has to come from somewhere and/or someone.”
This is the logic that justified the ten years of austerity in the UK and lots of Europe.
The experience of quantitative easing would demonstrate that that is economically mistaken.
Moreover, in the aftermath of the initial 29 crash, governments did the exact opposite both deepening and prolonging the depression!