Member Info for londoner7

Hi romaron, first, I can’t believe that you attempted to post a sensible comment, and on bonds too, into the maelstrom that is the PMO board – been and gone in 5 seconds!

I only spotted it because I was looking back to posting history to get to your comments last night. I was going to let them go but your post this morning prompted a response, which is, I wonder if one element of the Bressay RNS regarding Equinor involvement has slipped below the radar.

* The contingent payment increases to $30 million in the event that EnQuest sole risks Equinor in the submission of the field development plan.

Rightly or wrongly, I interpret this as the possibility that Equinor will withdraw from the FDP if it largely comprises Kraken infrastructure, at an additional cost to Enquest of $15m. If that happens, I could see CNE perhaps taking an interest and aligning the Bressay interest with the 70.5%/29.5% Kraken split. It’s very early days but as you raised it ;-)

Now I have the floor, I will comment on your post last night.

I broadly agree with your view that oil demand isn’t changing anything soon. But perhaps I’m more wary of the challenges of new technology so see chilting’s contribution on Green Hydrogen as a valuable addition to the board.

I’ve worked most of my life in leading edge technology. At times the commercial rewards of the work were not obvious, or at least not on the scale some activities ultimately achieved. I worked on ADSL (broadband over copper), introducing it into manufacture in the US, proving the technology. BT acquired the licencing and sat on it for six years before it went global. I worked in a small team on a location technology. At night in the pub we’d have fun speculating what might be the market drivers. We never envisaged, first the Japanese putting GPS into phones, then Apple coming out with the Iphone. Our technology now sits inside every smart phone.

My point is that across the world there are activities that in themselves may not be significant but combined with others can be revolutionary. The speed of these activities is only increasing.

Yesterday, I saw a suave looking Elon Musk, pictured with his young, singer, girlfriend. I think the story line was that he’d earned $50B between finishing his breakfast cornflakes and finishing his coffee. The man envisages a community on Mars, and I expect him to achieve it. A Bond villain in the making!

I love it, and suspect the future (even before the worms have me) will be quite different to what I imagine

As you point out, oil has many uses – many unique. Some say that oil is too valuable to burn. Perhaps one day that will be the law.

I said, "In practice, I don’t see the sense in exercising these warrants until a sale of associated shares is in place – why take the risk?"

A qualification here. Another option is to exercise the warrant just prior to the expiry July 2021, assuming the share price is above 0.15p.

Sweatysock, you say, “Mosman completed a Placement to fund the Falcon Well only recently and still have further options to top our money pool “.

In a sense last month’s placement isn’t complete, there was an extra component - Investors are also receiving one warrant to subscribe for a further new ordinary share at an exercise price of 0.15p with a term of 12 months (the "Placing Warrants").
These warrants have been in the money since Monday. I don’t know the mechanism for exercising the warrant, but in value terms 500m warrants exercised and sold at the current selling price of 0.19p would add £750m to the Mosman money pool, and £200K to the warrant holders. That’s more than enough to fund any prospect US drills or pay the directors their outstanding fees, if they elect not to take shares in lieu of fees at the upcoming general meeting (I had a July date in mind – I did a quick trawl back but can’t find the info to confirm this date).

The downside is that existing equity is diluted by 30%, but as Mosman appears valued on Oz prospects and good momentum, perhaps the fundamentals don’t matter.

In practice, I don’t see the sense in exercising these warrants until a sale of associated shares is in place – why take the risk? But as I say, I don’t know the terms or mechanism for exercising these warrants. (A warning here – this is my amateur assessment. I only follow the Mosman story, I’ve no other interest. AV will be aware of these warrants. Perhaps he owns some.)

ps hopefully, this time I have my decimal points in the right place.

pps There are a further 200m warrants outstanding from the Feb placing but at 0.23p these are currently out of the money.

Therapist, so you noticed!

Kraken wasn’t ready for us, so I took the opportunity to work on man overboard drills. I had my eye on the useless AIS operator, but I couldn’t catch him. I’m old school but the crew convinced me to use buoys instead. Most recovered which I saw as a result. Needless to say, the AIS is now working.

When I say, 'only the smaller companies like Enquest may be in the oil game', I'm referring to the listed oil companies. The National players, Russia, SA, etc will still dominate.

Incidentally, in BHP's report today they sounded positive on their long term prospects in oil - a couple of decades. They use a 'conservative' 3% field decline across the industry and see deep water as being the significant new supply which will require much higher oil pricing than currently. Interesting to hear, from a business which is under pressure to exit oil but in spite of oil being only 10% of their total EBITDA see a strong future in expanding their oil production.

Also, they are withdrawing from coal for all the obvious reasons, but still see a profitable future for those assets in different (smaller) hands. I see a parallel with oil perhaps 20 years out - only the smaller companies like Enquest may be in the oil game.

chilting, thanks for your response.

Interesting stuff, I'll dig in deeper, but I sense still a ways off - the worms might get to me first ;-)

"electric cars are a dead end technology.... Green hydrogen is the future"
chilting, an interesting comment, but what are your time horizons?

I guess we can now term the petrol fueled internal combustion engine as a 'dead end technology', but it has been market number one for over one hundred years.

Green hydrogen is the conversion of renewable energy (electric) to hydrogen. Teslas run on electric. Converting electric to green hydrogen is expensive, largely due to the fact that the process isn't currently done at scale. However, any Physics GCSE student will know that the added conversions electric to hydrogen to motive power will be less efficient than electric to motive power.

I can imaging that a hydrogen fueled internal combustion engine may be cheaper to produce today than the battery driven equivalent, but the later is the new technology and I suspect its cost of supply is rapidly coming down.

I guess the question is, when does the hydrogen solution compete with the electric solution?

I'm writing this off the top of my head so appreciate I may be missing something fundamental. If I am please correct me.

My time horizon is about 25 years - beyond that I either worm food or staring at a blank wall - so should I be adjusting my current asset allocation which is firmly in the camp of copper and nickel through a 30 year investment in BHP. They are pretty good at assessing the long term stuff.

RNS - now we have some insight into yesterday's high volumes.

Investec has offloaded about 6% (c100m shares), with Blackrock picking up at least 2%.

When I saw this yesterday I suspected an off the market transfer between funds. Hopefully the rest of the Investec stock has been taken up by firm hands, who may be below the 3% reporting threshold. If not, and there's an overhang of available stock then we could see a temporary impact on the share price. A consequence of an illiquid stock, particularly one like Breedon with a £1B market cap. on AIM.

Tomorrow might tell us how firm the new holders are.

oscar32, you say, "I understand the newly drilled Catcher well showed good results in the well test."

May I ask, based on what?

Hi L3Trader, I though Jude Lagan's holding and sale quite modest so wouldn't read too much into it. Apart from selling part of an options award to cover taxes it's rare to get a reason for the sale.

Besides, I follow a simple maxim when it comes to director buys/sales ( I know JL is a senior manager rather than a director). There is only one reason to buy shares, but there can be many reasons to sell shares.

Daughter needs a housing deposit, the mistress a bigger flat, etc.

Stoneroses, I’m always sorry to hear of people’s jobs at risk. I’m an investor here and can easily adjust to changes with little impact on my circumstances but appreciate it’s a very different situation when your job is at stake.

At the latest update the report was 7% of staff still of furlough with sites opening up as demand came back. The June revenue comparative with 2019 was 91% (LFL) so sort of fits with the 7% number. Breedon promised a further update in Sept.

You say you work in the Northern region, which I know includes Scotland but these days extends south of the border. I live in Scotland and know construction was held back several weeks behind England, so I guess you are seeing a greater impact in your region than the Southern region – is that your experience?

We know from previous acquisitions that the CMA is most likely to raise issues with an overlap of ready mix plant, so I think you’re right to expect restructuring in that area – management has been good at predicting CMA moves so a delay in opening existing RMC sites may be in preparation for a decision on wider restructure. The 26th Aug is a key date.

I would hope that cost control is an ongoing activity but always better to be doing this into an expanding market rather than a contracting market. With the almost stagnant markets of the last couple of years I suspect management are to some degree playing efficiency catchup under cover of the pandemic.

As an investor, and in your case an employee, we can only hope that the Boris build, build, build mantra has substance. If the market gets close to a sustained 2-3% p.a. growth I’d expect Breedon to benefit substantially, for all our benefit, through dividends and SAYE payments.

Sorry Therapist. I had a momentary wobble at the wheel, but back on track now. I just gave the AIS a kick, but it’s still playing up. I’m on a starboard tack, making good progress, but getting odd looks from the crew when I call for more sail.

I’m looking forward to playing with the DSP buttons later, although word is that one of our Swedish posters is crying into his färsköl at the prospect!

Breedon has the bases covered, whatever the composition.

A concrete mixture ratio of 1 part cement, 3 parts sand, and 3 parts aggregate is available from your nearest Breedon facility.

For an additional fee Breedon will mix if for you and supply to site.

A chance to blow the cobwebs off my Coastal Skipper’s badge.

I’m good on open water, and how hard can an FPSO hook-up be with all those fancy DPS electronics – I guess it’s a bit like auto park on the merc.

Hi L3Trader,

I'm guessing your net debt number is for the interims. With CapEx spending there's too much noise around mid year so I'm passing. I'm expecting the commentary to be the more interesting part. I'll be all ears on Magnus, my current plaything, but hopeful of some guidance on the credit repayment trajectory. I had considered the possibility of refinance ahead of the 15th Oct option deadline, but with the news on Bressay and possible FID in 2021 I suspect that will be a package of financing for 2021.

Thanks for the link to the bunker pricing. I don't follow this stuff but if I have my calculations right the price per Kraken barrel is $48.7 in Rotterdam and $53.5 in Singapore, which might be Front Savannah's destination after a top up. But to complicate further Kraken is probably priced at a discount/premium to VLSFO.

I know you like to see the workings so here they are:

Kraken API 14deg.

From Wikipedia {\text{barrels of crude oil per metric ton}}={\frac {{\text{API gravity}}+131.5}{141.5\times 0.159}}
Sorry about the formatting, but I get 6.51 barrels per metric tonne.

Rotterdam $315.5 mt, and Singapore $346 mt, gets you to the barrel prices above.

I don't know if marketing and trading is done in-house or if a trading company is employed but with the oil price instruments available the pricing, or differential on Brent, is probably agreed long before Kraken oil gets to Singapore. No doubt price differentials and shipping costs are carefully assessed as a $1 difference equates to $1m for a fully laden Front Savannah.

is a possible candidate for the next Kraken offload.

Then?

Possibly a top up for FRONT SAVANNAH which is still sitting in Orkney with 500K from offload #73. Can she take another 500K? A big girl if she can.

Now I'm completely out of my depth! Where are the tanker spotters who know this stuff?

And also, additional $30m over Mosman’s pro rata costs, should read $30K.

Oops, one significant error in my post.

Champion acquisition cost USD 108,000, not $108m. Sorry, I'm used to bigger numbers, but the comments hold.

“As part of its ongoing project evaluation, Mosman has reduced exposure to costs by farming out 10% of its working interest in the Champion Lease to an unrelated third party. That party will pay 13.34% of all costs of the site preparation, drilling and completion of Falcon-1 to earn a 10% interest in the lease.”

This is the only news in the RNS, the rest is filling.

Is this good news or bad news?

In Sept 2018 Mosman acquired a 60% WI in the Champion lease for $108m.

At last year’s farm-in, Xstate agreed to pay an additional $30m over Mosman’s pro rata costs – I took this to be a contribution towards the cost of the Champion lease. Xstate then withdrew from the farm-in.

At the placing last month Mosman stated, “Mosman has a 60% working interest and will pay 80% of the first well in the Champion Project. This well has an estimated total cost of cUSD700,000 to drill and complete. “

Today, “as part of its ongoing project evaluation”, Mosman has given up 10% of the WI to an unrelated 3rd party on the same pro-rata cost terms Mosman disclosed last month, i.e. 80/60 of costs for each % WI.

Either Mosman has decided to de-risk the project or the c$93m reduction in costs was forced on them by the delayed sale of Welch. If the project meets expectations the partners would want a repayment of investment within 12 months – that’s the typical target return on say a $30m-$60m well tie back in the North Sea. A good return if the oil gods are kind.

But there’s another point I nearly missed. The ‘unrelated 3rd party’ now has a 10% interest in the Champion lease from Mosman at no cost. This 10% interest cost Mosman $108m/6 = $18m. A 10% interest in the well is one thing, a 10% interest in the lease is something quite different. Is the RNS wording wrong?

I often wonder about the timing of Mosman RNS releases – during market opening hours. Is it to sucker in punters who given time to interpret the news might not be so quick to hit the ‘buy’ button? It certainly makes it a traders share.

There may be good reasons to hold Mosman, but I believe the US operations do little more than maintain the company and its directors, supported by what has become a biannual placing.

Falcon 1 may be a very good investment, the drill bit will discover if it is, but the real winners would be Baja who have a 30% WI for 10% of the cost, albeit they contribute time and effort as operators.