Member Info for longtermthinker

When speaking about Zama;

“Great news for Mexico,” said Juan Carlos Zepeda, head of the National Hydrocarbons Commission, the government regulator. Taking account of all taxes and fees over the life of the project, he said, “the government take in that project is 83 per cent”.

WOW, that is a big take! I didn't realise the percentage would be so high, that must also be put into the equation when deciding Zama or SL.

LTT

Bloobird,

how can the word of Richard Rose be taken seriously! He is soon to be out the door, how many meetings has he had with Harbour there their future plans for the company have come up in conversation? Why would they even share their plans with someone they are sacking?

And anyway how can they say they like something when it is an unknown quantity! 600m barrels gets split with Pemex 40/60, will Harbour be happy to invest in 90m barrels in Mexico where the current President is wanting to roll back on opening up to outside oil companies? It would be a slippery slope.

But lets see, but for Harbour it would meet none of the criteria they talked about why back in October, but they can change their mind right. Suppose we will just have to wait and see.

LTT

“I will send an initiative to reform the constitution, because I cannot be an accessory to theft, robbery, I cannot accept that individuals harm the public treasury,” López Obrador said last week, according to Bloomberg.

Now maybe the unitization gets worked out and Talos even gets to be operator, but I cannot see a future for the other acreage PMO/Harbour own, so how does Zama not become a stranded asset? One of the things Harbour talked about steering clear of.

The unitization will show the direction of things to come I feel.

LTT

Not so sure, November 2022 is when the licence expires and I believe Navitas has until September this year to get signed in or get pushed out. So I feel we will get an idea of Harbours future direction sooner rather than later.

LTT

I have been thinking I have been thinking about Zama quite a bit recently particularly after Richard Rose made a comment about Harbour wanting to keep it , although no comment have from Harbour about this. Also after talk from Pemex and Mexico about allowing a private group operate the Zama oil field.

So I have been thinking, lets look at the group, Wintershall Dea have 40%, Talos have 35% and PMO have 25%, that’s a nice amount of lets say a 700m barrel field, but then we have to take into account Pemex are after 30-40% through unitization, so lets say they get 35% that’s 245m barrels, so the rest of the group get the reminder which would be about 115m barrels to the new Harbour group, non operated interest.

Until unitization is decided firstly how can Richard Rose make such a moment that Harbour would like to keep it? My numbers are not perfect, but if recoverable is lower and Pemex take move, nearer 40%, then it starts to look a lot less compelling! We don’t need to go into the issues of dealing with a Mexico government who have opened up to outsiders and then shut the gates again and are reviewing all the deals.

Is this a place the new Harbour want to do business, all that talk of being operator; being in control; not wanting to have stranded assets, was it all waffle? Are they going to turn their business plan upside down? Because it seems to me, doing down the route of developing Zama could be a start off in the wrong direction. I suppose tomorrow we will get a better idea of what the unitization will look like and make a better decisions from there.


LTT

Ovets,

I have to agree, haven’t quite got my pant on the line, but I feel we are the closest we have ever been to getting this across the line. I don’t see how the new Harbour/PMO can turn their backs on SL, I cannot see where else they will replaced production from! Buying old producing assets will not cut it as they potentially become a FTSE100 company. Zama is not worth the hassle and risks, plus it was always up for sale, why would they change their mind!

It’s a FPSO project, just like SL, but they wouldn’t be in the driving seat and only have a 25% stake. No I just don’t see Zama on the table.

LTT

Hi Much, I wonder if they will reimagine phase 1 ? I feel with there new size, why not do back to a bigger first phase, bigger outlays but it would be a bigger prize from the outset.

LTT

Showing a 7.4% spread here on LSE not sure how accurate it is, but any leak of news would send this far higher imho, for those with more accurate info the volume will be the first sign imho.

As RKH is an all or nothing play at the minute (well not quite nothing) the only thing that will move this is an arbitration result or Navitas signing on before Sept.

LTT

Nice one Wraith, good luck to you, I'm in a similar boat, 2019/20 December I got some PMO and RKH, then sold out PMO in Jan as thought they were a bit toppy at £1 and the profit was too nice not to take, more good luck that management to be honest.

Since then the few RKH I bought at that time, thinking PMO was about to get into a better position went down, I hung on thinking PMO would sort it's woes but then in Sept this year, as it became clear Harbour were taking over, I stared to average down further having bought at the real lows throughout the year; got some PMO too, just felt either way we would come out of Covid at some point and things would re-rate. Now with Harbour coming on board I am thinking to hold longer and see what comes.

Basically this turn of events although a bit tragic for Tony Durrant and PMO actually mean the possibility of the project going ahead is better than it has ever been because the debt ratio of the new company has been greatly reduced and they will have the income to fund SL development. In fact as PMO and RKH have stripped the project further and further to cut costs and get a partner and give back the free carry to do a phased development with UKEF funding; Harbour might be looking at this differently, they might want to rework it to have a bigger phase one as there must be cost savings and efficiencies to produce more at the outset, plus in the current climate of anti oil whilst it's still the lifeblood of our society, it might be prudent to get as much out sooner thus getting their money back sooner, then everything else is a bonus.

It is still a risk for sure, but if the arbitration brings anything like $100m to RKH, the company will be in a much better state to either get to first oil or should the worst happen; if Harbour threw away hundreds of millions of dollars spent so far on SL (not to mention the free carry they don't have to pay) by walking away from SL, as someone said on here, it would be bad, but we and FIG should have all the data and info to pitch a worked up, ready to go project.

Also the fact Navitas deal has been extended to Sept this year gives another reason to have a little confidence.

LTT

Yes it seems like it's getting close, the recent article with Italy's lawyer seems to point the way. You don't do a press article saying how this new precedent where internationally firms work on a no win no fee system for such cases (forgetting to mention the reason being Italy going back on it's word!).

So talking to the press seems like a pre-empt for a result that will not be in there favour in the same way prior to the Budget the UK Government leaks some info and press starts talking about 30p on Cigs and 15p on Spirits, then when the budget comes out, we all sigh with relief when its only 15p and 5p forgetting that it has still gone up!

No idea what the result will be but did someone mention previously it might all get put to bed by April so the Italian government could draw a line under it. Or maybe I was dreaming that bit like my dream about Harbour going hell for leather in to SL and we re-rate to 50p overnight! LOL

I am still a half full type person, I understand what Stevo is saying about Harbour not having a track record of doing anything but buy producing assets, but also don't see how they can mention PMO overseas opportunities and then come in to being and knock them all on the head! Zama is fine, it clearly meets none of their business model criteria and has been up for sale some time, so no surprises that it won't go ahead. But SL is a different kettle of fish IMHO, if they want to flex their muscles and become a bigger player with dividends and international growth, there is nothing even close to SL where they can be in the driving seat from the start. It is a rare opportunity for them to be able to materially change their production profile in 4/5 years as operator and have exploration upside they can take a pop at during the development stage. If SL was a stranded field, with no further upside around then of course, no way would it be on the cards, but Isobel, Johnson Gas to name but a few, never mind Phase two taking them up to 134k a day!

Anyway not long now that's for sure. Harbours first moves will be the most interesting and ultimately the signal as to SL and RKH's fate.

LTT

Suppose in a small community people just move around jobs all the time. Hope he is on the ball for the big changes heading their way! If Harbour pull the trigger that is!

Seems PMO is getting gradually re-rated in expectation of Harbour entity coming in to being. Brentl has been over $51 since 1st of Jan, oil companies are going to be posting bumper cash flows with all the cut backs on spending and streamlining of their companies this past year, or should I say past FEW years!

I am surprised it's stayed above $55 for some time, UK and world economies in general are not out of the woods yet with Covid, they are no where near running on 4 cylinders yet, not even 1, but the oil price stays high. Can't help thinking when things really start to open up, Oil will be $70+ in a blink!

Anyway the only effect that has on us is making Harbour look at SL more closely as it becomes very profitable indeed, but live it too late and service companies will be in demand and costs go up, thus profitability decreases!

Now where is that award from Italy?

LTT

Thanks Mogger, seems like the License renewal in May isn’t going to be a problem!

Roll on end of March and Harbour coming in to being. PMO when they are absorbed will, with oil in the mid $60 be bringing a lot of cash no doubt, an unexpected amount when you consider oil was in the $30-$40 range when the deal was announced! Possibly $200m+ extra for a start!

LTT

would be case closed and RKH receive £150m payout, keeping say around £90m, share rerates in a flash to 25p as with money int he bank (baring our board then talking about going on a spending spree!) we can survive without dilution.

May Licence extension is agreed on the provision FID within 12 months, then Navitas in the Summer signed up and bingo 50p is reached as Harbour seems odds on to make FID. Sept Harbour announce Div to shareholders and become a FTSE100 company and FID is made. RKH flirt with 75p. LOL Anyone can dream.

For what it's worth I didn't add UKEF into the equation as I see only two scenarios;

1. Harbour takes it's first breath end of March as it comes in to being, UKEF application is taken off hold and Harbour now being a larger entity gives confidence (with American backers too), a smaller loan request goes in which makes things even better and UKEF signs off on say $300m. This would need to happen sharpish otherwise scenario 2.

2. Harbour dither with SL and UKEF application stays on hold, by Summer they decide to continue with the application, but the reality is, it's a none starter now as its too late. UK are hosting COP26 and I see no way UKEF could sign off on a Fossil Fuel project even in an overseas territory later this year as they host this event, the UKGOV would look not only look foolish but it would be hypocritical. the press would have a field day and of course Argentina would bang the drum loudly about Malvinas maybe even take the green track of "They plan to drill in the pristine waters of the Malvinas that are rightfully ours................!"

One can dream, but even so and joking aside, can't see UKEF being part of the SL story if the loan doesn't happen soon, otherwise COP26 will make it a none starter.

LTT

I just don't see where Harbour can materially grow production at the lowest cost without Sea Lion. PMO needed SL but the debt kept them back and was their undoing (well the debt and covid, with the debt kicked out to 2024 they would have been in the money today and I imagine back to 90p a share, but alas it wasn't to be).

Harbour comes in to being next month, after trumpeting their push to be more international, using the NS cash (which at these prices will be considerable) to fund growth to pay div's to share holders, if they then knock Sea Lion on the head, what sort of message does that send out? They may not have been shouting from the rooftops about SL but their prospectus shows SL as a considerable opportunity to massively grow production (which as we have said, they NEED to do).

So just cannot see them saying no to SL, if they did, they would then have to go full in on Zama, again they made a big deal talking about their business style, to then go all in on something where they are not the operator with an massively indebted partner would go totally against what they have said previously, in which case, how would they be perceived as a new entity, with no real plans and following a path they said they never would.

LTT

Interesting to read that Exxon will sell 38K a day production to private equity fund HitecVision for $1B with additional upside of $300 million in contingent payments based on the potential for increase in commodity prices. This is mostly operated by Shell and Shearwater is in there too. Wasn't part of that on PMO shopping list this time last year? How times have changed!

So why I am putting this, well $1B to $1.3B for 38k barrels a day production, ageing production I might add is a tidy sum of money. However these will be on the decline and buyers will be beholden to the operators as to ongoing investment to try and up /maintain production.

$1.5b can buy 80K barrels a day, with a phase two project increasing that to 130K with lots of potential exploration upside. With oil heading north and the economies around the globe chomping at the bit to get cracking and make up for lost time, just cannot see how they would put this on a back burner or pass it by.

Seems like the days of buying cheap producing assets are numbered if not already out the door, Harbour will need a plan, so Zama or SL?

LTT

Cannot remember the structure of the award and percentage to our lawyers but if there was an award of say $135m (middle ground allowing for some loss of interest) we would have to expects 30/40% to go to our lawyers, hence the "No win no fee", wondering if Curly has put an extra claim in for a work related injury! Put his back out while reaching into the back of the cupboard for the last packet of Hobnobs!

LTT

Seems we are a bit in the wilderness until Harbour deal is done! We could get some news on a payout but COVID just has everything on a go slow and hope will not change are fortunes.
Harbour can no longer be secretive once the PMO deal is done, warts and all will be on display, it won’t take a rocket scientist to see that their production profile is full of ageing assets, it won’t keep their share price up for long even with a promised Dividend if as oil goes up, their production goes down.

Seems they have approvals from Mexico but I still don’t see where Zama will fit in with their business strategy.

Anyway we will see what happens, any leak that Harbour is sniffing about the SL project and this will be up, long before any announcement imho.

LTT

As oil hits $64+ I can't help thinking the new Harbour is going to be raking in the cash. I believe Harbour have quite a few hedges in place on their own production, however PMO's production has hedging to a much lesser extent so increases in the oil price will be having quite an effect on their cash situation or should I say Harbours cash situation from end of March.

Fingers crossed the higher oil price will make producing assets become more valuable giving Harbour fewer options to buy. They have plenty of work to be done in the North Sea to maintain their production but that will not make much of a dent in the cash pile coming in. They will be twice the size with over double the production. With 65K barrels a day and $35 oil, PMO would have ended 2020 neutral even with $2b debt to pay down. So at $60+ they could have made some real dents in their debt pile. Alas it wasn't to be, but it will give Harbour a good war chest to make hay while the sun shine; but don't leave it too long Harbour, you don't want to be sourcing rigs and materials as all the contractors and suppliers put up prices as demand rockets.

Will we be calling the next few years the "Roaring 20's" as we all come out in to the sun and make up for a lost year!

LTT

However they forget that depending on the vehicle you might get 350-400miles on a tank, what are we talking on an electric? 250? Suppose it’s a little unfair as if I filled up at a service on the motorway, I’d be looking at and extra 10-20p a litre. But still it’s going to be expensive for high milers.

LTT

after this past year; many have fallen; lots of write downs, lots of cutting back outgoings and overheads to the bone. PMO in particular ran a pretty tight efficient ship, it was the debt that brought it down, I could sort of see what Tony was doing, bumping up production, this time last year (what were they £0.90-£1 ?) was seemed to be the start of the up cycle, but alas Covid, a black swan event put pay to that, to Harbours gain. Last year PMO said $35 a barrel average for 2020 would keep them pretty neutral now with $60+ they are are making oodles of cash.

So I am pretty much expecting some bumper earnings all around, but will that filter in to exploration? I still feel in the current climate the big and mid cap players will be steering clear of the uber large developments. This has to be good for us and Harbour. Buying production becomes more expensive for a start; anything deep water also has to be lower down the pecking order. Work-overs, tie backs and exploration around current producing assets has to be the focus for many, but in the North Sea it would just be extending the production level plato a bit longer, not really adding a hefty amount.

There also has to be a great opportunity to see what service companies will do to get some work. I'm not saying do them over, but there must be a lot of oil rigs suitable for the Falklands either idle or becoming idle in the next year or so, with no-one wanting to book anything longer term until we see where oil is going. Everything is still knee jerk reaction and all these professional analysts change their predictions like the UK weather! Just look at the weekly reporting in the US, they are consistently way off the mark! My concern is that we head for a supply crunch and Russian and Saudi slack is taken up in and instant, where else is there an odd 1m to 2m capacity waiting to come on stream so quickly.

My personal view is everyone is underestimating the boom once things start a semblance of normality. Yes there are redundancies, jobs lost, it's happened to people I know; my work has suffered quite a bit too, but human beings are resilient, we pick ourselves up; dust ourselves down and forge ahead once more. Like a tree falling down in a forest; the gap it leaves doesn't stay empty for ever, no the light that touches the forest floor that couldn't before starts a chain reaction of nature taking advantage of things. The aftermath of this epidemic will be no different, people will be heading back out (possibly running or even galloping) with heads high, spending again; holidaying; eating out and seeing friends again, this will inevitably create growth, jobs and hopefully a rising tide to lift all boats.

Lets hope Harbour's incoming tide lifts this old boat! Lets hope Harbour can cause a tsunami!

LTT