Member Info for longtermthinker

I think saying a doing are two different things. Everyone is making the right noises but for me, I would be after a hybrid petrol/electric in the next 3/5 years, if hybrid became the norm, towns and citied would be far cleaner as their design suits that environment, stop start, slow speeds and stuck in traffic, longer journeys are another matter entirely. Don't get me wrong I'm all for electric vehicles but there are still so many practical things that need to be in place before the only option is an all electric, otherwise you will end up with loads of old bangers polluting the roads that should have been retired years earlier. Also where is the energy coming from when everyone is charging up on an evening? These folk buying 80K electric cars taking the moral high ground, yet the energy is coming from Gas and Nuclear.

Anyway enough ranting, will be an interesting decade. I see Buffet has seen that oil has been demonised to a point that it's worth investing in. Someone who has seen the cycle many times before and he is going to profit from it. Don't think his shareholders have demanded only green investments or they are leaving!

LTT

Just wondering what happens to all the cash PMO are making. Do they still have some hedges in place? If not they must be making a bit of cash since they cut back everywhere and made themselves super efficient. Last year they said $35 average in 2020 would leave them pretty much neutral, so what happens to the spare cash when Harbour take them over? Is that just a Harbour Brucie Bonus?

LTT

The oil price also seems to be reminding us how it's still important with what is happening in Texas; solar and wind does well when the sun shines and the wind blows, but as they have found at their cost, all electric network is no perfect answer, energy diversity is a necessity, no one option fits all purposes. Imagine if all vehicles were electric in Texas; what if there was no fuel for back-up generators.

So this idea everyone phases out oil in the next 5/10 years is pie in the sky. Harbour need Sea Lion without a doubt, it's really all about will they keep us along for the ride or chew us up and spit out the bones long before FID!

LTT

Nice one Croft, hope you are not a socks with sandals type of person! Just wondering, are you sure your partner will get you those slippers? You know what it can be like down the market these days, you see a pair you like, just about to pick them up and the owner of the store decides he wants them instead and palms you off with something much lower quality and value.

But suppose we will just have to wait and see, anything can happen these days and the unexpected often does!

LTT

But if they consume RKH they then need to bring in partners and if they don’t they take on all the risk, and future risk of phase 2 and further exploration. Yes they would have done the groundwork but majors are going green apparently, after this current slump in oil, many have fallen or are saddled with debt.

I hope RKH doesn’t get eaten alive, but it’s dog eat dog. If they do I’ll make a nice sum but if they make it to first oil, my meagre holding would be life changing.

LTT

I have been pondering this quite a bit, as others have mentioned, at our current market cap, our potential, our predicament (being we are pretty much sunk if Harbour do not go ahead), why not just buy RKH, even at today's share price, they could make an offer of 15p, even 25p who else would then step up to the gate in the current climate to bid higher, I think no-one .

So in theory Harbour could become 100% owner if they kick Navitas in to touch and take us out for peanuts say £0.33p (£150m give or take). I think quite a few might bit their hand off.

However even if FIG approved; Navitas and RKH capitulated what are the benefits to Harbour. Of course firstly they own 100%, but with it 100% of the costs, and 100% of the exposure and risk. They would also be at the mercy of new partners if they found the risk was too high and want others with big pockets back in, not an easy task in these strange times when oil is no longer needed after 2025 (he says tongue in cheek). Still the perception of that has to be off putting, who wants to invest in a new province with 30+ years of potential if by the time it's producing nobody wants your oil!

But lets just say they do the above and someone like Cairn steps in (fill in your own preference of partner here). Partner funds 40%, Harbour stay operator and Yayyeeeee, full steam ahead. 4 years later SL phase one is up and running, cash is rolling in; amazingly oil is still in demand and gas is looking even better. So Harbour say, "Hey Cairn, we fancy some exploration on the gas side whilst we crack on with Phase 2, how about it?", Cairn say, " Sorry matey, our 2024/25 budget it already spoken for, then in 2026 we are focusing on debt pay down so how does 2027 sound?".

A simplistic view but there lies the answer I believe, with a few partners involved you share risks, rewards AND the burden, that would be where the benefit of having RKH still around as in the above scenario RKH would be super cash rich; paying back it's share of debt in leaps and bounds; paying a div to us long suffering AND have cash left over with nothing to do but plough into further exploration in the new province. Harbour wouldn't have to wait for someone to match their funds to explore/develop/work over, Rocky would be aligned with Harbour in the region. With someone like Navitas its even better.

Harbours and all E&P will be focused on risk/reward and project payback, more so now. $15b deepwater projects even if they contain a possible multi billion barrel prospect that comes good might be 20 years to get their money back. Such investments are going to be few and far between from now, which is why the smaller cost efficient producers will survive and reap the rewards over the next 10/20 years. IMHO.

So for what it's worth, that is why I think Harbour will not buy out RKH. IMHO.
Good luck.

LTT

But surely they would want to sell the short now in the 20's and then sell the new shares at a higher price and pocket the difference, get two bites of the cherry!

Buy back the share today at 23p then in March after suspension new Harbour is say valued at 30p sell those and you have pocketed a further 7p difference. Or am I missing something?

I suppose just waiting from their point of view is the lower risk strategy, just give back the shares to cover your short, but hey, sure they know what they are doing. Covid has certainly played in to the big shorters favour that's for sure.

LTT

Hi Arfur, couldn't agree more. I read something a few weeks ago that all this banging the drum, about the end of fossil fuels is folly; yes we need to transition that is without doubt, but it needs to go in tandem, there is no quick fix. Something else talked about the energy used when some B level celebrity posts a picture on Instagram, the frenzy of sharing and trending and likeing causes a heck of a spike, imagine that thousands of times a second!

It really is chaos theory! Wasn't there a saying, "If a butterfly flaps it's wings in the Amazon, a Cyclone heads across the Pacific!" Now it's more like a celebrity take a funny picture of his butt in Brazil and a power station in Munich gets an energy spike as European servers need energy! Crazy world eh!

LTT

Hi Stevo12,

I think you are right it is a very binary outcome and it will be this year, either way we should be put out of our misery! LOL.

However I'm wondering about your "Strong Arm" idea, certainly Harbour could try that on, in their webcast they talked about relationships with suppliers and how they are know to be very tight on costs and push to make projects as viable and cost effective as possible, but how would that appear, it's like being the Mafia, "Take the deal or Mario makes you some concrete boots and you can swim with the fishes!". It's one thing to take advantage of PMO's situation, who were basically in a dire situation and anyway controlled by it's creditors, it's another to actually intentionally put someone in that position for your own ends. FIG would have concerns about such a tactic for a start; would you want the company running the show using such business practices! There is also the matter of what they would owe RKH if they said we are not going ahead and pay up your share of wind down costs. Suppose you could get in to lots of legal wrangling going down that path! There must be something in the contract somewhere as to what would happen in that scenario. Still could that happen? we are entering a new super cycle for oil, currently at $60 with the world ticking over in idle! What happens when the flood gates open? I don't think everyone says, "Tell you what, let's put off the Summer hols till 2022, I'm quite enjoying looking at these 4 walls!". Super lean oil companies are going from famine to feast, mark my words; quarter after quarter of right downs and profit warnings, now things are turning those cut backs and streamlining will pay dividends, literally and that is Harbours intention going forward.

Another reason Harbour liked PMO as despite the debt side of things, they were a very lean company, the irony is, with oil back at $60 they would be making (and are making) a lot of money right now. Back in April/May they were saying they had cut back everywhere so at $35 oil they could weather the storm in a roughly neutral position. So 65k barrels a day @ $60, they have $1.5m more a day now than last year, simplistic calc, but shows how the higher oil price can change their position (and all oilies for that matter).

Still if they had survived we would be looking at SL kicked down the road again a couple of years while their debt position became more manageable and UKEF would be less keen due to that debt position.

Now if only we could get a payout from Italy before the end of March!

LTT

£1 a share and they can have mine, however with an OM payout and Navitas onboard as I have said before, a sniff of SL going ahead and selling out before production would be stupid, it's not just 30% of SL, how do you value the acreage RKH has because as soon as SL is going ahead, all that becomes more valuable.

RKH is not a distressed company, the deal gets us to 1 year past first oil before paying back our share of costs, they cannot strong arm us like they have done with PMO, if anything it was PMO creditors who sold PMO down the river.

I am concerned we get bought out too cheap, Curly and Mo may look at a low ball offer as a way out to pastures new and advise we take it, but I would hope not, if SL is going ahead the rewards they could reap would make their salary look like pocket change! Not only that, how foolish would one look to have held on all this time only to fold just before you get the real prize. Look at Desire, what legacy does Phipps Jr have? All the cash in the world will not make up for Oil to Water and not hitting anything in a prolific basin!

I would like to think, jocking aside Sam is better than that, if he gets this over the line, all past sins will be forgotten and he will change the fortunes of Falklands Islands for ever and share holders like us would do very well indeed. There would be a sense of pride in achieving that for sure. I used to be a shareholder in Dana Petroleum then run my Tom Cross, i did quite well, but I remember reading an article after Dana was bought buy the Koreans where he said, he was doing a final shareholders meeting or something and lady came up to him to shake his hand and said she just wanted to say, she'd bought shares in the very early days of the company and after this deal she would become a millionaire, she could take care of her children and grandchildren whatever life was going to throw at them. He said it was something that gave him pride to know not only had he made a successful company, but done well for his shareholders.

Suppose we will have to wait and see.

LTT

Meant to say if they crack on with SL as some of their NS assets go in to serious decline (of course some will offer up infill drilling and nearby prospects to extend their life) they will not only replace production but add to it. If they don't they will be punished by the market for sure. Tullow has had a lot of bad luck, lots of reasons why they have been hit hard, then magnified by covid, saddled with debt and no direction as to where production growth will come from, their share price has been rated accordingly. Harbour will need to be proactive as a new company for sure.

LTT

Harbour have gone for PMO for a number of reasons IMHO, suppose first and foremost, Harbour have assets in the NS and the Tax loss of $4B they well get from PMO is fantastic for them, also the production and cost savings, they must have thought it was there birthday when PMO went on a death spiral, as oil looks to be stabilising above $50 (I realise we are currently at $60) but if the numbers are worked on $50 oil, the new group will be making a lora lora cash to say the least.

NS is their cash cow, with the tax losses they have an opportunity to make money and build a war chest with which to plan their future. As mentioned with $60 oil distressed and cheap producing assets start to become thin pickings. Yes majors are divesting but they are not selling off the crown jewels just yet, it will all be like the NS stuff Harbour already have, end of life or at least on the downward curve. Such a strategy has faired them well, but it's like spinning plates, the more you are spinning the more likely they will start to fall, you can't keep them all up and those that were not spinning so fast to start with..........so it's always a step forward but half a step back.

They may have not trumpeted the Falklands and SL but they have stated from the outset they liked PMO for the reasons above, but also because they liked it's international footprint and portfolio. Yes this covers Zama and other Mexico acreage and Asia but as it stands Zama is a non starter, it meets none of their stated business model criteria.

I am not saying SL is nailed on by any means, sure Curly and Mo could grasp defeat from the jaws of success at the 11th hour, after all their track record shows they are consistently better at poor descisions and losing shareholders money! However Harbour have shown SL as a massive part of reserves, if they plan to do as they say, expand their international footprint using their stated business model, then producing assets are on the cards, but to really up their game they need to do something that doesn't include them taking on something that needs investment to slow decline and put off the inevitable decommissioning costs.

For myself I am reasonably positive. I've listened to the Harbour teams webcast a few times, they are smart, want to be proactive, are keen to grow and state oil is here for some time despite the current demonisation and companies like theirs need to be around to supply. They also want to have an international foot print and pay a dividend, this point I find interesting. Harbour are entering a new world of analysts and targets to be met, not to mention keeping investors happy, talking the talk is one thing, now they need to walk the walk.

Significant long term growth opportunities are in the PMO portfolio ready for FID and to be sanctioned, yes a few years of development would be needed, but what a dramatic production increase it would bring with many further opportunities then on the doorstep. If they crac

Surely some military department would have something to say about the UKEF application! I mean FIG have said all along, oil revenues (which would be substantial to say the least) would pay for the military presence on the island to UK Gov. From memory some historic payments too!

How could UK not want to support the creation of jobs; help an overseas territory; secure energy AND have a fully funded military in the region. Seems a no brainier to me!

LTT

Hi Much, hope you are well, yes as far as I was aware UKEF application went in and was on hold like a lot of things due to covid, as you say, there debt position at that time would have meant it pointless to continue, as you say, no reason to not continue with it now.

Despite the set backs SL was PMO's future, they were set on increasing their production substantially through the SL development, they just were always on the back foot in the low oil price cycle and now it seems Harbour will reap the rewards as oil rises and the production tax losses against NS profits will help not only pay down debt faster, but pay a dividend and fund more production/SL development. This is something the new PMO/Horbour have to do, they have declining assets and they not only need to replace that lost production, but add to it.

LTT

PMO put the application on hold at the start of Covid. Presume that’s why it’s not listed.

LTT

If that is the case;

"most will simply use the shares they receive after the merger to close their shorts!"

a strategy that could be quite risky; if the share price drops then I suppose they could make more more from their short; but in a rising oil price $57.8 at time of this message; vaccine rolling out with some sense of normality returning from March onwards, even talk of Summer 2021 being saved! It could be risky indeed to have shares stop trading and then a few days later come back to market double what they are now. Yes I realise they are being given the shares to pay off the debt, but surely buying back the shares now around 20p is better than giving away your new shares valued at possibly 30p.

Just thinking out loud and wondering if there could be some buying through Feb and March if they decide to close shorts rather than take the risk.

LTT

Sorry if this is a silly question, but when the date is set for PMO to become Harbour, I presume shares will stop trading and the new shares issued to the market, so what happens to any shorts? Will they not have to be given/bought back to/for the original owners before that happens?

LTT

Very funny Happy and of course SL seems like a no brainier. We cannot expect anything until end of March though, maybe and hopefully there are talks and plans being made behind the scenes however but nothing can be official until Harbour comes to life, as things stand they are both separate entities.

Anyway with April being 39 years I think since the Falklands War I don't see anyone pushing ahead and making noises about SL development, why poke a stick in a hornets nest at that time, let the anniversary go whilst working hell for leather in the background. IMHO

LTT

It was nice to hear about the hedges getting stung, so often these companies with their huge war chests of funds can, to my mind create a situation that is self fulfilling, I know they say it's all part of bringing balance to the market, but the hedges surely push the balance in their favour. Also as in ARMC case, being a debt holder, they will have insight and influence over the company which puts them in a situation of insider knowledge, how can they be allowed to trade in the company in such situations!

It does stink in all honesty. I mean they held their huge short when the share price one year ago was £1 ish, so even now they are not going to close as the new company shares will no doubt cover it for them. Lets not even go there with regards the slap on the wrist for not declaring the biggest UK short position, a few million but how much did they make, not to mention how much have private investors lost!

Anyway all water under the bridge, we are entering a new chapter now where such leeches will not have a hold over the new Harbour. From March it's a new dawn, lets see what the new team with new ideas brings.

LTT

That’s the press and media in general though these days, speculation, hearsay and no real facts.

The bottom line is Falklands voted to remain a British Territory, they have a right to self determination. Argentina have enough problems without creating more, any physical aggression would be a shot in their own foot internationally.

I’d like to think now after Brexit the Falklands would be even more important to UK PLC, not just for the possible monies they would receive to pay for military presence on the Islands but also a foothold in the region a stones throw from one of the last great unexplored continents apparently teaming with untapped resources, I don’t mean oil as the way things are going in decades to come we will be all powered by batteries! But untapped minerals we will most likely need for our fossil fuel free future.

LTT