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“And to that end, UKEF support has been granted to enable development of the Falkland Islands resources an an overseas territory”.

Now wouldn’t that be nice!

LTT

Hi Auson,

I see what you mean, I suppose I was thinking along the lines of more reason for Italy to sort it and pay up, particularly if they are looking for investment in any sector going forward. The big news with India and Cairn is bad press.

I just hope it starts to make SL and dealing with FIG look more and more attractive. If as seems the concensus we are in the twilight of fossil fuels, then such a region with great fiscal regime is a sure way to get a quicker return on investment.

To be honest my biggest concern as many shy away from fossil fuel investment is what happens when nobody invests in extraction and production can't be met by the likes of Russia and Saudi, they can't earn enough to invest further and oil starts to rise? We might all be able to afford and have access to an electric car in the next 5 years, but do we have the infrastructure to support it, does wind and solar have the clout to fill the fossil fuel gap? I know for a fact the Nuclear project Hitachi walked away from was a king pin to UK's energy needs over the coming years, now it's not happening, nobody is talking about the elephant in the room! What is going to make up the slack? Despite the move from fossil fuels, we will need gas powered stations otherwise we will be in big trouble.

LTT

It is a little off topic, but this does affect us in a couple of ways. Will Italy want to go the same route if we get a sizeable payout? Will they try and settle before the final decision? India doing this will hit them hard when they are looking for partners in the future, big and mid cap oil players are having it hard enough without the risk of losing billions when countries start down a nationalistic route.

The other reason I bring this up is obviously to do with Harbour. India is a pretty international player, in most cases following the international rules of play, but this will spook oil companies a bit. It will make Harbour again think twice about doing anything with Zama and the state run Pemex. I can understand dipping a toe in on some smaller projects as a partner to build relationships, but Zama would be a big project; are Harbour really up for investing billions to then have it all taken away and spend millions in court to get anything back! They must see that part of the reason they have got PMO was because the Zama sale was strung along by Pemex, they would be foolish to put the new group in the same situation when an oven ready Penguin is basted and ready to go!

It will be interesting to see how things play out.

LTT

Falklands, just do the filter, I used to have a giggle reading Godders, but realised it's for the wind up or he's really bored, I didn't want to waste any breath and feed his obsession. There is no sense as to why he would hold and be here when he seems to hate RKH so much. The story of being left shares blah blah blah and pointless to sell is ridiculous, he could have been out a week ago at a high and be done. He didn't so there are other reasons he is here.

If though you are genuine Godders (although I filter you, but see the green bars and people trying to reason with you), then I apologise and suggest you seek some help for what is obviously a kind addiction, really I mean is sincerely, sell up or get some help mate.

LTT

I wonder though how the market will see the new Harbour with a depressed share price because they are out of favour as a fossil fuel producer, when they are paying a dividend and have massive earnings per share! British American Tabacco as far as LSE are concerned have a 7.25% yield in these strange times where money in the bank isn't worth having langusing long term, that's a great return. I don't see everyone fleeing from that stock!

Don't get me wrong, we need to transition to a clean energy economy, but knee jerk reactions are no good for anyone. Harbour have set out their stall, they produce fossil fuels for an economy that still needs it massively to keep it going AND produce energy to build that clean energy economy. Maybe 5/10 years from now they will start to transition, who knows, but for now their focus is fossil fuels.

IMHO LTT

PMO 926m share in issue currently at 18.5p per share.
As this is approx. 5% of the new Harbour we can say that the new group will have 18.5B shares. For arguments sake lets say they use the opportunity to do a consolidation 1 new Harbour share for ever 5 you own (this would be clever as who has an exact number to dived easily by 5!).

Ok still with me?

So now we have 3.7B shares in issue @ 92.5p a share.

From now on it's pretty much guesswork and hypothesis but this is mainly to get our heads around what the company might/should/could be worth. New group average 220k per day production 365 days per year = 80m barrels a year. (give or take).

Now let's just say with the rising oil price and Harbours hedging and tax breaks we get $7 a barrel profit after tax/expenditure/pay down debt etc. $7 a barrel clear at current prices.

80m barrels a year @ $7 = $560m

So how does this compare to its peers? Does this hypothesis confirm that when Harbour comes to life we will still be at 18p or lower/higher?

All the above is just back of the fag packet calcs but I think it's interesting, it shows how a drop in production or a drop in the oil price can effect things dramatically, but that also means, stable production, more coming on stream and a $ or two on the oil price, also materially effects earnings to the positive.

With the above in mind it makes clear a couple of things; Harbour need to maintain and show how they will grow production over the next few years especially if they plan a dividend, otherwise mr market will crush them and shareholders locked in will not be able to get out easily. A rising oil price while production drifts lower will only save them for so long.

as mentioned these are very rough numbers so if anyone has more accurate production numbers/decline curve stats/lift costs per barrel/capex/debt costs etc the above can be fine tuned for sure. Still interesting though. To my mind I just don't see how the new enlarged Harbour will be at 18p!

LTT

RKH is the most attractive it's been for a long, long time. There was a really smart guy on iii called Stu I think, when PMO signed up he was hounded a bit for saying PMO was the wrong company; it was the kiss of death. At the time on the surface it looked great to have a partner, but it ended up being an albatross around our necks! PMO's debt mountain just kept dragging them and us back, to the point where the UKEF application and Navitas coming on board was our last chance saloon.

Covid came along and all the hidden cracks opened up and it was PMO's undoing but their misfortune has cleared the decks so to speak and Harbour have the production profile and cashflow to service it's debts and invest in production as lets face it, they really need to replace declining production assets. The hedges they have in plus a rising oil price (even at $55 SL is lucrative) has to be the time to invest in production that will come on line possibly 2024/25 as at that point their NS production will be well down the curve.

The other thing with Harbour is it's size, they will be a big company with the clout to do deals, sign contracts and have access to long lead items that small companies may not. This is all good for SL going forward. If UKEF come good then brilliant, but if they don't in the current climate it's not the end of the line for SL where as it would have been with PMO. To be honest if PMO had survived in this current climate, even with UKEF support it may still have been put on hold for a few more years. IMHO

LTT

To be honest I had until recently written off any hope of an award, so anything we get would be a bonus. It always seemed a bit too hopeful but then with the court case and no win no fee, things picked up.

Of course a £300m payout would be great, but in reality if Italy wants to settle outside for £100m of which I believe we keep 60% or so, then I would hope RKH would bite their hand off. Even £50m where we would keep say £30m would be a game changer for the company, it would mean no dilution to first oil should SL go ahead and if Harbour drop the SL project (feel this is unlikely, but you never can tell) we would get 100% back of the whole thing; we would have access to all the data and developemnt planning. This would be far from ideal and would decimate the share price, but with a bit of cash in the bank from a payout, it would leave RKH with a little wiggle room/breathing space to sit down with FIG and discuss new scenarios to get in a new partner, this could include tax breaks; lower corporate taxes; a tier royalty system where the royalties start very lower and increase over 5 years of production or pegged to oil prices.

Suppose what I am getting at is, we are entering a new age of Fossil Fuel demonisation; promises we will all be in electric self drive vehicles in 10 years with funding for oil and gas projects seen as wrong, as I'm sure these fund managers shouting about this are cycling to work; have downsized; staying local; given up their 2nd pad in France and no more private jets to their yacht in the Med eh!!!!!!!.

All these things, should it come to pass will make FIG start to think out of the box if they really want to get oil revenues to protect their way of life and economy far in to the future. But this is the last chance saloon, leave it too much longer and it will be game over for sure. However I do not see it getting to that stage, I would hope Harbour are having such discussions from March that will enable SL a go ahead.

LTT

Seeing a lot of green filter bars these past few days, is Godfrey complaining because the price is going up? LOL, I mean if he had the millions of shares he says he has and has such hate for the company, can't understand why he doesn't take the opportunity to get out, a 4p rise on 2m shares, well is about £80K. If I had those shares and truly believed this was a false dawn ready to fail abismully I'd take the £80k thank you very much and be off! But hey I'm adding fuel to the fire here aren't I, which is what such poster want.

But to counter my positivity, cannot see how this rise can be sustained without news and momentum in the oil price. of course we have no production, just a possible payout, so it's either hope of that or just the idea that our oil in the ground is becoming more valuable. But we still have a long way to go, with banks being urged to not invest in Fossil Fuel projects (think it was HSBC recently) and other investment companies turning away who knows what is going to happen. I just feel 2021 is the last chance saloon for this going ahead then I can walk away with head held high or head in hands! LOL We shall see.

LTT

Why would they bother buying shares in the market when they have tranches of options at such prices, if they are coming up to expire then just vote themselves another tranche or sell straight in to market and pocket the difference. It certainly is jobs for the boys, the lax regulation in aim enables so much for the unscrupulous (I am not implying anyone in RKH by the way). However that is the nature of AIM, they risks are high, you are more likely to lose everything than win, but it is the place where if things come good the returns you can make outshine anything else, hence not for widows and orphans and should only be a small part of a balanced portfolio.

It's not for everyone, but you have to be in it to win it as they say.

LTT

Just stumbled across an article for October on Energyvoice, search for "Chrysaor and Premier Oil to merge, BP deal scrapped". First time I have seen an analyst put up a graph showing Chysoar decline curve projection as is and with PMO deal done. It's quite telling, although it obviously adds a nice amount of production, it only raises and then levels the curve out to 2022, then decline continues as before although from a higher starting point.

So this was done when the deal was announced, how close are people going to look at the company once all it's secrets are on display, it won't take long to realise they have have to do more than keep buying old declining assets if they plan to pay and sustain a dividend going forward. PMO despite there issues were pinning their hopes on SL coming on steam to not only maintain production but take it back up the curve, it was going to be a huge part of their future, they just couldn't get there due to the debt burden.

If Harbour knock SL on the head I just don't see where they can expand internationally using their business strategy unless they go into another mature basin and take decline assets of the hands of a major, but if they do that again, they will be seen as a one trick pony, buying into decline for jam today but with the legacy of cleaning up and turning the lights off at some expense.

Wonder what is going on here though, this rise will not be sustained unless something is happening behind the scenes we don't know about or news of an award is in the offing. Now that would be nice and give us a lot more stability going forward.

"This time next year Rodders!" has never seemed more possible than in 2021. Roll on and out that Vaccine; Biden knock shale on the head and Opec+ stick to keeping those taps closed!

LTT

CitizenTS, as far as I am aware and what I heard from PR, the submission had been put on hold, not ended so my thinking is, it will need to be amended and continued with, pretty much everything would stay the same, just a name change and update of the new Harbour's better financial position. As to the semantics of UKEF ending fossil fuel overseas investment; does that include overseas British territories; do they mean on new applications; does that include those already submitted etc! Who knows.

LTT

Not sure Harbour/RKH/Navitas would want to give up a further percentage to bring Cairn on board especially as Navitas deal is kicked out to Sept 2021 (a decision needs to be made by then).

So Cairn with a war chest of cash would either need Navitas kicked out and they get access to their percenatage. Not sure how happy Navitas would be with that, but then can they prove they have access to funds for their share of development.

Other option as suggested is Cairn buy RKH out. This is an interesting one as yes they are incredibly cheap, but what they are worth is not reflected in the current climate for sure. PMO got taken out effectively by Harbour but PMO was in a very dire situation in a terrible market, the stars had lined up in the most negative may for them, having to renegotiate the millstone of debt around their necks with a worldwide pandemic decimating their revenue stream. The vultures came in. Luckily shareholders will retain 5% of the new group but they could have ended up with nothing.

So can Cairn buy RKH, I don't think so, they would have to be chatting about this behind the scenes and RKH is not yet in a position to run out of cash at the minute or raise funds. They are having costs covered by Navitas and Harbour to first oil; or is it a year post first oil, either way, nobody is coming knocking on the door for $500m share of costs. So with that in mind why would Curly and Mo sell us out. they can ride the gravy train for a few more years and if SL comes to fruition all those share options will make their income from RKH over the past 10+ years look like loose change! Then as said before, at the slightest hint of FID and SL going ahead you would be looking at 50p in a blink. If SL is going ahead, the rest of the acreage comes in to play and what that holds.

I just don't see them selling us out so cheaply, it's not in anyones interest when we are in reality we are so close to the finish line. As Harbour completes the reverse of PMO we will instantly have a partner of scale and with resources to actually do what has been talked about for years. PMO has been a slave to its debt, this time last year it seemed they were turning a corner, but the pandemic knocked that on the head, the debt pile and timing to reorganise it was just really unlucky. Despite this being not great for PMO shareholders (of whom I am one), to me it seems great for RKH and SL. Now there are no more excuses, no more being tied by huge debts they can hardly service; no more risk of having to sell off parts of the business to pay down debt; no more bending to lenders controls. If nothing else we get to know this year if it's on or off and that is a good thing.

LTT

Seems like a bit more paperwork and a court hearing in Feb but then it's game on, still looking for new company to become Harbour by 1stQ 2021. Interestingly mentioned in the RNS,

"In addition, the regulatory condition to the Transaction regarding Premier's licence interests in the Falkland Islands has been satisfied."

So I imagine (of course I don't know for sure) PMO/Harbour have had some talks with FIG, can't imagine it would just run along the lines of, "Can you sign off on the change over to Harbour so we are sorted for end Q1? May Licence extension! Oh lets not talk about that yet, we are still not sure we are bothered to develop SL. FID, Navitas? Ermmmm let's not talk about that just yet, no we can't comment. Anyway can you do this sign off sharpish or what?".

As of this post $56+ Brent, wonder if the oil price keeps heading north, could Harbour hedge part of the future production for SL. That would be interesting if they could as I seem to recall anything about $50 and SL would be quite lucrative.

Interesting times just got a whole lot more interesting! Fingers crossed.

LTT

Would make a lot of sense, Pmo having done the numbers and synergy cost savings. If PMO back 1 year ago were planning to buy and it be profitable then, it must be a no brainer now as expectations climb of vaccine rollout and everyone vaccinated by Autumn! More production cash at higher oil prices to fund.............?????????

LTT

Hi Overts,

and those $4B in tax credits are not all going to be ploughed back in to the North Sea, they need to maintain production there as long as possible and maybe increase but longer term, ageing infrastructure at some point we not be cost effective. They need to invest those profits from the NS cash cow where they get their biggest bang per buck, getting dragged in to a money pit project with no say is just not on thier radar no matter how big the prospect might be (Mexico). With plans for a dividend they need to secure future production to pay it. The new Harbour cannot sit on its laurels as from March when the deal is done, they will be under scrutiny, something they have not had before as a non listed company.

LTT

If PMO walk away then 100% of SL would sound great but in reality I'd rather have 30% and the project going ahead. No PMO/Harbour and my feeling is Falklands Oil will never happen.

RKH start doing the rounds AGAIN and they will most likely get a low ball offer for the whole thing if they are lucky! The current climate I just don't see who else would want to try, not to mention the time taken to look at all the data, etc, etc, etc, etc. You would be back to years to get it all worked up to FID again.

Nope 30% of a project going ahead is the way for me please, first we need to get to extension of Licences, Navitas are already on the hook till Sept, so 8 months we will know for sure, hopefully much sooner.

LTT

Totally agree Ovets, some things they brushed over or made only a general comments, but when it came to goals, strategy, long term plans they were quite explicit; they like control, they don’t like stranded assets, they don’t like to go somewhere with other parties in the driving seat. When you listen to all that, when they talk about looking at Zama, you can easily conclude Zama will be up for sale, getting in to bed with Pemex is a none starter.

I think if FIG bend a little further and it would be an opportune time to negotiate when a new player comes in and Harbour with its tight rein on suppliers could really make SL work. Just don’t see what else Chysoar could get excited about in the PMO portfolio for growth taking in to account thier business strategy.

LTT

Lets not forget, Harbour will also be listed so if they start showing interest in SL project, a wider audience will suddenly see this on their radar, it won't take long for people to see that 40K production to Harbour and 30K production to RKH will effect companies share price and EPS very differently.

Roll on end of March when PMO becomes Harbour with 250K production; $4billion in tax loses to use up; an impetus to grow and saddled with less debt, with a rising oil price. Lets not forget this is during a 3rd lockdown with a vaccine rolling out around the globe. Baring this Covid mutation putting a spanner in the vaccine works, 2021 looking more rosie.

LTT

Well this all sounds interesting, if they settle for $100m and our legal supporters get half, that leaves us with $50m which at least gets us our money back and expenses to date, would imagine any tax to pay would be quite low as surely the original cost of $29m would have been in accounts as a tax loss.

Obviously a hefty award would be brilliant, but even getting our money back keeps the wolf from the door for quite some time as long as Curly and Mo don't decide to go on a spending spree or up their pay package and bonuses! With cash in the bank to cover running costs for several years we could get to first oil (if this ever goes ahead) with very minimal or even zero dilution. Navitas and Harbour cover all our costs up to that point then $50+ oil would give us some impressive earnings, once you start doing a bit of maths on barrels per day, shares in issue and after tax profits, the earnings per share make the current share price look like a dividend payment, not a share price! Quite staggering and hard to believe, but perfectly plausible and possible if Harbour hit the green button. Interestingly edging to $55 Brent oil price must be making SL more and more attractive by the day.

LTT