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I suppose whatever way you look at it, if the share reacts on this kind of volume, which is pretty low although compared to the norm a little unusual, it bears well for when some real news arrives.

Harbour/PMO deal done and even a hint of Harbour going over the numbers with SL and this is 20p + IMHO.

Interesting times. Sure leaks will start as any increase of activity in preparation down the Falklands will spread like wild fire.

LTT

LOL Hi Ovets, I don't think the train will be overcrowded! In all honesty this demonisation of Fossil fuels could be the cause of an oil price spike cycle or worse still wars. The lack of investment; bigger players trying to distance themselves; countries making bold statements about renewables and investment funds saying they will no longer invest in companies related to fossil fuels is all a bit scary and short sighted. Harbour see decades of need for fossil fuels whilst the transition takes place, they are playing a longer game, I just hope SL and the Falklands are part of that decades plan as nobody is going to invest $1.5B to develop SL if they cannot see further than 10 years down the line. SL phaseI is a stepping stone to phaseII and phaseIII then further exploration and gas. Huge potential down there, but with the way things are going, if it's left any longer it just becomes un investible.

LTT

Totally agree, UKEF was put on hold by PMO early on in this pandemic, they didn't pull it. Of course since then we have heard lots of news about UKEF ending the funding of any new overseas fossil fuel projects as soon as possible, but nothing about those already in the system, submitted following the guidelines UKEF set out for such applications.

So if Harbour after March do decide to take a closer look at SL, they may as well take the application off hold, they have nothing to lose from it as everyone is expecting nothing from it so they may as well. One thing is for sure, they will be having talks with FIG with regards Navitas and the name change to Harbour so who knows what they might do so sweeten the deal.

I wouldn't put it past Harbour to try and negotiate some further tax breaks/deals with FIG, their bargaining chips would be, "UKEF unlikely to come through; the future of fossil fuels is increasingly uncertain; we are looking at projects that can withstand and be profitable for all at $30, only way we can get to that is if you help; if not then SL is just not viable for us to develop." I mean who else would be interested in the current and future climate.

FIG must be starting to realise that the world is changing; the train is leaving the station shortly, UK will stop petrol and diesel car 2030 (How the grid will cope with this is another matter; more gas power stations no doubt, so cleaner but still fossil fuels). If they don't get someone on the train and down there to get the party started in the next couple of years then their dream of oil riches is toast. To be honest this has been said for the past 10 years but I truly feel if this is not signed off by Sept 2021 then it's done, nobody is going to develop a new oil and gas province in the Falklands.

IMHO LTT

P.S. Happy New Year to all, hope it's going to be happy, healthy and preposterous for all!

"If all cars in Japan were electric, the country would be short of electricity in the summer, while the infrastructure for a 100-percent EV fleet would cost the equivalent of up to US$358 billion, The Wall Street Journal quoted Toyota’s President Akio Toyoda as saying at a press conference in his role as chairman of the Japan Automobile Manufacturers Association."

and exactly what will power those EV's? Japan is lucky, hydro, access to Geothermal and lots of sunshine, but limited by useable land so solar is more of a token gesture than a real option, otherwise you can charge your car but rice costs you $100 a bag! I still don't understand this love of batteries, of course they have their place but it would seem far more sensible to have the wind and solar creating hydrogen as it's energy packed and we could I am sure use existing technology with little adaption to store and transport. But then I suppose building electric charging stations etc creates jobs and keeps people busy.

I am pretty sure Gov think tanks are thinking less about how to power a country of EV's and far more about how they can tax this new world as there will be a big hole in their budgets without petrol revenues!

LTT

Ha Ha, nice one Arfur, I remember those days of "Wine with Rosie" and "One legged Pete and the Parrot" it was funny if not taken too seriously. There were some interesting and informative posters on III back then.

With regards RKH and Harbour, SL and the wider basin does tick a lot of boxes for the new enlarged company and they really would be in control of a new basin with oodles of potential going forward, funded for now by the NS cash cow taking advantage of $4B in tax losses.

My only concern is as majors start to divest further, possibly more opportunities start to come up for someone of Harbours size. They have plenty to do in the NS to maintain production and it makes sense to invest there further, but if they want a more international footprint and diversification then it's got to be Africa and South America. As discussed, despite what the company says and doesn't say about Zama, the company strategy (if they keep on track) would be to go through the motions and sell, there is no future in Mexico with a nationalistic leaning more and more Government and an indebted Pemex. Also as more big players divest, it does make you wonder how E&P companies will be seen going forward, already negative press and demonising of the industry is taking it's toll, this will be more so on longer term projects as offshore is, how many projects will never get developed due to this! I read that Rockefeller Investment Funds are looking to dump fossil fuel investments over the next 5 years and many other investment funds are being urged to follow suit. How long before Banks start to be singled out if they lend money to fossil fuel projects, bit like UKEF now shying away. But where does it all stop.

I read something about an oil company placing an order for uniforms/jackets with North Face (I think it was North Face or some other outdoor clothing company), the order wasn't filled citing something like "Supplying an oil company does align with the companies goals", someone high up wrote an open letter back, explaining the very adventuring attitude the company promotes and the way it's garments are made would not be possible without the oil industry. And there lies the problem, if you go down the route of not investing in fossil fuels.

The safety of the Falklands with a benign Gov that is keen to support an oil industry, with a great fiscal regime has to be relatively high on the list. I have never done the maths, wouldn't know how or where to start, but sure a project such as SL would anywhere else need to be 1.5 or 2 times the size to make similar ROI (but as I say I have never done the maths so it's just my presumption).

So bottom line is, it's really now or never as another couple of years there may not be anyone willing to partner or loan money in the oil industry despite the fact we still need fossil fuels. Lots of hoo har with the Nord 2 pipeline but don't see EU knocking that on the head for solar and wind power!

LTT

It's great to see some press coverage, but Oilprice articles do seem a bit churned out at times. Of course there is no infrastructure as it is a new province in the making and as for the harsh climate, well it's no more hash than the North Sea. It is still good though to bring SL potential to a wider audience and get those interested in harbour and ultimately RKH, Argos and Borders.

I do hope UKEF come on board with guaranteeing the loan, it would be fabulous for all suppliers; as well as of course for Harbour and RKH. It would show further support for it's overseas territories who'm now as we are heading out of the EU on the 31st will become all the more important AND it would show UK PLC is going forward making it's own decisions and looking after it's own interests. The fact this would also ultimately put money in to UK PLC coffers and pay for military presence in the Southern Hemisphere would be a huge bonus. It makes you think, why would you NOT support this project.

On another matter that has been discussed here, interesting statement by Toyota about the future of EV's they are basically saying this knee jerk; band wagon jumping reaction to Petrol and Diesel cars is not the right way, it may tick political boxes and make politicians sound good, but the facts are that infrastructure and the electricity grid is nowhere near getting close to meet those timescales, they don't see to mention that or how it will be addressed. So they stand to decimate an industry striving for a goal that cannot be reached in the timescale they want. Crazy times.

Another sound bite article from Oilprice about shale not returning in strength till 2022 citing "Investors wanting to see more environmental responsibility going forward!" Erm I would have though it went without saying environmental responsibility, but what they don't say anything about is profits, I'd have though investors would be wanting to see who and how they will turn profits and raise the share price as an important reason to invest!

LTT

As we all know in 1998;

Well 14/05-1A
Operator: Shell
Licence Number and Basin: PL002
Spud Date: 04-07-1998
Terminal Depth: 4525
Well Name: Sebald
Result: Oil and gas shows
Comments: "Rockhopper subsequently reclassified this well as a gas discovery, but it remains a well with gas and oil shows in FIG’s inventory."

Hmmmh a couple of boxes ticked there as SL has oil and here is a gas discovery. If only there was upside potential in the basin to add on further production and exploration once SL is up and running that would tick another box and if there was opportunity to be operator on any further discoveries that get appraised and tied back! That would be another box ticked!

Once Harbour comes to life end of Q1, things should get interesting.

LTT

Listened to the Chrysoar webcast and despite them not saying a lot about SL or Zama for that matter, it's what they said about their strategy as a company that tells us lots more.

Linda said quite a few times, NS is the Goose that is laying the golden egg of cashflow but they need to use the cash wisely. Their strategy to stay clear of stranded assets and being operator is what has stood them in good stead and will do so in the future. Buying in to a basin that is cheap just for production is not on the cards, they don't like to rely on others to be the drivers.

So although they say nothing that is committal and how they will look at the overseas assets for their merits and ROI, they do say the PMO attraction was not only the NS and savings their, but it's international assets and opportunities. If we take in to account the company strategy then it's not difficult to read between the lines and see Zama will be sold, it meets non of the company strategy goals in particular being beholden to Pemex and only having 25% non operated.

They also like gas, going forward gas will be more important. Does Johnson spring to mind? Hmmmh maybe time to buy some Argos me things, tuck those in the bottom drawer.

Other interesting points if you like conspiracy theories! Linda is ex-shell and so is the new non exec joining the new company; Simon Henry who is also Non-Executive Board Member and Chair of the UKGOV Defence Audit Committee. Both would have been in Shell during the 1998 drilling, wonder if either would have been close to the action. Probably not as Shell is a vast company, all the same interesting.

LTT

I don't see how Zama can be a good place to invest the last time overseas oilies got involved they got burned badly, then started opening up again only to start down a nationalistic path. why would they not do it again, get other players involved and after investment and all the horse work is done with a rising oil price, just make it more and more difficult for them to stay.

Worth looking at Oilprice site and reading a few articles, a lot is churned out with not saying much more than what has already been written elsewhere but in a different way, but sometimes it's great to get a condensed gist of what is going on. Search
"Mexico Is Quietly Pushing Out Foreign Oil Investors" and "Mexico Plans Further Debt Relief For Pemex". It's not just about getting involved, it's about if you do how long could it drag out to get anything done?

Let's look at things more simply, Harbour if they are pumping 200K per day next year and lets say with 60% hedged, every $1 oil edges up from here it's an extra $80K in the bank. Of course every dollar down they lose that but hedging has them in a good place. Now going forward how long do we think Zama will take to get to FID and then production? I don't know but imagine it will be 4/5 years even with a tailwind if they are lucky, but of course they would not be driving the project and indebted Pemex would be, they would not be in charge of their destiny and 5 years would surely see a huge decline in production in the NS assets.

I still feel they are being cagey with regards SL, they haven't even had PMO shareholder approval yet; the pens haven't even come out of the drawer to sign anything so why poke a stick in a hornets next now. What would happen if they said, "Well with regards SL, we will start up the UKEF application as UK overseas territory is looked on differently/we want to get it nailed before the rules change and then once approved we will head to FID and sanction." If they said that at such an early stage before the PMO deal is even done they would be insane.

I don't see anything they said as a positive or negative. Tony did a video chat with Malcy about securing everything he needed in Sept, all sounded positive, they would secure the debt out to 2024 Q2, even after speculation in the press said Chrysoar had talked about different funding options but nothing was as good for shareholders. We all know what happened then!

The only difference here is once Harbour is under public scrutiny they will have give analyst presentations and explain the how's and why's especially if they plan a dividend. We will know within 9 months if its the beginning or the end! IMHO

LTT

I think even a whiff of SL going on the front burner and RKH is well up in a blink. If Harbour hint at taking out RKH, the SL is going ahead and the share price is through the roof, even if they start the ball rolling on SL thinking to take out RKH later would soon see value attributed to the rest of the acreage as it stands to reason, if SL is on, the wider basin is game on.

I wonder if it's wise taking out RKH either way, would FIG be happy having one entity taking control and then sitting back? If Navitas, Rkh and Harbour get the party started there is plenty of opportunity for said players to farm down acreage for further exploration to keep things moving forward. If it's just Harbour, they can do what they like, plus they are at the whim of their accountants and debt, things take a turn and everything is on hold again, where as 3 or 4 interested players keep up momentum IMHO. But we will see.

LTT

I have to agree with Rookie, I think people have this mindset now that $40-$45 for Brent is going to be the new norm, they believe anything more and Shale will be back with a vengeance, Iran will flood the market with 2m+ barrels when Biden gets in and does a deal and that Opec+ will flood the market at a moments notice. EV's are taking over the transport industry so oil is history!

However there is never any mention of the number of shale operators and supply businesses that have gone bankrupt; the lack of investment in production around the world, project budgets cut or cancelled not just this year, but the reduction in next, not to mention lack of investemnt over the past 5 with lower oil prices. Where are the next big discoveries coming from to prop up the decline curve, come to think of it, who is stumping up cash for exploration? I'm sure Opec+ and Shale may take up some of the slack but as demand recovers that slack may only replace the natural production decline. That I believe is the elephant in the room.

Today we should hear from Harbour/Chrysoar/PMO about their plan. Ageing NS assets will need to investment to make that production decline curve less steep, after all, who wants to be telling the market you are going to lose 5K production next year that you can't replace as oil heads to $55? Fine if your a private company, but future shareholders expecting a dividend, hhhmmmm it will be an interesting presentation. I hope some analysts there will ask some tough questions.

LTT

Also it seems highly unfair to blanket all fossil fuel projects to cut investment through UKEF. The NS and associated industries pay a HUGE amount of tax in to UKGOV coffers. How can they turn their back on them so easily and effectively ruin the chances of some projects when applications were made in good faith under the previous application process.

Hmmmh, defiantly could be some loopholes for those with ongoing applications. It would also trumpet the freedom the UK has to make it's own way and show it's support for overseas territories, not to mention securing access to energy and extending our footprint in South America.

Either way it all comes down to what Harbour's plans are after Q1 2021 deal is done. Not an issue for UKEF if Harbour withdraw the application to concentrate elsewhere. (unlikely imho, but who knows).

LTT

LOL SK just seen your numbers and quite sobering and yet it is too simplistic a view as you well know PMO is at a real low due to many reasons but you have to put sentiment in to the mix. If you are looking at realistic valuations on things, then Shale companies should have negative valuations and Tesla........ well how do you account for that?

You cannot just add two and two and get 3.5! The sentiment that will come with a more positive outlook; a rising oil price; covid vaccine; the enlarged group all need to be taken in to account.

However you did stir up a hornets nest which I presume was always your intention. LOL.

LTT

Lets not forget, they plan to pay a dividend, even a tiny one has to be looked on well by the market, there should be still some investment companies and pension funds who are not demonising anything to do with fossil fuels!
Interesting times ahead.

LTT

Hi Mogger, that does seem very interesting. I am surprised Navitas did put such information though as I remember Sam talking at the AGM how they had to put the application in and not make a fanfare about it as UKEF. didn’t like the idea of being badgered on its descisions process.

But Sam did also say UKEF had suggested it was the best time to submit in July/August last year.

All very interesting indeed.

LTT

Hi Mogger,

it would be nice if UKEF guaranteed the loan but I feel the only way I see them getting around their current statements to cut overseas investment in fossil fuel projects is either A. sign off as soon as possible under the radar or B. Falklands is actually UK overseas territory so it would be a UK investment not overseas.

To my mind A. is a non starter as nothing will get under the radar if PMO 2.0 got for FID and set everything in motion. Argentina will bang the drum and through the "No more overseas fossil fuel investment" right back into our faces and worse into the media. B. could be possible and be damned, UK needs to look after it's interests now and going forward. But again it does go back on these recent statements.

I think Navitas document was made well before recent events and lets face it, these type of documents are for investors and it sounds great UK with guarantee even if they were still 50/50 as to the outcome. The application has been on hold for some time now so any statement Navitas has made has to be taken with a pinch of salt.

Either way it's the deal breaker it once was. I remember last year they were talking about the application being ready and having been advised it was the best timing to submit. If in October last year if the loan was not approved I feel that would have been it, end of the road. Yes PMO would have talked about kicking it down the road until after renegotiating loans etc, but really we would have been in a bad place for sure.

Now things are incredibly different and if nothing else it will be a definitive yes or no over the next 6 months from PMO 2.0 with or without a UKEF loan. IMHO.

LTT

It's funny how we instantly gravitate to the default "Hopeless Board, terrible deal with PMO. we should have been producing by now", myself included, but Arfur makes a good point, SL was discovered and the bear market since has really mauled the oil sector, the ramifications of this when coupled with the demonisation of fossil fuels will come back and bite us in the aR5e for sure!

The thing is, as i've looked more at other E&P's over the years, it seems there are many instances of discoveries taking 10+, 15+ years to get from discovery to production and these were during times of much higher oil prices and better sentiment for sure. So actually it is pretty amazing that a tiny player like RKH have managed to actually hang in there so long and now be in with a real chance of getting to the finish line or at least start the journey towards it in earnest retaining 30% of not only SL but of the wider acreage where there are many more prospects going forward. As I have said before UKEF is unlikely but if they did that's just a bonus.

I think a responsible government has to balance both the transition to zero emissions and a reduction in fossil fuels but at the same time make sure it is smooth without a knee jerk, particularly now. As and example, Germany are pushing ahead with Nord Stream 2 and finding ways around US sanctions because they know gas is going to be the fuel that powers their economy for some time. Taking a stance of "lets cancel the pipeline because we want to be carbon neutral and living off wind and solar" would have not only been stupid, but down right dangerous for the powerhouse of Europe and ultimately that would effect the whole of the EU.

IMHO SL has the best chance of FID in the coming 9 months that it has ever had without a doubt.

LTT

Am I missing something, why is the Falklands not on there? I realise PMO put the Application on hold earlier this year, but imagined it would be in the list!

LTT

............Not sure what the average timescale is for E&P but if you factor in a couple of years from acquiring a licence and getting partners; then a couple of years to survey and drill; then if you are lucky and hit oil; couple of years to do some drilling to assess the find; work up the numbers; engineer etc, etc etc, get a partner/partners................ well we all know as we sit here some time after SL discovery.

But looking at those times scales; the way things are heading, who wants to invest in all that to get to FID in 2030 and find demand has dropped 25% and nobody wants to invest in something a further 3 years to production with oil then at $30!
Of course I do not think that is the case by a long shot, but accountants and internal planners will be looking at such scenarios, so the first fatalities of this new world will be wild cat exploration and long term development.

Hence why I feel SL is a now or never play and as we have said, where else can the new PMO look to increase it's production profile within 3/4 years, whilst demand for it's product is still high. IMHO

Very interesting times are ahead, at least we will be rewarded or the pain will be over in the next 6 months or so.

LTT

Just heard this on the news, so good point, so first are overseas territories classed in the same boat? Could they get around it with a loan to FIG who then offer incentives to get the party started?

To be honest my feeling is this is not such a big deal for us now. If we had the old PMO at this time just refinancing its debt and kicking the can 4.5 years down the line, then this news about UKEF would IMHO have been the end. A lot of time and effort went in to the application because it really was so important for PMO to have backing due to its HUGE debt pile, which as we have seen has finally been its undoing.

After 1st Q 2021 PMO 2.0 is in a much better position, even more so with Brent hanging out around $50 rather than $40. With $4B in tax losses to recoup from NS production, they will have a war chest to move forward, because that is what the new PMO will have to do. If FIG were to sweeten the deal a bit further as Lsetown suggests or some other creative tax break, then it will finally get off the ground. In this climate of change (excuse the pun) where the life blood of the world economy is being demonised, everyone has to get on board, or at least be seen to do so, but sunshine and wind is some way off and if everyone downs tools on oil, we are in for a shock to the extreme. We need stable fossil fuel production and distribution to power this huge change in our society not knee jerk, band wagon jumping! Even though the UK wants to stop investment in fossil fuels overseas I don't see them telling the NS to shut down any time soon! Those tax revenues from production to the petrol at the pump are still far too important to just let go over night.

So my feeling is UKEF option is gone, they could say all project loans currently in the system will be looked at in the same light as when they were submitted prior to this announcement, but all new applications from 2021 will not be accepted if they are solely for fossil fuel projects. You could also think that FI as an overseas territory will become more important for UKPLC as we crash out of Europe so all the more reason to look after ones own! However Falklands is a tinderbox at the best of times, so would UKGOV really want to have the double whammy of sabre rattling? "The UK again flaunts its colonial past trying to take resources from the Malvinas and supporting it with a UKEF loan after it recently told the world it would not support fossil fuel projects overseas!". So in that respect I think UKEF is a non starter now.

It's really down to PMO 2.0 keeping Navitas in the loop during this transition is a good call. If they have access to say $500m for the project then PMO's $1B should be doable. Lets face it, they new chain of events although initially negative at first sight, could play in our favour. What I mean is, this push to demonise fossil fuel has to make the bigger players and mid caps think twice about wildcat projects. (sorry and bit long)..........