Member Info for longtermthinker

Lsetown,

yes I think that would be a great idea. It seems as of today UKEF funding is a non starter for lots of reasons. Once PMO 2.0 is installed in power 1st Q 2021 this larger entity with more clout and actual resources to get going might start talking with FIG along those lines, lets face it FIG have loads to gain and nothing to lose by doing this. But if they hold out and allow a couple more years to pass, it will just get harder and harder to get anyone interested. In this current climate and going forward, who wants to invest big money in to a resource that appears to be in it's twilight on a project that is looking at 20+ years of life and then some with decades of production needed to get their investment back.

It's now or never I feel.
LTT

I keep hearing about EV's are taking over, headlines such as 9% of new cars now EV; ban on gasoline and diesel engine cars by 2030 (I can see the loophole now, hybrid petrol/battery will be ok) and the first of 100 EV charge stations just completed in Essex. Pretty amazing headline grabbing news, but when you actually think about it it's not even close to being a game changer!

With approx. 2m new car registrations 9 percent equates to just 180k new EV cars, it would be interesting to know what percentage if included is a hybrid battery/petrol version. But seeing as the UK currently has 38million cars registered as of 2019 we start to see that EV's have some ways to go. Not to mention if they stick to their guns, how many petrol/hybrid car sales will there be in 2028/29 to beat the deadline? The mind boggles. So even if the deadline sticks, there will be 10's of millions of cars using petrol for decades after. Also 100 charging stations over 5 years is quite laughable, where do you think to energy will come from to fast charge 36 cars in 20mins at each station? Solar panels on the roof? LOL. It will be nuclear and gas generated energy. A far better route to pursue to my mind is hydrogen, clean and energy dense generating from solar and wind thus negating battery storage and cleanly power electric cars, but hey, big business has gone down the battery route so we will have to see.

But then as we transition where does UKGov get it's tax from? Petrol from the pump is a massive revenue stream for the government, so all the EV tax breaks go out the window and suddenly charging gets more expensive or road tax goes up. So setting deadlines like 2030 make great headlines and make the right signals but reality will always be different and in politics 10 years is a long time.

Anyway, despite the shouting about clean energy and transitioning, the big oil players have decades of investment to recoup so they know they are not switching the taps off anytime soon. A whole lot more drilling and production will be needed to assist the green plan. IMHO

LTT

And there another issue springs to mind, until a couple of years ago I was still running a 14 year old Fiesta with 120K on the clock, it went to a good home and become a friends daughters first car, but if we are all forced to trade in and get an EV, even if it could be done and infrastructure was there, how much waste would this create and how much energy would be consumed to create all these EV's?

I remember a few years ago when they did the scrap your old car and get cash towards a new one, my Dad's mate had a beautiful Mk3 Ford Escort, he'd kept it tiptop and it broke his heart to see it go, but the deal was so good, problem was it did get rid of loads of bangers from the roads, but also took perfectly useable cars that should have been kept running as the pollution was far less than the creation of a new more efficient car when you look at the full life cycle. Crazy world eh!

LTT

Couldn't agree more Overts, despite all the shouting about EV's, no Diesel or Petrol cars to be made by 2050 and wind and batteries, Oil and Gas still have a massive part to play while we journey to this new energy age.

I'd like my next car to be an EV but will most likely go for a hybrid of some sort as I'm doing over 16/20k miles are year and I live in a flat, so nowhere to plug in and if I did want to, no doubt I could, but along with the high cost of the EV, i'd be needing another £5/10k to get some charging point put in, not to mention the planning and regulations i'd need to meet.

The other thing is how much do these things cost to charge? I know there are free charging points, but when the mix of EV and Petrol is 50/50 these charge points cannot be free anymore. Suppose what I am getting at is electricity is not that cheap, my Dad for some reason decided to stop using gas, got rid of the central heating and gas boiler and had electric radiators fitted. His bills doubled over night. Yes he stopped paying for gas, but his £45 per month gas bill disappeared and we had to start topping up his monthly electric with an extra £80+ direct debit.

Suppose what i'm getting at in a long winded way is, there is no magic bullet and fear of investing in oil and gas going forward is going to be bad for everyone longer term. As an analogy we will look back on covid (and I do not make this comment lightly as myself, friends and family have been effected this year) as the cure being more detrimental for society as a whole than the actual disease. The ramifications of which will be felt for the next decade.

Anyway back to PMO 2.0 the web conference that I listened to sounded very upbeat and they sounded like a company looking for growth, no big talk up of the Falklands but then why rattle that hornets nest until the time is right. I think leveraging NS assets producing and benefitting from the $4B tax losses will need to fund international growth, if they want to pay a Div as suggested then growth will be all the more important. It would be foolish for them to focus on exploration internationally and leave a engineered and ready for FID project on the back burner, especially when 3 years from now their NS production will be will on the inevitable decline curve.

The prospectus will hopefully give us a sense of direction.

LTT

I suppose the interesting thing for me will be Chrysoars production profile, I know they have some great hedging in place, but their mature producing assets, what condition are they in? up to now they have not had to reveal such information, but this prospectus will have to give some guidance and if not im sure there will be some analysts picking up on it at some point. The fanfare of 250k barrels a day will be short lived if there is no way to maintain it and stop it's decline.

Well not long now anyway, they will want it out before Christmas so 2 weeks or so max.

LTT

Yes jw61, i heard the same from PMO investor relations, creditors are taking a 25% haircut, I was surprised at that as they will have lead the way for this reverse takeover, not Tony would only a couple of weeks prior to the announcement was doing a web chat with Malcy talking about the debt being sorted and negotiating 4.5 years would give PMO plenty of time to pay back the debt, which with a rising oil price and the BP assets could come down quite quickly.

So I can only think that the creditors decided that the offer of money back now, despite the 25% allows them to use that money in these tough times lending at higher rates to distressed companies or investing in distressed companies which will grow as the pandemic gets put behind us. Otherwise why do it.

I just want to see this prospectus now, want to see what PMO 2.0 have in store for 2021 and beyond, also what they are bringing to the party.

LTT

Morning everyone,

with a vaccine rolling out this week; Brent edging closer to $50 than $45 ; the new PMO 2.0 wanting a done deal and hopefully wanting to flex its muscles from 1st Q 2021, I am just wondering from those more in the know and with more experience of these matters than me, what are the next steps.

If we imagine the PMO deal is done by end of 1st Q then with regards SL are the next steps as follows?
1. Navitas Farm in
2. FID
3. Project sanction

Seems they have given themselves some time to decide if they want Navitas coming on board and I haven't included PMO continuing with the UKEF application. My feeling is before any of the above, if UKEF application is taken off hold, then it would be a sign of game on for sure.

But with regards to FID and project Sanction what are the usual timescales on these things, maybe I am looking at it too simply and maybe I'm getting confused. Am I right in thinking PMO/RKH to enable the UKEF application will have had to supply a fully engineered project listing budgets, suppliers, stake holders, approvals etc etc etc, in which case there must be a lot of ducks lined up just waiting for the GO button to be pressed, would that be a safe assumption?

These things take time and maybe the new PMO will need to do due diligence but surely it wouldn't be like starting over again.

Anyway if anyone could share their thoughts i'd be most interested to hear and learn. Many thanks.

LTT

Hi fecm,

I hold both and to be honest don't see why PMO 2.0 would get rid of SL. Zama although an opportunity would be risky with Pemex and Mexico nationalistic leanings more and more as time passes.

Once the prospectus is out there will be more clarity, they will need to have some forward plan otherwise any listing will be shorted. I am not totally clear with current PMO position on SL, I know the UKEF has been put on pause and did the current PMO right down all the work done on Sea Lion recently? Someone here will know as if they did, unfortunately that means the new entity is in tow minds about SL. They wouldn't want to list and then in their first year say "We are not going with SL so will right off XXX million dollars". If that's already written off on the books, they must be thinking to invest elsewhere.

But then, what else is there at the moment? Current PMO had a future (although with the debt it kept getting pushed back) to massively raise it's production levels with SL, kicking it down the road due to debt restraints and oil price was one thing, doing a total reverse when you finally have the production and a rising oil price to support such a development is another.

The prospectus should point to one way or the other. Fingers crossed.

LTT

Hi CitizenTS,

as a private company Chysoar have had it pretty good, but once listed they will be scrutinised and picked over, this will show up all the dodgy wall paper covering any cracks. They will need to keep up the impetus of the listing, the money rolling in from 240K+ production will only go so far.

Just look at Tullow, falling from grace, the biggest killer was having to tell investors "we are losing 10k of daily production and we have no idea currently how to replace it!" The head guy went and the new guy has at least got a strategy and secured $500m from Uganda so debt goes down and there is a forward plan. Chrysaor cannot go in to this reverse take over without a plan, it's backers will want out and want a return, they only way the will get that is with a forward plan they can sell in to. IMHO

$1.5B seems peanuts to the rewards 3.5 years from hitting the go button. Never mind the potential once up and running.

Even a sniff of them going for it and we will be closer to 50p than 10p, that's for sure. I think the first inkling will be steady increases in volume, week in week out. Then it's game on! Fingers crossed.

LTT

I'm with you Ken, times have been so bad for oil companies, even Exxon writing down billions, in 2021 1st Q if oil holds, even mediocre profits will look fabulous against previous earnings. Such a tied will lift all boats for sure!

LTT

I think we can be pretty sure capital gains tax will rise, they might go for dividends too but common sense says they have to scrape back the covid cash somehow and it seems only fair to come after us whom have the free cash to actually invest. Wonder if they will take a bit of the capital gains threshold too, it's 10k currently I think, not that I have ever used it fully with share gains. LOL. I think they are going after 2nd property owners and landlords etc too. No doubt the are waiting until after seeing which way Brexit goes, if we can't get a deal, who knows what is going to happen 2021.

As long as they don't touch our ISA tax free wrappers then I'm fine with it.

LTT

New company will not be debt free I'm afraid, they will still have substantial debt, however their debt profile will be much better with around 240K barrels a day production, a good percentage hedged and a rising oil price in to 2021, also the tax losses it is getting from PMO worth $4B will be great for earnings from production in the NS.

Anyway we just need to wait for the prospectus, it should explain everything.

LTT

I’d like to think things would move a bit faster once the PMO reverse is complete, they are looking at by end 1st Q 2021, at which point or soon after they will need to show a strategy and willing to move forward. Even with oil in the $50 range and economy picking up as vaccine rolls out across the world, they can’t live off assets with declining production (the prospectus should be out Dec so this may be touched on). Of course they will need to look over all the old PMO brings in to the new company and it might take time, but it’s not like a complete new entity is buying SL from PMO, they team who know all about it and where it’s at will be part of the enlarged group.

It will be interesting to see what happens after 1st Q as if they want to keep a bigger stake Navitas will be out, if they want to go with a partner then sign quicker and get UKEF started again and line everything up and secure a rig. Autumn\Winter 2021 would be good timing Falklands Summer for development drilling!

LTT

I don't think the NEW PMO can afford to hang about, Chrysoar will reverse in to PMO and as shown above will be a huge HOWEVER they will also from that point be under scrutiny, as analysts poor over the account and their assets; production numbers, etc, etc, etc, it won't take them long to see that future growth to stem production decline of ageing NS assets is not coming from he NS. If they want to grow and increase their share price and potentially pay a dividend then they need to add production.

A rising oil price for the lean, streamlined surviving companies in the E&P sector will give them an initial boost for sure, but sustaining that will be difficult. Also a rising oil price means buying cheap production becomes more expensive and for the NEW PMO, Zama just doesn't seem a sensible option, it could be a bottomless pit, throwing money at it to have Pemex or Mexican gov, pull the rug out at any time.

It's going to be very interesting how PMO plan to move forward, they will have to convince institutional investors they have a mid and long term strategy, I don't think moving in to solar is on their radar! My feeling is they will crack on to keep the momentum of becoming this big player, to my mind there is pretty much only one sure fire way to do this in the least amount of time with low risk. But then I do have a vested interest and view the glass as half full.

Interesting times are coming indeed, if nothing else the dream will come alive or it will finally be extinguished.

LTT

LOL Yes Boot, it would be extremely tempting after all this time and I understand your feeling, however if the New PMO did give the green light and we were at FID about to have it all signed off, I think we would be much closer to £1 at that time and ny offer would need to be more. It would make one think, what would the share price be in 3 years as the first oil is produced! Especially as with a reasonable award to pay for general running of the company and PMO/ Navitas paying for everything and giving a loan for our share until one year after first all (I think from memory), thus negating further dilution apart from our boards hefty awards! Yes in that scenario what would RKH be worth!

Mind you as many point out, it will be really down to our board and what they decide to do, I think it will be them who push us to take the money and run, sure some of them would be happy with 50p or £1 a share and be off, it would nicely top off the millions they have been paid over the years.

In a perfect world though, I'd hope after all this time they would try their hardest to keep RKH in the game to first oil and beyond for their own pride to be able to say "We did it" to look back and say "It was a long and tiring road, but we brought prosperity, independence and security to the Falkland Islanders, and we made our share holders very wealthy in the process". It's a much better story than saying you spent the best part of your career milking an AIM company for all it's worth, then at the first sniff of a real future, sold it off before its full potential was reached.

Anyway, what will be will be, but as Much says, who'd have thought PMO's troubles would put them and us the closest we have ever been with SL to actually get to FID and sanction. AND just as we come out into the light in Q1 2021, to rising oil prices and a possible vaccine to get the economy going again. If ever stars were lining up and ducks were getting in to rows, this has to be the time and the best chance we will ever have. If it doesn't happen in the next 6 months, then it just was never meant to be.

Good luck to us all.

LTT

Just been reading an article on Pemex the most indebted oil company in the world apparently.

“The company has been struggling with falling production and few options for help as the government suspended all contracts with foreign oil companies as well as tenders for new exploration blocks.“

Above From the article, so Zama is not going anywhere soon either for sale or development. Where can the NEW PMO look to not only stop but reverse its ageing, declining NS assets?

1st Q is going to be very interesting, even a hint of Sealion being in the offing and well............. who knows where the share price will go, it won’t sit around the 6-10p mark that’s for sure. IMHO.

LTT

The problem is, we are here because of the debt, kicking the can down the road would mean another 4 years of hands tied and being controlled by our creditors, ever jitter in the markets and economy and the share price would plummet and we would be on tender hooks as to whether we breach covenants again or not. Yes we could say in a rising oil environment our debt could be paid quicker and we can go it alone, but we tried that already and along came covid and so quickly PMO was on it's knees again.

Back in Jan we had a lot going for us then a black swan event came and took it all away. I hate to say it but this is the best chance to go forward with a longer term outlook to grow and get our money back. Maybe not the dizzy hieghts of £1 any time soon, but much better than going to the wall. Let's not forget we are not getting 5% we are closer to getting something like 23% or more, it's just the debt we have takes the Lions share.

LTT

Have to agree Surfit,

no point at this stage big-ing up the Falklands, they will know too well what a tinder box of rhetoric and sabre rattling it is.
Have to agree Surfit,

Better to get the deal done by Q1 into a rising oil price and then once the dust settles move thick and fast, they will be looking 5 years out not 6 months. With the amount of money already spent towards a FID, why would you go for Zama and Pemex. I presume they wouldn't be the operator either for Zama so being beholden to a huge indebted company with an increasingly nationalistic government would be foolish if you have aspirations for growth. It wouldn't make sense. Get Zama near to FID in a rising oil environment and off it at the best price you can get, they are hardly going to put in the RNS, "Due to no realistic interest in Zama because of low oil prices; covid-19; demand destruction globally and a increasingly nationalistic leaning Mexican Government, we have decided to go through the motions ourselves until a time we can off it to someone else!"

Chrysoar/New PMO have a cash cow with the North Sea production and $4B in tax losses to offset, but they also need to look 5 to 10 years down the line as to how they will replace and add to that production. If they have aspirations of offering a Div which will ultimately increase the share price they need to do more than what they have been prior to this deal, that is buying mature assets that bigger players don't want anymore due to inevitable declines on the horizon.

So although we are in a better place than we have been for some time and at the very least will soon be in a position with a partner with the resources to actually develop SL (unlike the old impotent PMO saddled with debt, beholden to it's creditors), it's still a binary play. Either PMO 2.0 will push the button thick and fast, as you say, before Argentina has a chance to raise a voice and green/enviroment organisations bang the drum about UK Gov green policy; FID would be done and supplier contracts signed, then it's all go. Dragging it out any longer would be a death by a thousand cuts for sure and it will be game over.

I air to the side of it finally happening but it still is very much a gamble. In the current climate of oil being evil nothing is for certain, even though those branding it evil are sat at their laptops or tweeting on their smartphone oblivious to the fact oil has and is making that possible. Yes we need to change but there is no magic bullet, abruptly turning off the taps now will do far more damage in the longer run. IMHO

LTT

There is a filter button if you are logged in. I am totally open to debate and alternative views, but when it's like a broken record just, blah, blah, blah with no real input, it is worth using on occasion.

LTT

Cash, hope you don't mind me asking you a question, it seems you would have a far better idea about such things.

When this is all done and dusted, what happened? PMO gets suspended and then the NEW PMO shares are issued and the company share price gravitates to reflect the new market cap?

So if the size of the new PMO makes it a FTSE 100 company am I correct in thinking that fund managers and pension fund managers will have to buy these?

Many thanks in advance.

LTT