Member Info for longtermthinker

What I don’t understand is how they value Chrysor and the parent company. If they are private obviously you can look through the books etc, but it doesn’t take into account the reality of market value which means it’s not a level playing field.

What I mean is, if Chysor was a listed company with declining production and high debt despite its backers, would its valuation not also be on its knees at this time? It just seems unrealistic to value PMO on its market cap when the whole sector is not reflecting reality, never mind the shorting which will possibly distort valuations in some way. Chrysor is not effected by any of that so how can they saw PMO is only worth 18% of the new group.

I’m probably missing something for sure!

LTT

I know this is probably a silly question, but we were told in the early days of Covid that @ $35 a barrel we would end the year cash neutral give or take. since then apart from the odd blip we have been around the $40 and we had some hedging in place even higher.

So if it takes 6 months to complete the deal, if things stay as they are with the oil price around $42 and share price and market cap, up to the actual stock market listing of the new shares, what happens to any possible free cashflow? It is entirely possible we could have more cash in the bank than our entire market cap! I know that it might automatically be used to pay down debt, but if so, then our partners are not stumping up the $2.7B as per the deal so it seems a bit even more unfair, or am I missing something really stupid in my thought process.

Kind regards LTT (numpty)

I suppose it shows that TD has been strong armed into this, he was quite positive and looked well, in good spirits with Malcy; but hearing him on the webcast it was like a different person, reading a script and doing what was necessary. The millstone of debt around PMO's neck has finally dragged them down, or should I say dragged them in to the jaws of Chrysoar, it will be the debt holders who have led this for sure. ARMC tried to sell some debt or something or other I believe with very few takers, this may have been the nail in the coffin.

LTT

Totally agree fecm, I watched the Malcy interview and he was pretty straight and explained it was a tough position but all was going well and offering shares to existing holders would allow them to offset a bit the dilution, never expected this in a month of Sundays! But as I say it puts RKH in a much better place for sure, now there is a REAL chance SL will be developed, not just that it could kick off in 2021/22 which I never imagined if PMO had done the debt deal and kicked the can down the road for 4.5 years. SL would have been even more reliant on a share price above $60 for a few years before PMO could pay down enough debt to even think of SL going ahead. The New Improved PMO will be a force with a can do attitude. IMHO.

LTT

Cheers Marunam2 always a pleasure reading you posts. Once everyone gets their heads around the fact Covid is not going to control our lives for ever and the economy picks up most likely as we head in to 2Q 2021, a rise in oil prices will really make this game on. Still risks but we are so much closer to a real step change than back in January.

From what I have read Chrysor like Tullow and many others have production declines but no real way of materially increasing production or at least no road map to show investors, never mind just maintaining in these tough times. Buying producing assets here and there is fine, but the North Sea despite it's Brent premium is ageing and big discovery days are long gone. Hence Chrysoar needing PMO more than many realise. Im a PMO holder, luckily from a very low average so this deal although not great, I will get my money back down the road, not the return I was expecting in 2021 if PMO had done the debt restructure giving them 4.5 years more, but then you cannot have everything as it would have possibly meant even more delay to the SL development due to the debt. Now my RKH holding has far far more potential than PMO holding ever could. Good luck to us all.

LTT

I wouldn't be surprised if TD wasn't thinking to off some production to Chrysor and then they thought, "Why pay $300m or so for X producing asset when we can have the whole lot for next to nothing, as soon as the hand was shown, they probably knew TD was between a rock and a hard place, hence the deal. It's still better than nothing, who knows, as the deal gets done, 6 months from now, approved Vaccines might be out; oil demand increases and the cracks in supply and un-replaced production decline start to raise it's head, as the new entity comes to market we get a stonking valuation and the share price fly's! Along with Pigs; dogs and cats living together and world peace!

LTT

RNS said this when discussing speculation about Chrysor;

"To date, terms of the transactions discussed do not, in Premier's opinion, provide better outcomes for either its shareholders or creditors than those proposed under the heads of terms announced on 20 August 2020."

I would like to know what the offer was on the table at that time! It must have been REALLY bad as can't imagine a great deal worse than this. Really would like Tony to explain how this deal is better for share holders, at least if we have sorted the debt and bought the BP assets, we increase production, shareholders had a chance to buy shares to keep a similar percentage holding and the debt can was kicked 4.5 years down the road. With possibly another 6 months of Covid madness before vaccines and better weather and better testing along with a rising oil price, how could being taken out and only retain 5% of the new entity be better for long term holders.

Can't help thinking from the webcast that Tony sounded a "Not Happy Chappy" he has maybe been strong armed in to this situation. He won't be short of a bob or two and no doubt he will get a golden handshake, but for people like this at the top, it's not so much the money, it's about being top of the tree, the main person where the buck stops, now he will have no power or place by the sounds of it, he's hardly going to stay on as tea boy and bottle washer!

LTT

Great post Marunma2, it makes so much sense, amazing how things can change. PMO had pinned their future production growth on developing Sea Lion. Back in Jan they were well on their way to acquiring production, to help pay down debt; Navitas coming on board, things were looking more positive than they had ever been, then Corona Virus! Suppose that is the way of the world, those built on shaky ground just can't survive an earthquake. How shale is still managing to hold on and keep drilling is astounding. PMO had $1.9B debt but a well run business that actually made money and would make it through the year neutral at $35 a barrel and they still couldn't survive intact!

Navitas would do well to sign off on the project now. My feeling is once the dust settles and the reverse takeover complete, I wouldn't be surprised if SL moves thick and fast to take advantage of the subdued market, as you say, as big as Zama is, would they really want to risk nationalisation; tax increases, being shouldered out once the investment and work has been put in. We have seen already the problem PMO had getting shut, even more so now.

Also let's not forget how much work has been done on the application for Export Credit, so many ducks must be in place that we are not aware of, if you were buying PMO's stake in SL that's one thing, but absorbing them will mean all the knowledge and people are there ready to go, there cannot be many projects in this current climate that are so ready to go! It would seem crazy to wait for oil prices to be higher and then try and get things moving as you'd already be in the next oil cycle paying higher prices for suppliers while missing out on revenue from said higher oil prices, basically a double hit to the project meaning eventually you have a higher break even for future downturns!

Still a big wait and see, but this is a big event for RKH. I presume if Navitas sign, then we have no further costs to pay until 1 year after first oil as PMO and Navitas had that as part of the deal. Please correct me if I am wrong on this.

LTT

Thanks a lot, that's clarified a few things for me. So it seems it is up to Navitas, if they do the deal all good, but if PMO cancel the deal where would we be? Sure they have some clause should PMO go back on things. Is a concern though as you say if it went back to 40/60% and the new group want to push forward, how would we be able to pay our share? Dilution or a give-away! We could end up between a rock and a hard place like PMO!

Hmmmhhh very interesting indeed!

LTT

"The PIM submission in late July has kicked off the formal application process for the senior debt financing guarantees for which we expect initial feedback in Q4 2019."

That was from a 22nd August Sea Lion update. Just wondering what happens now, do PMO keep running as an independent entity? I know, a silly question, PMO knocked the BP deal on the head, but if we are 6 months + to PMO becoming part of this new US company, what happens if the Senior Debt Facility gets signed off? Has that stopped as well, I don't see why it would stop as although the deal looks likely, to end the application and then the deal not be agreed with shareholders would be stupid.

I suppose what is interesting, is the possibility that the application gets approved and even though PMO would be part of a bigger group, the fact that RKH a UK company and UK suppliers involved are still on board might mean the loan is still done, of course if RKH was taken out then it would be cancelled, so makes me think, RKH might be more valuable left alone if it supports the projects for the new owners should they go ahead.

Considering the work done to date, we are so close to FID and "Key service and supply contracts are nearing final agreement in preparation for execution at Project sanction" as of the same update. Just seems crazy to me that a pro-active company wouldn't look at moving this forward once the deal is signed.

But who knows, there are lots of things tied up between PMO and RKH that I am now wondering about.

LTT

meant to say 30% hedged at $60 through 2021, effectively tax free as they use up the $4b tax loss.

LTT

Hiya Much,

hope you are well and nice to see you posting, agree there is a lot to be positive about. I'll drop RKH an email as I think we all should if we have concerns rather than just bleating on here. Some clarification would be good even if all they can say is "We welcome communication with our new partners once the deal is complete", which is of course is the crux of the matter. A ton of work needs doing and approvals need voting on, long before RKH can say anything.

It really is a time on limbo, but we know that as PMO put things on hold some time ago, so 6 months then we will hopefully have a better view forward, not just in RKH but economy etc in general. Then either we are taken out or things possibly move thick and fast as our possible new partner is a player with 250k production that will effectively be tax free with approx. 30% of it tax free as they eat through the $4b tax loss.

Interesting times indeed. Watch this space.

LTT

I think it is 50/50 as mentioned they can string this out and just take out RKH for pennies but the FIG might not like that, the whole shooting match going to a US company, i'd like to think they would want RKH to stay involved but who knows.

On the presentation they do clearly show the Falklands as a Falkland Islands "Key Asset: Sea Lion" and in it's 2C Resources as at YE19 the have it at 927mmboe with 43% of those resources being Falklands Islands. Mexico and Zama sounds great but lots of trouble in Mexico, they seem to be going down a nationalistic route.

I also noticed in their presentation they have 10% of the Schiehallion Filed off the Shetlands, a pretty similar project to Sea Lion, floating FPSO although only 27m barrels of remaining reserves. So they are not averse to an FPSO project. Falklands oil is similar to brent $ wise from memory so just cannot see them passing by or putting the project on hold too long. The are a proactive company who want to grow, Sea Lion as mentioned has to be one of the lowest risk highest return propositions going forward. $35 break even, the pandemic is not going to last for ever; companies like Harbour play the long game, they will have a multitude of projections and scenarios on the oil price, invest sooner in the SL project with suppliers on their knees needing the work at lower prices and reap the rewards as SL comes on stream in a much better oil market.

Lets face it, everyone is predicting $50 average over the next 3 years, but does this really take into account how much production decline has been/is taking place through lack of investment. Saudi and Russia will only be able to pick up so much slack when things start picking up in 2021.

Lets not forget, Trump is going to start talking about how he beat Corona and it's not so bad so lets make America great again!

Lets see anyway. I'm wanting to feel glass half full but anything can happen in the next 6 months and I have lost some trust in our board, lining their pockets with shares which they will benefit from more on a sell out. IMHO

LTT

My main concern is that the new group just take out RKH for a pittance, they have taken advantage of the current environment to take PMO, I'm a shareholder there luckily with a very low average so am riding this out but what happens to the promises to RKH, free carry etc! The new group would most likely just see it as a nuisance and make an offer as we bring nothing to the game, it's not like we are a partner bringing $400m to the development. We are just riding the coat tails.

Seems to me now the biggest risk is our board just throwing in the towel and take whatever is offered with no other options. They will get a nice payout like Tony, but the rest of us get very little. It wouldn't surprise me if the new group didn't kick the can further down the road and just watch RKH fold or come cap in hand, then do what they did to PMO.

It would be a shame but a possibility, can't see the board wanting to hang around with a cash offer.

LTT

Now that would be nice, but who in the current market would want to pay off $2b to take PMO? Chrysor makes sense as the $4b tax credit will benefit them big style, especially with hedging 55% of it's production at $60 for 2021! It's the North Sea assets and tax credit that makes it a steal in this distressed environment. Big players moving out of the north Sea.

LTT

shorts all over it? There must be better shares in the oil sector to play with for shorting than this, the risk reward just doesn't weigh up! Each to their own I suppose.

LTT

don't see Falklands as a dead duck, reality is this deal is not done for around 6 months, lots of hoops to jump through, T's to cross i's to dot. They are taking over a company who (until putting it on hold) had Sea Lion development a big part of it's future, didn't imagine at this stage in a webcast that Linda would say "We like what we see, Falklands is ripe for development in a great tax regime so we are going full steam ahead!". The media would go into a frenzy, "Yanks to develop Falklands, Argy Bargy to follow!!!!". At this stage it would be insane.

I need to look over the groups assets to see where they have projects, but don't think a US company will be too intimidated by Argentina and they can always play the "This is between you guys and the UK, we are just a business doing a job!"

But anyway a lot can happen during the next 6 months for sure. Bit of luck we should see the share price rise to 20p which sounds like the value in the new enlarged group. Good luck whatever your plans.

LTT

Just listening in and they just showed a slide which had "Key Asset Falklands", I have to say I was concerned they might off Sea lion project as concerns about other assets they have in South America, but seems not. Anything can happen but seems the combined group want to grow, $4b of tax credits, north sea production will mean quicker debt pay down and funds for future development projects! Anyone know of any projects that are ripe for development in a great fiscal environment?

LTT

P.S. Wonder what this means for the Navitas deal? Are they needed now?

Sorry I sorted it, listening to Tony now!

LTT

Anyone got any experience of this, want to listen, do you just dial in and can hear it or is there a link online to listen online? Thanks

LTT