Member Info for longtermthinker

A few years ago now, when Desire was doing all the talk of going back to the Falklands as Shell data and drill results showed great promise after re-evaluation, there was a little company called Rockhopper that went and picked up all the acreage around Desires. I had a cheeky punt then thinking if Desire came good, RKH would be dragged along by the coat tails, little did I know Desire would falter and RKH with one drill would hit the jackpot! What a ride that was, I have taken punts on other investments and they have failed, but that's the nature of the beast.

The above was more luck than good managemnt and the cards are stacked against it happening again but who knows, not me, not you, but where the RKH share price was is only relevant if you bought high and hugged an held. For anyone with a balanced portfolio with a little cash to spare and fancies a cheeky punt, they could do a lot worse. Good luck with whatever your plan and strategy is.

This is not advice for anyone to buy/hold/sell but just think why you would do any of those depending on your current position.

LTT

Hopefully hear something in December, failing that Jan 2020. It's interesting the article about PMO, Durrant seems to be playing it cool giving some conservative promises, partly as that is very sensible at the moment as oil seems to bouncy around daily and weekly in a knee jerk reaction style, but also gearing up for a great 2020 for them.

Every couple of dollars on oil and their expectations to pay down debt will increase, same for the industry as a whole at the moment, lots of underinvestment and streamlining and cost cutting. I can't help but feel a few E&P will be posting more positive returns of the next year. more so if the US sort their trade deals and Shale continues to falter.

The thing that interests me is IF it comes to pass, PMO might, just might be able to secure a partner for SL and fund things themselves. I know, I know this is not something that is likely at the moment and the BEST scenario for everyone is the UKEF loan. At the AGM it was clearly pointed UKEF was make or break. But now as we head to 2020, yes UKEF not get involved would hit PMO hard and RKH REALLY hard, but if PMO kept it's head down; paid down debt with Zama sale and then beat expectations of further debt reduction (as mentioned it could be getting down to nearer $1.3B rather than the conservative $1.5B), late 2020 SL could still be a goer without UKEF.

Of course for the above to be possible, it would mean RKH surviving the fallout from UKEF loan not happening. At which point PMO might make a whole paper offer to put RKH out of it's misery! But should RKH survive that, and PMO reduce it's debt considerably then why wouldn't they try and fund themselves in a more positive environment. Let's face it, as mentioned PMO needs to replace reserves and production over the next 5 years; what options are there around with such an understood basin with great fiscal terms?

Its all getting interesting and I feel a little more positive despite the lack lustre share price. I expected the share price to just tread water after the AGM and everything would be dependant on UKEF, but I didn't expect such a drift down. For a cheeky punt it might be worth it but only as a highly speculative punt, I won't be betting the farm.

FWIW and IMHO, I still cannot see why UKEF would not get involved; it's a big loan, but by no means top end; it also helps an industry that employs a lot of people that this past 5 years has been knocked and hit quite hard, never mind the knock on of supplier involvement and of course the Falklands themselves, huge investment and money to the FIG which will then pay for it's share of military support in the region and then some.

LTT

wondering if this worth a speculative punt from here? I am actually surprised to see this heading down as there is no real reason for it. PMO and RKH are tied, love it or hate it they are. PMO have tied their flag to the mast; their driver over the next 5 years is the development and production from Sea Lion. Yes PMO have fingers in other pies in the short term, but their driver for replacing decline and increasing production is SL.

That is why I'm surprised to see RKH heading so low as nothing has changed and if anything, things are changing for the better, oil price seems to up holding up, in a range from $60-$70 this is very positive for SL progress if UKEF come up with the loan and great for PMO to be paying down debt. It also is great for Zama sale, the extension of which must be a good sign for them to get a good price.

In the wider O&G sector there must be some light at the end of the tunnel; Shale in the US seems to be slowing and the now the market seems to take EIA weekly/monthly numbers with a pinch of salt. Saudi need the oil price to stabilise around this level; high enough to see their floatation at a good price; low enough to slow shale and fend off a recession. Lets face it, they could turn off the taps further and spike the oil price, but it's not in their IPO interests, no this level is good. As mentioned this should start more investment in oil after 5 years of low investment.

So with the above in mind there may be more interest in a mid cap getting involved with PMO and Sea Lion as we head in to 2020. Lets face it there are not many projects so ripe and understood for development in such a benign environment with such good fiscal terms for FIG. If you were looking to spend millions on a project, this would have to be one of the better ones going forward. In particular if your accounts dept is holding the purse strings with a very conservative approach.

Quite exciting really if you believe UKEF will come good. As Much has mentioned Zama will most likely be the first piece to drop in to place, after that news could be thick and fast in the New Year.
Still very high risk; more sensible move would be buy PMO then you have the security that they can survive a negative outcome for SL where IMHO RKH might not HOWEVER from here the upside on a positive outcome could be at least double in the short term, many multiples in the long.

IMHO LTT

It’s funny up until the crash in the mortgage market everyone was buying junk that was triple AAA rated, think there were a few seeing the madness over a couple of years but whilst people were making money nobody seemed to care, well until the music stopped!

It is going to crash, it’s self fulfilling, the more they drill and pump the lower the oil price, how can that be a sustainable business model. Majors have cut back on spending but the shake guys haven’t, they can’t. IMHO.

LTT

Hi Mike,

it begs the question how can the smaller players survive much longer when even bigger players are having trouble just to stand still and were did the predictions of shale adding almost 5m barrels a day by 2024 come from, how are they worked out.

It seems Exxon are just spinning plates and it's getting more difficult to keep they all going, it does begin to prove the idea that you need to drill more and more or production drops off a cliff, so how can someone drill a record number of wells this year and expect to increase production next year, that would mean drilling a new record number at lower oil prices.

Seems the drilling efficiencies and technology advances are running out of steam! Interesting times for sure. The bust in the shale industry will end up creating a boom in the more traditional E&P companies, just can I get the timing right to ride the next wave?

LTT

Interesting, but I don't see how Shale can add almost 5m barrels by 2024, such for-casting seems crazy at this juncture when shale drilling rigs have dropped 9 months in a row, at some point they are going to run out DUC's and they won't be able to drilling past enough to stand still, never mind increase production.

Who is going to lend the shale drillers more money, to get an extra 5m barrels a day of tight oil to market at lower prices? Higher oil prices will only kick the can down the road. The crash and oil spike will b that much worse.

LTT

Interesting scenario, suppose the way to look at it is, how far down the pecking order would that scenario be, surely there would be a long line of British/UK companies on the list prior to this. There would also be criteria to be met as with any loan, lending to a foreign company in an economic environment that has been quite unstable would again be well down on the list.

A more likely scenario first would be a UK company working in Argentina in say a partnership that has received a loan from UKEF, in that scenario the UK partner could see it's business effected or assets/banking frozen. But again they would be shooting themselves in the foot, inward investment to Argentina would be looked on as more risky and where would it stop, would they seize anything that had British involvement?

It does give food for thought for sure.

LTT

I think this is a really interesting point. It depends I suppose on how deep the rabbit hole goes!

You could look at it that UKEF lends money to companies to support their business and all things UK so not aimed at just putting Argentina's nose out of joint, but then if it's for a specific project that is attached to Argentina then issues could arise.

However you could also look at it that if Argentina go down that road, are they shooting themselves in the foot if UKEF has supported projects that benefit UK and Argentina, then not only are they trying to influence what is happening in the FI, but could put projects and jobs at risk in Argentina. Where does it stop.

I seem to recall during the drilling they rattled the sabre about boycotting suppliers, banks and anyone else connected to "illegal drilling in the Malvinas" as they put it. So it's not too much of a leap to imagine the same if not more so with not just exploration, but a long term development taking place.

I suppose the way to look at this is, will UKEF be influenced by the possibility of Argentina playing up (which they are going to do whether or not UKEF support the project) and what is more detrimental, sabre rattling and posturing or not getting involved and appearing to have been influenced and shown weakness with regards to a project that would effect many companies as well as the FI and it's people whom have a right to self determination as well as our support which the UK already does with armed forces based on the islands.

IMHO, this does bear some more thought but at the moment apart from this, I still cannot see why UKEF would not support such a project when there are so many wins.

LTT

Noticed PMO is bucking a trend for a change, seems oil comes off and PMO gets hit much harder, but currently PMO is up quite a bit on recent weeks, consensus is news of Zama sale is coming.

Someone there randomly mentioned PMO should take RKH out and then control everything down there.

So wondering what thoughts are here? FWIW, I don't see it myself, they are talking to farm down further and I seem to recall RKH being open to offer something to sweeten the deal so they could get a 3rd party involved (or am I just dreaming that bit!) so can't see for the life of my why PMO would even contemplate taking out RKH. Any monies from Zama must go to reduce some debt and maybe even pay a little div to appease the long suffering.

However, lets imagine they did decide to take out RKH or try, what stands in their way? I'd imagine it would have to be an all share offer, surely this would not be signed off by shareholders as it dilutes their holding just when they expected a share price increase due to reduced debt from Zama. What about RKH, would they see this as a good deal, not us I mean, but our board, at this time when they are so close to possibly moving forward and funds being secured, would they try and push us down that path?

Also how would FIG take it, allow PMO to be in total control and how would Taxes to be paid by RKH at first oil be sorted out, what is it £65m? That in itself would put off PMO.

Hmmh interesting times. Just surprised PMO heading north isn't lifting us a little, as a stronger PMO reducing debt; offloading Zama, firmly putting a lot of it's eggs in the Sea Lion basket, shows a level of commitment we have been waiting for, for a long time.

IMHO LTT

UKEF funding may not be in the bag but as a lender, just like a bank, it would seem unlikely PMO could get refused. Like when we were heading for our mortgage last year, our advisor checked all the small print, liased with the lender on our behalf answer questions, then the loan was approved, mainly because we proved we could pay; were not over stretching; we were putting in 25% of our own cash thus aligning our interests to pay back the loan. The bottom line being the bank wants their money back with interest because that is their business.

UKEF is no different, it’s government backed bank, their remit is to be paid back whilst supporting business and projects that employ people, working with UK business; make money that can be taxed, basically win win win.

If we start getting into this “Green movement will curtail support to energy projects like ours” then where would that stop? Everything is connected, we need fossil fuel to make transitions to green energy fact.

As a government organization surely they must see this a supporting energy independence in this current climate, as well as strategic presence that is going to be all paid by FIG from monies they will receive especially as we look to crash out of Europe. So with that in mind it actually goes above and beyond meeting UKEF criteria as it will also remove burdens on our stretched military presence. An extra win!

Still strange times ahead, but despite doom and gloom it seems PMO is needing Sea Lion for its own growth. Sale of Zama will show this more so.

LTT

As tempting as deep water is off Brazil and I'm sure there will be major takers, you have to look at the overall costs, buy production, then no doubt to keep and increase that production you need to drill more and this is truly deep water drilling through massive depths of salt. High reward but high costs, then factor in the royalties to Brazil.

Suppose what I'm saying is FI still has a very lucrative profit per barrel due to tax regime and relatively shallow depths. Be interesting to know what size field you need in Brazil deep water to be comparable to Sea Lion over the life of the field.

Of course it is all immaterial if UKEF don't stump up some funding, which is why we are under 20p, at this moment it's a flip a coin investment, the potential; tax regime; oil price; location it's all irrelevant, it's just about UKEF and funding, if that comes through, that's when all the factors come in to play and potential can possibly be realised.

Suppose it's a matter of watch this space. IMHO

LTT

Hi Dif, Much et all, I forgot about that, so what we are saying is for a few hundred million investment support which is a loan, they have to pay it back, we move forward on a project worth billions to UK companies; 100 of millions in taxes; security in the South Atlantic paid for by the FI AND back payments for protecting their islands and way of life! How could this not get signed off.

LTT

I would imagine FI Gov paying for their Defense and thus paying for UK to have a free carry presence in the region MUST be a positive for UKEF giving some support to the project, it would seem insanity to do anything else.

For me the next catalyst has to be Zama sale, no matter what they get for it, it nails their flag to the mast so to speak. Where else does PMO have such growth opportunity once Zama is gone.

I think this finally is the year when IF the ducks can be lined up there will be a step change and things will move pretty fast, a bit like a domino effect, Zama cashed in, UKEF signs up to support; banks come in and project sign off. When it happens be interesting to see where the share price is, if it stays too low, I’ll be piling in as there will be no better investment to just sit and forget till first production. Sure there will be trading opportunities along the way, but I have better things to do, and trading is not my job, I just hope things don’t move too much before I can load up my ISA allowance next year as 3/4 years from now, I don’t want to be paying tax on all the possible capital gains there will be.

Of course imho, it really is make or break, sense says it will happen, but in reality it’s a binary coin toss, hence we are sitting at 20p.

LTT

sorry, meant,

If it starts becoming a political exercise with politicians banging the drum one way or another trying the influence for their own agendas, nothing would every get signed off.

LTT

Hi Much, all,

I seem to recall at the AGM, there would be no annoucnemnt about the loan application, again as UKEF doesn't want publicity about these things, it may seem important to us and our vested interests but to them it's just an application for money that will benefit the UK and if all the boxes are ticked then it should be straight forward. If it starts becoming a political exercise with positions banging the drum one way or another.

Don't get me wrong, I am sure if they were asked if the application was in, they would say yes or no, but the first we will officially hear will be UKEF signed off or said no, no doubt the share price will be a signal before any official news.

As would said, it's all about ticking boxes and meeting requirements. I know it's no the same, but before we bought our house last year we met a financial advisor/mortgage broker, we held off the application until after May as my wife and I had lived overseas for a while and we were both coming up to 3 years full time and self-employed in the UK; plus my wife would hear what her bonus would be. It was incredibly sound advice and we sailed through, but if we had tried 3 month earlier we would have been knocked back and then applying somewhere else it would have been in the system that we had been declined once.

All that can be done now is wait and trust these guys have ticked all the boxes and dotted all the "i's".

LTT

I think one thing this does back up is what Sam was saying at the AGM about him not badgering UKEF and them not wanting to undue publicity, they have a job, helping Britain be Great, looking after our interests. Fossil fuel has a part to play for the foreseeable future, it needs to help the transition and be part of the mix, we can't just turn of the taps, there would be riots in the street.

Bottom line is UKEF has to think about the bigger picture, not the whims and fancy of the moment. Stop investing in companies seeking fossil fuels, where do you stop........hmmmmhhhh, we won't invest in the steel industry as it uses too much energy that affects global warming; we won't invest in chemical companies for the same reason; lets invest in solar panels in Africa, yes, hmmmmhhh but the cost to make them, the energy used in manufacture and shipping, thats not good......... and so on.

LTT

I think one thing this does back up is what Sam was saying at the AGM about him not badgering UKEF and them not wanting to undue publicity, they have a job, helping Britain be Great, looking after our interests. Fossil fuel has a part to play for the foreseeable future, it needs to help the transition and be part of the mix, we can't just turn of the taps, there would be riots in the street.

Bottom line is UKEF has to think about the bigger picture, not the whims and fancy of the moment. Stop investing in companies seeking fossil fuels, where do you stop........hmmmmhhhh, we won't invest in the steel industry as it uses too much energy that affects global warming; we won't invest in chemical companies for the same reason; lets invest in solar panels in Africa, yes, hmmmmhhh but the cost to make them, the energy used in manufacture and shipping, thats not good......... and so on.

LTT

https://www.desmogblog.com/2018/12/18/fracking-finances-record-oil-production-fuzzy-math

worth a read from back end of 2018. I have always been fascinated by the fracking boom, year on year it's been touted to fail as you point out but for every expert saying bust, there are others saying boom. I found interesting in this article how despite the fact the producers reached capacity for the infrastructure in some of the producing regions, they still carried on increasing production, taking the hit of $10/$15/$20 discounts to get their oil out to market, why would you do that? The oil is not going anywhere, why keeping pushing to produce faster and more thus causing the discounts to increase? It seems a lot like spinning plates to me, it seems to be all about servicing the debt; keep everything moving because if you pause for a moment you'd never catch up; or you'd be asking for another loan at higher interest rates......... vicious circle it seems..

https://www.desmogblog.com/2018/12/18/fracking-finances-record-oil-production-fuzzy-math

It seems a bit like the 2015 movie The Big Short, while the music is playing everyone is making some money and people are working, everything seems ok, but when the music stops.............! It's become a massive industry, if it imploded...... well it doesn't bear thinking about, of course investors would lose a lot of money, but all the people who would lose their jobs; all the suppliers of equipment......the hotels......the transport....... Gosh, keep those plates spinning eh!

Not really into the conspiracy idea, but it does seem when you have the media and all banging the drum about "Bigger producer than Saudi, self sufficient by 2030, etc, etc ,etc" it's not in any reporters interest to shout too loudly about the negatives, it would be ......... wel........Un-American, particularly the way the States seems to be at the moment.

Anyway back to RKH.............Tumbleweed roles by.............
;-)
LTT

Evening everyone, before we start speculating on a funding announcemnt, does anyone know if Premier have actually applied for the funding?

I suppose one way to look at it is if Boris becomes PM, then it should be a positive for funding with dwindling North Sea revenues. I just can't see them not going with it, surely it must tick a lot of boxes.

LTT

Dear carroteater,

i'd kindly suggest people do nothing of the sort. Lobbying a minister on the pretext of supporting a loan application for an oil company you have shares in would be foolish at best and downright detrimental at worst!

Lobby your minister about the state of your roads; schools; a passion; an injustice; whatever; but lobbying to put pressure on UKEF so your shares can increase in value, erm.............. I think not.

But that's just my opinion, each to their own, no disrespect intended.

LTT