Member Info for longtermthinker

Aim, didn’t you say something similar about FIG signing off on OM?

The next news in September should be the closing of Navitas replies to questions and supplying an updated EIS with all questions addressed. This will then go to a Exco meeting I believe. Not sure when that meeting is, possibly October. Oh gosh, then by your reckoning we have 8 or maybe 9 weeks to get EIS, FDP signed off, then Navitas have to start handing the cap around! 🤔

Maybe you are right, maybe Navitas are hoping rather than planning to FID in 2024, they might be cutting it a bit fine, but even so, they will get it in the bag by Q2 2025 as they will have cash pouring in from Shenandoah.

So all good with me, Q4 2024 or by Q2 2025, I’m fine with it either way. 👍

LTT

You are probably right MD, that would be the way to play it, possibly sell Borders on the rise, as nothing is going to happen there until Sea Lion is FID'd and pumping oil. They buy back in after the inevitable drop and fund raise.

If you think about what hoops Navitas have had to jump through with the EIS, FDP. etc, Borders have a PDF that is almost 2 years old saying drilling will cost $300m with the caveat,

"Drilling expenditure is highly dependent on market rig rate when contract is negotiated and where equipment and services are mobilised from".

They won't be able to confirm how much they will need until they have an approved FDP and an EIS which as we know is an extensive document in itself! Of course someone with deep pockets could come along and offer up the Capex and Drillex, but they would still need the FDP and the EIS before anything can start, which would be 3-5years off if they found a partner tomorow. IMHO.

LTT

Hi BlooBird,

I imagine once a footprint is in the Falklands then over time, FIG may soften on that front. They are adamant now that no infrastructure will be built on the islands, but once oil starts pumping and massive quantities of gas are discovered in North of the basin, they may have to rethink. A Gas to Liquids floater would be out of the question as they would need HUGE quantities of gas for that, but a small facility might be on the cards once the "Greener" potential comes into play and the "Jobs it would create".

So, I would never say never. Just as it stands it seems unlikely and anyway, let's get Sea Lion up and running first, then other players will possibly come onboard and folk might start sniffing around Borders Darwin discovery and RKH southern acreage. Fingers crossed.

LTT

I was looking at the Prax 2023 annual report and read about the Hurricane purchase as part of their upstream strategy. They envisage production on the Lancaster field continuing into mid/late 2025 at oil prices of around $80 per barrel. They currently produce around 7k per day.

I was wondering what Prax will do once production stops there. The Aoka Mizu will sail away, hopefully to refit for Sea Lion ready for late 2026, but Prax will lose its upstream production that it has been capitalizing on.

So could Prax buy into Sea Lion? Take a 20% stake from Navitas and secure 9k to 10k of high value oil if Sea Lion is producing at 45k+ per day 🤔.

Prax has refining, logistics, transport mid stream and down stream capabilities. They would be losing there upstream once Lancaster ends. This could be a way of keeping that upstream going and with excellent growth potential in a very stable and lucrative environment.

Probably a long shot I know. But thought I’d just throw it into the mix.

LTT

Sorry, meant “Wouldn’t want to be invested………”

LTT

Well, Sept is the time that the EIS gets sorted and sent back to FIG with the updated answers to the publics questions. Not sure what the timescale is for FIG to review updated EIS, but a good percentage of answers should be cut and dry, they may have to outsource some of the review should there be any technical stuff that goes above FIG head, but no doubt FIG will be all over this ready for the next big meeting.

As we have said many times before, the Falklands need this to happen to ensure their survival, and this is the last chance saloon, if they kick the can down the road, the boat will sail and it will become harder and harder to get an oil industry started in the islands. Oil companies will no longer invest in projects that have a 25+ year life for fear of being stuck with stranded assets, not to mention the deluded anti oil rhetoric that is getting worse. Look at the North Sea, waiting till Oct to see if Labour will give them some scraps to keep them alive!

Strange times are ahead, would want to be invested in any North Sea E&P, even though some have current dividend yields of 10/15%+ Crazy.

LTT

I can't understand what the fascination is with sharing/boasting about ones share holding! Everyone has a story to tell, "I bought at Xp and sold at YYp, aren't I clever". Not, so often people share that they bought high and sold low, but what does it matter. Whether someone has 5000 shares or 500k it's down to the individuals risk and reward profile and more importantly with RKH, how much you can afford to lose/sit on while other shares seem to be heading up all around!

My holding might be quiet small to many on here, but to me it's a big amount of money. Should we get FID in 2024 and OM comes in, although 40p/50p a share wouldn't be life changing, it would give me some freedom to pay a hefty amount off my mortgage and still keep some skin in the game to first oil! That would be a fantastic result, so don't worry what other people have or say they have, it could be complete fantasy, they seem to need recognition from faceless avatars, which is a be weird to say the least, even proposing to offer proof, which is even weirder!

So lets just get August out of the way and see what September brings, hopefully some good news and a nice break above 15p/16p.

LTT

Well that’s good news Gus, I thing I read somewhere that the appraisals could be used as producers, if so have Borders started their EIS and FDP? Or can they plug the appraisals ready to be used as producers, then apply for a production license, and then sort out the EIS and the FDP?

I’m still not sure about sharing a rig as RKH has an anchored semi-sub in mind to reduce emissions, rather than a DP rig. But as you say, if the rig market is tight, there may have to be some compromise.

Interesting times are ahead for both companies me thinks. 👍

LTT

But Gus, why would Navitas/RKH share an over spec’s rig? 🤔 they need a rig for roughly 12 wells in this first phase of drilling @ 52 days per well. So Navitas will need the rig for almost 2 years maybe more. With Navitas screwing down suppliers on price to get to first oil for $1.2b why would they then pay over the odds on a day rate to support Borders without any skin in the game.

A rig for the north basin might be $350k per day, but a southern basin would run at nearer $450k+ per day. The numbers just don’t add up!

But stranger things have happened, if Navitas were to take a slice of Borders then sure, I can see the reasoning behind having a higher spec’d rig.

LTT

I am not totally sure how RBL works, but surely once the EIS and the FDP are signed off, if RKH haven’t got the OM funds, they could easily get RBL of $50m 🤔 if not they could come to shareholders as I rather find a bit more cash to get FID in the bag than give up 5% or whatever to Navitas /New Partner!

LTT

I seem to recall DEM did a calculation that was much less than $100m. I think you need to bring into the mix the vendor financing, if that comes in a $400m then I presume it would mean you calculate from about 12.5% of $800m 🤔 but don’t quote me on that.

LTT

Well they still have a couple of months for OM to be put to bed. So 28 days takes us till the middle of Sept, then FIG will have to book in a meeting to sign off on it, so that takes us to middle of Oct. Then the FDP will need to be signed off before Navitas can call in all the finances to me signed off (I am giving Navitas the benefit of doubt, that they have already sounded out those who are backing the project, and it’s all in hand bar shouting and signing.) At which point, RKH will be informed what their share is and THEN if OM hasn’t come in (probably around mid/end November) RKH might have to fund raise. But we shall see.

LTT

I think you are right Auson, Navitas hasn't had much share price movement over the past couple of years since they FID'd Shenandoah. Ok they are within sniffing distance of breaking an all time high once again, but don't see how their share price could go much higher once Q2 2025 arrives and they are just making cash, hand over fist! But then maybe they will make an offer of 25p per share for us if we are still stuck at 15p. LOL

LTT

The EIS is an important stepping stone to FID. Without the EIS sign off, the FDP cannot be approved, without the FDP approved the project will be un-financeable, which in turn means FID cannot happen. Once the EIS is signed off, whether it effects the share price or not, it will be the first domino to fall, then they others should topple in quick succession if they are to get FID over the line by the end of 2024.

Right, back to the holiday, nothing to see here until September IMHO, unless of course OM annulment decision comes in, but can't imagine that happening as they will all be on there hols too! In Italy they practically all take the month of August off and head down the beach!

LTT

Sounds great at this moment in time, but if you consider OM annulment going in our favor, and FID coming off before the end of 2024 with first oil end of 2026, it would be foolish to agree such a take out offer.

The reason being, to achieve FID that would mean the EIS and FDP are signed off and the funding has been sorted. This means to touch paper has been lit and we are barreling to first oil. 50p per share would mean a buyout of approx £320m. With the tax losses we have against profits and us bringing in £200m + a year ( haven’t done the math, just a rough guide) and that would be EVERY YEAR for the next 20-30 years. Letting the shares go for 50p to my mind would be crazy after coming all this way, through the ups and the downs.

Of course we may be forced into it if we get a bidder and shareholders vote for it. But at first oil, I’d like to think we would be well north of 50p if we can just hang on in there.

LTT

That “rust bucket” has been producing oil from the Lancaster field since 2019 with minimal down time. I would imagine it’s better to have a working FPSO refitted for Sea Lion than a hot or cold stacked one like the Munin and have to work through all its issues and quirks out in the field!

We don’t want to got through something like the Eirik Raude fiasco! (I realise that is a rig, but the same principles apply)

The Lancaster field is now owned by Prax Upstream Ltd, the last article I read said the field was being produced through one well (should have been two) and there was over a 50% water cut. An Offshore Technology article dated May 21 2024 said that,

“ Based on economic assumptions, production will continue until the field reaches its economic limit in 2024.”

They are on a rolling charter also, 180 days notice for Prax or Bluewater to end the contract.

So going by the above and the possibility of an increasing water cut, the contract should end in the next 6 to 9 months, then it will be on its merry way to dry docks for a refit and upgrade no doubt.

I suppose you have to ask yourself would Bluewater allow the Aoka Mizu to stay on the Lancaster field on a rolling contract of 6 months or let it go to Navitas on a 10+ years contract! 🤔

Regards LTT

Thanks for that Thenorseman,

It’s interesting that they upped capacity on the FPSO during build and their break even is $35, although the tax rate is much higher in Norway I believe.

So if we are getting the Aoka Mizu that produces 30k per day, I wonder what its capacity could be increased by when it goes into dry dock 🤔 could it be upped to 45k per day, a 50% increase or would that be a step too far?

Still as you say, we are lucky we have one earmarked that ticks a lot of boxes, NS ready, removable turret, Suitable for extreme harsh environmental conditions due to hull strength, DP, and the most important one, seems to be available in 2026.

LTT

Sorry meant, “ So politically he WOULDN’t be able to push through big changes”

LTT

Blatav1,

Navitas have re-engineered the whole project to be profitable at very low oil prices. Even FIG have intimated they could be flexible with the royalties to allow development of boarder line fields.

FIG really needs this to work, the Falklands future depends on it. So if the oil price drops too low, I can see FIG reducing or giving a royalty break to stop Navitas walking away.

Also if Trump wins, which is a little less of a certainty, he may flood the market with oil, but then how many marginal producers would struggle and even go under with oil at $40 a barrel? Shale would be the first to succumb with any lengthy period of sub $40 oil. The North Sea might have a second wind as the EPL drops off and fields become profitable again, but it could be too little too late there, the nails are already being banged into that coffin I’m afraid. Everybody is getting the 5hit out of Dodge already!

So yes if Trump gets in, he may try and flood the market with oil, but if he does win I think it won’t be by a huge margin, so politically he would be able to push through big changes IMHO but we shall see.

LTT

To be honest, I wouldnt even mind if we follow the trajectory of Navitas over the next 3 years, 168% gain would make RKH around 40p a share. Of course more would be better, I would like to see that number on FID and financing news along with the annulment ruled in our favor.

Be interesting to see where Navitas share price is at first oil on Shenandoah in Q2 2025. Although we should have FID long before then going by Navitas self imposed timeline.

I read in the EIS that the rig will be drilling on site approx 20months after sanction, so to get to first oil by the end of 2026 a lot of things need to line up. So funding/sanction in Sept/Oct end at the latest, then we get news of the FPSO, rig hire, long lead items etc. The rig gets mobbed down, depending on location from early Jan 2026 to start drilling by the end of Q1, start of Q2, approx 50 days per producer. Meanwhile the FPSO goes to refit, tootles down Q3 2026 and gets linked up while the rig is drilling the last of 5 wells to start production. 😅 Phew.

It is doable, but it would mean everything has to run like clockwork and smoothly! But imagine Ian and his team are putting their Nike’s on as we speak, unzipping their tracksuits and warming up ready to settle into the starter blocks waiting for the gun!

Despite the pessimistic share forecasts, or maybe realistic share forecasts, I am really excited to get this show on the road and see how the project unfolds.

LTT