Member Info for longtermthinker

Have to agree, if Opec+ can keep oil in the $75-$85 range then it's good for them and good for SL going forward, an odd spike to $90+ would be a shock, but a sustained spell at $100 would be terrible for everyone.

LTT

Happy, you could also say, if Italy had allowed the development MOG/RKH would have had no problem fund raising or getting a loan for development (as it was prior to the demonising of oil). So yes there is risk, hence a possible 50% cut in the amount we are after, but to my mind we should get more as the put into Italian law they the development could go ahead and wrote in a clause for RKH to pay a higher rate of royalty to go to environmental arm of government. Can you imagine the uproar if RKH had gone ahead with the development then said they were not paying the extra royalty because it was added at a later date!

LTT

I think if Harbour got a buyer then yes it would be a goer as FIG wouldn't allow anyone who would sit on the asset at this late stage, I think they would want some assurances that the buyer would have the funds and the connections to green light the project otherwise FIG will say no and make them hand over everything to RKH whom at such time may have a viable plan going forward with Navitas.

The ship has sailed with regards to Navitas getting their 30%, so RKH would get back a minimum of 40% and a max mum of 100%. I wonder what Harbour is planning to do, Sam was having a face to face meeting with them the day after the Investors Meeting, wonder what went on there!

LTT

I believe it was said we paid £45m plus from the £231m we received, the rest of the tax on the free carry was due at first oil or 1 year after first oil. As Harbour are walking away they are no longer planning to give us the free carry, it is irrecoverable, therefore we cannot pay tax on something we have not received, what is there that is difficult to understand about that?

If I build a house for someone and they ask me to add on a conservatory at £50k, I have quoted the job, then they say they can’t afford the said conservatory, I don’t will them it, so they don’t pay for it. Then when I am doing my end of year accounts, the tax man doesn’t come after me saying, “I want 40% of that conservatory you built! You quoted for it, so I want the money!” of course he doesn’t because I never built it; bought materials for it; payed men to work on it plus I never invoiced it, so how can I be expected to pay tax on something that doesn’t exist.

LTT

Happy,
it's not a vailid point, as SecretBlueprint said;

" deferred tax is in fact a "deemed " capital gains tax deriving from Premier Oil promising to carry Rockhopper's 40 % share of development costs in the farm out deal. There is no hope of Harbour Energy keeping faith with the development carry after they exit the licence, so the deemed capital gain will never become an actual capital gain so cannot be taxed in the future."

It's what Sam said at the meeting, there should be no tax to pay. They said they had a good relationship with FIG and the mineral dept, and have had many phone calls since the Harbour news. They will be in touch with them again once the new government is signed in.

Triking, I didn't get any impression from Sam either way as to his feelings towards the new FIG, I recall he said he would be getting in touch with them once they are signed in.

And anyway if the FIG take away the License we will take them to court, no win, no fee style. (said very much tongue in cheek!)
;-)
LTT

Happy,

Why are you trying to wind people up, you are not invested here and only recently we’re recommending a switch into Borders as a better option!

Keith is only saying what Sam said at the meeting. FIG will not take away the licence from anyone trying and pushing forward, what they don’t want is someone sitting on it.

LTT

Happy,

Sam was asked the question of tax liability and gave the answer that we had already paid the £45m in 2013. With regards to the other tax liability, they were under the impression that as Harbour were leaving, and they where not getting the free carry then they would not be liable, he said FIG may see that differently, but should the situation arise then the would go into discussions under UK Tax law. He didn't say he was looking for a fight; he didn't say he was contacting lawyers, he didn't say FIG had requested payment, he was just answering a shareholders question to a hypothetical situation that may never even arise. IMHO.

LTT

Harp,
Sam talked a the meeting about that. He said they had paid $45m or so up front, the other $60m was on the carry, in recent years this has been reduced down further but Sam said they were under the impression they would no longer be liable for the tax bill as there would be no carry (which makes perfect sense to me, why pay tax on something you never received). He said if it came to that they would speak with lawyers and are pretty confident it would either be a lot less or it would go away.

LTT

However, if we did clear £100m and we reworked the number to develop SL for approx. $1B with perhaps $200 vendor financing, then if Navitas came in for say 65% of everything in return for funding 65% of costs until 1 year after first oil that could be doable.

Yes I know what you are saying where does RKH get it's share of costs from, £100m (if we are lucky), won't stretch that far once we have paid decom on the Italian assets, Harbour exit expenses and the possible dock decommissioning (although I can see them keeping the dock on for some time while the new dock is under construction). But if we get a partner and get to FID, shouldn't our rerated share price enable a minimal fund raise to meet our share of costs? because we wouldn't need our $200m or so straight away, we would need the bulk of it in the final years of development prior to pumping oil, surely at that point we wouldn't be languishing at 25p a share with 45k barrels a day about to come online.

For me I'd rather we gave away 65% and get this thing across the line, as waiting is no longer an option, and lets face it, such a deal would still be better than the previous deal we would have had with Harbour and Navitas combined.

LTT

Navitas cannot make a move on RKH until Harbour has exited, that is going to be by Christmas if we are lucky but most likely officially rubber stamped in the new year. So that gives us time for the award to come in, if it’s £100m then we get rerated to around 20p. So any offer from Navitas as to be above that. But why would Navitas want to take us out, and would FIG allow them to? Better the devil you know and have RKH deal with FIG as a go between. Also Navitas call themselves an E&P Partnership, so to my mind they would keep us in the mix, it would be too much hassle and red tape with Harbour just walking recently too.

Now what the deal will be with Navitas is anyone’s guess. They were getting 30% and an in on the rest of the acreage for stumping up their share of costs and funding 15% of our costs to 1 year after first oil. We cannot expect that deal to be happening as they are effectively on the line for 100% of all costs on a $900m development. They are going to want their pound of flesh. I just hope someone else is sniffing about who could take 25% and pay their share of costs, it makes things much more doable if we get $200m vendor support. Hmmmh interesting times indeed!

LTT

I wonder if the Italians had allowed Om to go headed and MOG decided not to proceed, would the Italian Gov taken MOG to court over the 3% extra royalty payments they insisted on at part of the deal to allow OM to go head! Well maybe not, but you can see what I am getting at, they allowed it and wanted 3% extra royalties for the Gov. coffers, they created a new law for this, so then they turn their back on it. That's not on and hence why we are in this situation.

LTT

I sort of agreed and would happy with that outcome as we would still clear about £75m after the arbitrators took their 35% cut. But seeing in black and white that Italy banned OM then amended the ban to allow OM to go ahead between the time RKH bought out MOG only for them to reintroduce the ban 2 years later is simply not playing cricket!

LTT

So I wonder how long we have to wait? As they have only been allowed 5 pages each it shouldn’t take much sifting through. I think as many have suggested, this was an excercise in allowing the argument to put in, so they can put it down and to bed once and for all. If they give any inch to it, it opens a can of worms. Of course RKH could still have lost the case but it seems more and more unlikely going by the Italians clutching at straws and making an eleventh hour fuss, in a last ditch attempt.

LTT
I

Hi Much,

I think offer was my wrong choice of words, I meant they will get one or the other as a judgment. I would love it to be the full £275m however hearing Sam talk about how they come to the numbers I'm inclined to be hopeful for £100m but resided to the more realistic back costs as I cannot see how they can charge for lost profits when they bought into it know it was going to run into possible issues as the Italians had changed the rules and RKH where aware of this.

LTT

I am inclined to believe they offer will be either £50m, £100m or nothing. £100m if they rule both parties should shoulder the costs and take equal responsibility; £50m if they go down the route of saying RKH should get it's back costs but nothing for lost production as they bought in knowing the asset was up in the air with regards permissions having been denied. Or they get £0 because they bought into the asset knowing it possibly wouldn't go ahead!

Not sure which is the most likely outcome, it all comes down to what assurances the Italian Gov gave to RKH about the application being eventually allowed to get through. If it was all verbal that could effect the outcome!
We will no doubt know soon enough.

LTT

Sorry meant “No excuses that they are along for the ride”.

LTT

Hi Ovets,

Sam said they received two sample announcements, one saying Harbour would go ahead with SL and one that said they wouldn’t. It was very to the wire as to which one they would go with.

So basically Harbour played their cards very close to their chest. It’s a shame but no point dwelling on what could have been, it is what it is. Hopefully Harbour go quickly and allow RKH to grasp the bull by the horns and crack on with things, there are no excuses that they are alone for the tide waiting for PMO to get it’s house in order.

LTT

and as Sam pointed out, the drilling is very straight forward, their graph in the presentation showed the consistency from spud to target depth.

I suppose one issue is repurposing at ship to be an FSPO, if they get one that just services say 40k per day production, we limit how production can grow as the cash starts rolling in. But hey that’s a way down the line issue to think about. Need OM in the bag and Navitas sign up before we think about drilling and an FPSO but with Harbour out of the loop should be easier to make quick decisions.

LTT

Also there is the matter of IF they get a foothold with a smaller development, everything else jump up in value, the add on development, Isobel/Elaine.

It is astounding that we are possibly about to become 100% owner/operator and we are valued at £24m. I just hope that is Navitas do come onboard we keep plenty of our assets because as soon as we start development, even if it’s to produce 40k per day everything in the area becomes more and more valuable.

For long term holders it’s a nightmare, but those looking for a punt, it’s an interesting proposition.

LTT

Cyan2,

Interesting that you say 8m as I believe Sam said the costs so far were over 8million.

LTT