Member Info for longtermthinker

Hi Nigel, I understand, I was just saying that Sam implied that the funders had done their due diligence and wouldn't have taken it on if they thought it was a 50/50 chance of success.

LTT

Hi Cyan2,

Sam said it's like a calculation where you put in a number and press go and then it spits out a final amount, they worked on that to get their 275m euros so he expects them to do the same. Suppose it comes down to how generous or how mean they want to be.

My gut feeling is RKH might get 100m+ (coming out at 65m+ after paying the lawyers). My reasoning is, the Italians have wasted their time asking them to look at a NON EU situation and then ask them to rule as if it's based on EU law (or something like that), so I feel they allowed it, so they can rule on it and stop this can of worms opening in future cases in it's tracks, hence a 5 pages argument completed by the end of next week. I have gone for the lower middle of the 275m to take into account variables, but who knows. All will be revealed soon I imagine as the 5 pages 2week deadline makes me think they want an end to it. IMHO.

LTT

Part 3

They are not going to take the 60% and cut Navitas out as they have said, “development of the project is not deemed a strategic fit for Harbour”, so hopefully they will go and let us take over 100% for $1 then we can do a deal with Navitas.

Hope the above helps.
LTT

Part Two,
8. I asked about contractors that Harbour as part of it’s view would have contacted to get up to date numbers for costs etc, I wanted to know would we receive those updated numbers or would Feed be started all over again. Sam said they haven’t, but would expect to, also they would be smart and use all the work that has been paid for to rework the project when reducing it down, he also said they had received many phone calls for contractors saying that if your going to be in charge we still want talk with you. One question I should, have asked with hindsight was about vendor financing, I think it was to the tune of $400m on the project submitted to UKEF, so could we count of vendor financing on the smaller project as $200m , this would help Navitas with their funding, knowing contractors had some skin in the game.
9. By then end of next year we could expect FID if they got a good tail wind and Navitas or similar came on board. But that is of course if they can get Harbour to leave promptly rather than string this out for another 3 months.
10. Regards to Ombrina Mare there are a couple of points. Firstly the payment system is if it’s £5 then it’s 50/50 if it’s £100 then it’s more like 65/35 to RKH. The submission is going in on the 6th of October and they said the lawyers were quite happy that it had been limited to a 5 pages argument. And lastly the chances of success, they are not 95% but they have a good chance as the funders wouldn’t be doing a no win no fee if it wasn’t. Although they are after approx 275m Euros, they know that they will rework the numbers to take into account down time and oil price’s etc. So it’s anyones guess as to them getting $30m to $275m push interest. He also feels the getting of the money won’t be an issue as they will go after it through the US, Australia, UK court system, definitely not through the Italian courts.
11. It was asked about build times for an FPSO, Sam said if they can repurpose a ship then possibly 2/3 years, if a new build then considerably longer as the ship yards are crazy busy.
12. With regards Navitas as a partner, firstly they are keen; they have just completed a $900m transaction on a project in the Gulf of Mexico and they have access to funding. Israel is where most of the funding came from which is good, as ESG in UK and US mean funding for oil/gas projects is drying up and he said Israel is less concerned about such things.

I will have a think if there is anything further to add. My take is, not all is lost, it’s going to be a rocking road, a lot will depend on the outcome of OM, then we will know if there is going to be an equity raise next year. Will there be an orderly exit of Harbour, will they back away gracefully or try and sell there stake, it is possible, even $50m to an interested party is better than walking away with zero, but that would also be subject to FIG, they wouldn’t want someone coming in without guarantees of moving thinks forward so they could vet

I went along to the meeting and met a few fellow investors, not a big turnout and the people I spoke with were quite down beat about RKH prospects prior to the presentation and I didn’t really catch up with anyone afterwards to see if their feelings had changed.

I won’t go through the presentation that has been put online, there were a few questions asked here and there during and after the presentation, but basically everything you need to know about the current situation is there. So in no particular order I will go over a couple of things I noted;
1. Sam is a pretty good speaker, he wasn’t flustered and spoke constantly about the situation for almost 2hrs, answering questions along the way to the best of his knowledge. He is very knowledgeable about all aspects of SL, the development,etc, doesn’t sound like someone alone for the ride. (take from that what you will).
2. They are keen to get this all sorted as quickly as possible and are in discussion with FIG, Harbour and Navitas and are actually sitting down today with Harbour face to face to see what the score is. I think he went over in the presentation what the options are with regards to 3months to exit, sell on their stake, take over Navitas’s share or return of everything for $1, which one shareholder kindly offered to pay!
3. They are quite confident they can shrink the project and still deliver returns that would be significant.
Navitas are up for this and still very keen. I asked about Navitas farm-in what would they pay, after-all PMO payed quite a bit for their stake. Sam said that the deal they were ready to sign would have taken RKH to first oil at no cost in the form of a loan. So I took from that to mean any deal with Navitas would be something similar, Navitas say get 51% of the projects/whole shooting match then Navitas get the investors on board and RKH pays nothing until 1 year after first oil and then pays back the loan at whatever percentage rate is agreed at the time. (this is just my hypothesis).
4. They plan the shrink the project down by half, so if they can get the numbers down to $900m/$1B then it would put them in a good place.
5. UKEF is basically a none starters (as we all guessed).
6. It was asked would FIG take away the license, Sam said they had a very good relationship with FIG, they hadn’t been so much involved in the past few years as PMO was the operator, but they plan so be again. He said FIG don’t want anyone to just sit on the acreage, so as long as RKH/Navitas are striving to move things forward there would be no issue with the license being extended going forward.
7. He was asked about FIG giving more incentives to get the project up and running. He said that currently FIG had no government in place, but they would be talking with them once they were signed in and wouldn’t want to say anything that might compromise discussions.

"The Tribunal anticipates that it should be in a position to render its award* in the course of July. The Tribunal will revert to the Parties towards the end of June to confirm this timeframe."

*Note: under the International Centre for Settlement of Investment Disputes (ICSID) rules the Tribunal's decision is referred to as an "award."
Then on the 2nd July we got;

"The Tribunal has made significant progress and confirms that it should be in a position to complete its work in the course of July."

So completing it's work sounds to me like the decision and the award numbers otherwise why would you say "Complete it's work".

Which ever way you look at it they said they will render their decision. So we should get a yay or nay anytime soon. I cannot imagine they would say, "We agree with RKH so now we have to think about the award numbers." If they are giving a decision then they must have some idea of what they are going to give as damages as that is part of the process. IMHO.

LTT

Hi Cyan2,

they wouldn't be interested in the AIM oiler, just the fully appraised and engineered SL prospect and the surrounding development potential. It's still and chicken and egg play, no-one is interested until it's going ahead, but until it's going ahead nobody is interested!

This is where Navitas is an interesting opportunity, they have assets in North America and Canada and thats it, they also call themselves a O&G exploration and production partnership. Will be interesting to hear what the plan is tomorrow going forward tomorrow. If RKH and Navitas decide to go it alone maybe they can go down the leasing route for an FPSO or why not get them in as a partner on a reduced lease rate and get a share of production.

Well, hopefully all with be revealed tomorrow.

LTT

Godders, lets not forget RKH delivered a discovery and a successful appraisal campaign, they made a lot of people a lot of money. It all fell apart when they got PMO involved and then spiralled now from there, there has been some bad decisions since but there has been a lot of bad luck too, who could have foreseen the Subprime Mortgage Crisis of 2007-2010; also just when PMO was to put paper to ink to sign off on FID, Covid came. How many companies have made it through those shocks without selling themselves to the devil, PMO is one of those casualties!

So the difference is the ball is well and truly back in there hands, so lets hear what they plan to do with it before we start talking of selling the company. (incidentally what is there to sell, if RKH is not going ahead, they have nothing, any money they have will go for liabalitites and Tax to FIG).

LTT

they emailed Sam and heard that they have been in touch with the lawyers, but the lawyers advised not to chase them about the result? But to my mind, you should quite rightly chase them up when they are coming up to 2 months overdue.

I am also wondering if RKH have any inkling that the result has gone there, surely after all this time they cannot turn around and rule in Italy's favor, they must be haggling now over the award amount or the interest payment on the amount. I suppose they would have to look at the production rates they expected and the oil price to come up with a figure, but suppose that is why they were after $325m!

Now wouldn't it be nice if we go it and cleared $200m after paying the lawyers fees? Wish I could remember what the sliding scale was on the deal with the lawyers, can't recall if it was a larger percentage on a small payout and a bigger percentage of a larger of the other way around.

LTT

And we need some payment of historic costs, RKH spent $100's of millions on discovering and appraising Sea Lion, so either we need some up front farm in payment or something that says we will get it back from oil revenues at a later date, surely they cannot allow Navitas to have 30% or become operator for just paying there share of development costs!

LTT

Sorry to post that twice, I thought it had disappeared into the ether so have to write it again.

LTT

I wonder if this is why the share holder meeting is on the 30th as this is when the exclusivity deal with Navitas, Harbor and RKH comes to an end. Hopefully the new deal on the table will be better than the previous deal, including some payment of back costs otherwise it would set a presedent that any other partner coming onboard would not pay any historic costs because why should they if Navitas didn't for their share.

But all this hangs on the outcome of how Harbor exits the deal, if it's a long protracted affair then we can't sign anyone up until it's done. I wonder what PMO have written in the small print of the original deal to be operator.

LTT

Suppose this is why they are having the meeting on the 30th Sept as this is when the deal between Navitas, Harbor and RKH runs out. Maybe Sam wants to announce a new deal with Navitas at that time, what that deal might be who knows, surely not as generous as the previous when Harbor was involved, also will it include some back costs being paid!

It does seem that our board has been looking at alternatives in case Harbor did walk away, Thursday should be interesting.

LTT

Part 2 of questions;

15. From 8.4.20 Results RNS "Falkland Islands spend of US$19.3 million relates primarily to pre-development activities on Sea Lion." If we were simply being billed by PMO alone for our share of predevelopment costs; then our 40% which was $19.3m USD! suggests that 100% of costs for one year were in total $48.25 MILLION USD .
We were not doing any drilling; where was the money spent?.
"...further such costs, estimated at up to US$10.0 million and included in the balance sheet under current liabilities, could become payable in the next 12 months."
Also another $10m bill that popped up; what was that cash used for?.

Below is the list of questions for the board so far, please add anything else you want to ask as I will send them through by the end of play today so they have some time to come up with some answers.

Regards LTT

1. From half year results Harbour wrote; "The Group has decided to explore the options to exit the project and its other license
interests in the Falkland Islands". As Harbour has stated, " the development of the project is not deemed a strategic fit for Harbour." then what is there to discuss? They will not develop SL so their license should revert to us. I am concerned that extended discussions will inhibit our moving forward with other interested parties.
2. What costs are involve in Harbours exit, what are our liabilities with this exit?
3. What has happened with UKEF? Presumable it's a non starter now the major player Harbour is walking away.
4. What will you do to preserve current cash until the arbitration result is though, and going forward if Italy drag their feet to pay, how do you plan on keep the company afloat with current cash burn?
5. What will you do with the arbitration money?
6. You may or may not have had an inkling that Harbour would be walking away, but what have you been doing whist Harbour where reviewing the project? Where you preparing a battle plan to pre-empt such a scenario? If so what is it, can you share you plan going forward with share holders.
7. Has there been any discussion with FIG about further tax incentives/breaks to gain more interest in the project, to get it off the ground. Such as royalty payments put on hold until 1 year after first oil, or a sliding royalty system than enables FIG to reap the rewards during the good times of high oil prices, but works of a sliding scale during tougher times, as I see this as a big hurdle for would be investors.
8. Are we still liable for capital gains (£65M?) to FIG and when will it be due?
9. Rockhopper say they have been talking with Navitas - could they outline what options they have been discussing with them?
10. Do the BOD appreciate that a significant amount of shareholders are unhappy with the company's performance to date?
If so, how do they propose to remedy this?
11. Can Harbour sell/offer up for sale their share of Sea Lion?
12. Will any new deal set up with Navitas include an up front payment to cover historic costs?
13. Any new partner coming in, will they have to pay some historic costs to get a share of Sea Lion and the surrounding acreage?
14. Do we still have any interest in Monte Grosso (25% stake operated by ENI) and if so what is happening with it?
15. From 8.4.20 Results RNS "Falkland Islands spend of US$19.3 million relates primarily to pre-development activities on Sea Lion." If we were simply being billed by PMO alone for our share of predevelopment costs; then our 40% which was $19.3m USD! suggests that 100% of costs for one year were in total $48.25 MILLION USD .
We were not doing any drilling; where was

Ha Ha, Ovets, not been on the wacky backy! But the point I was trying to get across is PMO paid us almost $300m cash for a fully appraisal asset along with free carry, ok that got watered down over the years, but now possibly have 100% of a fully appraised, fully engineered asset with a further discovery in Isobel/Elaine that could be as big as SL.

So with $70+ oil on the cards for some time going forward, how can RKH tout around SL with all the extras and not get some historic costs back? Just letting anyone come along and get 30% in return for just paying their share of development costs would be crazy, but then crazier things have happen of late!

I feel once we know the score with Harbour, if they relinquish all rights and the partnership is null and void, then we might find some sharks cirlcing because someone must feel they can get a world class appraised, engineered discovery for a song.

LTT

Below is the list of questions for the board so far, please add anything else you want to ask as I will send them through by the end of play today so they have some time to come up with some answers.

Regards LTT

1. From half year results Harbour wrote; "The Group has decided to explore the options to exit the project and its other license
interests in the Falkland Islands". As Harbour has stated, " the development of the project is not deemed a strategic fit for Harbour." then what is there to discuss? They will not develop SL so their license should revert to us. I am concerned that extended discussions will inhibit our moving forward with other interested parties.
2. What costs are involve in Harbours exit, what are our liabilities with this exit?
3. What has happened with UKEF? Presumable it's a non starter now the major player Harbour is walking away.
4. What will you do to preserve current cash until the arbitration result is though, and going forward if Italy drag their feet to pay, how do you plan on keep the company afloat with current cash burn?
5. What will you do with the arbitration money?
6. You may or may not have had an inkling that Harbour would be walking away, but what have you been doing whist Harbour where reviewing the project? Where you preparing a battle plan to pre-empt such a scenario? If so what is it, can you share you plan going forward with share holders.
7. Has there been any discussion with FIG about further tax incentives/breaks to gain more interest in the project, to get it off the ground. Such as royalty payments put on hold until 1 year after first oil, or a sliding royalty system than enables FIG to reap the rewards during the good times of high oil prices, but works of a sliding scale during tougher times, as I see this as a big hurdle for would be investors.
8. Are we still liable for capital gains (£65M?) to FIG and when will it be due?
9. Rockhopper say they have been talking with Navitas - could they outline what options they have been discussing with them?
10. Do the BOD appreciate that a significant amount of shareholders are unhappy with the company's performance to date?
If so, how do they propose to remedy this?
11. Can Harbour sell/offer up for sale their share of Sea Lion?
12. Will any new deal set up with Navitas include an up front payment to cover historic costs?
13. Any new partner coming in, will they have to pay some historic costs to get a share of Sea Lion and the surrounding acreage?

Seeing I did a worse case scenario post last week I thought i should counter it with a best case scenario. Of course this is pure fantasy as is based on somethings we have no idea about such as will Harbour walk away in a clean break or will the be able to put their share of SL on the market for sale, will FIG allow this to happen, how long will it take, etc,etc,etc.

However if Harbour do walk away with nothing, just give RKH the keys to everything, what then? Well then RKH will have a fully appraised; fully engineered, good to go project with upside. So what will they do with it? Seems they want to keep Navitas on board so why not give them 30% of everything, the whole Falkands assets, but they would have to stump up $150m to cover historical costs, it's only fair. Lets say another player comes in, for arguments sake lets say Cairn comes on board. They have a lot of cash coming their way, why not, but would we let them farm in for nothing? When we think what PMO offered/paid for their share we would be crazy to give it away for nothing. So lets say we allow Cairn to take 40% of the whole acreage for $200m maybe even allow them to be operator if they coming to FID by November 2022.

Then in my fantasy scenario, OM result comes if to the tune of the full monty, we clear $250m after the lawyers take their cut. Now we have two partners; $600m in the bank, more than enough to pay our share of development.

It could happen, ok maybe not Cairn, but some mid cap who is becoming cash rich with high oil prices, but limited reserves and share holders with no appetite for exploration drilling.

LTT

Bloo,

I thought I read somewhere that PMO had written off historic costs before the merger to create Harbour, but cannot for the life of me think where I read this! Maybe it was a dream or something. But if true would that mean that Harbour got everything for free so they won't have to right off anything? I am no accountant by the way so someone please enlighten me.

LTT

Happy I get what you are saying and where you are coming from, however this is a good opportunity to get some answers. I don't feel this is a time to ask for resignations en masse, it's a case of better the devil you know. You really want to throw away the good will RKH team have with FIG at this time? A time when we actually have a chance to be in charge of our own destiny? We have been on the back foot for sometime now, covid really changed everything just when we had a chance of getting this thing off the ground.

Let's hear what the board has to say and ask the right questions at the meeting. Yes we could just have a list of questions such as; Why are you paid so much? Why do you give yourselves extravagant share options? Why didn't you cut your wages sooner?Why don't you all resign? etc,etc,etc, which I can imagine they will say, " We paid ourselves and have share options and pension packages in line with other AIM listed companies."

So wouldn't it be better to ask them what they are going to do from NOW to earn those wages and share options, now that they will have the ball well and truly back in their court, because then they will have no excuses, no more "We are waiting of PMO to apply for UKEF", "We can't do anything until Harbour has reviewed SL",etc, etc. They will have to do something, and the last thing I want is to get in a legal battle with directors over pay packages, remuneration packages , over forcing them to resign when they should be concentrating on doing deals and getting Sea Lion to FID and project sanction.

LTT