Member Info for longtermthinker

I've added your question to the list. Thanks

LTT

This is a opportunity not to be missed so I though I would start a thread where we can get a concise list of questions that we can ask the board, rather than everyone send individually and they have to trawl through hundreds of emails ask same think, so for anyone interested, as you think of a question, copy and paste it to the list below if you like. To set the ball rolling I have put a couple of questions in no particular order;

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?

This is a opportunity not to be missed so I though I would start a thread where we can get a concise list of questions that we can ask the board, rather than everyone send individually and they have to trawl through hundreds of emails ask same think, so for anyone interested, as you think of a question, copy and paste it to the list below if you like. To set the ball rolling I have put a couple of questions in no particular order;

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. Harbour has been paying our share of costs on the project up to now, when does that end and can Harbour claim back those costs if they were part of a loan until first oil?

This is a opportunity not to be missed so I though I would start a thread where we can get a concise list of questions that we can ask the board, rather than everyone send individually and they have to trawl through hundreds of emails ask same think, so for anyone interested, as you think of a question, copy and paste it to the list below if you like. To set the ball rolling I have put a couple of questions in no particular order;

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.

Hi Dictumdedicto,

have to agree, I think now RKH and the board can take charge of their own destiny. PMO was a bad partner yes, but it was possibly the only deal on the table at that time, once that was done the die was cast and then a multitude of things happened some that the board could have handled differently with hindsight, some that were out of their control, such as covid. I mean PMO where riding a wave at the end of 2019/early 2020, FID was planned in for the end of the year, we all know what happened then!

However out of that we seem to be getting everything back as we head into a super cycle of energy, the majors may be divesiting but this is going to cause major issues down the line. Opec+ is now in control of the oil price and they are not afraid to cut or hold back on increasing production going forward and shale is not going hell for leather as it once did. Harbour is going to stick to their same old same old, stretch out the death tattle of end of life assets and drill for smaller and smaller add on resources to eek out further production thus putting off the decommissioning bills which are hanging over them. Hence their poor share performance, they are currently at 17p per share in old money, PMO were higher than that prior to the merger! It's insane!

So where does this leave RKH, well as they have lots of suppliers involved why not do some hybrid deal where they get some skin in the game. Surely there are a lot of companies wonder how their days are numbered with the ESG pressures, cut backs by majors and mid caps, would they not be up for getting into a new oil province with 30+ years of life in it?

The RKH is down for the count, but it's not all over just yet. I wonder if anyone is sniffing around.

LTT

What a turn up for the books this is! I have to admit when I started the thread " Worst case scenario", I never expected it to happen, at least we haven't hit 2/3p and plenty of buying no doubt for the arbitration result, not realising that any funds would have to pay the project exit/wind down costs and the tax bill to FIG before any monies get paid out to share holders! But I didn't see that one coming! What are Harbour thinking! Exiting Brazil, exiting part of Mexico but staying in for Zama and leaving the Falklands. But then correct me if I can wrong, didn't I read somewhere that PMO wrote off historic costs for SL before the take over! I wonder what the exit costs share is for Harbour?

So we are back to square one, well sort of, we have some possible cash coming from the arbitration which could be anything for $30m to $100+ so that would keep the wolf from the door, hopefully our board with use it wisely rather than try and buy producing assets. Our focus should be on the Falklands and getting SL up and running.

So without the dead weight of Harbour/Albatross around our necks what have we got. Well we have a fully engineered project that is good to go with a willing FIG. There are numerous prospects around SL to be drilled that could allow incremental increases in production for 20+ years. We are in a new era of high oil/gas prices as the switch to alternatives is not going as smoothly as governments would have us believe, and there has been a distinct lack of exploration drilling by majors and mid caps to replace production. Look at Harbour, they have just canned Brazil and part of their Mexican exploration program. As the mid caps come out of the darkness of this past 18months, where are they going to spend their cash? Of course returns to shareholders will be on the cards as the high oil prices give bumper results, but surely someone is going to be interested in SL as what is the alternative, bid for acreage; get partners; plan exploration; get a discovery (if you are lucky); appraisal drilling; engineering,....etc...etc...etc.....! We know, we have been through it and there lies the little chink of light at the end of the tunnel
If RKH get 100% back and let a farm-in with no back costs, any partner is getting almost $0.5B for nothing as the work has all been done. What is not to like about that!

I live in hope, roll on the investors meeting next week. Let's hear what the boards plan of attack is.

LTT

Hi LaticsRule,

I thing this questions has been asked before, but I believe, RKH put nothing in writing with regards a timeframe. FIG puts a time frame on license's, all right they extend them each time, but they could in November next year just say, "No that's it, you haven't taken a spi55 so its time to get off the pot!" However our boarded didn't do that, there was no clause that said if you don't commit you are out, but then what legal team would allow PMO to pay up what was is $270m cash, plus carry, etc, with the spectre of it being taken away. But thats what you get when you have a partner like PMO saddled with debt and hanging on but a thread each time there is a down turn in the oil price.

With Harbour we have a player who as the clout and the need to increase production, it's just whether they actually can walk the walk! They talk a good fight, about international growth outside of the NS, but stepping up to the plate is another matter. Tomorrow should be telling.

LTT

AA2020,

I just posted this on the Harbour website;

"Why not an all paper offer for RKH, the consolidation has given them some wiggle room, absorb RKH for say £200m in shares, get a US partner in who would pay some back costs and fund 50%, it would be like they got Sea Lion and the surrounding acreage for free! "

Didn't RKH do that to FOGL and get all their acreage, an all share merger back in 2015? What's to stop Harbour from doing the same. That way it sort of keeps everyone happy, those who want to get out and say goodbye to RKH, can sell their new shares thus recouping some of their loses, those who want to say in for the ride get a share of a much bigger entity who by the very fact of taking out RKH mean to develope it, so they still can get further returns by an increased share price and a dividend.

LTT

Why not an all paper offer for RKH, the consoladation has given them some wiggle room, absorb RKH for say £200m in shares, get a US partner in who would pay some back costs and fund 50%, it would be like they got Sea Lion and the surrounding acreage for free!

LTT

Be interesting to see if they have paid down $300m of debt, as they paid off $200m in their first two months of trading as Harbour.

As they going to kick Navitas in to touch and bring in Talos to work with them on Sea Lion, that is IF they like what they see with Sea Lion. Kick Sea Lion in to touch, well they better have somethings else in the pipeline otherwise how can they explain losing almost 75% of there 687 mmboe 2P+2C international reserves (if you include Zama in limbo) going forward!

LTT

Just wondering what we can expect tomorrow.

Half year results of course, but will they talk about forward plans; a dividend; a share buy back; Zama update although that is out of their hands as Talos has sent the Mexican Gov. a Notice of Dispute; Toulmont update for sure; Navitas deal going through or not? Sea Lion, still looking over the numbers!

With share holder 6month lockup expiring end of the month, what is going to keep them from rushing for the exit? Why leave the money stagnating here while there are rich pickings elsewhere. No Harbour will have to say something or have something up there sleeve as saying "We are a big fully funded E&P on a par with the likes of Aker BP", but no real growth options with Zama on hold plus they would be crazy to drill the 1st of a 2 well commitment on block 30 until Zama is sorted!

Will be interesting to hear what Linda et all have to say as there plenty of analyst watching now, lot like when they were a private company.

LTT

Just been browsing some old RKH annual reports and thought I look up where the Guardian was, turns out it was bought by Well-Safe in 2019 and has been turned into a bespoke P&A unit! (Plug and abandon). Hope that isn't an omen for this week! Harbour are going to abandon us!

Gosh it's a crazy read! Where did it all go wrong! How did we get to the point where we are beholden to Harbour and an arbitration result!

LTT

We should also remember hedging is a tool to smooth out the peaks and the troughs, if in the New Year we have a mild spring and gas prices drop through the floor, which they will invariably do at some point, we will be slapping Harbour on the back for locking in prices! Yes it's frustrating to think of the lost revenue but it's there to stop the company going bust in the down times, when they can't service their debt; can't secure financing, then get swallowed up by a bigger company for a pittance! Hhhhhhhm now why does that sounds familiar!

LTT

The crazy thing is, to maintain that 175k per day they have to drill, drill, drill, there is no letup if they don’t production drop rapidly. Ok the wells are on land cost a lot less to drill, however there are 100’s needed.

Can’t imagine who would pay top wack from Shell!

LTT

Harbour could take out RKH with 1 or 2months spare cash, easily 30p a share, but think it more likely they would make an all paper offer once the arbitration is sorted it would cost them 25/30m shares and then they would have the whole shooting match for a song! Might have to sweeten the deal for Sam and Keith, keep them on at a token jester (do you see what I did there!) but anything is possible!

If the arbitration brings in $100m clear then Harbour would have to think twice, take out the Rock for say 50p a share or let them stay in and flitter away their cash, then put them out if their misery!

LTT

Buzzthomas,
license is extended out to 22nd November 2022 so they have a good 14 months to kick the can out to. The key will be Navitas, if they kick the can out for them too it would be a little odd as everyone and their dog can see what a clutching at straws deal it was. If Harbour were to go ahead with no back cost payments involved and then give Navitas the option to buy in to the rest of the acreage, 30% from memory, to align their share for a few million quid, they would have to be insane! No it would be far more sensible to say goodbye to Navitas and keep 60% for sure or renegotiate the deal to get some back costs, but again, that was the issue, Navitas didn't have any funds, they were waiting for the back-up of UKEF funding to then be able to go around with the hat for their share of costs! IMHO.

Interestingly I wonder way they went for a an extension out to November next year rather than just 1 year May till May. Maybe so they can get a full years trading in and then make a decision without being rushed to a May 2022 deadline.

LTT

Hi Daikihaku1,
no me neither to be honest, it would be horrendous, but it would give the company a new freedom to market the asset, something they have been unable to do for many years. Not saying something will fall on their lap, but we are in a different world now, OPEC+ are keeping the oil price in the $65-$75 price band and they are not afraid now to cut production to maintain it; Nationalism raising its head everywhere. Not many places left that are as benign as the FI for a project despite the sabre rattling of Argentina. Mexico has to be a none starter for Harbour in the foreseeable, along with many other internationals.

Plus I am an optimistic person; I'm invested here so my posts naturally have to air to the positive, if I didn't believe this had a good chance of going ahead I would be out of here. But it's an educated guess, weighing up the pros and cons, but there is no certainty and Linda could still walk away as they are a company whom is averse to risk and SL could still be a step too far for them. Then how foolish I would look, but then that is my risk/reward, I wouldn't expect anyone to follow my lead as their risk/reward profile will be different from mine.

Posting here is just cathartic, to stimulate debate, get different points of view to my own and maybe sometime reevaluate.
Good luck to us all.
LTT

I believe the worst case scenario this week apart for Harbour not even mentioning Sea Lion is that Harbour decide to walk away saying it's too remote; the price is too high and the return is too low; oil is in the twilight so there is no point investing in a new province with a 25 year + life span when oil and gas will be needed less and less going forward; Nativas is not a good partner and bigger players are not interested; we are looking at M&S rather than development, etc, etc, etc.

If the above is the case then firstly without the arbitration result in, the share price would be hit really hard, I can see it dropping to 2/3p in an initial rout, then we would be waiting for the arbitration result which should be on the horizon. Lets face it, RKH don't have any say in that but the lawyers who have spent years working on this will want their pound of flesh so don't expect them to sit on their laurels too much longer when they are expecting anything for $10m to $60m+ as their cut.

So where does that leave RKH, lets say they just get their $30m back after the lawyers take their cut, it might not effect the share price, but it would give them a buffer of 3/4 years (at current cash burn) to market Sea Lion. We have spent years tied to a partner who as said, "Jam tomorrow, this time next year Rodders" and to be honest before Covid they might have just got FID sorted, but that is just one of those what if's. Thinking about it, it could have been worse, imagine if Sea Lion has been FID'd and sanctioned a year earlier before Covid and they we up and running with development, covid hit then Harbour swoop in and take everything! However with this new freedom to visit other players who knows what could happen, a fully engineered project, oven ready with a benign government who want it to happen. It might even shake up FIG to offer up further incentives to a new player to get this show on the road if Harbour walk away. This current situation must set some alarm bells ringing, Europe is going to beholden to Russian with the Nord 2 pipeline and gas going through the roof, if doesn't matter how many wind farms you have, if the wind ain't blowing you need a back-up plan.

Therefore all is not lost, however I just cannot see how Harbour will pass on Sea Lion, giving everything to RKH, writing off historic costs to date; all the good will; even if they just see it as, "Well we got Sea Lion for nothing, it came as a job lot of assets we got with PMO whom we only wanted for their NS assets; Toulmont coming on line and the $4B tax breaks", I just don't see how they can explain giving all that potential away to share holders. But then stranger things have happened, Harbour could get into bed with Neptune and then they will just be concentrating on paying down the ballooning debt pile.

It's going to be an interesting week, hope it's not a damp squid!

LTT

I think SL will be used as a stepping stone to the Southern Basins and Darwin, not the other way around.

Once SL is up and running with development then it’s game on for Borders and Argos for sure.

LTT

I’m very glad to read that someone from RKH responded, good they got the point in that Italy encouraged the investment and then changed their minds, however they still produce significant amounts of fossil fuels. It seems Italy was playing the environmental card to gain sympathy, but the reality is different so good on the Rock for spelling it out.

Is seems as well as demonising fossil fuels they are after the nasty oil companies who are taking them to court! Erm yeah right, what business in any arena would sue if they had invested £100’sm in a project then the government gave back word!

Well hopefully this means it’s coming to a head. Roll on next week and the Investors meeting, hopefully it’s going ahead with a tail wind of good news behind it.

LTT