Member Info for longtermthinker

Thanks Ovets, I missed that, nice to read they have been speaking with Harbour too. Let’s hope they have come to some consensus of how to get the show on the road!

LTT

Speaking of Cairn, what are they going to do with all that cash, they could return half to shareholders and snap up RKH for £250m ( about 50p per share) and have change! Was surprised to see Cairn had 21k in 2020 and guidance of 16-19k this year! Buy RKH keeping their 30%, stump up the cash to develope ( not needing to take the loan option and they will have doubled their production with plenty of upside!

Just my main concern is COP coming and the demonization of oil. Will FIG decide to no allow development! Will Harbour walk away due to the negative press that would be generated!
LTT

Could Talos not just take out RKH, then there are 3 partners paying their way, Harbour, Navitas and Talos! Suppose Harbour could let Navitas go and bring Talos in on better terms, not giving away too much of future potential for next to nothing. But why leave RKH in the mix? What do they bring to the party other than being a burden?

LTT

I have put this forward before and am wondering again with Harbour very recently posting an RNS declaring their shares in issue. Could it be a precursor to an all share offer? Is that possible?

If I was Harbour and I have two options, get rig of Navitas who are stumping up some cash or get take out RKH who are going to be a burden, I'd take out RKH as I'd ge the free carry back; I'd be paying their costs either way, so why not take their 30% and pay the costs involved but keep the lions share, plus all the added acreage which is currently valued at zero!

It make total sense. So what we need is a £100m payout to get us to 25p+ a share, then the take out will be nearer 35p per share. No a great outcome but better that it not going ahead, then we would have Harbour paper which is currently under valued by all accounts. Once the half year results come in, in Sept showing amazing profits we would then have to decide whether to sell up and cash in or ride the Harbour shares for further returns and a dividend. Of course nowhere near the returns we would get if RKH keep 30%, but just can't see that happening now.

LTT

Yes didn't Sam also send questions in for the AGM, but haven't seen any replies to those anywhere!

LTT

I have to say I have been mulling this over for some time now. On the one hand we should have the arbitration result shortly which hopefully puts us in a better position going forward, then it's a short hop to September when Navitas either gets sent on their way or are told they can say (hopefully on less favourable terms that they currently have).

The thing is the recent negativity towards fossil fuels is just getting worse, we have a lawsuit again against UK Gov about North Sea exploration; Shell told they are not doing enough, the list goes on and gets longer by the day. My concern is will Harbour walk away from the Falklands due to environmental pressures and shortsightedness by those applying the pressure!

I suppose FIG and Harbour/RKH can get away with saying, "It's not NEW exploration, it's already been discovered and appraised ready to go!" but still will they bend to the pressure. This for me is now my biggest concern.

Of course Harbours remit is to supply the world with fossil fuels during the transition and with 50/50 gas they are well placed. There is going to be a supply crunch as the race to renewables will not easy. Just look a Germany, talking the talk but they are still taking gas from Nord Stream 2 to power their economy cheaply.

So will Harbour be scared off because if they are, there are unlikely to be other takers of the project whether we have $100m in the bank or not!

In a quandary.

LTT

Hi Glenrothes,

Really appreciate the effort you are putting in to this, I have sent my details and confirmation of shareholding via the link.

Thanks

LTT

It's interesting how the Italian's are playing the environment card and seem to brush over the fact that they originally allowed the development to go ahead then were swayed by public opinion.

This will be the hurdle we have to get over with the development of SL, will FIG be swayed by environmentalists? especially the news is awash with floods and heat waves.

Come on HBR, lets get this party started, if you down commit to it this year, it's never going to happen.

LTT

Yes I recall they kicked the can down the road to end of Sept, but feel they cannot kick it out any further as Navitas will want to know. Also at the Harbour AGM they said they were reviewing Sea Lion so they must be reviewing the Navitas deal and seeing what a generous deal is was! So they will have to let Navitas know either way.

LTT

If I was Harbour I would knock the 2 wells on block 30 on the head and use those funds to kick of the Falklands, it must be about >$100m to drill two exploration wells not taking in to account contingency costs. Why would they even contemplate throwing more money away! Better to walk away from block 30 and let the lease go particularly as the current Mexican Gov have banned foreign companies from signing new leases to drill in Mexican oil fields. So why would they drill, talk about stranded assets!

No, the way forward has to be the Falklands now if they want to sustainably grow the business and create as Linda said, something online the lines of wanting another major hub/footprint other than the NS somewhere in the world. So other than buying into somewhere that has producing assets, which must be getting more any more expensive with oil above $70 per barrel, what other options are there?

LTT

I am not sure how it would work, but if Harbour were to buy RKH for an all paper offer, then they go with Navitas as a partner, would Navitas still be able to buy the rights to a further percentage of Isobel etc as the current deal states. My thinking is they would need to renegotiate as it was a bit too generous.

The other option is they kick Navitas in to touch, Harbour retains 60% and RKH reverts back to 40% original deal. Now if RKH got say £100m and Harbour did the FID and project sanction, what is to stop RKH looking get some money in to fund some of its share of costs? I'm not saying the whole amount they would need, but wasn't Moody some city boy wizz with connections, who could no doubt drum up a few hundred million? Or am I thinking of someone who was well connected 12 years ago and has been out to pasture since!

I suppose what i am getting at, is if and it's a BIG IF, we ended up with £100m, FID and project sanction happens, surely we would no longer be valued at cash in the bank, a value would have to be put on the fact that RKH would be making oodles of cash 4/5 years down the line, the closer that gets, the valuation of the company would increase. £100m put to Harbours £200m would no doubt get us through the 1st year with change left over, by which time we are a year nearer to 1st oil. Of course we could just take the free carry and pay it all back after 1st oil, but we should get a much better interest rate in the private sector, despite the big banks shying away from fossil fuels, there will be plenty of smaller lenders happy to make good returns on investment, as how is investing solely in Wind and Solar going to give anything like the returns the oil companies can. Just look at Harbour's cash flow as $70 oil! $200m paid down debt in less than 3 month!

LTT

My only concern, (apart from SL actually going ahead) is will RKH get taken out long before first oil? I mean Harbour could quite easily make an all share offer for RKH, 20/30p and get the whole shooting match for £135m, as an all paper offer it would mean share holders get a chunk of Harbour and exposure to potential growth but nowhere near the rise we would get from FID and project sanctioning. Sure our board would go for it, they would no doubt be happy with 30p per share and feet under the table in the bigger entity!

I suppose we now have to hope for a good settlement, £120m would give us about 25p a share valuing SL and the acreage at nothing! At least then Harbour would have to offer something nearer 40p per share!

By the way, how were the board going to reply to our questions submitted prior to the AGM?

LTT

Well Harbour will have to think twice about moving forward with a two well commitment on block 30. If they get a discovery then whose to say they won't have it taken away in some underhand way, and even if not, how can they monetise it, they won't be able to sell it so they will have to develop it in a hostile relationship!

I could understand Mexico gov giving operator-ship to to Pemex if they had drilled a well and proved up the percentages, but they haven't done diddly. Pemex will now play the tune and Talos and Harbour will have to dance, I cannot imaging it will be a March or the Quickstep! Didn't Pemex just the other day cause a gas leak that set the ocean a blaze! Do Harbour really want to have such a partner who is operator, they are an accident wanting to happen.

It would seem crazy that Chrysour, now Harbour, who set up in the NS to have safe and well managed producing assets, would contenmplate getting in to bed with Pemex and the Mexican Government after this. IMHO.

LTT

That is insane, Pemex haven't drilling any part of Zama, they even baulked at drilling an appraisal well in their acreage to prove up their claims! I hope Harbours drilling in block 30 are not surrounded by Pemex acreage otherwise this could set a precedent!

LTT

I am also unsure how SL is "too big". PMO had tied their flag to the mast, relying on SL for their future production growth, if it hadn't been for covid I think they may have just done it with the help of UKEF and Navitas. But that is history, now Harbour are in charge, a much bigger entity; with cash rolling in; a commintment to growth on an international stage with HUGE tax losses to offset. They could commit to Zama and stump up their share of costs out of petty cash, after all they just knocked about $200m off the debt pile in the 1st quarter of trading. Now the thing is will they want to be in Zama with Pemex in charge, do they want to be beholden to an indebted company who may take short cuts to preserve cash, put off infill drilling in the future or drag their feet with work-overs or explaining the development. As I say they can afford to and it should be easy money at the start, but what happens down the line.

As for SL, yes $1.8b is a lot of money. I am not sure if Chrysour has handled such a development of such scale before, so this is a negative point, but with Navitas on board that is some of the burden taken care of if they so wish. UKEF is a no no IMHO, I don't see how they could support such a project so close to COP, even if they say the application was in and they had said "No NEW investment in Fossil Fuel projects", there would be a lot of bad press that FIG, Harbour could do without. Even so, Harbour would be looking at a staged investment, they wouldn't have to stump up $1.8b at the start, so spread over 4/5 years it becomes a whole lot more manageable for sure.

So bottom line is, I think Harbour could afford it, it's just whether they want to. To my mind, unless they buy further end of life producing assets pretty soon, where will their growth come from? How will they sustain their production meaningfully; and how can they turn away from a asset that is on the books as having 36% of their 2C resources that is oven ready, not waiting on 3rd parties squabbling over unitization and who is going to run the show!

LTT

I don't understand you Godders99, you had the chance to change the status quo with you shareholding (if it actually is real) but you wimped out and couldn't be bothered and now you come back spouting on about NO FID Ever! Your " I can't sell as I'll tank the market and also I'm too scared to crystallise my loss." It is pure fantasy land, I have put you on ignore, you were quite funny in the past, but I have no time for someone drones on and on, when they could have made a difference. Shame on you Godders99.

LTT

They be keeping it for tomorrow’s AGM not that there will be anyone there to tell, but it could be added to an RNS saying all resolutions have been signed off!

LTT

On another matter regarding Harbour and Zama, it seems Pemex has decided not to drill an appraisal to back up its claims to have the lions share in its block and therefore it should be operator! This has to set alarm bells ringing. Are not Harbour due to be drilling an exploration well on block 30 later this year? Is it really worth it, later Harbour do the heavy lifting then move the goal posts to make it increasingly difficult to stay.

But to be fair in there PFD presentation ( which was pretty much the same as the April presentation apart from some rejigged numbers) they did add a couple of pages here and there with one of them was called "INTERNATIONAL: DIVERSE PORTFOLIO OF GROWTH PROJECTS" where they had SL down as a "Significant resource potential".

Interestingly Harbour list it as 60% and no mention of Navitas farm in (which would bring them down tie 40% across the acreage I believe), so my thinking is they are running over the numbers as a "Project review" but basically they are looking at whether they can kick Navitas into touch; squeeze suppliers a but more and get FIG onboard with a tax break or some kind of hybrid royalty system. I mean suppliers could be squeezed a bit more, as no doubt bigger longterm projects must be getting thin on the ground as the Majors are moving into renewables, so getting in to the Falklands at the start on a 5/10year project and then some, must be worth getting involved in, particularly as a main supplier at the start.

I see Harbours share price is down today after consolidation, it is the lack of direction I think that is causing this. No-one can see where/how Harbour is planning to grow it's declining production, or how it will pay a dividend. It's ok talking about a dividend, but if they start and then have to start borrowing to sustain it, it's a slippery slope!

I feel if they were to back off from SeaLion, Harbour would be hit hard, particularly when they have nowhere else to get potentially 60% of >500m barrels as operator (if you count Phase 2) with potential upside with Isobel, etc; in a rising oil price environment, in a world economy that hasn't even got out of 1st gear yet!

But hey stranger things have happened, who'd have though PMO would touch 120p a year last January, so be swallowed up by Harbour just over a year later!

LTT

Hi Much,

totally agree, even a $50m win after paying fees to our lawyers would put us in a much stronger position going forward and even if there is a "We are still looking at SL and other M&A projects", from Harbour at their AGM, it would be worth hanging on until Sept as they need to make a decision on Navitas staying in the mix or saying goodbye. They cannot string Navitas along any further than Sept.

It will be a very interesting AGM for Harbour. I don't see how they can post bumper profits, and mention a dividend whilst eyeing for a FTSE250/100 position by the end of 2021, without giving some direction on how they will grow and stem the decline of their ageing NS assets. As I have said before, even if they want to go with Zama, how can they commit to an FID on a project that is still in dispute! Even so their share is around 100m barrels of Zama, even less if they are using Pemex's numbers! Yes Harbour have some exploration, 50% of a block in Brazil with a well ear marked for drilling 2022, but even if it came off then how many years to appraise and get to FID and development.

So where is this "A New Global Independent O&G Company" they have been big-ing up? I think if FIG can be flexible with a Tax incentive to get SL Phase 1 off the ground, I see Navitas kicked in to touch as Harbour state in their April presentation, "Ability to pursue a fully funded growth strategy", so if they are fully funded they no longer need UKEF investment, so why would they give away a HUGE amount of acreage for so little? It seems crazy to me, if nothing else they should renegotiate the contract to be less generous on Phase 2 and Isobel and Elaine.

Anyway interesting times are ahead.

LTT

I think it's the share overhang and the uncertainty. Harbour is going to come out with some good number with regards earnings that's for sure, but what will it do with that money? Pay down debt? Give a dividend? invest further in NS, buying some more rust bucket end of life producing assets our instant returns, but will have to keep spinning the plates so as to push back decommissioning?

These are all things the asset managers will be looking for direction on at the AGM. Zama, what is happening there? Sea Lion a major part of PMO's future might get pushed back or dropped, so where to then? Cook said they liked PMO international potential, but without those two what else is there! All questions that need answering otherwise why invest in a company which is fighting a continusous decline in production in a new super cycle of rising oil prices.

Roll on the AGM and let's hear what Cook and co. have to say.

LTT