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Part 6 final part
One Dyas and Helium One
One Dyas – They pulled out of the One Dyas deal on the basis that (as they said in their March 2nd 2020 RNS)
- European gas price for calendar year 2020 reaching unprecedented and historical lows having fallen from above €17.2/MWh in October 2019 to current trading at €10.2/MWh for the 2020 calendar year futures contract;
- The target assets being subject to increases in both forecast opex and capex numbers, during the interim period between 9 October 2019 and now, as well as into the future; and
- Political uncertainty during the fundraising period, including the UK General Election and Brexit and, more generally, uncertain macro-economic conditions which negatively affected equity market sentiment.
However, when bigdouble mentioned that “as prices have already increased and are now at the levels they were in April 2019” and asked “Why did the Board not take a longer term view or were there other issues shareholder were not made aware of” instead of just saying that they made a mistake they actually had the gall to turn around and blame the market and shareholders by saying that “Shareholders, and the market more broadly, would not have been happy with the valuation they would have been paying to conclude the deal”.
You could not make this sh*t up. Once again it is our fault and not theirs! You can see it again in their comments on the value of the Helium One shares. With this they “ask that you and other LTH appreciate that this investment was made by the previous team and was not the responsibility of this Board. “
However, at the same time they also say that: “The stock has performed well since listing, an event enabled by significant support and input from SCIR, and we would expect it to continue to perform well in the run up to the well. Any further dilution is not in SCIR's control.”
There is a real pattern coming out here. Any success that comes they are willing to take all of the credit for but any failure belongs 100% to somebody else – whether that somebody else is the previous board or their own shareholders.
As I said at the beginning this lot are just totally untrustworthy and need to be gotten rid of sooner rather than later. We need to keep the pressure on or they will simply revert to their previous ways and continue milking Scirocco and it's shareholders for every penny that they can.
Part 5
The clear implication of (and reason for) this announcement was to imply to shareholders that the company had more than enough money available to cover their $5.7 million obligation for Ruvuma even though a careful reading of the statement told you the opposite. In fact, I was attacked and called a deramper by some other posters on this site when I pointed out that they were not funded for the drill and in fact very clearly did not have the money for it.
Now when they have been asked explicity how they intend to fund the retention of the asset they come out and say that it is not in shareholders interests for them to know this. I wonder why this is:
a) Is it because they don’t want to tell us that they don’t know how it is going to be funded?
b) Is it because they don’t want to tell us that unless the volumes traded of Scirocco increase massively that there is no way that Bergen will lend us the other $3 million?
c) Is it because they do not want to tell us that their only hope of funding Ruvuma is totally out of their control and is wholly reliant on a massive increase in the Helium One share price and them being able to sell their stock to raise the money?
d) Is it because they don’t want to tell us that even if Bergen could be persuaded to lend us the full $4 million then this would mean issuing between 400-450 million new shares (at today’s price) and so all of our shareholdings would be massively diluted and worth at least a third less than they are today.
Why will they not give us an answer, unless they don’t know or the answer is wholly unpalatable to shareholders?
Part 3
Like I have said before, once Fitzpatrick got himself appointed to the board of Solo/Scirocco everything started working out very well for him and Gneiss energy, even as the fortunes of Scirocco itself took a massive nose dive and the administrative expenses went up from £1.2 million a year (2017) to £1.9 million (2018) and £2.5 million (2019).
Make of this what you will…
Scirocco Corporate Governance
The corporate governance at Scirocco is rotten to the core. The fact that Gneiss Energy are allowed to bill the company such enormous amounts of money with no detail about what the billing is for revealed when when shareholders request it only occurs because Gneiss Energy is owned by Fitzpatrick.
Until 11th November 2019 Jon Fitzpatrick was Chairman of the Solo audit committee so essentially he was in charge of deciding whether it was ethical for him to be employing his own company to provide unspecified services to Scirocco at extremely high rates. Unsurprisingly he found this perfectly acceptable…
However, this is just the tip of the iceberg. According to the 2019 Annual Report he remuneration committee is composed of Alistair Ferguson (Chairman), Fitzpatrick and Nicolson. They have decided that it is ok for Doug Rycroft our COO to be employed not by us but by Fitzpatrick;s company Gneiss Energy. As shareholders we do not even know what salary Rycroft earns as he does not work for us. All we know is that his loyalties are to Gneiss and not to Scirocco.
The same remuneration committee has also decided that it is acceptable for our CEO Tom Reynolds to be paid £52,000 for his part-time role (his words in his linked in profile) at Scirocco. However he has also been allowed to bill us a further £53,000 for the “provision of management services” via his limited company “Quixote Advisers Ltd” (see page 76 of the 2019 annual report). Now call me naïve, but I thought that if you were the CEO of a company then providing management services was what you did as part of your PAYE job not something you billed as an extra through a services company.
This should never have been allowed to happen by the remuneration committee and it is a symptom of how little oversight that there is at Scirocco that it has been allowed to happen. I am no tax lawyer but I am willing to bet that a CEO billing more than half of his salary through a limited company is something that HMRC might be pretty interested in as I cannot think of any reason why he would not take his full salary via PAYE.
Part 2
Gneiss Energy Accounts
Steve58 uncovered some very useful information about Gneiss that he posted in the “Where have all the finances gone” thread. It involved looking at the Gneiss Energy accounts and looking at the money paid to and from the directors and matching it to the money paid to Gneiss by Scirocco. After reading Steve’s comments I have done a bit more digging and it makes for “interesting” reading.
According to the filings at Companies House:
2017 – Directors owed the company £222,335 https://tinyurl.com/y5bf7qme
2018 – Not available as they changed their accounting period
2019 – Directors owed the company £633,641 https://tinyurl.com/yxzyy8w8
2020 – The directors repaid the company £1,333,641 leaving the company owing them £239.924. https://tinyurl.com/y3g9lya8
It is worth noting that the only two directors of Gneiss Energy are Fitzpatrick and his wife, so the money is clearly going two and from the pair of them: https://find-and-update.company-information.service.gov.uk/company/10186928/officers
I find I interesting (and highly suspicious) that in the April 2019-March 2020 tax year Fitzpatrick and his wife at one point owed the company £1,093,717 (the £633,641 from between the long tax year of 1st November 2017 and 31st March 2019, plus the £460,076 that was taken between 1st April 2019 and 31st March 2020) yet in the same tax year they also repaid the company £1,333,641 leaving a balance owed to them of: £239,924.
We do not know exactly where they got that money from as the accounts do not say but we do know that between Jan 1st 2018 and Dec 31st 2018 Solo paid Gneiss Energy Ltd £763,000 for “provision of management services” and Jan 1st 2019 and Dec 31st 2019 Solo paid a further £538,000 to Gneiss Energy Ltd for “provision of corporate finance advisory”. The total of this adds up to £1,301,000 – a sum incredibly similar to the amount of money paid by Fitzpatrick and his wife.
It could be a coincidence but the “Occam’s Razor” rule says that it is unlikely to be…
The other very interesting thing to note is that when you look at the history of employees in the Gneiss Energy accounts then you see the following:
1st November 2016 – 31st October 2017 – the only two employees were Mr & Mrs Fitzpatrick
1st November 2017 and 31st March 2019 – there were 8 employees including the two directors
1st April 2019 – 31st March 2020 – there were 11 employees including the two directors.
In short, it would appear that Gneiss Energy was largely unsuccessful for it’s first year of trading only being able to employ Mr & Mrs Fitzpatrick. However, as soon as Jon Fitzpatrick managed to get himself appointed as a director of Solo and then get Gneiss Energy providing “management services” to his new employers at £763,000 for the year, then Gneiss’ fortunes changed dramatically.
It went from a business that was solely made up of him and his wife to one having 6 additional employees in 2019 and 9 in 2020
Is Wentworth still in a closed period? In previous interviews answering questions on company growth Katherine indicated a possible JV ie. talking to key stakeholders in Tanzania. In the latest interview there’s no mention of this?
IMO the license extension approval is not an issue. It may be delayed a month or 2 but will be approved and will not affect any potential sale in the short term. If we have no deal before the end of March, it’s time to move on and come back for CH1.
Steve ... I assume you’re referring to Aminex. IMO the their RNS indicates that AEX are not in the market for a merger of any type. So IMO that puts Scirocco in a stronger position with negotiations for any company that wants a part of Ruvuma. I think Ambrose wanted a deal with Wentworth with regards to Kiliwani / Nyuni but Wentworth want a slice of Ruvuma. So is it a slice for Wentworth or the whole 25% for the Zubs?
Hi Chris .... not sure why you see the license extension in April as a milestone date for a possible sale.
IMO the license extension is a done deal and is not influential of a sale this side of 2021 ($20m).
Results of 3D seismics are probably more important to a potential buyer, confirmed by drilling CH1 ($30m-$40m)
The next is the development license approval followed by route to market (sales forecast) $60+m
Pete... do you really believe the Zubs will allow dilution of Ruvuma to a third party? The only merger that I can see is Kiliwani South with seismics and a drill under the current development license. If nothing happens there, probably a loan from the Zubs to get us to Ruvuma production.
I think a few have ruled out WEN as a buyer of SCIR 25% or even a smaller %, but the latest timeframes released by the Zubs would allow WEN to obtain a better cash flow scenario. They would still need a placing for the initial purchase.
I posted below on the 30th Oct.
“ The only spanner in the works as I see it, is if APT as the new operator decide to complete 3D seismic and analyse data prior to drilling CH-1, in order to ensure the optimal spud location. I would, if confident I would get a further license extension.”
Buckler agreed with me and was slated for even considering this scenario.
There no conspiracy theory here, just the correct way of doing things. There will be NO placing, the Zubairs will not allow any dilution of their 30% holdings in AEX. If RA does not produce a deal with A producing company, there is a good chance that the Zubs will buy us out, unless KN1 payments come good.
There is a lot of disappointment here as a lot were looking to trade on CH1 or even get out of AEX with there shirts on. Just another year to wait and don’t panic.
Chesh.... I hope they do buy a bigger percentage. They would need approx. £1m to get us back to where we were (13%). I don’t think any PIs would object either.
If we stick with 4.6% after all the dilution that will take place to production, we’ll probably only end up with a couple of percentage.
I think if the BoD do not respond to get a higher percentage, I feel that they may sell all our holdings during an SP peak next year.
Steve....H1 will be valued at approx £12m when it goes to market and you need the MC to be over £20m to break even.
On another point, until we have the prospectus, we will not know if the IPO shares are subjected to a lock-up period.
Trrime not sure that would be legal. I suspect the SP used would be the value at CoP on 2nd Dec. anyway. If that’s the case if the SP was 0.02p at CoP on 2nd Dec, who keeps the remaining 0.008p per share?
Apologies for being a pain, but I would like to understand the mechanics.
Going mad on AOGL BB. 140% increase in SP now but on the 3rd Dec they will effectively be only worth 0.012p !!! Why wasn’t the share suspended? Am I missing something? A better option would be to participate in the IPO surely? Is it a case of the Shepard leading the sheep?
Chris you have a better insight to this.