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What I’m saying is that every forecast in the CPR is based on future projections. If the author of the CPR can estimate cash flow from projected future gas prices and gas flow and cost estimates provided by Angus(!), why is it not appropriate that he get similar estimates on re-financing costs from the same source?
Bridgedogg1: i sense a rather circular argument. The terms of the financing of the gas project are as important to shareholders as are the price and gas flow assumptions. The CPR says as follows: “OIL’s estimates of pre-tax future cash flows required to assign reserves are based on datasets provided by AE.” Though I don’t know what is meant by “assign reserves” in this context, it presumably includes the expected approximate terms of the debt re-financing in their estimates of future cash flows. Otherwise the conclusions of the revised CPR are not worth all that much, are they?
Angus are expecting the terms of the re-financing to be concluded by year-end. That’s six months since it was announced that they were in negotiations. It’s clearly either more difficult than they’re admitting, or there’s some other reason for delaying it. I imagine it’s to do with Mercuria’s payoff, their 8% royalty and the resulting quantum, interest rate, repayment terms, convertibility and fees on any new deal with Aleph.
Bridgedogg1: quite a lot in the CPR is informed guesswork. I could make a more accurate stab at the likely terms of the re-financing than I could at the sustainable volume and price of UK gas going forward. Interest rates are not falling, nor is Angus’s need for more money. The share price is falling and the management has done a volte face on its commitments re raising new equity capital. There’s a few pointers there for the author of the CPR.
WG818: exactly. The FCA should be all over this kind of thing but they’re asleep at the wheel as far as AIM is concerned. Angus are now constrained as to sources of finance. Lenders are not lining up to provide affordable money to these small companies and, even though the management may regard the equity market as a source of free money, they’re close to the limit as far as triggering a bid is concerned. I suppose Aleph could invent a whole lot of pop-ups and claim they’re unconnected but it won’t wash, will it? They probably don’t need further equity issues before a bid should be triggered, with all the warrants etc., and their existing shareholdings. I think Mr. Forrest would clearly like a decent price for whatever he’s got left, so a decent p&d would be nice. After that, it’s selling all the way, probably.
I don’t know what would happen if Angus declared insolvency after the re-financing. Would the Mercuria royalty still apply to a newly-incorporated successor company? Ridiculously complicated, all this, for such a small company. Vast is even worse.
WG818: yes, it’s an 8% royalty on gross turnover. I don’t know for sure what that means re tax and who will be responsible for the tax on that 8%.
Yes, the oil assets are all dead ducks. So is the Global Re-financing, which appears likely to be little more than a repayment of the Mercuria share of the senior loan (and the start of their royalty) and a change in the terms or an extension of the Aleph loan. Or a conversion to equity (that commitment to no new equity issues didn’t last long, did it?) It’s a bit of a puzzle as to why, in the circumstances, it’s taking six months to complete the re-financing. It should be a simple matter. Maybe they’ve belatedly looked at the cost of that royalty compared with their present arrangements and are having second thoughts!
Angus is still a single-asset company. Whatever they may say, all of the management’s time and the company’s money should be concentrated on keeping it operating as efficiently as possible and in arranging the most economic finance for it that they can. I have the impression that Mr. Herbert thinks that equity finance is free money.
Cynderlad: no, it doesn’t mean that 100% of revenues will accrue to Angus. Mercuria will have an 8% of turnover royalty on all future production from Saltfleetby.
Ocelot: It’s pretty clear that Mr. Herbert had not done his homework before making that statement about fracking in his interview with Malcy. It’s pretty academic though, surely? Angus won’t have the money to drill and develop Balcombe unless there’s a sustained rise in the gas price and a sustained flow of gas at Saltfleetby. I doubt Angus/Balcombe is bankable and Mercuria would want an even higher return than they negotiated on their Saltfleetby loan if they were to get involved. The alternative would be be more massive equity issues.
WG818: they don’t need a placing. They may have decided more loans as part of the global re-financing are what is required. Those loans will be convertible at very cheap prices into new shares, of whose issue the vote at the EGM at the end of this month will approve. Small shareholders will be hanged if they do and hanged if they don’t. Angus need the money.
Higher gas prices will help the P&L but it may be too late. How’s this for a scenario?
1. A short p&d takes place, enabling Mr. Forrest to get out of a substantial number of his remaining shares. His and others’ selling then gets the share price back below 0.55p.
2. The EGM approves the creation of a massive number of new shares
3. The Global Re-Financing results in more debt with generous conversion terms to Aleph and their associates
4. As a condition of the above, Mercuria gets repaid and their 8% of turnover royalty applies immediately. Mercuria bows out and collects its royalty money as long as the Saltfleetby plant is in production
5. Issues emerge over the equipment and the gas flow, requiring heavy additional investment and further financing. The share price falls sharply again
6. Aleph etc. exercise the conversion options on their loans at their new, low, conversion price, giving them substantially more than 50% and requiring them to bid for the rest
7. In view of the inability of the company to raise sufficient further capital, the Board and its advisers are pleased to recommend acceptance of the terms offered for the minorities. Enough shareholders accept the terms to allow Aleph to buy the remaining shares compulsorily and take Angus private.
Just saying..
Ocelot: Angus and its principal shareholders/lenders already have in place the perfect Non-Executive Chairman for their purposes in the person of the Earl of Clanwilliam. I’d be surprised if they want to replace a man with such a record as his at a time like this.
Sageman, well, nothing they say seems to be quite right, does it? There’s a nasty financing/cost overrun round every corner. There’s been no mention in their latest comments on a “global refinancing” about Mercuria’s participation, so it looks as if it’s going to be just another rollover of the Aleph debt, with more equity options. And it already appears that the warrants/debt conversion options may give their friends at Aleph control of the company at prices substantially below current levels. Then there’s the spending plans for a third compressor, possible new well etc to be financed in the new year. They don’t yet seem to have finished the expensive work on the permanent flow line. Then there’s the expected fall in gas flow, starting soon, of 10% p.a. and the 8% of turnover royalty once the senior debt is repaid. And regular maintenance is expected to close the plant for 35 days or so p.a. The recent share price weakness may not be the result of small investor selling. In my opinion, if you don’t trust the management of a company, you leave it alone.
Sageman: the problem is the finances and an abiding sense among experienced AIM company observers that something has been going on here for a year or two that is not, nor is meant to be, in the interests of retail investors. Trust has gone.
K3VMC: “..the comfort of an alternative strategy.. “. It’s surely simpler than that? Mercuria are not playing ball, they want their money back and they want their royalty money. They’re the senior lender. The only charges on Angus debt now are on their and the smaller Knowe loan. They can veto further borrowing by Angus. Equity finance is the only alternative and it may result in a doubling of existing equity and a bid at a much lower price. This is a pretty risky investment now.
HITS: It’s hard to interpret the EGM statement as anything but extremely bearish for ordinary investors here. I think they’re going to experience an eye-watering stuffing in the next few months.
Ocelot: in my earlier post this afternoon, for “September” please read “October”. Apologies.
Ocelot: well, it’s the usual ambiguity from Angus, isn’t it? The Investor Questions are dated 1 September, and answered 2 September. Then, investors look at the top of the page and they find this statement, that other questions will be answered by close of business on 3rd. So, many investors were expecting further answers by 3rd. It is probably an oversight, they left this sentence at the top of the page by a rather careless accident. But you can surely understand people’s confusion?
Ocelot: this post of yours falls a long way short of your usual sunny optimism as regards Angus’s prospects. Has something changed?
Yes, bubblepoint. Unless the author of the Replies to Investor Questions is particularly incompetent, it reads as if the Global Re-Financing is a dead duck and has become merely a re-negotiation with Aleph of their own lending terms as and when their £6mm. loan matures. Mercuria will have to agree to any new settlement between Angus and Aleph. I can see no reason why Aleph would want to accept terms less generous to themselves than the existing terms, if Mercuria are not a party to the new loan agreement. I imagine Mercuria will happily accept an immediate repayment of their remaining loan and the equally immediate regular payment of their royalty. And good luck to them, well played. Shareholders in this scenario will be stuffed yet again.
Bubblepoint: very often with Angus it’s what they don’t say in their Q&A’s that’s important.
In the 2 October Q&A they said this, with reference to the Global Re-Financing: “We announced last week the conversion of £3 million of that debt into equity and are actively working to refinance the remaining £6 million bridge loan before the end of this year.” No mention of the Mercuria loan, then. Have Mercuria demurred or is this an infelicity in the wording of the answer? It’s hardly a Global Re-Financing without the Mercuria loan, is it? Perhaps they should clarify the current situation.
I’ve had a look at the two most recent Report and Accounts (the next one is due early in November).
Re the diamonds, I can’t find a reference to them in either the 2022 or 2021 Reports. I may have missed it I suppose. But I’m left asking why such a potentially large realisable asset has only been brought to shareholders’ notice at a time when Vast are trying very hard to find a way of repaying potentially ruinous debt.
Re the debt, there are still three Charges outstanding, the first dating back to early 2018 and all in favour of Mercuria. I note that the RNS today refers to Tranche A of the Mercuria loan. Does anyone know if there are other tranches outstanding? In addition, the statement today says that the terms and conditions of the loan remain unchanged. However, as far as I’m aware, advisory fees, agency fees etc. do not constitute part of loan terms and conditions. They’re negotiated separately with the company’s advisers - brokers, NomAds, PR firms etc.
Vast have got a welcome 61-day repayment extension but it looks as if it’s merely a deferral and you have to ask yourself where they’re going to come up with the money required within the next two months.