Member Info for OofyProsser

Yes, Ocelot, but their cash flow will still be negative.

Good luck.

Bubblepoint: the game here is to keep the ball rolling, maintain the share price at a level high enough to be able to pay through share placings for the loan interest, royalty and hedges from which their friends at Kemexon, Aleph benefit so much. The latter appear to me to be taking a bit of a risk in the medium term but they know the real data better than I do. In any case, there’s nothing in this for the shareholders. Production at 2mmscfd is not very encouraging.

Bubblepoint: your “40 years my arriss, maybe if they choke the wells back to something like 10% and just leave them piddling away..”. may be closer to the mark than you think. He says early in the interview that they’re producing 2mm “scuffs” per day currently.

Ocelot: there’s an alternative explanation of the claim that Angus has 40 years of reserves at current production rates, isn’t there? In case you can’t see it, it’s that production is falling off a cliff.

EBITDA means nothing in these AIM companies, particularly Angus, with royalties, very onerous hedge contracts, undisclosed offtake agreement terms and loan interest at 15-16%. It will be interesting to see whether Trafigura will actually increase its loan to them. It looks odds on that they’ll need to. Hence he’s flying the merger kite again.

Fat finger.. that resulted in the Glass/Steagall legislation requiring the separation of commercial and investment banking functions in the US, which was finally repealed in about 1999. Even before then loans of all sorts were being split into various levels of theoretical creditworthiness, securitised and hawked round the investment market in increasingly dodgy and unscrupulous ways. It was those securitised loans that precipitated the crisis. You can say that this would have happened whoever was in government but that doesn’t absolve the profligate government of 2000-2010 from some responsibility. at least.

Anyway, the Cameron government was left with a very difficult inheritance. Their incompetence in the cases of HS2 etc. was appalling but I don’t blame them for the Covid spending. They’d have got badly kicked if the pandemic had proved much worse than it turned out to be. I do blame them for Liz Truss. Anyway, we’re about to get another Labour government but with a big majority which will make it hard to manage. The Party could splinter by the next election and a whole new political landscape could then open up.

Nothing to do with UKOG, of course, which appears to be finished, whatever else happens.

Skeizz: I lived through it too,. Yes, if the US property market had not been a problem, there would have been no banking crisis. But crises in the US housing finance market have surfaced many times - they were what led to the 1929 Crash. That resulted in the Glass/steafal

Skwizz: Kenneth Clark left office in 1997 with a budget surplus. “New” Labour’s election manifesto included a commitment to his spending limits over their first three years, then they went berserk and threw money around like a one-armed paper hanger, so that when they were eventually evicted in 2010, Liam Byrne left a note in the Treasury for his successor wishing him luck and saying there was no more money. The banking crisis in 2008 was as much a UK affair as a US one. If you want to trace it back to its origin, you have to blame Nicholas Goodison’s appalling paper on abolishing the distinction between stockbrokers and market makers and allowing the big banks to buy both. The Conservative Government was at fault for adopting his recommendations.

Economic growth since 2008 has been very poor, but it always is when you’re in a debt trap. I blame the Conservatives for a lot of things, including HS2, the water companies, unbridled immigration and for allowing the NHS to get into such a state, and for cramming the State school syllabus with so much “citizenship” etc. stuff that very few are getting a proper eduction any more. But Labour’s VAT proposal on private school fees will merely raise the burden on State schools and put a lot of good teachers out of work. And reduce the opportunities that lots of public schools have offered the State schools in their vicinity in terms of sports facilities etc. Rich people will continue to send their boys to Eton, the aspirational middle classes won’t be able to afford it. Whose interests does this serve? Very bright students from overseas will get the places at the best universities and the best jobs in the City and commerce which used to be the preserve of grammar schools and some public schools. Sic transit gloria mundi.,

Re politics, there’s going to be a big Labour majority. That won’t help them though. As always with a big majority, it’s impossible to control all the factions. In any case, the economy is still in the debt trap that Labour bequeathed to the Conservatives in 2010. A debt trap is the hardest economic situation to get out of. You need a war or a really significant technological development that increases productivity a lot. Labour is just going to make it worse and the faction fighting within the Party will make the last few years seem like a period of stability. Still, Europe is no better and if Trump gets back in, all bets are off. So eat, drink and be merry.

Are SPAngel the company’s broker? If so, what would you expect this chap to say?!He didn’t seem to know much about it, his guesses as to future production were not substantiated and he didn’t address how Angus, a debt-laden, hedge-hobbled owner of a quite rapidly depleting resource, will find money to pay for two new wells - or even another compressor.

A proper Q&A would ask detailed questions about the hedges and the embedded price protection in the offtake agreement. And about monthly cash flow. And potential future sources of finance. And whether a new compressor has been ordered and delivery date. Meanwhile the gas flow continues to diminish and most of the revenue from it is going to the lender. The hedges are the most important unknown. It’s impossible to discern how the new hedges apply. And why do the terms of the existing hedges keep changing? And do they still owe Mercuria £4mm on a missed hedge payment?

HITS: re the extra hedges, they’re at very much higher prices. I can’t think of a reason for having these. Whose price is protected? They had two sets of hedges, one of them with a price set at something like £4, before the Global re-financing. I didn’t understand those, either. I do wonder if the forward contracts after the re-financing priced in the 70’s might be purchase contracts in case the gas price really takes off at a time when they may fear their gas flow will be insufficient to meet the terms of the forward sales contracts. I’m hoping we may get some clarification of all this from someone. Also, we haven’t seen the full terms of the new gas offtake agreement and the “embedded” price protection they involve. Do you think these new hedge contracts are what they mean by “embedded price protection”, or is there some additional feature to the offtake agreement that we don’t know about?

Yes, it’s all so obvious, isn’t it? Darwinian processes at work. The smart and unscrupulous taking full advantage of the very dim and gullible. The latter would have lost their money in some way other than gambling on AIM in any case. And at least, when they invest here, they haven’t got a loss until they sell. I think we can all take comfort, or satisfaction, in that.,

... that’s 7.5mm therms of new hedges.

HITS: I don’t quite agree with this. The hedge prices on the Trafigura hedges have been substantially reduced (i.e. Angus makes much less on the production covered by them) and there’s another 7.5mm of fresh hedges, at higher prices, to cover the amounts Angus failed to pay Mercuria two years ago. These are material changes.

Hectorlongprongs: he’d be better advised to buy a Gucci Grace outfit. Oh, no, that’s already been done..

Net cash flow is more indicative of the trading status of companies like Angus. There’s an interesting comment in the report on the company’s liquidity position.

Re the hedges, the prices of the monthly hedges that Trafigura has taken over from Mercuria appear to have been reduced very substantially. In addition, they’ve had to add three more tranches of hedges to compensate Mercuria for part of the money owed to them on past hedges.

The gas flow is likely to fall by 10-15% p.a. going forward. The cost of new wells, as Bubblepoint points out, will absorb all or more of their likely cash flow. They say they’re looking at investment opportunities offshore. Well, good luck with that. You’ll be paying through the nose for them, if any. Angus needs a big rise in the gas price.

“ The Group recorded net cash outflows from operating activities of £0.900 million (2023: inflow of £3.286 million).”

Ocelot: there’s nothing wrong with affordable debt. Sadly, the previous MD appeared to have turned down a sensible bank loan of $20mm+ to finance the building of the new plant on the grounds that he didn’t need so much money, and then spent the next year and a half trying to find a source of similarly cheap finance, resulting in the usurious loans from Mercuria/Aleph. Now the new man has refinanced those with £20mm, ironically, on lower (though still extremely high) interest but with undisclosed terms for the new offtake agreement and for the new hedges. As a result, virtually all the cash flow on Saltfleetby is going to the lenders. What remains is having to be spent on keeping the gas flow up at a rate that services the loan. As an equity investor, that’s not my cup of tea.

I look forward to your spin on the upcoming interims, though.

That’s the kind of arithmetic that makes topping up really worthwhile.

SandyShore: re the “Swiss investor”, what kind of premium are you expecting him to pay for his investment in Vast? I agree with you that it would be advisable for him to wait for the documentation to be agreed formally, as outlined in your post. However, it’s taken so long already for any news on his involvement to materialise, that one wonders whether he’s just another diamond geezer to add to the existing historic parcel. Where are we on that, by the way?