Member Info for OofyProsser

Irishmouse: I don’t either. I came across it when I was looking at one of the late unlamented NMC Health’s Directors, who was also an Angus Director. It’s been a very interesting introduction to AIM and to the appalling absence of any investor protection whatsoever. I’m more interested in this being exposed in due course, rather than in Angus per se. I’m posting here because I don't think the connection with Mr. Forrest and Angus can be relied on to be of any benefit at all to AAOG shareholders, and arguments to the contrary should be met. I’ll probably be banned from this site now!

Ah, yes, the CPR. Which assumed a start date of mid-March 2022 and 3.5 months of unhedged production until end-June at market prices at a rate of 5mmscfd. Instead of which they’ve produced nothing in those months and are currently owing £4-4.5mm on the July/August hedges and counting. The CPR assumed a sidetrack to double production would be drilled before the plant began operation, instead of which it looks as if they won’t be able to drill it without stopping production (once production starts - they’re certainly not allowed to drill while building and commissioning the plant) at the existing wells. They haven’t got the money to drill a sidetrack in any case and there wouldn’t be time for full planned capacity production from a sidetrack to meet the hedge requirement in October even if they could do it. The existing wells won’t meet the increased volume required by the hedges in each of the nine months from 1 October, so there’s a virtually guaranteed substantial shortfall for at least the balance of this year on the hedges. In other words, really big losses. Mercuria, with whom they have signed the forward (hedge) contracts, have agreed to roll over the losses on part of the Q3 shortfall into Q1and2 of 2023, but we know none of the detail. If Angus can’t drill a sidetrack, they’ll be losing money until at least June 2023. If they can drill a sidetrack, they’ll be producing very little gas in 2022, since the existing wells will probably have to stop production while it’s drilled. From June 2023 the hedges decline to the level of the production from the two existing wells but the hedge price falls as well, reducing their income further. Meanwhile the 15% or so long-term annual reduction in production experienced since the field began production will start to resume. Even if they were to find the money, and the regulators were to allow simops of production from the existing wells while they were drilling a sidetrack, there’s no certainty the latter would find gas. They’re currently existing on the charity of Mercuria, which can pull the plug if Angus can’t meet the hedge payments. Mercuria are also due £3.5mm in debt repayments, probably by end-September, plus £1.5mm. of interest. They may agree to roll these over as well but they’ll doubtless want a sweetener for agreeing to do so. Meanwhile the weight of debt continues to increase and will have to be repaid one day from cash flow. Having taken over SEL in a very generous deal for Mr. Forrest, the losses and debt payments will all fall to Angus’s account.

There’s little doubt that Saltfleetby gas will prove a highly profitable resource. Probably not for Angus, though. Mercuria is going to take virtually all of it, in my view. Unlike the Angus management, they know what they’re doing. Angus may be kept in business but to attribute to them a prospective value of 3p per share or more seems to me to misunderstand their position.

Calculated by whom?

The Angus chat board on LSE is largely the preserve of company shills, boiler room types and irremediable dimwits. Most of the informed people have been banned from it by a complicit admin and/or moved to ADVFN, where the conversation can be quite intelligent.

The issues discussed by the rather superior people who’ve done lot of research on the other site are the monthly hedge contracts, the sidetrack, Angus’s current cash position vs. its debts and trade invoices, and the extremely late and slow progress toward producing gas for sale. The eventual flow rate is anyone’s guess. Yes, they should in theory be able to get 1.5mm therms per month but when will it start? And will they be required to stop operations to drill a sidetrack? And it’s too late now for even a successful sidetrack to meet the flow rate required by the October hedge. If it’s not drilled, or is unsuccessful in finding gas, Angus can’t meet the 9 months’ supply required by the hedges from October. Even if gas flows from the two existing wells at the required monthly rate from tomorrow, they’ll still be losing money on the August hedge. There’s also a massive share overhang from Mr. Forrest’s deal with Angus and from Aleph.

What do you mean by “our 8 million”? AAOG were going to issue to SEL options over shares to a theoretical value of £8mm to pay for AAOG’s acquisition of 25%, i.e. approx. 50% of SEL’s then interest of 49%, of Saltfleetby. This deal didn’t take place and was superseded by Angus’s takeover of the whole of SEL’s holding in Saltfleetby later in May. I’ve got this right, haven’t I? I don’t see how AAOG is now in any way involved in Saltfleetby. Nor is SEL, though Mr. Forrest still has a lot of embargoed shares to sell in stages in Angus, and a free carried interest (or equivalent) in its earnings once the debt is repaid. Good luck to him with that.

Very good, Irishmouse! For some reason, Mr. Forrest thought it more prudent to get out of Saltfleetby as soon as he could shortly after that RNS. The terms on which he did so must have taken a while to negotiate, but were very favourable to him. Particularly in view of the delays at Saltfleetby.

Angus could definitely do with the injection of £8mm. Cash, though - not shares or options. If they don’t get gas flowing at the Saltfleetby plant’s rated capacity by tomorrow, they’ll owe another £100,000+ PER DAY for the rest of August (and counting) to Mercuria. The latter will have to allow Angus another rollover of what they owe on the hedge contract. They’ll want a quid pro quo. Then there’s the £5mm. in debt interest and capital repayment that seems to be owed by end-September. Then there’s the £3mm. they’ll need for a sidetrack. Without that, there’s no chance of meeting the hedge volume requirement from 1 October. They haven’t got permission yet to drill the sidetrack while operating the plant.

Meanwhile, the Angus Board seem to have renewed their Trappist vows.,

I’ll have to rise to this!

Yes, Petroleum1, Lord Lucan has gone cap in hand to Mercuria for a reprieve and got a short one. However, you have to read between the lines with him, since none of his utterances is to be relied on at face value. He says there’s no up-front payment [as a quid pro quo] but I’d be prepared to bet they’re getting a shedload of Angus shares. He’s obfuscating the volume of the gas production that remains hedged in the next two months: “a portion” could mean the month’s worth they've already missed. They’ve still got all those debt service payments to make by the end of September, and a sidetrack to drill, for which they haven’t got the money or, apparently, regulatory permission and the deferral of part of this quarter’s hedge merely increases the urgency to get a successful sidetrack drilled. Their g&a and the staffing bill for Saltfleetby have to be met. Their multiple local contractors and commissioning team are still there, their bills will have to be paid. It’s not clear when they will be able to start piping gas - which is two years late already, even on their initial conservative projection. This deferment was not a precautionary measure, it’s a lifeline.

For AAOG, how does this change the outlook? The gas is late, the hedge losses are building up, they're short of the cash they’ll need to pay the next two months’ bills, there’s no news on a sidetrack, which they also probably can’t afford. Not without substantial cash flow from their gas. Which may, for all we know, continue to be hedged this month and next. They haven’t got money for buying AAOG and they don’t need AAOG’s losses. Their ability to place more shares is compromised by the huge number overhanging the market. But yes, they continue in business for a few more months.

Irishmouse: that hadn’t occurred to me, I’ve paid him the compliment of taking him seriously and have quite enjoyed the debate. It’s not difficult enticing me to take the bait though!

This is going to be an interesting seven days for Angus.

Just once more then. SFB is not a company. You can’t invest directly in it. It’s owned by Angus Energy, a poorly-managed company which is drowning in debt and hedge contracts. Its first (of 36) consecutive monthly forward contracts will cost it more than £3.5mm. on Friday this week if today's closing gas price prevails. They’ve over-spent so badly and are so far behind schedule that it’s possible they may not be able to meet this payment. In which case, their lender, Mercuria, who own the other side of the forward (hedge) contracts, will be entitled to take over SFB. I won’t go on about rising interest rates, debt repayments due in September, their inability to pay for a sidetrack to enable them to meet the more onerous hedge contracts beginning in October and the doubts over their being allowed to drill it at all while producing gas nearby. And the prospects for a placing are compromised by a massive overhang of shares in the hands of Mr. Forrest and Angus’s other lender, Aleph. I’ll try not to contribute again but Angus is in a precarious financial position, such that it’s quite possible they’ll lose Saltfleetby or have to give away a yet higher % of its income. It’s important to understand this.

The 31 December 2021 Accounts are available on the Companies House site. They appear to have redacted the summary financial data in the early pages of the report but the accounts appear to be intact. The Auditors’ Key Audit Matter on p.59 re recoverability of subsidiaries’ balances by the parent company is worth a read. Their going concern status is discussed in detail.

Yes, but the previous owner sold it to Angus for £1 and gave Mr. Forrest money for an abandonment reserve for the existing pipeline. Angus bought it on the premise that they could build a full treatment etc. plant, reconnect it to an NG pipeline and provide for eventual abandonment, for £2.5mm. They then discovered that £12mm was closer to the mark and took a loan at 12%+ interest (13% currently, going up) that gives vastly the greater part of the benefit of the current high price for gas to the Lenders, through the hedge contracts. The previous owners would have been able to build the plant for a fraction of the cost, but couldn’t see a profit in it. It’s cost Angus over £20mm. so far, and counting. And 4 or 5 x as many shares in issue through placings. And it’s cost the management what reputation they had originally. No informed investor now believes a word they say. The £6mm they’ve raised recently is largely allocated to financing cost overruns and they’ve got to spend over £3mm for a sidetrack, and probably over £3mm to Mercuria on the July hedge contract. And there’s such a big potential share overhang that a sufficiently large placing may not be available to them.

Who knows though? This is AIM. Anything may happen. Anyway, good luck with it if you do decide to invest. I’ll stop boring the AAOG Board now.

Petroleum1: thank you for this. if this is correct and the initial pressure is maintained, they could be OK. However, they still have to get past the end of July. They won’t be producing any gas this month and the loss on the July hedge is probably over £3mm. currently. Having seen what’s happening at dddd, I would be nervous holding this. Have you looked at the Charge on the Angus Debenture?

If you decide to invest in Angus, however, I wish you good fortune with it.

Petroleum1: you are clearly far more knowledgable than I am on hydrocarbon wells and processing. But my understanding is that you need more than a few days’ data from a new or newly-reopened well to establish a reliable pressure. In any case, they only have one compressor, rated at 5mmcsfd, so that even if they have excess pressure, the compressor capacity will limit production.

They’re still working on storage tanks etc., so presumably gas won’t enter the test separator until this work is completed and the components of the gas stream can be stored. There’s no date for nominations yet. The losses on the gas forward contracts are racking up (really, these are big losses) and the gas price is looking strong again, worsening the losses on the absent July gas. The upside in the share price may be limited by Aleph’s holding so many shares, bought just below 1.10p. Added to this, Knowe Properties may convert their loan into 200mm+ shares. They’ve each got a decent profit in these and may feel the need to realise part of it, in the circumstances. There’s still a lot of uncertainty in this. The gas is going to flow at some stage in the next few weeks but Angus’s financial situation is less clear. And they’re precluded from selling assets, borrowing money or factoring.

Petroleum1: I completely agree that it was an excellent deal for Mr. Forrest. He got £250,000 in cash, £1.4mmm. of debt written off and he’s already taken £1mm out of it by selling his first 91mm. Angus shares. So his involvement with Saltfleetby has earned him a handsome return, even if his remaining Angus shares should prove worthless and the other benefits of his deal fall through. If Angus manage to limp on beyond the end of August, he can sell another £1mm. worth of shares and so on every quarter thereafter for another three quarters. An excellent deal for him. No one could accuse Lord Lucan of being a hard-nosed businessman when dealing with old friends.

Petroleum1: with respect, you’re confusing Angus with Saltfleetby. There’s little doubt the gas field is worth a great deal at current gas prices. However, Angus has mortgaged its interest in Saltfleetby to the providers of its £12mm. Debenture, with monthly forward gas contracts in place for the next three years at an average of about 43p per therm, for up to 70% of their planned output. The hedges started this month and Angus already will owe Mercuria quite a lot of money at the end of this month, since they’ve sold gas forward but are not producing any. They’re very unlikely to be able to meet the higher gas volumes required by the hedges from October unless they manage to drill a successful sidetrack from a well from which at least four previous efforts have failed, and it’s unclear whether they will have regulatory approval to drill a sidetrack at all while they're still building the plant - or even with the plant operating. If they can’t drill it with the plant in operation, and have to close down operations for two months in order to have a chance of meeting the higher hedge requirements, they’re going to be in serious trouble. It’s quite unlikely that they’ll be producing gas this month. They’ve got capital and interest payments on the debt by September, much higher running expenses and a lot of equipment and installation to pay for. Most of the value in Saltfleetby at current gas prices is going to Mercuria, who lent them most of the £12mm and are Angus’s counter-party in the forward gas sales contracts. The gas volumes produced at Saltfleetby are projected to fall sharply from the year following the last of the contracts.

In any case, there appears to be some doubt as to whether past tax losses will be able to be used to offset profits on new oil and gas projects, doesn't there? I’m not sure where the new proposals on that have got to. And Angus have got no spare money to buy AAOG. The financing arrangement with Paul Forrest was with Forum, not with SEL. He retains Forum but he’s sold to Angus SEL, the entity which was supposed to be acquiring a stake in AAOG against the sale of 25% of Saltfleetby.

Anything’s possible though, it’s a murky business.,

It’s not a particularly impressive record, is it? Even by AIM standards. This is the AAOG site, though. All I’m trying to point out is that there is a number of reasons why Angus won’t buy AAOG, as follow:

1. Angus hasn’t got any spare cash. It’s got very little cash at all and will have a payment to meet on its July hedge contracts and an interest payment of £1.45mm and capital repayment of about the same by the end of September. And it’s required to maintain a cash balance of £1.5mm+ under the loan terms.
2. It’s unlikely to be able to use AAOG’s tax losses, its got plenty of its own and the recent change proposals have reduced their value.
3. Lord Lucan referred last month, at the time of one of his further deferrals of the date for “first gas”, to 1 July as the “drop dead date”. It doesn’t sound too good, does it? Still, there’s an announcement due tomorrow (his latest deadline date) so we may know more then.

I wish you and other holders good luck with your investment here and that an alternative suitor may be found. I’ll be surprised if it’s Angus.

Yes, quite. And Angus shareholders were told three years ago that they’d be enjoying the benefits of gas sales between May and August 2020. They’ve been waiting ever since. Lord Lucan forecast expenditure of £2.5mm. So far, it’s well over £20mm. The shares outstanding have grown about fivefold. Angus has debt of £13.4mm.., £12mm.. of which has forward gas sales contracts attached in which the gas is priced at a fraction of the current price. The contracts are in force from 1 July. The latest date given by Lord Lucan for “first gas” is this Monday. Watch this space. As far as AAOG is concerned, Angus seems quite unlikely to be in a position to use them.

February, surely?

Irishmouse: perhaps Paul Forrest intended AAOG’s tax losses to be used to defray future taxes on profits on Saltfleetby gas, and was naïf enough to believe Lord Lucan’s public assurances of first gas by end-2021, mid-Feb 2022, end-April, mid-May, end-May, etc., before he finally saw the light and sold him SEL. He must be relieved he didn’t have to rely on Lord Lucan’s subsequent forecasts of mid-June, end-June, 7-12 July and 18July (at the latest). Or perhaps he sold SEL after he got worried about the implausibility of Angus’s drilling a sidetrack in time to achieve the higher gas production required to avoid massive losses on the hedge contracts. He’s done pretty well from SEL - he got very generous terms from Angus. Any losses on his AAOG stake will amount to little more than a balancing error.

Amirkat: you’ve been very unlucky to be in these three shares. NMC and Finablr were the victims of a huge fraud. It’s not clear how DDDD shareholders find themselves in this position. However, the Administrators appointed at both companies are still in place. It’s not in their interests to work in a very speedy fashion, the fees are very good and it’s easy for them just to roll over the provisional dates of their appointment as they successively expire (though it’s true that these two are are complicated cases). In both cases, it seems highly unlikely that ordinary shareholders will see a return of any kind on their shareholdings, sadly. I don’t know what lessons can be learned from this kind of thing, other than avoid companies with high financial leverage and onerous Charges on their loans. And take notice early when Muddy Waters publishes an exposé on a company whose shares you own.