Member Info for OofyProsser

.. I do expect another placing and these are often preceded by a bit of a ramp. The FY 2021 figures and Report and Accounts are due this week, and the Sound bid term expires on Friday. The auditor’s report will be worth a look, as will the cash figure. But six firms have been in Angus’s “data room” (they may still be in there, Angus haven’t updated this information). They’ll most likely have access to information that people without that access (i.e. the rest of us) haven’t got, including information on the loan itself (e.g. the payment schedules on the interest and principal repayments). This is AIM and it remains to be seen whether this will be a relevant consideration.

Petroleum1: I’m sorry, I owe you an apology for that last remark in my earlier post. I understand your position and hope that I’m wrong and you’re right about Angus’s ability to get the plant finished and piping gas at the required rate by July. I appreciate that the gas price has made Saltfleetby many times more attractive than it was even a year ago. The question is, who will own it when the gas starts flowing? You are much more optimistic than I am about it being Angus.

My doubts are based on these factors:
1. Angus’s management can’t meet deadlines or budgets, they’ve never done so, not once. They also have problems project-managing. And you can’t rely on their pronouncements.
2. The start-up of the project has been successively put back, from the original August 2020, through several iterations, to the CPR’s mid-March 2022 and now to (probably) end-April. Some items of kit are unlikely to arrive before then.
3. It’s over budget and over the £12mm they borrowed. The loan payments start some time in the next three months (probably), a month or two before the hedges apply.
4. They haven’t got LCC approval for the changes they’ve applied for in the existing permission. The changes are much more extensive than they are saying. They haven’t got the EA approval that they said was expected “by 17 December 2021” either and the issue with both the EA and LCC appears to be the increased noise level expected to result from the changed plans. The CPR start date forecast was based on receiving permissions as forecast by Angus in late September last year. They refer to “first gas” and most people on these sites assume this means full production. As you will know, it doesn’t. There’s HSE and NG approval of everything they’ve installed to be acquired first. This will take weeks.
5. Their plans were based until recently on drilling a successful sidetrack before starting the main building work on the plant. They then took a very late decision to defer the sidetrack until they were producing gas at a sustained rate. Then they discovered that three items of kit are going to be delivered as late as 30 April. They perhaps should have stuck to the earlier plan. Their chances of producing enough gas to meet the hedges from October don’t look very good without a successful sidetrack.

Failure to make the loan payments and meet the hedge terms on time are events of default. The Lenders are commodity traders who’ll make more money if they own the asset. If I were them, I’d take it over. .

There’s a chance Angus will get it going in time. The nonsense of the FSP and the absence of an update since 27 January don’t fill me with confidence. If you think your asset is worth a multiple of the current share price and believe you can make it work, why would you put your company on the blocks?

I also think that people on all these sites give Mr. Forrest and the Earl of Lucan too much credit, I think they’re probably making it up as they go along.

They’re very unlikely to get a sustained gas flow rate from the existing two wells at anything like 8mmscfd. They’ll need a sidetrack for that. Apart from the well documented issues with the SF07 well for sidetracking from, there are doubts, which Angus has still not cleared up, as to whether they’ll be allowed to run the existing wells while drilling a sidetrack. If they have to stop producing in order to drill it, they’ll have big problems with the hedges unless the gas flow is pretty strong from the existing wells. The production rate to meet the hedges rises to 5.3mmscfd in October for eight or nine months. This is a higher rate than WIingas achieved in its later years.

I’ve been over this stuff before and don’t want to spend more time on it or be boring so if you’d like to continue posting this stuff unmolested, please be my guest.

..I should have added that all this talk at last of the hedges is obscuring the fact that the first anniversary of the initial drawdown of the loan is in early June and it was signed in mid-May. Without the Facilities Agreement, it's impossible to know when the first repayment of capital and the annual £1.45mm of interest are due but it’s got to be some time round then, hasn’t it? Failure to meet a payment, or to meet the terms of the hedges, represents an event of default, entitling the Lenders to take Angus’s assets.

Petroleum1: this was the relevant Q&A re the hedges:

“ The Hedge on gas production/sale of gas, is fixed for 36 months. a member on LSE chat board has stated that even if the loan is paid of early, The Hedge remains in place for the remainder of 36 months. Is this true? Asked on 20 December 20.

Yes, the hedge is for a fixed term on a declining balance which roughly aims to decline wiith the scheduled loan repayments. It would be very likely (asusuming we succeed in obtaining target production from the side track, itself 100% unhedged, and representing windfall gains at present forward gas prices) that the loan would repay earlier, but the hedge would be fixed on that scheduled loan amortisation profile.

However it would be open to the company to break or reset the hedge once the loan was repaid – although this would incur a normal mark to market charge – allowing for more dynamic hedging – i.e. picking particular moments to reset the hedge. The amount of hedged production after, say, two years would be less than c 25% of total production (including production from the sidetrack).“

“A normal mark to market charge”. This would reflect the prevailing monthly forward prices for the contracts for each of the remaining months in which they apply. I think Angus’s ability to renegotiate the hedges would depend on the willingness of their counterparty to agree to it. Though we haven’t seen the loan Facilities Agreement and it’s possible there’s something in there that covers this. In any case, the sums payable would be enormous, they wouldn’t be able to pay them all off immediately.

The discussion of the sidetrack needs treating with caution, too. They’re drilling it from a well which they said was fraught with issues - until they discovered they didn’t have planning permission for drilling it from their chosen well. I believe 9 sidetracks have been attempted from this well, all of them unsuccessful.

And the point remains- they’re way behind schedule, with no EA approval, no LCC planning permission and important bits of kit now re-scheduled for not later than 30 April. And there's a potentially major timing difference between “first gas” and an approved, regular gas flow to the NG connection. And they're short of cash, I’m expecting another placing. The 2021 Report and Accounts are due this week and a decision has to be announced by Friday on Sound Energy’s “bid”.

There will definitely be more news at the end of the week. They’ll be pulling out of the Angus process, won’t they?

Petroleum1: the Lenders are not going to dump the hedges (and we don’t know if they’ve laid off their risk in them with other forward contracts of their own). They’re commodity traders, not charities. And the hedges apply for three years from this July, not for just this year. The lenders are going to make far more on the hedges than they are on the loan. The hedge contracts have been written, you can’t undo them without paying at least the theoretical present value for them and then only with the agreement of the counterparty.

Will Holland’s LinkedIn page says he’s a Board Observer at Angus, appointed in the summer, presumably at the time Aleph Energy, of which he’s a Director, signed the Angus loan and Mr. Holland registered Grafton Energy Ltd. Mark2. Board Observers can’t vote at Board meetings but attend them and get all the information the Directors get.

You’re welcome. Rule 2.8 says that you can’t come back with another bid within six months. Not that that applies here, Angus will either be making a ton of money or be in new ownership in six months time. Or still working on their existing sites for peanuts, if they manage to negotiate a new deal with their lenders, who will in such a case pin them even more tightly to the wall..

keeptofacts: from Angus 4 February RNS:

“Formal Sales Process Update

Further to the announcement published earlier today, the Company now advises that Sound Energy Plc, a potential offeror have, as a term of agreeing to the Placing, been granted an extension to the deadline by which Sound Energy plc is required either to announce a firm intention to make an offer for Angus Energy plc in accordance with Rule 2.7 of the Takeover Code or to announce that it does not intend to make an offer, in which case the announcement will be treated as a statement to which Rule 2.8 of the Takeover Code applies. Accordingly, it has been agreed that such announcement must now be made by not later than 5.00pm on 11 March 2022, being the date being 28 days from the admission of the new Angus Energy plc shares to trading on AIM.

“In any case” last line - apologies.

As I understand it, an auditor generally resigns when he’s unhappy with some important aspect(s) of the way a company is being run. The previous auditor, E&Y, resigned in early 2020. The auditor is required to write to the company’s Board to resign and is required to include his reasons for doing so. It’s a shame that the Board has not seen fit to include the content of this letter in this RNS - assuming the letter has been received. In any case, I believe the auditor may be required to copy his resignation letter to Companies House, so it may be worth watching the Finablr site there from time to time.

It’s most likely something to do with the reasons for the late filing of the accounts, which are still outstanding. In addition, the company doesn’t appear to have a company secretary currently.

It’s certainly not good news but there’s nothing left here for shareholders in anti case, sadly.

Petroleum1: quite a lot of buying this afternoon in Angus. It looks like a pre-placing ramp to me.

Yes Petroleum1, if Angus can pipe that quantity of gas for a month before the hedge applies, and keep it going for a further year or so, they’ll be fine. They’re in a race against the clock and they haven’t got planning permission yet from LCC, or EA approval. Three pieces of kit are not likely to arrive much before the end of April. They’ve got an enormous amount of pipe to weld. Meanwhile the Sound “bid” currently values Angus shares at 1.05p each and there’s no sign of a counter-bid from any of the other five candidates in the data room.

If this were Shell or BP assuring their shareholders of where they’d be in three months time, that would be a different matter. Angus management’s history, however, is of missing every deadline, exceeding every budget and telling shareholders about the resulting problems very late in the day, even while they’re continuing to reassure them. There is no exaggeration in any of these statements. It’s possible though, as you say, that they’ll make it in time. But why have they put themselves up for sale at this stage, if gas production is just round the corner?

petroleum1: they’ve sold the c. 3.34mmscfd forward at 41.4p/therm. The volume rises to c. 5.2mmscfd from October, at 52.05p/therm. The margin between your £2.20 and this 41.4-52.05p. will be enjoyed by the lenders, not by Angus. If Angus doesn’t manage to produce gas at the hedge rates, they will have to go to the market and buy gas at your £2.20 (or whatever is the prevailing price) and sell it to the Lenders at 41.4p to meet the hedge terms. If they produce more than the hedge volume, they will enjoy the market price for it.

The amortising loan is repayable by end-2024 and there’s interest at 12%+pa. We don’t know the repayment or interest payment schedule but an amortising loan is repayable in regular instalments, not in a final lump sum.

Re SEL, they have guaranteed Angus’s performance under the terms of the loan contract, including the hedges. If Angus can’t make the loan payments, interest and capital, it’s an event of default and the lenders can take over their assets, as I understand the charges on the loan. SEL has guaranteed Angus’s payments. I’ve read the SEL charge but can’t recall the detail, having no interest in SEL. It’s on the Companies House site.

ivans: what made the Sound share price rise from 1.3p to about 2.5p between 1 December and the announcement of their offer for Angus? If it was merely a pre-bid ramp typical of AIM companies, one should be prepared for a re-trace, I should think. They’ve got 14 working days from tomorrow to decide on their offer. I should like to know what Sound shareholders expect the share price to do in either event, bid or no bid.,

I should have added that if they produce just the volume of gas required to meet the hedges, they’re extremely unlikely to be able to meet the interest/capital repayment schedule on their amortising loan. That’s assuming they can meet the payment I’m assuming will be due in June. Failure to meet the terms of the loan is an Event of Default.

petroleum1: I can’t get into the OGA data on my old and erratic IPad, so am attaching the below extract from a post of HITS’s in early November 2021:

“I am fully aware of the compressor problems affecting Theddlethorpe from August 2017.

Which is PRECISELY why the 12 month average I took to give my 4.17 mmscfd figure ran from August 2016 to July 2017, so SPECIFICALLY EXCLUDED that production-impeded period.

The OGA data on Saltfleetby production by month from first start point is freely viewable and downloadable from https://ogauthority.maps.arcgis.com/apps/webappviewer/index.html?id=984eeea3b1664049b12c02a28478bdaa “

In addition, the poster WG818 quoted the increase in the flow rate after an earlier prolonged shut-in and noted that it was maintained for just one of two months. And if you look at the bar charts of monthly production over the longest term, you’ll see that the decline is progressive. Both he and HITS accepted that a month or two of increased flow was likely but that it was very unlikely to be sustained.

There are further issues to do with the post-September increased hedged volumes and the prospective sidetrack, as follow:
1. It’s unclear whether they will be permitted, for safety reasons, to drill a sidetrack while producing gas from wells on the same site. If they have to stop production to drill the sidetrack, they will be in trouble. And without the 5mmscfd from the sidetrack production after September, they are unlikely to meet the hedge volume requirements. .
2. All the previous sidetrack attempts from this well have been unsuccessful.
3. They may already have spent the sidetrack money in getting the project into production.

I keep saying that there’s a possibility they’ll manage to make a success of it, but the Angus management does not inspire confidence (or trust) and the timescale is short. As well as all the other issues I’ve mentioned in earlier posts, there’s an enormous amount of pipe welding that needs to be done. They appear to have good people on site doing the work but it’s painstaking. Their multiple independent local contractors must be complicating the management of the project and it appears that kit has been delivered for which the supports are not ready. It’s a complicated process. So there’s a risk that it won’t be ready in time or within even their latest budget. The time factor is the crucial element.

Zaphod: if it’s not finished and producing at the level required by their hedge commitments by July, Angus will need a ton more money to keep going. Placings won’t raise enough. I can’t imagine their Lenders being prepared to give them much more rope.

There’s still a slim chance that they may get the thing completed and approved in time, though they may be close to being stuck currently. The absence of LCC planning permission must mean they’ll either have to ignore it and carry on building without it, or stop some of the work soon. The EA has still not, apparently, received an answer from Angus to questions it raised re noise levels from the new plant design, which is the subject of the LCC planning application. Angus said in December that EA approval should be given in early January (it had been expected “at the latest” by 17 December). The CPR on 1 October based its forecast of “first gas” in mid-March on receipt according to Angus’s schedule of regulatory approvals. Then there’s the specialised kit for which they still haven’t got delivery dates. One of these has to come from Texas. Angus’s latest forecast for completion is, at the latest, 30 April. Meanwhile, they have the distraction of six “potential bidders” in the data room! And once completed, the HSE and National Grid have to approve it. They, as has been observed before, work at their own pace.

I’ve no doubt the plant will be in production by the autumn. It’s merely a question of by whom, who will own it then, and, if it’s still Angus, on what terms. Who knows, though? This is the dodgiest end of the extremely dodgy AIM. And you only have to look at the Angus site here to see how many company shills and short term traders there are, all trying to lure in the gullible.

Zaphod: just a further clarification: the £12mm Debenture negotiated with Mercuria and Aleph is not for the pipeline, which was virtually completed by this time last year, three months before the loan was signed (there’s just a few yards left to build, and the connection to the NG pipeline to be welded). The loan is largely for replacing the refining facilities which the Theddlethorpe refinery used to provide for Saltfleetby gas, with a smaller refining plant at Saltfleetby itself, to be run by Angus (who’ve never done anything like this before). Yes, I’m sure there will be options for the operator of the field as things progress. The issue I’m commenting on is whether Angus and SEL will still own the field. The building of the plant is miles behind schedule, they haven’t got planning permission for large parts of it, nor EA or HSE approval of their plans and they’re probably short of the money they'll need, even with the recent £1.4mm placing. And the amortising Debenture will require substantial service payments, probably in June, and the hedges apply from 1 July. Failure to meet the terms of either represents an Event of Default, putting the Debenture holders in the driving seat. The Debenture holders are commodity trading firms, not banks or even hedge funds. I don’t know what is going to happen, clearly, but you’d have to be pretty inexperienced not to see the risks in this, wouldn’t you?