Member Info for OofyProsser

..sorry, old iPad playing up. Finablr plc seems to be essentially defunct. Maybe there’s some loose ends to tie up and it needs to be kept as a corporate and legal entity until they are tied up, but it’s got no assets and any assets discovered from the alleged miscreants will go to the shareholders in Finablr Ltd. That’s my reading of it, anyway. Shareholders here, as in sister company NMC plc, have been the victims of lax regulation, but mostly victims of dishonest and unprincipled, or extremely stupid, management. You can’t blame yourselves, or even learn useful lessons from it. You’d have needed very extensive resources and expertise to have spotted wrongdoing here.

Bowlers12: i think shareholders here own shares in Finablr plc. That company, following all the events detailed in RNS’s over the past 18 months or so, has sold all its assets for a nominal consideration. The shareholders of Finablr Ltd. etc. are the Prism lot, not the Finablr plc shareholders, which appears to be

...I’m sorry, I haven’t answered your specific question re potential revenues. But I think buying Angus would be merely a massive punt, demonstrating desperation on Sound’s part. The risks are very big. They can’t sweeten the deal by much, or Angus will be the dominant partner in the combined company. The hedges represent the pre-eminent risk, it seems to me. .

SoundasaPound1: I think Angus is a poorly-run company whose management can’t budget or project-manage. So please bear that in mind while reading my comments.

I can’t see a single point of symmetry between these two companies. The Sound Energy rationale for it looks like drivel to me. Angus has an enormous amount of work to do to complete its gas project. It’s earning no money now. It had a placing recently which appears unlikely to have raised enough money to get the gas into production. There is a 3-year £12mm amortising loan secured on all of Angus’s assets at SONIA (LIBOR) + 12% p.a. Once that has been repaid, there’s a royalty of 8% of revenue to be paid annually to the Lenders. The Lenders are commodity traders, not banks and the rise in the gas price since the loan was arranged has made the project pretty attractive to them. They have also arranged hedges on 70% of the projected gas output for the first three years, beginning in July, at what now look like very low prices. Clearly, if Angus are not producing gas by then in sufficient quantities to meet the terms of the hedges, they will be in dire financial straits. Failure by Angus to make timely payments to the Lenders on schedule will be an event of default, entitling the Lenders to take possession of Angus’s assets. At least three indispensable pieces of kit for the project are absent and they don’t know when they will be delivered. Planning permission is not yet in place for changes they’ve made to their previously-submitted plans, nor is EA or HSE.

The recent Sound bid for Angus is contingent on the recommendation of the Angus Board. Since Angus have said throughout that they’re worth a multiple of their current price, it would be strange if they agree to it. But a few days in the data room should persuade the Sound people that it’s less attractive than they’d thought. Though, as I’ve said, this whole situation is so far-fetched (and coincided with a big share placing by Angus) that it may all just be what is referred to among AIM participants as a pump and dump.

I should have qualified my comment on the loan repayment and interest accruing up to June this year: we don’t know the repayment schedule, just that it’s an amortising loan, so will require regular repayments at intervals throughout its life. I’ve assumed they haven’t been repaying it so far at monthly or quarterly intervals and that the first payment will be due this summer. The schedule may be quite different. But about £5.5mm, give or take, will have accrued up to June-July this year.

SoundasaPound1: Angus has not had any cash flow for almost two years. They’ve got a loan which requires c. £5.5mm in service payments in June and must be producing gas by July or the company is likely to be bust. If Sound don’t know this already, they will find out in the data room, where they are presently represented. I don’t think this bid is serious.

Is this not merely a housekeeping issue? The company has new owners, is it not they whose vote to de-list is required, rather than the original shareholders? Finablr has gone through receivership and a reconstruction in which the previous shareholders were disenfranchised and lost their investment.

The Sound all-share bid values Angus at 1.23p currently. The need to sweeten the pot if a bid is made, to encourage Angus shareholders to accept it, might be at least partly offset by the higher number of Angus shares following the recent placing at 0.8p. However, how can the Angus management recommend a bid at such a price, after their consistently bullish forecasts for Saltfleetby, Brockham and Lidsey? It wouldn’t make sense and the shareholders would give it quite a hostile reception. The Angus management have said several times that they think Angus’s true value is a multiple of the current market price. And if a bid succeeds, the weight of selling of the new combined company’s shares would see the price back at current levels for ex-Angus shareholders as soon as the new shares were available to sell , and way below the current price for Sound Energy shareholders. And Sound shares will take an even bigger beating if the management revise the bid terms upward.

So, I’m left with the most likely explanation: it supported a pump and dump, enabling Angus to raise enough money to enable them to limp on for another two months or so. There’s a chance, albeit a slim one, that they might thereby get across the line, as long as the missing kit arrives before their deadlines apply and that they can get lots of gas flowing and paid for. And I’d be wondering why the Sound share price went up so sharply between 1 December and the date Sound was identified as a potential bidder five or six weeks later.

Has Sound got the £13.5mm it will need to pay off the Angus loan on Saltfleetby in June? if not, where will they get it? And will the OGA allow a bid from a poorly-capitalised company for what has become a potentially useful gas resource? The Lenders can require early settlement of the hedges too, apparently. Where will Sound find the money for that (it will be a lot!)? It’s not going to happen, is it? This looks to me like a ramp.

petroleum1: whoever buys Angus will have to buy out the shareholders and repay £4mm of debt and £1.5mm of interest in June. In July, a buyer would be taking over the hedges. The hedges are a big risk and the risk depends on whether Angus can produce enough gas to meet their terms. Whoever is in the data room should soon be aware of these factors. A big oil/gas company with deep pockets would be able to buy it, but why would it bother? Mercuria seems to be the only entiity to which the hedge terms wouldn’t matter and they appear to have a good chance of acquiring Angus for nothing in the summer. If they don’t want to take it over, they’ll be in a position to require even more stringent terms for not doing so. The data in the data room will not answer the important questions: will they get the plant finished in time and will gas flow at the rates required at least to meet the hedge terms? In addition, if Angus can’t make the loan payments and/or the hedge terms, SEL as guarantor of the loan has to make up the balance. The pipeline and the lease on the land on which the plant is being built belong to SEL. If there’s insufficient cash in their accounts to meet the guarantees, these and their 49% can be taken over by the Lenders.

Yes, at current gas prices, Saltfleetby will be developed and if Angus manages to finish it and get the required gas flow in time, everyone involved will be happy (very). But there seems to me to be a very good chance that neither Angus nor SEL will own it by July/August.

I think Angus is a typical AIM company that exists to keep its otherwise hard-to-employ Directors in well paid jobs. SEL appears to have essentially a free carried interest in the Saltfleetby project. Its liability in the event of a default is limited to its stake in the project. Angus’s liability under the loan terms extends to all its assets and it pays all the costs of bringing the project into production.

Petroleum1: Angus haven’t got a single large shareholder, just Frazer Lang and his family, Knowe Properties etc. In my opinion, the FCA. and AIM should be taking a retrospective look at certain claims they made in 2020 in broadcast interviews re their financial requirements. They won’t though, AIM is generally, in effect, unregulated. I think Angus will remain unmolested by regulators until either Saltfleetby makes their fortune, or they get taken over either without compensation or for peanuts. There may be a chance that someone with deep pockets who wants the gas field for eventual gas storage purposes may be in the data room but I doubt it.

ps200306: re the sidetrack, there’s some uncertainty about that. They certainly can’t drill it while they’re building the plant - welding on site etc. Once they've reached the stage where the gas is flowing at a sustained rate and at a quality and a pressure as dictated by NG/Shell, there’s some suggestion they may be able to drill the sidetrack while the gas is flowing. Their latest mention of the issue was hopeful in this regard but not certain. If they have to stop production to do the sidetrack, they’re likely to have a big problem with losses on the hedges. Then there’s the fact that all 7 (or is it 9?) previous attempts to sidetrack this well failed to find anything worth having. It’s a second choice well, but they discovered rather late in the day that it’s the only one they had planning permission for. Incidentally, the LCC planning permission to change the details of the earlier planning permission for the whole site has not arrived yet, though it’s unopposed and the decision has been delegated to the officers responsible, not the Planning Committee. They still haven’t got EA or HSE approval for their plans, either. Sooner or later they’ll have to do work on the site for which planning permission may be refused or changes required, if they want a chance to have it ready on time. Of course, all these permissions could come at any time. Once the plant and the pipeline are complete, the HSE and National Grid will have to examine it all before approving it for production. They're said to work at their own pace.

The big issues, though, remain the loan payments in June and the hedges beginning in July. For the plant, the big issue is the possibility that vital items of equipment may be delivered too late. They should be able to finesse another placing later this month or in early March - before the publication of their Report and Accounts. That will be interesting reading.

70% of Angus’s expected production until June 2025 has been sold in monthly forward contracts from July at 43p/therm. From 2026, production begins progressively to diminish. If they don't produce enough gas to meet the terms of their monthly forward sales contracts, they won’t be able to meet their loan obligations and if production is late altogether and they’re producing far less than the contracts stipulate, they’ll quickly be bust and/or may be taken over by the Lenders. And that’s assuming they can scrape together £4.5million+ by the end of June to pay the repayments on their amortising loan and interest.

The Lenders are commodity traders. They have arranged the hedges on 70% or so of the project’s expected production. These are not your friendly neighbourhood bank. If they’re on the other side of the hedges and haven’t covered them elsewhere, and Angus is incapable of meeting the hedge terms from July, what would you expect a commodity firm to do, who has screwed Angus down to extremely ungenerous loan terms and stands to make a great deal of money from the hedges? They must have a couple of capable young MBA’s among their staff who wouldn't mind having a project to manage. With deadlines.

I don’t know why the Lenders would be buying shares, either in the market or in the placing. Why would they do it, if they’re expecting to be able to take it over in the summer? And Angus is reliant on placings to make up any further shortfall. Borrowings and asset sales are closed to them.

Nomlungu: I’ve been following your, Mirasol’s and HITS’ admirable posts on the Angus site. There’s quite a lot of pretty ill-informed people to contend with there.

The reason I didn’t mention the royalty is that I seriously doubt that Angus will make it that far.

Skittish, I’ve just been back over the Wingas/SEL deal and can’t see it.

Skittish: further to our conversation re SEL/ Wingas, can you recall where you saw the data re the cash paid by Wingas to SEL/ Paul Forrest?

Skittish: that’s me!

Gazprom sold him its UK Wingas subsidiary, which owned the Saltfleetby gas field (which had been closed for 18 months following the closure of the Theddlethorpe refinery), in May/June 2019, apparently for a nominal consideration. They also gave him £12.5mm (was it? Or £14nm? for site abandonment provisioning. Wingas was renamed Saltfleetby Energy Ltd later that year. Their offices were next door to Angus Energy’s and a deal was arranged - we don’t know when or how - with the Earl of Lucan, who had been appointed to the vacant MD job at Angus earlier that year following the Tidswell share dealing scandal and subsequent ousting of Paul Vonk, though he had no knowledge of oil or gas or experience in the industry.

Lucan bought the gas field for £1, plus £2.5mm for either an abandonment reserve or to bring the field back into production by installing refining facilities and connecting pipelines at an existing site to replace what had previously been done at Theddlethorpe. Lucan said the £2.5mm would more than cover the cost.

Since then, Saltfleetby has cost probably £2-3mm of Angus’s pre-existing cash, after which they spent a year negotiating a £12mm loan to finish it. They’ve had several placings in addition. The loan is at usurious rates and requires repayment of capital and interest, combined, of c. £4.5mm this summer. There are, in addition, hedge contracts over most of the expected gas production, which if not met will result in losses to Angus - possibly very large ones.

There are charges on the loans which forbid asset sales without the approval of the lenders and entitle the lenders to take over the assets of both Angus and SEL (the latter are guarantor of the loan) in the event that they don’t make the payments.

Saltfleetby is very late and it looks to the more analytical followers of Angus as if they are quite likely to fail to finish it in time to meet the payments.

All the assets in SEL (according to the May 2020 latest accounts) apart from some inter-company balances and £750,000 in cash, are the pipeline and gas site assets bought from Wingas. If they can’t make the payments due in June/July, the lenders may own SEL’s assets. Where the abandonment liability will reside, for which Wingas paid them all that money, is a moot point.

The suggested shuffling of part of SEL’s share of Saltfleetby into another company may well turn out to be a rearrangement of the deck chairs on the Titanic. The revaluation in the SEL accounts reflects the write back of the abandonment provision, since the gas field no longer appears to need such a reserve, being brought back into production again. It’s not clear what happened to the rest of the money that was not passed on to Angus, or if there was any. If he paid himself a dividend, he’s done well! Unless he finds himself liable for abandonment costs one day.

HITS: re Angus selling all or part of Poundland: they're not allowed to do so. The charges forbid the sale of any asset without the prior approval of the lenders. If they want to change the terms of the loan, think what the lenders will require of them. Angus may not be able to survive until the summer, in my view. And I can’t see a bid coming - this was a transparent pump and dump, simple as that. In my opinion.