Member Info for OofyProsser

irishmouse: yes, I understand. I only butted in here to share my view on developments at Angus but it hasn’t helped anyone invested in this, I appreciate that. I hope it will come good for you here, somehow.

MrEMC2: I wasn’t trying to criticise. It just seems to me that people like Mr. Forrest are given too much credit on these sites.
Most of the time it seems to me they make it up as they go along. He hasn't got much money, at least he hasn’t in his quoted companies. If he is a front man for rich Filipino interests, that’s a different matter but where’s the evidence of it and what’s the plan? I hope your investment here will come good for you in due course.

Yes, MrEMC2, I understand that but his taking a stake in AAOG is not really a positive endorsement of his financial acumen, is it? You’d have to believe he still had the backing of a Filipino entity to impute to him any financial capability, surely?

HITS: the Sound share price put on quite a spurt through December. I don’t know if that had anything to do with it. Did they need a higher share price, other than to make their bid seem more attractive and thereby support the Angus share price in the run-up to the placing? The rationale they gave for it was the weakest of its type I’ve ever seen (but I’m relatively new to AIM). So I don’t think it’s a real attempt to buy Angus. Who knows? Maybe there’s a quid pro quo, of which we’ve seen only the first half?

Do you think that Angus will get its £1.4mm? Presumably their broker will have tested the water pretty thoroughly before this announcement. Their December issue was under-subscribed.

I don’t really understand the level of interest expressed here in Mr.
Forrest’s activities. There’s precious little in assets or cash in any of SEL, Forum or Orwell - other than, presumably, the Saltfleetby-Theddlethorpe pipeline, which is mortgaged to the Lenders. I’m not aware of his doing anything very impressive in any of these companies (though if Angus had managed the Saltfleetby project competently, the huge rise in gas prices would have given him a massive windfall). Can someone tell me why he’s taken so seriously here?

Well, it will be interesting to see what happens to the Sound share price tomorrow. I’ll be surprised if the” bid” goes ahead but they may keep it going until close to the new deadline in March if Angus needs another placing after this one. Which it most likely will.

How about a question for the Q&A along these lines: “is the Board pleased with the role it has apparently played in the recent pump and dump associated with this evening’s announcement of a placing in Angus Energy shares?”?

The deadline is 15 February, so we’ll know whether the Sound bid is proceeding by then.

cloves: that’s interesting, I’ll have a look at those when I have some time, though I had a cursory glance at Egdon and UJO reasonably recently and wasn’t very impressed. . Igas has had a lot of planning applications in with LCC, I think, re work at its own sites. You’re right, I agree, there’s at least six indications of interest. Sound has to announce its intentions by 15 February.

cloves: a few million won’t do it. It’s too risky. It could all be gone within five months.

These are just my views, based on a reading of all the published data I can find. It’s possible I’ve missed or misinterpreted something and there may be something going on behind the scenes between related parties. I can’t see any sign of such a thing yet, though.

cloves: I don’t cover the whole sector but don’t know any small oil/gas companies with cash/borrowing capability of £20mm+ and an appetite for short term risk. If there are any like this, would you let me know? I’d like to take a look at them.

cloves: I’m a sceptic, my comments need to be judged with this in mind. I may be completely wrong, but the loan repayment and interest due in June are onerous and the hedges starting in July are potentially ruinous, unless the gas flow is sufficient to meet them. The big returns in Saltfleetby for up to three years are likely to be made by the people who are on the other side of the hedge contracts. People conflate Saltfleetby with Angus all the time. They’re not the same thing. Saltfleetby has been transformed by the soaring gas price. Angus may or may not own it this summer if they can’t meet the debt requirements or if the gas fails to flow enough to meet the hedged volume. A bid by any number of small companies without substantial cash resources won’t help Anguish. A big company will understand the risk in the hedges and factor this into their calculations. There’s no way of knowing whether the project will come in in time or with enough gas. And there’s little a better-resourced company can do at this late stage to finish the project more quickly - it’s the delivery of vital pieces of kit that is the cause of the latest forecast delays.

A placing adds some cash but increases the number of shares. Anyone serious about a bid and with the resources to mount one will prioritise getting the project working ASAP, so I shouldn’t think a placing would be a big issue if the money raised is to be spent on this.

I don’t think many small companies have the cash required to make a successful bid and if they did and it were recommended, the future of the combined entity would be as doubtful as the future of Angus on its own. A bid by a well-resourced company, whether friendly or hostile, would be the best outcome. I suspect that, if such a bid comes, it might be from someone who thinks Saltfleetby’s ultimate storage capacity is worth taking on the financial burden. I’ve no idea whether such a company exists. None of AAOG, SEL, Forum or Sound seems to have the resources to mount a serious bid.

Cloves: I’m sorry, I misinterpreted your post., I think. Yes, the shareholders voted in favour of a massive rise in the authorised share capital at the EGM last month. Odd timing, in that the normal date for the AGM is late March and an increase in authorised shares is normally a housekeeping agenda item. So there’s some expectation of a share issue before late March, otherwise why have an EGM in January to approve the increase?

cloves: I don’t understand your point. Shareholders nearly always approve these placings. They raised a gross £750,000 - before expenses. If this is a pointer to future investor appetite for Angus paper, they’re not going to be able to raise enough money without a very sharp rise in the share price.

petroleum1: it’s not a hedge fund that’s lent them the money. It’s an international, privately-owned commodity trading firm, and another, small, commodity firm investing clients’ money (apparently). The former has organised the hedges on the gas produced from Saltfleetby for the first three years. They’re getting an interest rate of 12% over LIBOR (SONIA). Plus shares. Plus a royalty of 8% of revenue over the life of the asset once the loan is repaid. There is a charge on the loan which gives them the right to take over Angus’s assets in the event of a default by Angus on its loan interest and annual (presumably, we haven’t been told the repayment schedule, just that it’s an amortising loan) repayments over the next three years. £4.5mm in total this summer, it’s believed.

Sound is in a not much better position. Over-borrowed. They’re offering shares, not cash and they’ve gone up from 1.3p to the bid valuation of 2.2p in the past eight weeks. They’re at 1.96 now, which values the bid at about 1.33p. Both companies need cash. The bid does nothing for either company in this respect. Angus’s report and accounts is due within five weeks. They must have very little cash left. Their going concern status may be highlighted in the report. If the Sound bid is withdrawn or its share price falls significantly, one can expect a commensurate fall in Angus shares. Sound’s is the only bid at the moment.

As for the Saltfleetby asset, there’s some dispute as to the reduced rate of production in the last year or so of production. It may have been due to problems at the Theddlethorpe refinery, it’s true. But the previous owner didn’t fancy building the plant that Angus is building to replace the gas refining facilities that existed at Theddlethorpe. Lord Lucan said at the time that this was because it would cost them £15mm, while Angus could do it for £2.5mm. In the event, Angus is spending more than £15mm in total, and it’s two years late. The economics of the asset have been transformed by the unforeseen huge rise in gas prices. However, with the loan repayments due in June and the hedges to meet in July, it’s quite unclear whether Angus will still own it by then. At the least, if Angus can’t meet either requirement and have to ask for a renegotiation of the loan terms, the Lenders will be able to nail Angus down to much worse terms than in the existing loan.

The project is very late and substantially above each successive budget. Angus needs cash. The December placing, which raised less than £700,000 net, was under-subscribed. They’re not allowed further borrowings or a rights issue, or to sell assets, without the approval of the Lenders. A few days in the data room should reveal all this to potential bidders. There’s no business rationale for the Sound bid. Yes, it looks a bit like a pump and dump.

petroleum1: and they need a successful sidetrack by the end of September, or they won’t be able to meet the quantum required in the hedges. That’s assuming that the two existing wells produce in time and to target levels by the end of June and that the HSE allows a sidetrack to be drilled on a site where gas is flowing.

Yes, your final sentence may be correct. Or they may be trying to twist the arm of the Lenders, who may be anxious that the hedge terms be met. Or it could be a pump and dump.

Sadly, Angus’s 1 October revised Competent Person’s Report has been overtaken by events, as its March 2020 predecessor was. It reported that the Directors of Angus were expecting first gas by end-February. The CPR’s author predicted mid-March. Now the Directors predict 20-30 April, with the proviso that it may be later. They can’t predict when certain key components of the plant will arrive. There are, as discussed before, time constraints in terms of loan interest and capital payments, due probably in June, and hedge contracts beginning in July. Failure to meet the terms of any of these may result in the company’s assets being taken over by its Lenders.

I agree with ps200306, that there doesn’t appear to be any clear rationale for a bid by Sound for Angus, and that something else is going on. They’re both over-borrowed and short of cash. The risks in Angus appear more immediate than those in Sound. They need a placing, really.

Whatever emergency may be brewing here, I can’t see how bidding for Angus will resolve it.

The Sound share price was at 1.3p at the end of November. The rise since then is better than the performance of Angus shares since this bid speculation started.

smithfields: this is what I’ve been trying to suggest. An offer by Sound for Angus doesn’t make sense at all for either party, does it? Even the rationale for it offered by the Sound management is exceptionally feeble. Perhaps the Sound management is unaware of the precariousness of Angus’s financial position. If so, a few days in the data room should clear this up. And Gneiss should be able to give them some advice on this! The best explanation I can offer for Angus taking the action they have in inviting bids is that Angus may need more money than their advisers suggested they could raise with their share price at 0.65p. They’ve got the share price up by 50% or so as a result of the 6 January announcement. There may therefore be a placing just round the corner. What experienced participants in the AIM often refer to as a pump and dump; though It’s not clear to me that this is allowed for a company which has put up the for sale sign.

The above is largely speculation on my part. The bottom line, however, is that the bid doesn’t appear to offer anything useful to either party and would presumably result in a number of Directors losing their positions. So there must be some other explanation for it all.

It’s all in shares though. Not 1.5p. It’s already worth just 1.32p. The overhang of Sound shares if this offer is accepted in the hands of Angus investors, many of whom are expecting “several bags” from their investment (inexplicable, I know, but that’s what enables the insiders on the AIM to make such a good living) will probably cause quite a big fall in the share price of the combined company - down to the 1.3p level that seems to have prevailed for a while until all this kicked off, I should think. But it’s not going to happen, is it?

If I were interested in buying Angus or its assets, I wouldn’t wait until the Lenders have taken it over. The price will be a high one at that stage and they have deep pockets. Sound will either have to take a punt soon and assume Angus has got its sums right (for the first time ever) or they can wait, in which case they won't have the financial means to bid for it. In any case, the Lenders will be involved, since their charge on Angus’s and SEL’s assets give them protection against asset sales and they could probably demand immediate repayment of their loan. I think it’s the Lenders who have the whip hand here. I think Angus are in a very weak position. It must be clear to everyone that they no longer have any confidence in the quality of the asset and/or their ability to get it finished in time. Why else would they be selling an asset whose value they estimate at a multiple of even their current share price, so close to first gas?