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smithfields: yes, I understand the term “synergy”. I can’t see any here though. The only things they have in common are an interest in gas and inadequate financial resources. In addition, if the Angus Directors should perceive that they will be surplus to requirements in the event of a successful bid from Sound, they’re hardly likely to recommend it, are they? The whole point of these small AIM resource companies is to keep their Directors in the manner to which they’ve become accustomed for as long as possible.

irishmouse: as I understand it, the only bid Angus have received is from Sound Energy. The others are expressions of interest. Sound and the four or five others now all have equal access to Angus’s data room. I don’t understand your comments on Mr. Forrest, his (SEL’s) 49% stage in Saltfleetby and AAOG. For all we know, Mr. Forrest could be one of the bidders, couldn’t he? And the “bid” from Sound is for Angus as I understand it, not for 100% of the Saltfleetby gas field. It’s a very odd situation altogether. Why would the Board of Angus put the company up for sale when they’re pointing to far higher (multiples, in fact) asset values than the current share price and are still predicting they’ll get the project producing gas in time to meet their financial commitments in the spring/summer? If they’re correct, why not reject all the “bids” and start raking in the cash from May, when they should have the plant finished and approved?

Meanwhile, the price of Sound shares went on a nice uptick from just before they started contacting Angus with their expressions of interest. And Angus has gone from 0.65p to Friday’s 0.98p on the news of the “bid”. Though Sound’s “bid” is all in shares at 2.20p and they are down from this level by 12% or so since the announcement of the “bid”.

I fear that, as a famous American lady once observed “there’s less to this than meets the eye”.

Yuri.F: I’d say the best way to approach this is to write it off to experience. And if you’re ever invested again in something that Muddy Waters or the equivalent writes a similarly scathing report on, get out of it as quickly as you can (or read the report first, if you can get hold of one. A long summary of the Muddy Waters report on this was available free on the internet). Shareholders here have been robbed by an allegedly corrupt, thieving management, who appear to have done a smart job of covering their tracks.

Investors in this have been extremely unlucky. The shareholders, as owners of the company, are not unsecured creditors and it’s vanishingly unlikely that they’ll see any return from it now. They’ve been robbed and there’s no recourse.

Well, according to their offer, Sound are bidding to create a “platform”. Perhaps that’s similar to “synergy”. What they actually need is something that will add cash/cash flow. Angus has no cash and if it hasn’t got £4.4mm or so by end-June at the latest (they haven’t told us the precise timings of these payments) its assets may be taken over by its Lenders. The latest update to progress at Saltfleetby has put back completion of the project another two months, to the end of April, subject to parts being delivered in time. After that, National Grid and the HSE will have to examine and approve it all and the gas flow will have to be steady at the required pressure and tested thoroughly by NG before Angus can sell it. They still need planning permission for the changes to the original plans, and the outstanding EA and HSE approvals for which they’ve been waiting for a very long time. So you can add another month or so to the new schedule before they'll earn anything. And they still won’t have started on the sidetrack whose forecast production (even though all 9 previous attempts at a sidetrack failed from the well they were obliged to choose) will be required by September, to meet the hedge terms. Production from the two existing wells for a month is unlikely, even at current prices, to meet the payments on the Debenture. After that, if the Debenture holders allow them to continue, the hedges apply from 1 July. It’s hardly a sure-thing cash flow machine, is it? Add to all this the fact that the Angus management has never made good on any assurance or forecast. Not once. I don’t think the Sound management will proceed with its bid, but we’ll know by 15 February.

smithfields: some, at least, of the five firms in the Angus data room may not be quoted companies. Angus has not disclosed whether it has done any due diligence on theses firms or on their ability to proceed with a bid. You’ll only find out who they are if they announce their intention to bid. That seems fair, surely?

Do you think the Sound share price will rise, or fall, in the event that they decide not to continue with their bid?

ELREY: yes, the deterioration in standards in London is shocking and deplorable. In the case of AIM, it’s worse than Perth and Vancouver at their lowest, in my view. I think the rationale is that these companies are going to list somewhere, tons of listing and ongoing advisory fees are going to be paid, so it might as well be here. I’ve used this expression before, but it’s a form of regressive taxation: money is being resdistributed on a lavish scale from a lot of relatively poor private individual investors to a few well-off financiers. Disgaraceful and, as you’ve observed, nothing is done about it.

ELREY: I believe that Muddy Waters referred to NMC, Finablr’s sister company, as a retirement benefit scheme for ex-E&Y audit partners. Words to that effect, anyway. You’re right, the modern audited accounts are inadequate. Though there was enough financial information in the public sphere, principally the report and accounts, which they compared in detail with NMC’s local competitors’, for Muddy Waters to form a strong opinion on the underlying state of affairs. It’s extremely difficult for private investors and under-resourced investment management firms to conduct analysis to an equivalent standard. Basically, these two companies appear to have been just crooked. The box-ticking culture that’s developed within regulatory compliance and oversight in the City since Big Bang will never catch this kind of thing and the absence of any serious penalties for wrong-doers when they’ve been exposed (though not by the regulators) merely allows them to carry on unmolested.

Indomie: the UAE must be thoroughly embarrassed by it all, I’m not sure they’d want an investigation there. Even worse than Finablr was NMC, its FTSE100 sister company, run by the same lot, give or take. The money’s all disappeared there, too. No redress for shareholders. Scandalous. The ex-Chairman was having parties at the House of Lords a few years ago when it was listed, if I remember right. Imagine a FTSE100 company inviting an Earl onto its Board, and giving him the Chair of its Audit Committee, though he had no accounting experience or qualification! Carson Block ridiculed it. What was the LSE/FCA doing? Or the Company’s financial advisers, auditors and brokers? He’s still a Director of an LSE-listed company.

ps200306: well, I’m a sceptic. If the Sound bid doesn’t proceed, I can’t see how the other five will see things differently, assuming my view is correct. The Sound offer doesn’t seem low-ball to me but it’s all relative in a share-only deal, isn’t it?

ps200306: I don’t think anyone other than insiders knows the dates and precise value of the individual debt repayments, just that it’s an amortising Debenture, so will be paid down over its life rather than in a final lump sum. The interest is at 12%. The charges are available to view on the Companies House site. The terms were agreed in May last year but the final payment is due at the end of 2024, four years from the date on which they started negotiating (November 2020) so perhaps 31 May is the first repayment date.

Re the hedges, they’re on p. 49 or thereabouts in the Angus revised CPR, 1 October 2021, released later that month. They start this July and carry on until June 2025. The expected volume of gas flow is expected to begin to tail off progressively from the following year. They average at 43p. If Angus fails to meet the gas volume required to meet the contractual obligation of the monthly hedges, they’ll presumably have to buy the shortfall at market prices to meet them - i.e. buy at possibly 200p and sell at 43p. Possibly very costly indeed. Without a sidetrack, it’s unlikely they'll meet the hedge terms in total from September at all. It seems doubtful whether they can drill a sidetrack while producing gas. They said in October they were looking into this. It should have been drilled much earlier but parts were missing and, I suspect, money. One of the Debenture holders, by the way, organised the hedges. It’s unknown whether they are the counterparty to them or just the intermediary, or whether in the former case they’ve incorporated them in some series of forward deals. The Debenture holders are commodity trading firms, not banks.

I realise this is AIM and you have to speculate to accumulate but the risks in this are very high and it’s quite unlikely it will be spinning off excess cash flow any time soon, at best. It needs more money itself currently, has just held an EGM where it got permission for an 80%+ increase in authorised shares, though it would normally do this at its AGM. The AGM is normally at the end of March so naturally people are wondering why they need this permission two months earlier. It’s not really the kind of deal Sound needs, is it? Even for shares.

ps200306: their RNS today is talking about a new target for first gas of 20-30 April. It looks ambitious. In any case, “first gas” is not sales gas and they’ll need a whole lot of regulatory approvals by then and National Grid and, presumably, HSE approval after it. Another month seems on the optimistic side of realistic. They borrowed £12mm. in mid-May last year. It’s an amortising 3.5 year Debenture, so interest and the first capital repayment must be due soon thereafter. £4.4mm. probably. They’ve got insufficient cash to get to that point, as I’ve already remarked. Will Sound seriously want to get involved with this - even in an all-share bid? Your price would probably crash under the weight of ex-Angus shareholders’ selling once a deal completed and you'd still be over-borrowed.

I think what’s gone on is outrageous but it’s not the fault or the responsibility of the present management. Finablr was comprehensively bust before they got it. There was no money or prospect of any to pay to shareholders. The new company is a different corporate entity. I can’t see any chance at all of Finablr shareholders getting a payment of any kind. They can’t sell their shares so might as well keep an eye on them once a year or so but that’s about it, sadly. It’s wrong, it’s bringing London into disrepute but these excesses have been increasingly prevalent since Big Bang. Corporate and personal honesty has gone and greed is all that matters. It’s the same in politics.

I think the Sound management has accepted earlier statements by the Angus Board about the prospects of their getting the Saltfleetby gas plant on stream in time to meet their loan and hedge deadlines, and that thereafter it will be a cash flow machine.

They’re in the data room now, apparently. In the light of today’s RNS from Angus detailing further long delays, I’d be very surprised if Sound will proceed with a bid for it. Angus looks unlikely to get the gas out in time to meet the deadlines (which involve events of default, enabling the Lenders to take over the assets) and they need more money to give themselves a chance of doing so. It would represent a big risk to Sound, not a cash flow machine. The delays detailed today appear to explain fully Angus’s decision to put itself up for sale.

Surely the people to blame in all this are the allegedly crooked Directors and officers of Finablr who are suspected of having stolen the money that forced the company into liquidation? And, to only a slightly lesser extent, the financial institutions that brought it to the market and sold it to investors through the LSE. Is no one going through the accounts properly, of companies seeking a listing in London? Is the FCA asleep at the wheel, or short of the powers it needs? If Carson Block can spend a few weeks going into the accounts of Finablr’s sister company NMC and decide on the strength of his research that it’s crooked, and take a big short position to back his view, surely the banks which support the company’s introduction to UK investors should be able and willing to undertake research of a similar quality before recommending it for sale to investment clients? It seems to me arguable that they are guilty of a serious lack of due diligence. Why is nothing done?

I think that, since the discovery of the shortfalls in Finablr’s accounts two years ago, there has been little prospect of equity investors getting anything back. Whether some of the stolen money will ever be traced seems doubtful too. The systems outage at Finablr, to correct which they appear to have paid a large ransom to the culprits two months later, occurred two weeks after the Muddy Waters (Carson Block) review of NMC. Finablr was uniquely well-placed to move money round the world from the Middle East and a two-months systems outage should have enabled software experts to cover their tracks, shouldn’t it? Though, of course, the systems outage and the missing millions may be entirely unconnected.

You never know! Though Wingas may have sold Saltfleetby in the first place on consideration,of the Interets of the Russian State. I’m sure President Putin would prefer Europe to take peak gas from his new pipeline rather than from massive storage facilities under Lincolnshire.

Irishmouse: I should think that with 49% of the Saltfleetby gas field, he probably thinks he’s got enough and needs to de-risk/diversify his investments a bit. Presumably he bought these shares in the first place with part of the money left to him by Wingas for a pipeline decommissioning reserve. I doubt there’s anything more sinister than that, though his timing may be influenced by certain short term considerations after a big rise in the Angus share price (as there was a month earlier in the Sound Energy price). I agree that as it stands the Sound Energy bid is a non-starter - if it was ever a starter. It’s already worth nowhere near 1.5p in any case at the current Sound share price. And think what would happen in the event of a successful bid to a combined Sound/Angus share price with nearly 40% of the shares in the hands of fed-up ex-Angus shareholders.

I don’t think Mr. Forrest would have an interest in beating down the Angus share price. As for goose and golden egg, there’s a chance they may make it across the line in time to gas production, and at the necessary scale, but there’s some pretty high hurdles to clear before June. I think you need to have a pretty high risk tolerance to invest in Angus. It’s more like a roulette chip than a stock market investment. Who knows, though?

SEL is in the same boat as Angus: the gas plant needs to be operating at forecast output levels by July or the ownership of their assets may change hands. And Angus are short of the money they need to finish it. It’s been suggested on another chat site that the most likely resolution to the requirements of all the parties in the £12mm. loan may be the provision of some more short-term finance by the Lenders to tide Angus over to full-scale production - though at a price.

Irishmouse: I wonder what price he paid for his Angus shares. He owns 49% of the Saltfleetby project and shares offices with Angus’s FD and with Tidswell, (see my post 2 before this one) and the Earl of Lucan. Not an insider at all though, would you say?

I’m sorry, I read only the sale part of Paul Forrest’s declaration. He still has 13.5mm shares in Angus, slightly more than he sold.

Petroleum1: removing the hedges would require a cash payment up-front of the present value of 36 monthly contracts. Many, many millions at these prices. As has been observed elsewhere, Angus struggled to get a small, under-subscribed placing away last month and the Debenture terms preclude further borrowings. Where would Angus get the money to get out of their forward contracts?

Yes, but the new CPR updated them on 1 October. On p. 50. Not as high as 220, but to assume that gas prices will remain at 220 over the whole life of the project is naive. Probably! It’s certainly not in line with the futures market prices, which the CPR uses as its benchmark.

Re Mr. Forrest’s sale: he knows more about what’s going on than anyone except the Angus Directors, and, since he owns a large no. of shares in Orwell Group, which shares its registered office address with Lucan Fashion and is co-owned by Carlos Fernandes ( the Angus FD), and Jonathan Tidswell, I think it’s safe to say he probably knows roughly what’s going on too.