Member Info for OofyProsser

It seems to me that the management here are thumbing their noses at their shareholders, the owners of the business - particularly the ones participating in the current “revolt”. Given the amount of their shareholders’ money they seem to be planning to spend, anyone still holding these appears to be what Americans call a “patsy”.

It seems to me that the management here are thumbing their nose at thevshar

gkb47: yes, quite. You’d have to be quite naive not to see this SEL option deal as part of the suggested SEL/Anguish/Mercuria loan deal announced today. The months it’s taken to get this far with that loan may have been spent getting accountants’/counsel’s/HMRC’s opinions on the use of the tax losses.

I don’t understand why investment management firms with shares in this would not want to exert their influence to get a better deal, if the tax losses are the primary factor here, as it seems they are.

...that’s my opinion, it’s not intended as investment advice.

Shareholders here can probably assume that the new shares proposed in the option agreement will find their way to Mercuria, where, if the tax losses can be used, they will be. If this is the case, your company is worth quite a lot of money and the terms you’re being offered are, well, to say “not very generous” would be extremely generous to the option holder. I’d vote against the deal, replace the Board and suggest that the new one find an investment bank willing to earn a fee to find a more sensible price for the tax losses.

Please see the Angus Energy RNS today if you dont understand what I’m talking about.

HITS: yes, I agree with this analysis. I wonder in what circumstances and to what extent these losses can be used by a company taking AAOG over. If Paul Forrest has found a way of using them, the AAOG shareholders should try to make him pay something for them. The current terms offer them nothing and they are, after all, the people who’ve invested the money that’s been lost and appears as losses in this balance sheet note. Their accounts (SEL and Forum Energy Services) are due at the end of this month, aren't they? I see that gkb47 is wondering whether Wingas left some money in SEL. I doubt it.

I noticed this and copied it to another site yesterday, from June 2019, concerning the Angus involvement in the Saltfleetby licence:

“The heads of terms (including exclusivity provisions) agreed note that completion of the acquisition of 51% of the licence is conditional on the prior acquisition of the field and licence by a third party abandonment operator.”

I've assumed that the third party abandonment operator is SEL. there’s been no mention of anyone else in this role. SEL is responsible for £8mm. or so of abandonment costs for the pipeline, as I understand it.

I also agree that it’s very hard to see Anguish getting the loan they want. And it's hard to see how they’ll make any money if they do. So tax losses are unlikely to be of much use to SEL/Forum there. And there's no news of any big project, or of how they would pay for one. It would be galling for AAOG shareholders if AAOG disappears, the losses disappear into Forum and that company gets sold off to someone who CAN use the losses. In the absence of evidence of any such sequence of events, I think, as you know, that this option deal is misdirection.

HITS: an amusing analogy. However, the car didn’t belong to you to start with. It had chugged to a standstill and you’ve offered your 8 smarties for it. The car isn’t worth anything except that its registration document may offer you a value that the current owners of the car can’t access and therefore don’t attribute any value to. You’ve offered your 8 Smarties for it, which many appear to think is a fair-to-generous offer in the circumstances. However, in this tube of Smarties there’s a nasty trap in the form of liabilities if you stain the carpet with them. None of this offers anyone any value at all, except if you can realise the value of that registration document.

It will be an act of generosity if the AAOG shareholders let you have the car with its valuable document (the tax losses) free, gratis and for nothing. All they’re being offered for it is a 95% dilution and the assumption of unaffordable abandonment obligations in an unaffordable gas project (Anguish’s Poundland). Whereas, if he can get access to the document, SEL is acquiring something of considerable value to its shareholder..

gkb47: I imagine that, if AAOG remains a separate corporate entity within SEL, It will need to be a signatory to any agreement that requires security for a Poundland loan. It’s hard to see what it brings to the table for these purposes, and this is unlikely to escape the attention of any “funding partners”. So it will tend to make the negotiations even more protracted.

Re the £8mm, they’ve merely calculated how many shares they need to get at the 0.10p par, or nominal, price to give them 90%+, haven’t they? £8mm. worth of AAOG shares at their nominal value does this for them. £8mm. is entirely irrelevant for valuation purposes.

In any case, it’s just misdirection. Surely?

gkb47: apologies, I should have entered the whole figure and wouldn’t have made this mistake. Still, it’s the same number as it was in the 29 September RNS. So no new ordinary shares have been issued since then.

gkb47: re the option: SEL will own 95% or so of AAOG if this deal is approved. Under English law (as I understand it) if AAOG remains a separate entity and a subsidiary of SEL, SEL won’t be held responsible for its debts or its performance under agreements which it enters into.

In any case, it’s unlikely it will go though, isn’t it? It’s just a distraction.

gkb47: according to ADVFN, the no. of shares in issue is 499.3 million, the same number that the Company gave in their 29 September 2020 RNS following the conversion to 10mm+ AAOG shares of part of the Riverfort loan.

The rationale being discussed for the proposed Forum Energy Services option, from the point of view of why do they want it?, appears to be that Forum wants the £40+mm. of losses in AAOG to use to defray tax on future profits within Forum. The AAOG Board attributes nil value to its tax losses in the balance sheet, since they see little chance of their ever being used. If I were a shareholder here, I’d be writing to the Board suggesting that they re-value these losses as a matter of some urgency and, in the absence of a tempting cash offer for the shares from Forum which recognises at least part of this value, I’d advise the Board to recommend rejection of the proposed Forum terms. (This assumes the losses can be used in the way described and have a realisable value to a bidder. )

*Ferreira. Sorry.

..Dexter Perreira is a director of an independent mining (not oil/gas) consultancy which has done some work for Philex Mining, PXP’s mining parent.

*Dexter Ferreira.

...and re your interlocutor elsewhere, Paul Forrest has had no publicly divulged involvement with Forum Energy Limited since he got involved with Poundland - he resigned as company secretary at the end of May 2019. And I can’t find a reference to Dexter Perreira at PXP - though he may have access to better info than I have. Worth a question, I should think.

I see the cast list is growing. The trouble is, I really detest that film. Quite disturbing.

I still think these proposals re Forum Energy Services and AAOG are merely a deliberate distraction. The kind of thing that might get cooked up between a double glazing salesman and a menswear wholesaler/part-time model. What conjurers call “misdirection”.

gkb47: are you enjoying your amusing exchange on the Angus site? I’ve had a look at PXP and should think they’ve got enough on their plate without getting involved in Poundland. Forum Energy limited’s accounts look pretty dodgy to me too, they’re going to need another re-capitalisation by year end or another rollover of a large inter-company loan. None of PXP or its group subsidiaries appears to have a positive cash flow and it’s hard to see how any advantage they might get in terms of a UK AIM quotation would compensate them for the cash drain Poundland would represent. Forum Energy Limited itself appears currently to have no employees and the Directors are unpaid. There’s also an “emphasis of matter’ in the auditors’ report which rewards scrutiny. In any case, as another poster put it of the people involved with Angus/Poundland on the other Angus site, “these people are not Machiavelli, they’re Baldrick”.

I think the only real difference between Angus’s and AAOG’s treatment of tax losses is that Angus discloses the quantum - about £19.8mm. While they may be carried forward indefinitely, they can only be used within the company within the Group in which they arose. Almost all in AEWB3. There seems to be a doubt in Angus’s case as to whether they would be useable by a company that took over Angus. I’m no accountant either but wouldn't place reliance on balance sheet tax losses as an asset value guide.

I agree, again. In the AIM oil and gas sector there seems to be quite a number of companies whose shareholders would do better if they were wound up immediately. I’ve come to the conclusion that they carry on (and keep getting share placings away, somehow!) merely to allow their Directors to take (surprisingly enormous, in the context of their P&L and balance sheets) salaries, expenses, club memberships, bonuses, share options, port etc. When will the penny drop with the “mug punters”, the CFA, AIM, the Serious Fraud Office etc? I suspect some of these people and their advisers would be up on racketeering and/or wire fraud charges in the USA. Though even there, the SEC seldom seems to notice offences until someone tips them off with chapter and verse.

gkb47: I agree. When Wingas/Gazprom sold Poundland to Angus, they did so on the basis that they couldn't find a way of making it profitable. It’s there in their directors’ report. The interim MD of Angus said at the time that was because Wingas would have hired Halliburton, who would have charged £15mm. to do the whole job, ha ha. Angus have spent a lot more than the £2.5mm. that Wingas gave them for an abandonment provision(ha ha), and now Angus want another £12mm., of which £2mm. at least, by my reckoning, will now go in arrangement fees etc - so they’ll need more. Then there’s the estimated £12.8 mm. abandonment liability that Wingas estimated was required, in their last published accounts. And forward sales at 30p. of up to 70% of the gas they’re expected to produce! No, I can’t see a profit in it either and it’s not clear that Angus can find a bank which can.

None of these companies possesses such a pot as you describe. We’ll know more at the end of this month with the Forum Energy Services/SEL accounts - assuming the two companies favour us with their publication. Incidentally, I’ve had a flick through the AAOG accounts and the only reference to tax losses is this, on p. 49 of 66:

“Factors that may affect future tax charges

No deferred tax asset has been recognised in respect of tax losses because of uncertainty as to their future availability, which depends on the Group making future taxable profits.”

I can’t find a reference to the quantum of tax losses. Are investors here assuming that the total figure of £41mm of accumulated losses are offset-able against future profits, to reduce the tax bill? Is there an accepted figure for tax losses?