Charles Jillings, CEO of Utilico, energized by strong economic momentum across Latin America. Watch the video here.
So the flow rate from B2 is 3.06 MMSCF and the flow rate from A4 is 2.82MMSCF which means a total production of 5.88MMSCF per day. This is more than enough to meet all of the hedge requirements going forwards even without the sidetrack. Job done boys, its now just a case of counting the cash and then drilling the sidetrack to up the income to £50 million + per year.
Head In the Sand, I am well aware of what the value of the production is in therms and have posted the calculations before, but just in case you need to be reminded here it is in simple terms.
1. The total value of the gas sold to the hedge is £8 million regardless of the price of gas. On top of this you have an excess of 644,253 therms over the hedge (at 6mmscf/d) which would be worth approx. £4.5 million at the average forward gas price of £6.93. Total £12 million but likely to be a little more so more as due to the re-arrangement of the hedge there will be more market gas sold in the winter period (higher priced) than I have budgeted for.
2. I am absolutely aware of what the hedge is in therms, it seems however that you are not. The total amount of gas hedged in therms between July 2022 (the start) and June 2023 is 18.120.397 (an average of 1,812,040 therms per month). At a production rate of 6 mmscf/d then this would give a total production between September 2022 and June 2023 of 18,764,650, hence the free 644,253 therms to be sold on market I mentioned earlier.
3. At the 7mmscf/d that you mentioned earlier this would give a total production (between Sept 22 – June 23) in therms of 21,892,092. If we subtract the therms hedged from this we get a remained to be sold on market of 3,771,695. Once again using the average price of £6.93 per therm then this give a profit of 3,771,695 * £6.93 = £26,175,561. Add on the guaranteed £8 million from the hedged amount of money and you get £34,175,561. It’s really not complicated.
As for your comment that you never said that it would only produce at 2.4mmscf/d that is not my recollection of things at all. My memory is of you mentioning more than once that the official OGA figures showed average production of 2.4 mmscfd over the last several months of the field being in production, but having had a quick look through your post history I cannot find the actual posts, so if you maintain that you never said this then I am happy to apologies and take your word for it. You definitely said on more than one occasion that Angus would need a successful sidetrack in order that they meet the hedge requirements though – I assume that you agree that you said this?
"The claim made was that the first well was producing 10 million cubic initially by itself (and it categorically isn't).
Howey, you may be right, but then again ANGS's RNSed statement is literally crystal clear and thus just a tad tricky to misinterpret accidentally.
Regardless, the key figure to know is consistent/"normalised" flow from both existing wells combined."
HITS – it is nice to see you mentioning that Saltfleetby could produce 10mmscf/d without drilling a sidetrack, especially since you spent so long telling us all that it was just Poundland and would never produce more than 2.4mmscf/d.
Personally, I think that with the decline the two current wells will only produce a total of about 7mmscf/d. At this rate, all of the missing hedged amount would be covered by mid-November and then by June the company would make £26 million in market sales and an additional £8 million in the hedged money.
Then on top of this we have the sidetrack, but depending on how well the other two wells produce this may not even be necessary since we know that the maximum production capacity for the equipment is 10mmscf/d.
Penguins’ post has just made me realise that I made a very large error in the calculations that I posted earlier. I was so focused on how long it would take to pay off the hedge with the missed July and August amounts rolled over to next year that I completely forgot to include any revenue from the hedge itself and over the course of the next 9 months (from September to June) this amounts to another £8 million which I had not accounted for.
Obviously this takes us up to a revenue of £15 million between now and June 2023 even without the sidetrack.
In a minor correction to my first post it should be noted that in the Q1 & Q2 production sections I mentioned the monthly production rate not the quarterly one. This should obviously be multiplied by three to get the correct number. Apologies.
Going forward
From August 2023 onward if the gas price continues at this average (£6.93) and with the hedged amount dropping to 4.5 mmscf/d until the end of the year then Angus will make a further £23million in H2 2023 and this is still only at production of 6 mmscf/d.
Even assuming that the gas price drops right back down to £2.50 per therm then Angus will make an additional £10 million in H2 without the sidetrack.
So in short, without the sidetrack coming online then Angus will make between £17.8 million and £27 million by the end of 2023 dependent on gas prices.
If the sidetrack does come online on Jan 1st 2023 and production increases to 10mmscf/d then the numbers change radically. Production in Q3 & 4 2022 would remain the same as before but production in Q1 2023 would pay off all of the amount hedged by the middle of January and leave an excess of nearly 1 million therms by the end of that month. By the end of June 2023 then the excess production would be 8,150,113 therms which would mean a total revenue between September 2021 and June 2023 of £56 million to Angus (at £6.93 per therm).
If the gas price continued to be 6.93 per therm throughout the rest of 2023 then Angus would show an H2 revenue of £62 miillion.
So there is no ttightness on cashflow whatever happens, instead there is just the option of good revenue of absolutely spectacular £100 million + revenue.
No Head In the Sand, no I had not confused mmscfd and monthly production, but I had however, forgotten to put in the excess hedged amounts that needed to be added between September 2022 and June 2023 which does have a small (£4.2 million) affect on the revenue generated over the next 9 months and means that the minimum amount of money that Angus can make is actually £7.8 million at 6mmscf/d rather than the £12 million I originally quoted.
In order that there is no further confusion about the calculations I explain all of the workings belos
6mmscf/d translates into 1,876,465therms per month.
The hedged volumes per day were (as per Angus’ documentation)
Jul-22 3.34 MMSCF 1,044,566 therms hedged per month
Aug-22 3.34 MMSCF 1,044,566 therms hedged per month
Sep-22 3.45 MMSCF 1,078,967 therms hedged per month
Oct-22 5.19 MMSCF 1,623,142 therms hedged per month
Nov-22 5.37 MMSCF 1,679,436 therms hedged per month
Dec-22 5.19 MMSCF 1,623,142 therms hedged per month
Jan-23 5.19 MMSCF 1,623,142 therms hedged per month
Feb-23 5.75 MMSCF 1,798,279 therms hedged per month
Mar-23 5.19 MMSCF 1,623,142 therms hedged per month
Apr-23 5.37 MMSCF 1,679,436 therms hedged per month
May-23 5.19 MMSCF 1,623,142 therms hedged per month
Jun-23 5.37 MMSCF 1,679,436 therms hedged per month
Jul-23 4.45 MMSCF 1,391,712 therms hedged per month
So in total there hedged amount was originally
Q3 2022 there was 3,168,098 therms hedged
Q4 2022 there was 4,925,721 therms hedged
Q1 2023 there was 5,044,563 therms hedged
Q2 2023 there was 4,082,015 therms hedged
Obviously there has been no production in July and August and production will only commence for September now so this means that Angus start with 2,089,131 thems owed to the hedge.
At 6mmscf/d starting in September this means production of
Q3 2022 there will be production of 1,876,465 therms (down 1,291,633 therms on where the hedge should be)
Q4 2022 there will be production of 5,629,395 therms (down 587,959 therms on where the hedge should be)
Q1 2023 there will be production of 1,876,465 therms (down 3,127 therms on where the hedge should be)
Q2 2023 there will be production of 1,876,465 therms (up 1,129,066 therms on where the hedge should be)
So over the course of this 9 months then Angus will produce 1,129,066 therms more than they owe the hedge and all of this can be sold at market rates.
To calculate afinancial value on this then we take the average of the expected gas prices between September 2022 and June 2023 then we get an average price of £6.93 pence per therm and the multiplication of these two numbers means an income of £7.8 million.
HITS – as ever, some of your post is accurate but claiming that with the hedge at 5.8 it will be a drain on working capital until the sidetrack is drilled is simply untrue.
If Angus get 6mmscf/d out per month and the first two quarters have 5.8 mmscf hedged the this means (at the current gas price of £5.70 per therm) that they will generate £1.9 million in operational profit from the hedged sales and an additional £700k from the market sale of the excess giving them an income over the two months of £2.6 million. (£1.3 million per month).
Even if we assume that the hedge remains at 5.8 all the way until the end of Q2 2022 then with the forward prices as they are:
September £5.70
October £6.30
November £1.15
December £7.87
January £7.80
February £7.80
Q2 £6.68
This will mean that the company will generate £12.3 million in operational profit over the next 9 months without the sidetrack.
If the sidetrack is successful and brings production up to the 10mmscf/d level that George has talked about previously then even if this only happens at the beginning of January the revenue generated will go through the roof:
Sept- Dec at production of 6mmscf/d would generate a revenue of: £5.2 million and Jan-1 June (at 10mmscf/d production) would generate a revenue of: £65 million.
In short, even without the sidetrack then revenue and cashflow is comfortably profitable even at a hedge of 5.8mmscf/s every month, but with the sidetrack in place it goes from comfortable to raining cash.
The company have said on a number of occasions that they will produce enough gas at Saltfleetby to cover the highest levels of the hedge even without drilling the sidetrack. This is what their analysis has told them and this is what convinced Aleph etc to lend them the money in the first place. Given that most figures that are operated on for financial reasons are very conservative I expect the gas output to comfortably exceed the hedge values. Remember, that these were done at the same time as the loan was being sorted out and so if they had thought that there was any danger of not easily exceeding the hedge then they juts would have made the hedge numbers smaller and for a longer time.
All of this stuff about will they won't they make the hedge is just nonsensical scaremongering. Of course, once they drill the sidetrack and get the production levels up to 10MMSCFd then they will be able to really take advantage of the new gas price levels and at a point in time when they are also getting to keep 100% of the revenue.
HITS – I realise that the second half of the Aleph group package requires shareholder approval which is why I wrote that: “ only half of them have been formally issued yet as the remaining 273 million (plus 173.1 million warrants) require shareholder’s approval which will be given at the General Meeting on Monday 13th June.” I agree with your second statement though – this approval is indeed no more than a formality.
As for your query as to why Aleph are only listed as showing holding 7.19% on the Significant Shareholders section of the Angus website, I think that this is a very sensible question, but in my opinion it also has a very simple answer.
If you notice in my original post I mentioned the shares as being allocated to the “Aleph group” not to Aleph themselves. This is because in the “Acquisition of 49% interest in Saltfleetby” RNS it specifies that the £6million is raised “with a group of family offices and private investors led by Aleph”. In short, Aleph did not come up with 100% of the £6 million and therefore they do not control 100% of the 546 million shares.
My reading on this is that Aleph have not sold any shares but in the first tranche of shares issued they only own 7.19% and the rest are owned by the private investors and family offices mentioned above – though all presumably owning less than would be required to issue a TR1. My assumption (but this is only a guess) is that Aleph will be issued a further 7.19% when the second tranche of shares are approved and that they will hold onto this as well. Remember, that the key point for Aleph is that they only have the right to appoint two non-exec directors to the Angus board as long as they own above 10% of the company so I would be surprised if they sold any of their allocated shares in the near future.
Whether deliberate or unintentional there seems to be some degree of confusion over the amount of shares that are going to be issued and the (slightly bizarre inference that there is going to be another placing). If you read through the two RNSs that have been issued (the acquisition of Saltfleetby and the Notice of GM) then all of the information is there, however it is a little confusing so for clarity here is the explanation.
1) There is not going to be a further placing above the £6 million that has already been announced in the RNS of the 24th May. Every one of the 546 million shares that are allocated to the Aleph group as part of the £6 million investment is taken up, but only half of them have been formally issued yet as the remaining 273 million (plus 173.1 million warrants) require shareholder’s approval which will be given at the General Meeting on Monday 13th June.
2) The board are also asking for approval at the GM to be permitted to issue a further 682,438,000 shares should they need to (basically in order cover the Saltfleetby covenants). Out of this 682,438,000 they are also asking for permission to sell up to 341,219,000 into the market to raise capital should this be required in the future. However, if is important to note that this comes out of the 682 million and is not in addition to the 682 million. It is also important to note that this is absolutely standard behaviour amongst listed companies. All of them need to have the flexibility to issue shares for the board to make purchases without holding a GM to approve this every time.
The placing for £6 million has already happened. The shares have been sold and the market knows this and is expecting them to be issued. The approval to issue further shares is just standard practice for listed companies – after all there would be no point in running a listed company if you could not issue shares in it. Inevitably some more shares will be issued at some time in the future but they would presumably be related to future acquisitions or covenant requirements and it is definitely not something we need to be concerned about in the near-term. Before they start thinking about issuing any more shares the company simply need to get on with generating cash out of Saltlfeetby and with the 49% acquisition, at least 100% of this cash is now coming to Angus.
Head In The Sand, you and I were having this same discussion over 6 months ago and I thought that we had settled it when I sent the questions to Angus explicitly asking:
A) What is the predicted output of Saltfleetby without the sidetrack being drilled? Will it be enough to cover the 5.4mmscfd of the hedge in November 2022?
B) If the sidetrack is successfully drilled, what would you hope would be the total gas output of Saltfleetby mmscfd in a worst, probable and best case scenario?
C) Will it be possible to continue producing gas at Saltfleetby while the sidetrack is being drilled or does all production have to stop during this time period?
The full answers to these questions from October 27th 2021 can still be seen here: https://www.angusenergy.co.uk/media/investor-questions/ however a short version of them is:
A) The two existing wells will cover all of hedged production even at its highest point.
B) A successful sidetrack would deliver 7mmscfd in a worst case scenario and the probable case is 10 mmscrfd.
C) It should be possible to drill the sidetrack while continuing to produce from the existing two wells.
So an unsuccessful sidetrack, while being disappointing for both the company and investors will not be the disaster you are claiming. In fact, assuming that production does not commence until June and is then capped at 5.4 mmscfd (the minimum required to fulfil all of the hedge requirements) then Saltfleetby would still generate £12 million (£6 million net to Angus) between June 2022 – December 2022.
If the sidetrack is drilled in July this year (and becomes operational in August) then these figures will increase to £30 million generated and £15 million net to Angus. If, as you suggest the sidetrack is drilled in September with production ready for October then we would be looking at £23 million by December and £11.5 million net to Angus.
So in all we are looking to generate in 2022 anywhere between £6 million net to Angus (in the event of an unsuccessful sidetrack) and £15 million net to Angus in the event of a successful sidetrack being drilled in July.
In 2023 (and a gas price of £2.50 per therm) the difference between the sidetracked and un-sidetracked numbers does become substantially more significant. At production of 5.4mmscfd Saltfleetby generates £11 million (£5.5 million net to Angus) and at a production of 10mmscfd generates £54 million (£27 million net to Angus).
So you are correct in saying that in the current gas-price environment that a successful sidetrack will be an utterly transformation game changer for the company. However, you are incorrect in saying that an unsuccessful one would be very damaging. In fact, it would still be making more than twice as much money as Saltfleetby was originally budgeted to generate when Angus were loaned the £12 million to develop the Saltfleetby site. The difference is simply between Saltfleetby being better than expected and being truly company-changingly
Interesting to get a formal confirmation of the information leaked by the LadyOfAim twitter account back in November that there are offers on the table to buy out Angus’ share of Saltfleetby and even the company itself.
We also see the same negative posters coming out and making more laughably untrue statements about how nobody is really interested in buying the asset and it is all made up in order to hold another raising… These are the same people who once called Saltfleetby Poundland and said that it would never be worth anything and yet here we all are, discussing how many millions that it might be bought for. I wish they would just be realistic. There has been plenty to criticise Angus for over the years but Saltfleetby is a success story and it should be recognised as such.
There has clearly been ongoing interest in acquiring Saltfleetby and the only question really is how much should Angus accept for it. The basic level of money that has been suggested is £20 million (£14 million plus Angus’ share of the loan which would be another £6 million) which would value the entire asset at approx. £40 million. To me personally, even though this would be a cash influx of more than double yesterday’s closing market cap I do not think that it is enough. Looking at the Ice UK natural gas futures and putting them into my long-term calculations it now shows that there is the potential for Saltfleetby to deliver £32 million in revenue during 2022 as opposed to my previous forecast of £19 million. Realistically, I would say that this would put a £66 million value onto SFBY with £12 million removed for the loan meaning that I would be looking at a value of Angus’ share of approx. £27 million.
Of course, the big question is whether it is worth selling Saltfleetby even for £27 million especially since (assuming that gas prices stay at the value they are now) then the asset will generate approx. £50 million per annum (£25m net to Angus) each year. The answer to this really depends on what other assets that they have in mind to buy with the revenue – repeating the value reaped from Saltfleetby four or five times over the next 5 years would certainly keep me happy and I think that in both gas and geothermal it would be possible to do this. Geothermal has certainly shown some fairly significant revenue generation in the USA over the last few years as larger companies have moved into the sector and snapped up the smaller players.
But it is a nice position for the company to be in and also for us as shareholders – especially when it is all about an asset that was for a long time deemed by many to be worthless.
7. The high court injunction would not have been issued if the judge was not satisfied that the ADME claim was solid. KONH should be shown on the NHNL share registry and ADME were never obliged to make a $1.75 million payment to NHNL. If they were meant to have made this payment then they would have made it or said they could not pay. They would not just have ignored it. Shareholders were not notified about this because this is just standard business arm-twisting. It happens all the time but ADME would not make public statements if they were not true.
8. Anyone who wants to know what he (and any of the other directors of the company) have earned just needs to look at the annual report. It is all there and it is not a secret.
9. Going forwards the board are looking to progress AJE and Barracuda and are looking to acquire new assets in Guinea, Brazzaville and Gabon. They like appraisal assets as they can buy them cheap and sell them for ten times the amount. They are also looking for production assets for the sake of cash-flow. They are very happy with the current boards and are very capable of defending their positions.
The ball is in Align’s court now, but overall this was an impressive performance from Osa. He certainly seems very confident in the ADME position on NHNL and I look forward to seeing how the company handles the Jennings accusations in their circular
I logged into the investor call without any issues either. Made some notes too. Overall it was a fairly impressive performance and although it did not answer any questions on the Jennings allegations as these will be addressed in the circular it was pretty informative.
1. About AJE – YFP who operate the concession are open to being helped by their partners and ADME have assembled a team of their own that have done all of the technical planning an the engineering. Essentially ADME staff are running the project. Osa refused to speculate on when AJE will generate any revenue to ADM but says that the board are eager to get to this point.
2. The Barracuda CPR has been delayed because they have started to look at deeper reservoirs rather than shallow ones as the deeper ones are much more economically attractive. He said that the delay has been useful as it has deepened their understanding of the license. It was unclear if the CP had been paid for, he appeared to say in one sentence that it had been paid for and in the next that it hadn’t.
3. Nigerian Marginal Bid Round – the company are not really interested in this any more. The Nigerian govt basically wanted $1.50-$1.80 per 2c barrel and the wider market in Nigeria has better opportunities (like Barracuda). But partnerships are still being formed and it is still a work in progress.
4. The company is confident that it will cover operating costs in 2022 in the same way it always has, with a mixture of debt, equity and directors investing.
5. The company are eager to use the Trafigura facility and are looking over 2-3 possible new transactions each quarter. It is a work in progress.
6. Ginsky was correct to the letter in his assessment of KONH. It was an SPV that took over the assets from an offshore company that ADM did not want to run an offshore jurisdiction so they onshored it. They paid $250,000 (and presumably the $550,000 in shares though this was not specifically mentioned) in order to acquire their share of KONH and this money went directly to pay the company owners who can be seen listed in the Calabar Capital list of directors. NHNL were fully aware of all of these actions and to suggest that they were not is insulting.
These are the questions that I have submitted so far for tomorrow;s investor call. I wonder if the company will see fit to actually answer any of them?
1. ADME claim that KONH Ltd own a majority share of NHNL. How can this be possible when KONH was only formed on 19th February 2021 and it appears that the only money ever put into it was $250,000?
2. NHNL have published documentation showing that KONH was meant to make at least one payment of $1.75 million which never got paid. How do you explain this?
3. If NHNL is a subsidiary of KONH (as you have announced on multiple occasions) why is KONH not shown on the NHNL share registry?
4. Why is it that if you were informed by NHNL that they declined participation in the KONH proposal on August 17th that shareholders were not notified of this action. Even if you believed that the contract was watertight, surely shareholders should have been informed that a company that you claimed was KONH’s subsidiary saw itself as no such thing?
5. What has happened to the bid that was submitted to the Nigeria Marginal Field round?
6. Why has there been no publication of the new Barracuda CPR? Has this been paid for and completed.
Spikey, in that case then, assuming that Dan is right and it is Align selling, then we should get an announcement from them on Monday as they should already be down to 4.12% from 5.78%.
Of course, there is every possibility that Align could actually be buying in order to strengthen their position in the upcoming vote. To be honest, that would make more sense to me than them selling now.
Dan, I am not convinced that it is Align selling as it would be a strange strategy for them to call an EGM and then sell out their own votes in the EGM before it happens. However, if you are right then they are currently down to 4.31% of the company and if they sell another 1.5 million on Monday and Tuesday they will be down to 2.84% and will have to issue an announcement as being under 3%. So, I guess we find out soon one way or another.
Ginsky -It also would not make any sense to transfer a company and its assets from a jurisdiction where there is no taxes on profit, income or capital gains (Bermuda) to a separate jurisdiction where there is taxes on all of these things (the UK).
I cannot understand why anyone would do this and I cannot recall any interview with Osa in which he mentioned this. I am happy to be proved wrong though if you can dig out the link for the interview in which he said it.
Ginsky - the idea that the deal between KONH and NHNL could have been done years ago is just mindless optimism. It only works if you ignore all facts.
KONH UK Limited was only incorporated on 19th February 2021 so it could not have set up NHNL originally, nor could it have done a deal with them years ago. There is also no way it had any money in it before ADME paid for 51% and the $250,000 that they put in would not have paid for anything significant from NHNL even assuming that it went to KONH, which considering the shares wen to Calabar, I sincerely doubt.
I get that you want to be optimistic about ADME's claim but you have to find some facts to support your theories.