Utilico Insights - Jacqueline Broers assesses why Vietnam could be the darling of Asia for investors. Watch the full video here.
That said, as I have posted further down, I think that Angus would make more money by seeing through Saltfleetby to the end rather than selling it for £14 million now. Once they have paid of the debt then at 10mmscf/d they would be generating a revenue of approx. £26 million per annum by 2023 of which the Angus’ share would be £13 million per annum. This is enough to fund many new projects and purchases and would have the advantage of being a recurring revenue rather than just a one-off windfall.
For some reason a bunch of the posts from earlier about the takeover rumours seem to have disappeared. It really irritates me when this happens. Clearly somebody complained about it which does lend credence to EchDeltas claims of groups of individuals who are not keen for the share price here to go up. I had previous ignored these accusations as nonsense but it is strange that someone has clearly complained about the speculation. Would anyone like to own up to it being them and explain their reasoning?
Anyway, regardless of whey they disappeared there were some interesting posts that were up there. So to discuss the hypotehetical situation where Angus were to be offered £14 million for their share of Saltfleetby then this would mean that the buyer was willing to pay £28 million plus £12 million debt.
At 10 mmscf/d we know that even with the hedge Saltfleetby would be generating £2.5 million per month and pre-hedge it would be generating £1.5 million per month at 5mmscf/d so this would mean that it would generate £20 million in 2021 alone and then another £26 million in 2022. So if a buyer were to purchase 100% of SFB for £40 million then it would take less than a 2 year payback even with the hedge in place which is perfectly workable.
Of course, if 100% of the asset was sold and the debt was paid back then it is entirely possible that the hedge would no longer be in place for the new owner. In this case they would be looking at generating over £60 million in 2021-2022 and that is at conservative oil prices.
I can see why a buyer would like the deal. Angus have done the hard slow work in getting Saltfleetby through to production. If somebody with deep pockets came in now and could get rid of the hedge then £40 million would be a cheap price to pay to get hold of it.
Balancedviewer – I agree with what you suggest and would far prefer that Angus held on to Saltfleetby as opposed to selling it. There is huge value in Saltfleetby and we would be far better in holding onto the asset and generating money out of it over the forthcoming few years than cashing in for £14 million now even if that did give them the required funding for Lidsey and geothermal projects.
By my calculations, even with the hedge still in place I would expect that Saltfleetby would generate between £17 million to £20 million by the end of 2022 dependent on whether they get first gas in April or June. This would obviously pay off all of the debt in 2022 alone and would mean that there would be a revenue of approx. £26 million per annum coming in of which Angus’ share would be £13 million per annum. This is enough to fund Lidsey and geothermal easily, even if it delays both by a year or so.
However, the important thing about this rumour IMO is (if it is true) is that it shows the value that others in the industry place on Saltfleetby. There are many on these boards who want us to think that it is not going to work but then there are others out there who would spend £40 million on it in order to make even more money. It just confirms everything that I have been saying during these last few months and shows how valuable Saltfleetby is going to be.
Tom Winnifrith has posted this tweet earlier today:
https://twitter.com/TomWinnifrith/status/1464211264624893959
Does anyone pay for share prophets and could tell me what the full article says?
I'm sorry for the typo in the previous thread title.
Tom Winnifrith has posted this tweet earlier today:
https://twitter.com/TomWinnifrith/status/1464211264624893959
Does anyone pay for share prophets and could tell me what the full article says?
It’s possible that any one of them could be the con artist isn't it?
NHNL could not have any rights to OML141 and have conned KONH into paying them some money into buying a share of these non-existent rights. They definitely wouldn’t be the first Nigerian fraudsters.
KOHN could have lied about being the parent company of NHNL (and by Nigerian law they could not) and could then conned ADM into paying them for 51% of a company that does not have any rights to OML141. We also definitely know that they received cash and shares from ADM.
ADM could have known that they held no legal stake in OML141 and conned investors like monecor in the last fundraising, but then ADM were the ones who handed over the money to another entity so in the classic con-circumstance ADM look like the victim.
I know what I think and IMO the key to all of this is the question of the subsidiary that was not legally allowed to exist and the fact that KONH were the ones who received the money.
But it could all be a simple and straightforward business disagreement. None of us know the truth and all of us can just come up with theories. In the end the truth will out, but who knows how long that will take.
My gut feeling, for what it is worth, is that ADM's takeover of KONH was legitimate and NHNL do legitimately have the Risk Sharing Agreement for Barracuda.
Where I think that there is an issue is that KONH may never have had any rights or contract with NHNL. After all, ADM announced that NHNL was a subsidiary of KONH when this is not legally possible under Nigerian law.
What seems most likely to me is that ADM did not do proper due diligence on KONH before they bought 51% of the company and it has now turned out that KONH have no rights to NHNL. Like I said before the key red flag is the labelling of NHNL as a subsidiary of a UK company when this would not be allowed under Nigerian law.
Obviously, these are only my suppositions on this and I have no definitive way of knowing but it feels like the case.
No earlybird Osamede was only appointed as a director of KONH on April 13th 2021 which was at the same time the transaction was completed. All the details can be seen here: https://find-and-update.company-information.service.gov.uk/company/13213236/officers but there is nothing untoward about this at all. It would have been unusual for him not to have been appointed a director after ADM had just bought 51% of the company.
There is a lot that appears to be "unusual" about a number of these transactions but from everything I can see the takeover of KONH by ADM was perfectly legitimate and above board.
Dan, it strikes me that if there is any scam going on it is between KOHN and ADM or KOHN and NHNL.
The company that ADM have paid money to is KOHN, so the people behind that entity have come out wealthier to the tune of $250,000 in cash and $550,000 in ADM shares.
KOHN have been the ones who have said that NNHL are a subsidiary of KOHN (as per ADM’s announcement on March 23rd 2021) and this is the key element that makes things suspicious.
1) NHNL claimed on its previous website to be a 100% Nigerian owned company.
2) K.O.N.H. UK Limited is a UK limited company whose details can be found on companies house and of whom Osamede Okhomina is a director.
3) NHNL claim on their current website that the are no longer in business with KOHN.
4) ADM claimed when doing the original Barracuda deal that NHNL is a subsidiary of KONH (as per ADM’s announcement on March 23rd 2021).
5) According to Investopedia a subsidiary is a company that has more than 50% of it’s shares owned by a parent company.
6) Under Nigerian law, companies that are operating in the oil and gas industry must have 51% of their shares owned by Nigerians.
So the big red flag issue here is that K.O.N.H. UK Limited has said that NNHL is a subsidiary when this is not legally possible. The claim that “KONH holds, through its subsidiary Noble Hill - Network Limited ("NHNL"), a 70% indirect interest in the rights, benefits and obligations under the RSA relating to the Barracuda area of OML 141” also does not seem possible because NHNL is not legally allowed to be a subsidiary of a UK company and it is not possible for KONH to own 70% in the rights of any Nigerian oil company due to the 49% rule.
The issue looks to me like a problem whereby ADM have bought into KONH believing that it has rights to OML141 via NHNL, only for it to turn out that this is not the case. Luckily, the $550,000 shares that were issued to Calabar Capital Limited (a company that have two directors in common with K.O.N.H. UK Limited ) have been locked-up until April 2022 so if there has been any misrepresentation going on then it should be possible to recover them .
Obviously, my suppositions here could be wrong and the issue could be wholly the fault with NHNL. However, it is the word “subsidiary” that seems to make everything fall apart. It has a very specific meaning and it is a meaning that is to possible to be applied to KONH and NHNL under Nigreian law.
The only bad point about the whole situation post-RNS is that since ADM did not ever have any direct exchange of money with NHNL then they are reliant on KOHN's contract with NHNL being watertight. As Dan said earlier ADM's interest in NHNL is indirect and therefore not directly in their control. This does lead to the potentially worrying possibility, as suggested by tresha99 that ADM have been duped into paying for a stake in KOHN in order to acquire an interest in NHNL. KOHN do seem like an unnecessary middleman. Why did they not negotiate directly with NHNL like Zenith Energy have claimed that they are doing?
But I will repeat what I said in my last post - although today's announcement has raised a number of questionst he company has at least now communicated with shareholders and to this end we are all better off today than we were yesterday. It is just a shame that it took aim regulation to force them to let shareholders know that their was a dispute about the asset ownership going on.
It seems that all of the emails to aim regulation may finally have had an effect as AMD have finally released an RNS and weirdly enough I see the content as being the first bit of positive news that I have seen in a while regarding Barracuda.
Although the company have now admitted that there is a disagreement between themselves and NHNL, a company that they previously described as a subsidiary of KOHN, then at least they have said that the dispute is without merit and that they still own their interest in NHNL.
Disputes happen, they are relatively normal in business and they usually get sorted out one way or another so I would say that there is probably a decent chance that ADM can now hold onto their share of OML141 if they can fight it in court. The company is certainly in a much better position than they were yesterday morning.
It is amazing how much difference a bit of communication makes. Obviously there are still questions to answer and Spikeyj raises a few of them below but in the circumstances today has actually been a good day. If only they had done this a few months ago.
WG818
To deal with your questions one by one:
1. What happens if gas prices fall to more historic levels?
It would have a huge impact on the additional profitability of the field but It really doesn’t impact on Saltfleetby’s ability to pay it’s own way. The hedged values are lower than historic gas price levels and even if Saltfleetby only produces the amount of gas that it needs to hedge it would still produce £19 million by December 2024 which is more than enough to cover the loan that needs to be repaid.
2. What happens if the sidetrack fails?
Again, it would have a huge impact on the additional profitability of the field, but considering that the company have made it clear that the field will produce in excess of 5mmscf/d even without the sidetrack it should not materially affect anything else and should deliver the same value as in answer 1.
3. What if Saltfleetby is not producing by April?
It doesn’t matter at all. Nor if it is not producing by May or June. As long as it is producing by July and can meet the hedge
4. What happens if Saltfleetby only manage to produce 4mmscf/d?
In this instance then the company would have major problems. It would not be able to pay its debts and the project would fail. But, as I have said before, Saltfleetby has always produced a minimum of 5mmscf/d when the equipment on the site was properly working. If you look at the OGA figures you will see that this is the case in 2014, 2015, 2016 and the only reason that it was not the case in 2017 is because the equipment was not working.
The trouble is that you create a situation where everything that can go wrong does go wrong and then you present this as what is likely to happen when in fact it is incredibly unlikely.
So for your disaster scenario to happen all of the below would have to occur.
1. Gas prices would have to fall back to historic lows.
2. The company would have to fail to produce any gas at all until July.
3. The sidetrack would have to fail completely.
4. All of the industry experts on both the Angus and Alephas well as the historical OGA figures would have to be wrong and the field would have to only generate 4mmscf/d as you suggested.
This is a lot to go wrong. Could it happen? Yes, of course it is possible. But it is also possible that Manchester City could get relegated at the end of this season if they fail to win any further games. It is highly unlikely though.
I will grant you that my last post should have said “in my opinion the gas will definitely be flowing by April” though.
HITS, I agree with you on the fact that the total repayments on the loan is approx. £15 million to be repaid in full by December 2024. Personally I assume that the first repayment would not happen until July 2022 as that is when the hedge kicks in and also when the company would have to be producing money, but a month is neither here nor there when it comes to this kind of money.
Assuming that the repayments started in July 2022 then this gives is 30 months of payments to clear the £15 million debt. Conveniently, this works out at £500k per month and by my calculations, even without the sidetrack being drilled and just with existing production and factoring in the hedge, then they company would still make an average of £750k per month by December 2023 which comfortably beats the minimum requirements to service the loan.
I get what you are saying that the market as a whole appears to contain more sceptics than believers but I think that this situation will change dramatically once gas production and revenue actually starts to come it. One very important aspect to remember is that Angus were able to raise £12 million in debt to finance Saltfleetby and debt financiers have a much lower risk threshold than equity investors so the proposal must have been compelling. I also simply think that Angus would not have been stupid enough to agree terms or hedge targets that they couldn’t comfortably achieve – as they simply didn’t have to.
As you rightly say, we won’t know which of us is right until the time comes, but although I agree that there is little likelihood of first gas in February or even March, I don’t think that this matters. The gas will definitely be flowing by April and then Angus will be showing that they have made Saltfleetby work and there is a much brighter future ahead for both the company and the share price.
We wait, debate and eventually see.
Ginsky - Yes someone did say that they signed a contract with the goverment - you did. These are your words:
"They signed a contract to develop barricuda even passed by the government. Do you think contracts can be terminated on a whim ? especially ones given by government approval."
Even your latest comment is nonsense, there was no need of any Nigerian government approval for ADM to purchase shares in KOHN UK Ltd as it was a transaction between two UK companies. I am happy to be proved wrong if you can provide any evidence of Nigerian governmental approval being delivered for any of ADM's Barracuda transactions though.
Tresha99 - no I am not MarketGunslinger or RobertSham. I am an investor in ADM who sold out for a loss last month after months of trying to get the company to reply to my emails about what was going on. All I want to do is to get ADM to issue an announcement to clear up what is happening with OML141. If it turns out that ADM still own Barracuda and the NHNL website is a hack/fake then I will potentially buy back in. However, if that was the case then why did the company not simply announce this is what had happened. In this case, unfortunately, I think that the company’s silence speaks volumes.
But we have done this point to death again and again. The company are expecting that the existing two wells will produce in excess of 5mmscf/d as they told us this in the Q&A questions that I asked them.
Logically, they are clearly expecting 6mmscf/d as this would allow them to service the highest amount of the hedge (5.38mmscf/d in Jan-March 2023) with a bit of wriggle-room left over. You have to remember that they negotiated the hedged amount of gas and so it was always going to be an amount that they felt comfortable to deliver. If they were not very confident that they would deliver in significant excess of 5.38mmscf/d then they would simply have negotiated a smaller amount. The average value of the hedge over the entire duration of the period is only 4.4mmscf/d so it would have been easy to just make it that – however, they were confident enough to make it higher.
Also, the company are planning on drilling the sidetrack which they believe in the worst case will deliver 7mmscf/d and in the probable case will deliver 10mmscf/d.
In the “worst” 7mmscf/d post-sidetrack circumstance then the fixed gross monthly revenue between Oct 22 and March 23 is £1.5 million. Although the hedge price does fall to £0.3775 in Q2 2023 this equates to £620k per month and with a production of 7mmscf/d it works out at a total value of £1.2 million per month.
In the “probable” 10mmscf/d post-sidetrack circumstance then the fixed gross monthly revenue between Oct 22 and March 23 is £2.3 million and in Q2 2023 although the hedge value is only £620k per month the gross value is still £2million per month.
My point is that you only ever mention the worst possible circumstances and even in these you acknowledge that the Saltfleetby is making at least £520k per month which is more than enough to cover its debt obligations. In anything other than the wort circumstances then the company makes money hand over fist.
It is not just about the over-simplistic “how much gas and by when”. We know that enough gas will be delivered prior to the dates it is needed even in the worst case scenario. What really matters is how much gas over the minimum requirement will be delivered and therefore how much money will be delivered to the company to pay off the debt and how quickly.
As I said before, the company CPR has £9 million of debt paid off in 2022 (see page 53) which shows how confident they are that the gas numbers will be high.
HITTS - I am sure that you are correct but where did you get the details that Angus have to start paying back the loan in June from as I have looked in the CPR and cannot see this.
Also, you say that Angus need to pay a "fairly hefty chunk" of money. What is this in actual numbers? Have you seen some figures somewhere or is it just an estimate? If it is an estimate then that is absolutely fine (we all have to estimate things) but it would be interesting to know what your estimate is so I can put it into my figures and we can play around with the numbers to see what difference the different amounts make. Obviously, if you have it as a factual number then that is even better.
Ocelot is correct Yanis - the difference in pricing is to do with the hedge.
ie. July 2022 Angus produce 5mmscf/d with 3.38 hedged at $0.414 and the rest for sale at the ICE summer forward price of £1.0575. his would generate £437,000 from the hedged 3.38mmscf/d and £535,000 from the 1.62mmscf/d that couls be sold at market price.
If Angus produced 10mmscf/d in July 2022 then they would still generate £437,000 from the hedged 3.38mmscf/d but they would generate £2.2 million from selling the unhedged 6.62mmscf/d at the unhedged market price.
I do not personally think that Saltfleetby will be producing from February and I certainly think that there is no realistic chance that it will generate £10 million between February and June.
I make the point that the company could make £10 million + between February and July to counter the fear-mongering that they will not have any money to make loan repayments in June or enough gas to satisfy the hedge in July. The company have plenty of time to generate gas and money in order to satisfy their commitments and, as has been pointed out on many occasions, these commitments are pretty conservative anyway.
My point is that.
1. It does not matter whether or not Salfleetby is producing in February. As long as it is producing by June then the company will be able to meet their financial commitments for the loan.
2. Saltfleetby has always produced a minimum of 5mmscf/d when the equipment on the site was properly working. If you look at the OGA figures you will see that this is the case in 2014, 2015, 2016 and the only reason that it was not the case in 2017 is because the equipment was not working.
The company seem to strongly believe that the will get from natural flows in excess of 5mmscf/d (so a minimum of 6 to satisfy the hedge) and with the extra pressure that will have built up over the 5 year shut in period it is perfectly possible that they can get 7mmscf/d . But again, they don’t need it.
Secondly, as has been pointed out here, Angus intend to drill the sidetrack first. This seems a perfectly sensible proposition to me as being able to produce between 7-10mmscf/d is obviously financially better than producing between 5-7mmscf/d.
As I have said many times before it is is clearly NOT necessary to drill the sidetrack to provide sufficient production to make the loan repayments and meet the hedge requirements but obviously if it generates more money then it would be foolish not to do it. And it does generate more money. Production at 6mmscf/d generates £6.25 million in revenue between July and December but 10mmscf/d generates £14 million. The main reason for this increase is that the additional gas is obviously unhedged and so can be sold at market rates in an era of exceptionally high gas prices.
It is not just about how much gas and by when – it is about how much gas over the minimum requirement will be delivered and therefore how much money will be delivered to the company to pay off the debt. I will repeat here what I mentioned last night: page 53 of the company’s CPR shows them paying off £9 million worth of debt in 2022 alone – so those in the know are confident.
Ginsky, that is total nonsense. ADM have never signed a contract with the Nigerian government. All they have done was to pay $250,000 in cash and $550,000 in shares to KOHN UK Ltd to acquire 51% of their share capital. This meant that they were effectively acquiring KOHN’s subsidiary Noble Hill Network Ltd which was the entity that owned the Risk Sharing Agreement for the field.
However as we have seen last week it transpires that NHNL do not believe that they are a subsidiary of KOHN Ltd and in fact says that they have had no business relationship with this entity since they rejected their proposal on August 27th 2021. They even go as far as to say that they have issued cease and desist letters to KOHN to prevent them from claiming “all statements of Ownership in NHNL or participation in the NW OML 141 RSC”.
So at the moment it appears that ADM have invested in a business that has no rights to Barracuda whatsoever and that they have known this (as the 51% owner of KOHN) since August 27th 2021. If this is true then ADM have been misleading the market when they published their annual report and when they raised their recent funding.
Of course, all of this could be utter nonsense from the NHNL website. As has been suggested on here, it could have been hacked or it could be a legal dispute. However, in any of these situations the matter could have been cleared up (or at least clarified) by an announcement from ADM explaining their point of view but there has not been one. This is why I think that the company is misleading the market. Don’t forget that another AIM company, Zenith Energy, have also said that they are in exclusive negotiations with NHNL over the rights to NWOML141 even though ADM has told the market that NHNL is a subsidiary of KOHN.
All I want the company to do is issue an announcement telling us the truth about what is going on. This should be simple. The fact that they have not done it is what makes me very suspicious and is why I have complained about the company to their nomad and the company and their nomad to aim regulation.
Aim regulation’s email address is: aimregulation@lseg.com if anyone else wants to complain about this silence too.
Ginsky - no I didn't.
I do not believe that there has been any such short attack on the company. The first time I have even seen it mentioned is in your last post. However, even if it did exist then it would pale into insignificance compared to the fact that until they issue an announcement to the contrary, it looks like ADM have been misleading the market about their interest in OML141 both on their website; in their annual report and during their recent fundraising.
They need to clarify the situation with OML141. Everything else is just noise.