Member Info for Peterashbeck

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.

So people now expect us to be worried about the well not producing by June. It is once again the creation of a straw man argument. Yes, of course it is possible that the company will not be in production in June 2022 and will fail to produce any revenue to service the debt and will have to return to the market to raise equity to service this, but the risk of this is infinitesimally small. In fact, it is more likely that the company will have generated enough money to pay off almost all of the debt by June than it is that they will not have any money to pay the first instalment.

As we all know, Angus is targeting production of first gas to be in February 2022 and so this gives the company a quarter of a year window of delay before the lack of gas becomes an issue in terms of paying off any debt payments due. Personally, I have not seem any specific information in the CPR to show how much money Angus need to pay as their first debt repayment but using the ICE forward prices and a conservative production estimate of 5mmscf/d then it is perfectly possible that if the company started production on the 1st February that they could generate:

February with 5mmscf/d at £2.2675 / therm = £3.3 million
March with 5mmscf/d at £1.9775 / therm = £2.9 million
April with 5mmscf/d at £1.0800 / therm = £1.5million
May with 5mmscf/d at £1.0800 / therm = £1.5 million
June with 5mmscf/d at £1.0800 / therm = £15 million

This would give a profit of £10 million + and pay off almost all of the debt by the end of June.
Of course, this will not happen, but it is more likely than them producing no gas by June 1st. I merely cite the example to show how ridiculous the straw man argument is.

Whatever way you break things up the company is going to be earning in excess of £500,000 per month every month even if it only produces 5mmscf/d; even after the hedge comes in and even if they do not drill a sidetrack. So these scare stories that Angus may not be able to pay off the debt are absolutely ludicrous. Interestingly, if you look at page 53 of the current CPR you see that the company’s own projections show a cash flow forecast with them paying off £9 million of debt in 2022.

The “what if they are not producing by June” argument is absolute nonsense. It is just about still possible, but frankly it is more likely that Newcastle United can still win the 2021-2022 Premier League title than it is that Angus will not be producing gas by June.

Dan, I absolutely agree that ADM need to go through the proper channels rather than replying to individual emails from shareholders but this is what I have been asking them to do for months. All that I want them to do is to make an announcement clarifying their position as to what is going on.

The reason that I have complained about them and their nomad to aim regulation is precisely because they have not made any announcement about this entire mess. When NHNL (a company that ADM claimed in their 23rd March RNS was a subsidiary of KOHN) has now gone public and announced that they are unconnected with KOHN and 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” then there is clearly an massive problem.

However, with the lack of response from ADM, the issue has become even bigger. Whether NHNL are telling the truth or not is not even the issue any more. It is the silence from ADM that has become the problem. NHNL have made a claim that materially effects the ADM share price as (if true) it would mean that ADM no longer owns any of its biggest asset and so ADM should absolutely address it with a formal announcement even if it only to say that this is all lies. Also, the Nomad should have forced them to do this.

The fact that there has been no announcement from ADM does, as I have said on numerous occasions before, make me 100% convinced that they have lost the asset but this is of secondary importance. The key issue now is that they are so contemptuous of shareholders that they can’t even be bothered to let us know about what is going on.

If (and note that I said if) they have been lying about their rights to OML141 in the annual report and lying about their rights to OML141 during the recent fundraise then this is a huge market abuse. This is why I have reported them to aim regulation. All of this could be cleared up with a single RNS but they haven’t announced anything. Why? And why have the Nomad let them get away with it?

Well they have been reported by three different people on this board alone now so hopefully we will get to the bottom of it sooner rather than later. But I don’t think that the truth is going to be pretty.

I have had a similar response to you and it does not seem automated so maybe this is a good sign that they are looking into it. I have not received any response from the Nomad. Did you copy in the Nomad on your email?

If we have both had a response from aim regulation then maybe it will help if others report this situation too.

PART 2 OF EMAIL

Regardless of who is telling the truth in this situation it is clearly necessary for to release a statement clarifying their own position on this matter in order to clarify what is going on. They have claimed ownership of the NWOML141 asset: on their website, in their annual report and (presumably) in last week’s (15/11/2021) fundraise. If they have known all along that these rights have been rescinded then this is a clear case of market abuse. If their NOMAD Cairn Financial have not done anything to sort out this situation then it raises the question as to whether they are the correct organisation to carry out the NOMAD role.

Please can you ensure that an announcement is made to the market immediately to clear up the mess that the dispute over the asset ownership is causing as it is private investors who are (as usual) being most damaged by this lack of transparency.

Yours sincerely,

Peterashbeck

Let's see if we get any more information this time. I am not going to give up...

I have now reported both the company and the Nomad to aim regulation in the hope of forcing them to make an announcement. Email below:

Dear Sirs,

I am writing to you to urgently request that you carry out your duty as Energy’s NOMAD and require the company to issue an announcement to investors explaining what is happening with the OMNL141 asset. I have also sent a copy of this email to AIM regulations as I believe that Cairn Financial Advisors are currently being negligent in their regulatory duties to ADM and its shareholders.

I have written a number of times before to both Cairn Energy and ADM requesting that they issue clarification on whether the company still retains it’s investment in OML141. The question was brought about when Zenith Energy announced on August 31st 2021 that they had signed an exclusivity agreement with Noble Hill-Network Limited who own the Risk Service Contract for the NW OML141 asset.

I have not had any satisfactory reply to these emails.

The situation took an additional turn last week when Noble Hill-Network Limited updated their website and announced that they received a proposal from KOHN- Energy about the development of NW OML141 on April 28th 2021. They also make it clear that on August 17th 2021 that NHNL rejected this proposal and declined to participate “due to lack of funding and misrepresentations. Further to this the legal Counsel notified K.O.N.H. to Cease and Desist all statements of Ownership in NHNL or participation in the NW OML 141 RSC. Further to this the legal Counsel notified K.O.N.H. to Cease and Desist all statements of Ownership in NHNL or participation in the NW OML 141 RSC”.

So we now have a situation where there are three different claims on who has the rights to the NWOML141 asset and two of them state that it is not ADM.

1. ’s website claiming that they still have an interest in this asset as of today. https://energyplc.com/operations/barracuda-field/
2. Zenith Energy’s official announcement claiming that they in exclusive negotiations for NW0OML141 since August 31st 2021: https://polaris.brighterir.com/public/zenith_energy/news/rns/story/xoz83mw
3. The NHNL website claiming that have been informed (via their 51% ownership of KOHN) on August 27th 2021 that they have no rights to this and have been told to cease and desist in all statements of ownership. http://www.noblehillnetwork.com/

The ceiling and the floor are exactly the same thing, it just depends on which side of the price you are currently standing. Crash through the floor and it becomes a ceiling - but 1.5p is a floor at the moment.

I think that the company has clearly decided to keep quiet about the loss of Barracuda on the basis that saying nothing and having investors assume that you have been lying to the market is better than saying something and having to admit it. At some stage it will be clear though and this is when the share price will take a real knock as, despite what has been said on here, the real value to the share price here was in he potential of Barracuda and not AJE.

It must also be clear to everyone that the lack of any news coming from the company about Barracuda means that it has definitely gone as it would have been such a simple matter to clear up in RNS. I assume that nobody here actually thinks that we still have any rights to Barracuda or OML141?

Saltfleetby does have a time-critical element in terms of delivering sufficient revenues to meet debt financing costs, but as we have discussed plentifully on this board these timescales are very conservative

To recap

Angus only HAS to start delivering gas by July 2022 when it is contracted to deliver 3.38mmscf/d for the hedge. Since the company expect the field to produce 7mmscf/d with the additional pressure from the well being locked-in then this should be simple. Even if there is no additional pressure then according to the OGA figures the well will still deliver 6mmscf/d. This will create a revenue of £1 million per month after operating costs. Once a successful sidetrack is delivered then production should increase to 10mmscf/d and revenue of £2.2 million per month.

We know from the 26th October RNS that the company are planning to deliver first gas in March and we have had no updates to say that the sidetrack should be delayed. However, in case there are any delays in this then there is a three-month margin for error on first gas production (to when the gas needs to be delivered for the hedge) and as I have already mentioned the hedge can be met without the sidetrack at 6mmscf/d. When you add in the fact that the sidetrack can be drilled without affecting production then there really are not any major issues.

Therefore the time critical element of this whole project is merely to get first gas delivered by July 1st. Since it is currently budgeted to happen on March 15th (as per 26th Oct RNS) this gives 3.5 months leeway for things to be delayed before there are any issues. It is also worth mentioning that this “time critical” date is three quarters of a year away. Hardly something to get too panicked about IMO.

Dan - I agree that the Zenith RNS does not confirm that we are out so far - though I note from reading the Zenith forum on this website that is a recent investors call the CEO was asked:

"Can you clarify the Nigeria announcement. There is speculation about the ownership of this asset. Is there any comment you can make?"
He then apparently replied that "I can only say to investors that we have never made imprecise descriptions of our situation regarding acquisitions. We have declared that OML141 NW is the object of our exclusivity agreement. The fact that this is exclusive means that nobody ekse is there and I have nothing else to add."

So I ) do think that ADM and Zenith are both talking about the same asset and I do not think that Zenith are talking about a partnership the way their CEO refers to exclusivity meaning that nobody else is there. However, but I agree that we probably have to wait for the next RNS from Zenith to be sure of this 100%. I would love to think that ADM may inform shareholders themselves but after my experiences over the last few months I rather doubt that they will.

I may have to do some investigations into whether Zenith are an investable company if they do acquire Barracuda as the license is likely to be incredibly valuable if it is run by somebody who actually has the money to finance the wells. It is just a damned shame that it could not have been us and that I (we) had to find out the hard way what a bunch of duplicitous people appear to be running this company.

Nobody has responded to my emails either from the company or the broker.

The fact that there has been no RNS released even to say that they are looking into things speaks volumes in my opinion. ,

The first official news we are likely to get is ironically going to be an RNS from Zenith on November 30th where they announce that they now own an asset that we were assured belonged to ADM.

Absolutely ridiculous.

I agree that the NHNL website is a bit unusual, but I have emailed ADM and their Nomad and asked them to release an RNS with clarification at 12.30 today so they do know about this:

1) If the NHNL website has been hacked, this is all fake and NHNL is still a subsidiary of KOHN which ADM own 51% of then ADM should release an RNS saying this is the case.

2) If the NHNL website is legitimate then ADM should release an RNS explaining why they have misled the market for the last three months including through the recent fundraising.

Whatever happens there should be an RNS. The fact that nothing has been released seems very dodgy to me. I have been emailing them for months with questions about OML141. The few times they replied they were evasive and when I asked direct questions they stopped responding. I believe that they have indeed lost all claim to OML141 and anyone beliveing different is just clutching at straws - but we need clarification either way.

Has anybody else emailed the company? Have they replied to you?

“And they borrowed £ 12million - which has to be repaid - which leaves £ 7 mm to cover their G&A costs over 2 years - it sort of disappears before your eyes doesn't it?”

The figures that I quoted are after operational expenses. So I guess another way of putting it is that in the event that the sidetrack is unsuccessful and there is no additional pressure in the well then they will still pay off the £12 million in 18 months and have generated £3.5 million in profit plus whatever they can generate before the July hedge kicks in which would be 51% of between £5 million and £7.5 million dependent on whether they start producing gas in April or May. This means paying off all debts and generating approx £6 million in revenue over 18 months in the low -case scenario. I don’t think that is bad going myself, especially as we also have the potential upside of the best case scenario. Under this, with a successful sidetrack , they would pay off all debt and bank £16 million in revenues over 18 months; let alone what they make over the subsequent years.