Member Info for Peterashbeck

Well, the accounts make abysmal reading. Administrative expenses going up by over 50% on 2019 when at the same time income is dropping down to 33% of 2019 is a total joke. I don’t really care about the impairment as this always skews the figures but even if you remove the impairment then losses have nearly doubled from £1.6m in 2019 to £2.9m in 2020 and £900k of that is administrative expenses which the company have control of. Frankly in the covid period the administrative expenses should be going down not up. The fact that they are not just shows how little the company cares for shareholder’s funds.

Given that the cash burn (without impairment) is slightly more than £200k per month and they only had cash of £30k plus the equity fundraising of £1.2 million (from March 2021) then frankly it is an absolute shock that they did not run out of money in June. There is definitely a placing round the corner, but the fact that we are in September and have not run of money does seem to indicate that the company do seem to have more of a handle on expenses in 2021.

However, the massive relief to me, as will surprise absolutely nobody who reads these boards regularly, is that the accounts do confirm the fact that we do still own the rights to Barracuda via our 51% share in KONH. From the company’s evasive answers to my emails I was genuinely worried that we did not and that they company had been misleading us all, but thankfully this is not the case.

Barracuda is the only reason for investing in ADM IMO and it is easily the most valuable asset that we own. As long as we have this on boards and management can get a grip on the out of control administrative expenses then ADM still has a chance of delivering decent returns for investors in the future.

This company never makes anything easy. I was also expecting a 7am RNS this morning delivering the accounts and confirmation of all that I talked about yesterday.

I do realise that we have the rest of the day to make the announcement but once again I am uncomfortable about the lack of information - and the time from a regulatory point of view. A suspension for ADM would be a disaster and it would also indicate that my initial concerns about Barracuda were warranted.

Come on, just publish the accounts already and put me out of my misery!

Just to keep you all updated, I have not heard anything back from NHNL by email confirming or denying that they are a subsidiary of KOHN, so that still leaves me completely in the dark. However, I did email the company auditor with the same request on Monday so hopefully everything will be clarified in the accounts when they come out tomorrow.

Although I have been very unimpressed by the terrible corporate comms on this matter (though it was probably wishful thinking to even consider that corporate comms would be a priority for ADM) I am happy that it would appear that my worries were unfounded and ADM do still own their share of the rights to Barracuda and the rest of OML141.

There is no way that ADM could put out annual accounts reflecting their ownership of this asset if the ownership was not true and they would have had to release an RNS reflecting any change in ownership this morning before the accounts come out tomorrow. The lack on any RNS notifying of a change leads me to believe that our Barracuda ownership will be reflected in tomorrow’s accounts and therefore it must be safe. Obviously we will only get confirmation of this when the accounts are released tomorrow but I think that it is 99.9% certain that OML141 will be there.

I am sorry if my posts have confused anybody but I have been deeply concerned that we were going to lose the only asset of any significant value that we own and this would see my investment go up in smoke. The worst part is that the company could have cleared this up in a two minute email but they just chose not to. If they engaged with corporate comms in a less ham-fisted manner then I am sure the potential of Barracuda and the rest of ONL141 would be more accurately reflected in our share price.

Although I have modelled Saltfleetby extensively, I have to say that that while I believe it is going to deliver millions in revenues to Angus in the short and medium term and will clearly drive the share price up and deliver ongoing cash flow for decades, I actually think that what has much more interesting potential for massive future growth is the geothermal side of the business. Cash income of £15-20 million per year is absolutely fantastic for the company but it is not necessarily life-changing for investors. The geothermal on the other hand could really make the share price increase exponentially.

Obviously there are no companies that are really doing completed geothermal in the UK at the moment but it is a market that has been taking off in the US over the last couple of years and the returns look like they could be company making. The really interesting part of it is if you put together “exploration” geothermal funded by debt and with the debt serviced by the gas revenue from Saltfleetby then Angus has the potential to budget for very significant development investment into this area. It should also be easy to get funding in the many tens of millions for this when they have proven cash-flow to service the debt. Also, I am pretty sure that there will be significant government grants in this area too as we are all pushed down Boris Johnson’s environmental pathway.

Anyway, that is where I think that Angus’ future could really lie and I think that Saltfleetby is just a stepping stone to the geothermal. Obviously, if any other Saltfleetby-like opportunities come up that couls also deliver £15-20 million per annum then the company should seize them with open arms, but in my opinion the long term future is clearly geothermal. I have been doing some research into this area on companies in the US and I will share my findings on here when they are finished.

Nonetheless, all of these calculations are based on two big suppositions. Firstly that the hedge is 70% of production not 70% of volume and secondly that the time for the side-track is indeed 16 weeks – and I know that there are people on here who disagree with both of these assumptions.

While there is little point in modelling every variable in this equation at the moment we can definitely make some logical assumptions from the data that we already have.

The first assumption that I am willing to make is that 16 weeks must be pretty much the maximum amount of time that the side-track could take to complete. This means that if it takes less time than this then there will be more revenue for Angus than I have modelled so far, so the income will be greater than currently estimated.

The second assumption is that if the 70% of the hedge is volumetric and not total production then it is unlikely to be for the whole 10mmscf/d. If it was then that would mean that Angus had no choice but to do the side-track immediately but then they would still deliver approximately £15 million of revenue from Saltfleetby in 2022. However, if the hedge was based at a volume of 5mmscf/d or 7mmscf/d then there would be a massive upside for Angus. At 5mmscf/d then only 35% of total production would be hedged and 65% could be sold on the open market , while at 7mmscf/d only 50% of total production would be hedged and 50% could be sold on the open market. With the direction that gas prices are going this is likely to have a significant benefit to Angus.

So, in short, whatever way I look at this my financial model tells me that we would be looking at a minimum of £10-15 million income from Saltfleetby in 2022 even if the side-track took 16 weeks to complete and the hedge was a volumetric one of 70% of 10mmscf/d. If the side-track takes less time and the hedge is volumetric at less than 10mmscf/d then there would be a significant increase in revenue.

I think that this is a good start on a guide estimation of what Saltfleetby can bring into Angus as revenue in 2022 but in order to make the model more accurate I will be writing to this month’s Q&A session to see if we can get accurate figures on how long the side-track will take to complete and also how the hedge works – whether it is a volumetric or not and, if so, what the volume is based on.

I do not think that the issue with the side-track is anywhere near as important as some seem to think that it is. The key element is clearly to make as much money as possible over the course of the year, whether that is before or after the side-track. To try and get clarity on what this would mean I have modelled the revenue that

If Angus stopped production after June and only then carried out the work on the side-track then even if no gas production was possible while it was happening and it took the full 16 week timescale which has been claimed on these boards then I cannot see it as being a major issue.

The company would already have banked £8.6 million for the 4.5 months of production before they shut down – as per the figures that I put in my previous post.

If they stopped producing for July- October then they would presumably have to make good on the profits that the hedge provider would otherwise have made.

Working on the same costings from before where the gas price is 87.23p per therm then the company that provided the hedge would technically miss out on an income of 44.23p per therm during this period (the 87.23p sale price minus the 43p price guaranteed to Angus). This would mean that they missed out on approx. £750,000 per month in revenue for the four months that there was no production. This totals £3 million.

Since Angus had already made £8.6 million from production from February through to June then they would simply pay the hedge provider the £3 million out of the £8.6 million that they had already made and be £5.6 million up. Add in the fact that there would then be production for November and December at extremely high gas rates as well as 10mmscf/d production levels and they would probably be looking at a total of about £10 million for the year.

If Angus did the side-track immediately in February and only commenced gas production in June then they would have the advantage of producing 10mmscf/d after the side-track and would bank £2.8 million for June (before the hedge) and £1.8 million each month from July to October, totalling £10 million in revenue by the end of October. Add in the additional revenue for November and December at extremely high gas rates as well as 10mmscf/d production levels and they would probably be looking at a total of about £15 million for the year.

So actually by these calculations it would appear to be more advantageous for Angus to drill the side-track straight away as the extra revenue that would come in from 10mmscf/d production would counteract the fact that 70% of this production would only bring in 43p of income due to the hedge.

Obviously, this is all based on 5mmscf/d and the company have stated that production even without the sidetrack will exceed this. If it goes up to 7.5mmscf/d then the profit on site goes up to nearly £17 million between Feb-September and even if the naysayers are right and it goes down to 2.5mmscf/d then it still makes almost £6 million profit between Feb-September and there are still three months left of the year where the gas price is likely to go back up to where it is today and increase profits significantly.

The key point of all of this really is that whatever figures you use (high or low) we are all simply arguing about how much money Saltfleetby will make and how quickly. This is not exploration where we might not find anything or first production where the reservoir might not flow – we know the gas is there and we know it is going to come out. It is just a case of how quickly it comes and what the gas price is.

If I had to guess personally then I would go for the middle figure of 5mmscf/d but that is just because it seems sensible to me to go for something average and hope for a better upside – but even the “bad” production figures deliver the company a lot of money.

The absolute worst case production figures of 2.5mmscf/d deliver a profit of £8 million per annum (pro-rata and without putting any uplift on the winter 2022 prices).

The sensible production figures of 5mmscf/d deliver a profit of £12.5 million

The very high production figures of 7.5 mmscf/d (without sidetrack) deliver a profit of around £22 million.

As per the Competent Persons Report that Angus commissioned the company are due to produce 5 million scfs per day without having any need to drill a sidetrack. In the Q&A of the website they confirmed that it will exceed 5mmscf/d. I guess that this means it could be anything up to 7 or 8 to begin with but to keep things conservative we will stick with the 5 that both the company and the CPR have assured we will get. We will also assume a first gas date of February as Angus have stated in their 11th August RNS. Again, to be conservative we will say that this is half way through February and not February 1st.

5mmscf/d equates to 1.6 million therms per month.

The current prices for gas futures were updated the other day on www.theice.com

Feb 2022 – 189.02 pence per therm
March- 172.5 pence per therm
April – 100 pence per therm
May & June – 87.5 pence per therm

On this basis Angus will have

Feb 2022 – (half month) = 800,000 therms x 189.02 pence per therm = £ 1,512,160 income
March 2022 – 1.6 million x 172.5 pence per therm = £2,760,000 income
April 2022 - 1.6 million x 100 pence per therm = £1,600,000 income
May 2022 - 1.6 million x 87.5 pence per therm = £1,400,000 income
June 2022 - 1.6 million x 87.5 pence per therm = £1,400,000 income

Total for the 4.5 month period £8,672,160

After June the hedge will then kick in and the value to Angus of most of the production will decline significantly. The futures prices for July / Aug / Sept are set at 87.23 pence per therm currently and assuming that they stay this way then the revenue would look like this.

The gas allocated to the hedge would be 70% of 1.6 million therms = 1,120,000 therms
The gas that was free to sell to market would be 30% of 1.6 million therms = 480,000 therms

The revenue generated would be:

July-September 2022 – At 75p per therm the hedged 70% would generate £481,600 per month and the unhedged 30% would generate £418,704 per month. The total revenue over the three months would be £2.7 million.

If you look at the monthly operating costs, (that can be seen on page 47 of the CPR) the you can see that the annual opex for the fixed opex is £1.39 million and the G&A is £520,000 = £1.9 million. This gives a monthly opex of just £160,000. So in the 7.5 months that I have given figures for here the company will have generated £11.3 million in cash with total opex of £1.2 million giving a total profit on the site of £10.1 million.

This is even with the hedge in place, and without drilling the sidetrack. This means that when you include the end of next year and the annual winter uplift then Angus will have generated enough money to pay off the loan even without the sidetrack and even with the hedge in place.

Those responsible for the hedge would get the gas that they need to make profit and there would be plenty of cash to pay off the debts.

I very much disagree with those of you who have posted that things are ok here and the idea that the reply from ADM was written by "someone who confused themselves" is simply clutching at straws. I still maintain that the company are being deliberately misleading. They answered my original emails in a very evasive way and then when I asked them direct questions they simply stopped replying at all.

As I have said on numerous occasions here, I think that there is some real skullduggery going on behind the scenes here. I want to know why NHNL are described on their website as being "100% Nigerian owned" but are described in ADM's RNS as being a subsidiary of KOHN. I believe that the truth of the matter is that NHNL are NOT a subsidiary of ADM and this is why the company have not answered my question about the ownership of NHNL.

Anyway, I have today written to NHNL asking them if they are a subsidiary of KOHN. It is a simple question and I hope to get a straightforward answer. I will let you know if I receive one.

WG818 - I do not mean to be rude but it is clear from your post that you have no experience running a business as there is no way than anyone in any industry would do as you suggest. Angus are not going to stop production when gas prices are at their highest in order to drill a sidetrack that will mean that they come back online in summer when prices are much lower. By doing this they will lose money twice.

The obvious business decision is simply to produce from the existing gas while prices are high and then drill the sidetrack after the prices drop down again in summer. Basically the company will make as much money as they can while prices are high and worry about the sidetrack afterwards. Only an idiot would do otherwise.

As I said below - with gas prices as they are then as long as Angus can start production in mid February (as per the 11th August RNS) then they can make £15 million in revenues before the hedge even comes into play. This will pay off all of the debt less than 5 months after commencing production.

Saltfleetby is a goldmine.

I have been looking at the affect of today’s gas prices on Saltfleetby’s potential value this morning. For once, it makes very good reading whatever way you look at it. I’ll come back in more detail later but my quick calculations based on the ICE gas futures average price of 183.6p for Q2 2022 say that Angus can potentially deliver £15 million in clear profit between February and June 2022 assuming that they are able to get to first gas by halfway through February.

This may sound crazy, but you need to remember that , the CPR price per therm was estimated to be 39p and it is now looking like it will be almost five times higher than that when we commence production.

Dan - No, this is not a standard reply at all. All they would have to do is confirm that “as per the RNS of March 23rd NHNL is a wholly owned subsidiary of KOHN which is majority owned by ADM. Under no circumstances would we allow our subsidiary to enter into negotiations with another company that would in any way affect our holding in the RSA”.

However, they have not done this. They have just avoided answering the questions on the basis that they know nothing about Zeniths negotiations with their own subsidiary.

They have still not replied to my follow up email.

This stinks.

We are going to lose Barracuda and any claim we have to any of the rest of OML141. Mark my words…

I was extremely unhappy wit the last reply as I cannot believe that ADM as the 51% owner of KOHN would not have an idea about the negotiations that their own subsidiary is carry out with a rival AIM listed company. Something is very fishy here.

I have sent them back the following email:

Dear Sir,

Thank you for your reply. However, I am confused as to how you cannot be a party to Zenith's discussions with NHNL. You have stated a number of times in your RNS releases and in your emails to me that NHNL is a subsidiary of KOHN UK Ltd. Since ADM has been announced as owning 51% of KOHN then it is your own subsidiary that Zenith are negotiating with.

How on earth can you be allowing NHNL to negotiate with Zenith without your knowledge if you are the the majority owner of the company via your stake in KOHN? Surely as company owners you could revoke this exclusivity deal in a second if you were not happy with it?

With this in mind, please could you have another go at answering my questions?

1. Can you confirm that in the event of any sale of the RSC to Zenith Energy AMD Energy will still maintain their 70% indirect interest in the rights, benefits and obligations under the RSA relating to the Barracuda area of OML 141?
2. Can you confirm that it is the KONH UK Ltd subsidiary of NHNL (the company who own 100% of the RSC) that Zenith are in negotiations with?
3. At what point and under what transaction did NHNL end up being a subsidiary of KONH UK Ltd as it’s website still maintains that it is 100% Nigerian owned
4. please could you confirm what percentage of ownership KOHN UK Ltd has in NHNL?

Kind Regards,

xxxx

I will let you all know as and when I hear a response from my latest email. However, my concerns have been increased rather than decreased by the correspondence I have had. I am every more convinced that we are about to lose all of our Nigerian assets.

Please would somebody else also email the company and see if you can get any more clarity than I have received please?

I have now written to the company a number of times by email. In the first email I said
“As an investor in ADM Energy, I am extremely concerned that Zenith Energy is claiming that they have an exclusivity agreement to purchase an asset that ADM have previously informed the market that they own. Both of these announcements cannot be correct and I think that it is important for ADM to issue an RNS clarifying what is happening.”

I got the following response:
“Thank you for your enquiry. To clarify matters the Zenith Energy announcement with Nobile Hill-Network Ltd (“NHNL”) does not conflict with our announcement. We are not ‘asset owners’ but we hold an indirect interest in the RSC by way of our interest in NHNL via K.O.N.H UK ltd as per our announcement on 28th April we have a “70% indirect interest in the rights, benefits and obligations under the RSA relating to the Barracuda area of OML 141”

I then replied with the following additional questions:
Can you confirm that in the event of any sale to the RSA to Zenith Energy AMD Energy will still maintain their 70% indirect interest in the rights, benefits and obligations under the RSA relating to the Barracuda area of OML 141?
Zenith Energy RNS stated that they were in negotiations “with Noble Hill-Network Limited ("NHNL"). Can you confirm that it is the KONH UK Ltd subsidiary that Zenith are in negotiations with?
I also have a query about KONH UK Ltd. Since this company was only set up on February 19th 2021 I am confused as to how the Nigerian company NHNL can be it’s subsidiary especially since NHNL describes itself as being “100% Nigerian owned”. Please could you advise me of how this is the case?
Also please could you confirm what percentage of ownership KOHN UK Ltd has in NHNL? We have already paid KOHN £575,000 for our 51% stake in them but it is very unclear as to exactly what this has bought us. Will the money be refundable if it turns out that there are issues?

I received the following reply:
In respect of your queries below, I hope you can appreciate that, as ADME is not party to Zenith’s discussions, we are unable to comment on the contents of their announcements in so far as it relates to their activities. We would suggest that you contact Zenith directly should you need further information on any statements they have made.

AGEOS has clearly explained the difference between a “Risk Service Contract” and a “Risk Sharing Agreement” however there are still a number of issues that do not add up to me.

It is clear from the Zenith RNS and the Noble Hill Network website that NHNL own 100% of the Risk Service Contract for NW OML 141. The Zenith RNS of August 31st explicitly states this in describing NHNL as “ a private Nigerian oil and gas company, that holds 100% of the Risk Service Contract ("RSC") for the development of the North-West Corner of OML 141 ("NW OML 141"). The Noble Hill website describes “Our first acquisition is a Risked Service Contract in Bayelsa State Nigeria, OML 141. It extends across 105 square kilometres of the Northwest Quadrant of OML 141”

However, what is unclear is what ADM’s Risk Sharing Agreement refers to and, more importantly, who this RSA is with, because none of it really makes sense.

In the RNS of the 23rd March, ADM explain that they are acquiring a 51% interest in K.O.N.H. UK Limited, and describes KONH as the parent company of NHNL (by explaining that NHNL is a subsidiary of KOHN).

However, if NHNL is a subsidiary of KOHN and KOHN is now 51% owned by ADM, then how on earth do ADM not know about the deal done with between Zenith and NHNL – as it would have been them doing the deal, as the subsidiary could not have signed off on such a deal without the parent company also approving it.

It is also interesting that the 23rd March RNS announced that “The RSA also grants the RSA Consortium an option to acquire a participating interest in the OML 141 Licence” but then on 8th June ADM were forced to put out a new RNS correcting this by saying: “The investment in the Field was made by way of an acquisition of a 51 per cent. interest in K.O.N.H. UK Limited ("KONH"), which holds a 70 per cent. interest in a Risk Sharing Agreement ("RSA"). In the announcement, the Company advised that the RSA grants investors in the RSA an option to acquire a participating interest in the OML 141 licence, however, there are no option rights attached to the RSA and, accordingly, to the benefit of ADM.”

I have made a number of email enquiries to the company about this but they have not replied with any satisfactory answers. Has anybody else had a response to their queries?

As things stand, I feel that it is very unlikely that we are still going to own Barracuda at the end of this process and this worries me because it is the company’s major asset.

The company has always been terrible about communicating but this is beyond a joke. At the moment there is no clarity on whether the company still owns any right to Barracuda or not and all it would take is one announcement to clarify this but they simply won’t do it. I have to say though that I am surprised that Cairn (the nomad) have not forced them to take action – it is very poor form IMO.

I have just sent an email to AIM Regulation complaining about both the company and the nomad and requesting that they look into this situation. I have been told to expect a response in the next 48 hours.

I have to say I now believe that we no longer own any of the asset. Too much time has passed with the company remaining completely radio-silent when they could clear it up with a one-line statement. With any small-cap company, whenever this happens it means that bad news is on the way…

As Robert have said, if Noble Hill-Network Ltd are 70% owned by KOHN (who were only formed in Feb 2021) then why does their website say that the company (Noble Hill-Network Ltd) are 100% Nigerian owned? http://www.noblehillnetwork.com/Noblehill-Network/About.html

I was expecting an RNS from the company this morning clarifying what on earth is going on. If the situation is as described by the optimists here it would only take 5 minute to clarify that Zenith are buying into our subsidiary. However, the fact that nothing has been announced at all makes me think that the situation is rather more serious than most on here hope.

The fact that there is no clarification on whether we still own Barracuda or not is an absolute disgrace and if it does turn out that we no longer own it then the board should be reported to the FCA for fraud and deception along with the nomad and all who have conspired in this farce.

I am still hoping that it is Zenith who are wrong in their RNS but the longer the silence goes on from our board the more concerned that I am that this is not the case.

I think that this is a nice assumption but is actually wrong. There is a very worrying post on the Zenith forum by a poster called AGEOS who suggests that Karra Oil Noble Hill Ltd has been struck off in the Isle of Man less than three weeks ago. If this is the case then ADM's share of anything that it owns has disappeared with it. AGEOS claims that the Noble Hill-Network Limited that Zenith refers to is a Nigerian company and is entirely unconnected to the identically named subsidiary of Karr Oil Noble-Hill. If he is correct then we are left with absolutely nothing.

This is a total mess and needs clarification from the company by RNS immediately.

Zenith Energy have just issued an RNS this morning that claims that they have entered into an exclusivity agreement to acquire 100% of the Risk Service Contract for OML 141 from a company called Noble-Hill-Network Limited.

How is it possible that they can enter into this agreement if we already own the license? I know that management have failed to deliver by updating us on the marginal fields and also failed to deliver on the Barracuda CPR but please tell me they haven't just lost the most valuable asset in our portfolio. I can't believe that this is possible but I also cannot understand why Zenith have made their announcement today either.

Does anyone have direct contact with the company so they can ask? Surely they must release an RNS to clear up this confusion. Please say that we are watertight on our ownership!