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That Oireachtas debate was painful, and a good indicator of how screwed the country is. Everyone agrees the renewables transition is not working, or at least going too slowly, but there is no Plan B.

"The Iron Law of Climate Policy: When policies focused on economic growth confront policies focused on emissions reductions, it is economic growth that will win out every time."

https://rogerpielkejr.substack.com/p/the-iron-law-of-climate-policy

It's a red day across the markets. To be honest, I feel gratified that anybody took enough notice of PVR that it went down in tandem.

Thanks Fernan10, your analysis makes sense. As well as the SOTP valuation, SP Angel says that a yield-based valuation would make sense in the future. You can see their calculations on page 9. They show a yield of 26% based on today's share price. It is left open as to what a reasonable yield percentage would be, and therefore what multiplier for today's price. But there again, it depends on the number of shares on issue. Under both methods of calculation, if the number of shares goes from ~1.7 bn to 2.5 bn without commensurate increase in assets, the target price goes from 8.2p to ~5.6p.

My bad -- I took the market cap values on page 9 and divided by the share prices. But one's in dollars and one's in GBp. It does indeed look more like 1.7 bn shares. But then a dilution to 2.5 bn shares could mean a third off the target price? i.e. 5.6p instead of 8.2p. Have I got this right?

The SP Angel research note has some dilution factored into the 8.2p target price (which I didn't notice first time round). Taking the share price and market cap rows from the table on page 9 of their note, they are allowing for 1.76 bn shares initially, rising to 2.24 bn in 2023. Remains to be seen if they can keep a lid on equity dilution beyond that.

"Sounds like the Greens would welcome a fuel shortage"

That's not even a joke. I attended a meeting organised by the Green party many years ago to hear a talk given by a retired petroleum geologist from BP. His topic was "Peak Oil", back when that was a topical thing, and how it would result in the destruction of the global economy and widespread famine and death. One of the party members opined, and this is a direct quote: "this is good for our agenda because we want to get people back on their bicycles and cycling to work".

Indo: "People will be ordered to work from home in the event of a major fuel crisis sparked by the war in Ukraine, under secret Government emergency plans".

https://www.independent.ie/irish-news/politics/return-of-work-from-home-plan-to-save-fuel-in-event-of-crisis-caused-by-ukraine-war-41724210.html

Good article which, though written in an American context, sums up our situation and Ryan's attitude to a tee ...

http://www.rrapier.com/2022/06/we-need-win-win-energy-policies/

"Energy demand just isn’t that elastic in the short term, so people pay what they have to pay to get to work ... Hence, what we are seeing right now is one of the possible consequences of the energy transition. When alternatives don’t scale up fast enough to fill the gap between oil supply and demand, oil prices skyrocket. I know that many people who have opposed any additional fossil fuel development saw a different scenario unfolding. They believed that alternatives would scale up fast enough, and that we wouldn’t need the oil."

"Here’s the thing, though. If we invest in fossil fuel development — and we don’t need the oil and gas because alternatives do scale up rapidly — that’s a loss the fossil fuel companies would take. That is the risk they are taking, for the potential reward that demand will be there in the future. What’s the downside of continuing to support our domestic oil industry? That it will simply continue our addiction to fossil fuels?"

Steady on there. This was signposted in the annual report just seven weeks ago:

"As detailed in note 1 on page 70, the Company’s cash flow
forecasts for the next twelve-month period to March 2023,
indicate that additional funding will be required to enable the
Company to meet its obligations. These conditions, along
with other matters described in note 1, indicates existence of
a material uncertainty on the Company’s ability to continue
as going concern."

I pointed this out then amidst a general ramp fest and to general shrieks of protest from chief rampers bigbench and sharetrader123. Go back and read the forum from Apr 20th (the day after the report and the occasion of a very upbeat GL interview with Proactive) to get a flavour. It wasn't just me. Fernan10 also posted a cautionary note, estimating about $18m of unfunded commitments (including Annoual drill and Sidi seismic) BEFORE first revenue from LNG. We've just seen the first $5m of that raised.

There are only two ways for SOU to raise the money it needs -- debt or equity dilution. There is no other way. Nor is there any point complaining about those certainties. 200 million new shares is not out of the ordinary compared to any of the last several years. The only somewhat regrettable thing is that it has to be done now, at such a low SP. That is why I will keep on repeating ad nauseam, watch the dilution like a hawk. SOU is still on the same path to monetisation as it was seven weeks ago, and its prospects look reasonably good. The value of that to existing shareholders depends on how the coffers are managed over the next 18 months.

Malcy says:

"This is good news for Sound who have made this first public raise in two years and with a very good addition to the register from institutions and of course Afriquia Gas. The money will enable them to prepare for FID, new activities and corporate G&A. "

"Before today’s raise Sound had achieved a very creditable 133% rise in the share price in less than a year and therefore justifies the 20% discount it is money that will ensure the future is very strong for Sound. I am confident that management who recently held a great investor presentation will do well in the coming months."

Uh, Malcs, that was 133% from an utterly abysmal 1.3p rock bottom, and they've now shed half of it. This is the drongo who said 19p was a transformative deal (which fell through, of course) two years ago. Seems like Malcy has ridden this one all the way down along with the rest of us ... though in his case, not with his money.

"I was under the impression that funding was trivial. That banks were beating down the door to lend us ..."

If you have that impression, it was not gleaned from anything GL said. I give him a plenty hard time, but I don't accuse him of saying something he didn't. What he *actually* told you was that SOU have battered their operating costs down to 300k/month, so this raise of 4m for the next year or so should be in line with expectations. In retrospect, GL was doing a bit of advance a$$ covering at the Q&A.

Nor would I expect this to be the last time SOU will have to tap new equity. I have to admit I once naively thought the $18m Afriquia loan would cover SOU's G&A up to first LNG, but it became very clear if you've studied the RNS's that this is wholly tied to project construction costs and can only be drawn down on that basis.

No, it's only the punters on here who have come up with the syllogism: "gas is really needed, we have gas, therefore we are really needed". The logic is flawed. Private lending institutions are in it for the money, like any business. They aren't forking out $200m for the good of SOU shareholders, but to extract maximum value for themselves. Expect all negotiations to be tortuous. (And, IMHO, to stretch well beyond the end of this year).

Hmmm. The RNS makes soothing noises about Phase 2. On a positive note, the director participation indicates a certain level of confidence. On the downside, this isn't really about Phase 2 but basically keeping the lights on ("INCLUDING enabling pre-development work up to a final investment decision on our Phase 2 gas pipeline development"). And another 12+% of existing existing shareholder equity bites the dust. The SP Angel target valuation is predicated on the existing number of shares in issue as outlined in their research note of last month. One can infer that the target price now goes from 8.2p to c. 7p. As I said before, watch the dilution like a hawk or someone else is gonna eat your lunch.

Fault lines starting to show between Ryan, government, and regulator:

Indo: "Leo Varadkar defends meeting LNG developers as Eamon Ryan insists the gas terminal should not proceed. Mr Varadkar said the meeting was “permissible” and would take place in the coming weeks. His move drives a further wedge between him and Environment Minister Eamon Ryan... Mr Ryan said the energy crisis and moves at EU level had not caused him to rethink his position on LNG. He said the focus must be on rapidly developing offshore wind energy. “My thinking [on LNG] hasn’t changed,” he said."

https://www.independent.ie/news/environment/leo-varadkar-defends-meeting-lng-developers-as-eamon-ryan-insists-the-gas-terminal-should-not-proceed-41716141.html

Biz Post: "Regulator offers to incentivise LNG terminals to boost ‘security of supply’. The Commission for the Regulation of Utilities has said it would allow a cut in the charges for any LNG facilities adding gas onto the national network... But Eamon Ryan, the Minister for the Environment, is opposed to the project as he believes it could lock the state into the use of fossil fuels for decades to come."

https://www.businesspost.ie/politics/regulator-offers-to-incentivise-lng-terminals-to-boost-security-of-supply/

If Ryan is this intransigent on LNG which everyone is telling him is needed, I can't see much chance of him bending on Barryroe.

My caution about the timescale for Phase 2 FID is simply based on observing Phase 1. The finance discussions with Afriquia Gaz were ongoing very early in GL's tenure. It took nearly two years to get to FID from that point. The need for gas was no less urgent, customers were lined up, it was low risk, and it was an order of magnitude cheaper than Phase 2.

Phase 2 is technically low risk, but there's likely to be a larger number of parties to the financing, each with their own terms to be negotiated and a lot of I's and T's to be dotted and crossed. I could be completely wrong, but then it'll only take 6 months to find out ;-)

Finally got around to watching the Q&A. In conjunction I read the SP Angel update from last month, which contains a lot more detail on their valuation basis which I hadn't seen before -- highly recommended. It is finally possible to see a solid connection between their valuation and future cash flows and potential dividend yield to investors. To my inexpert eye it seems to add up.

It also seems to me SOU is progressing well along the monetisation track they've been following. If there is a fly in the ointment, my guess is it is an over-optimistic view on the timelines. Phase 2 is a large and VERY expensive project. They don't yet have a bank as primary partner to lead the rest of the debt financing. And it sounds like debt financing alone won't cover all the costs, so there'll still be vendor financing and/or further equity to consider. Given all that, FID by end of 2022 is an extraordinarily optimistic timeline, and the experience of Phase 1 (COVID notwithstanding) just makes it sound a bit unbelievable.

In the SP Angel docs, 2025 is shown as an almost full year of pipeline revenue. In other words: FID in 2022, immediate start of pipeline construction and completion in 24 months, and gas starts flowing in early 2025. It is purely a guess on my part, but I still think that revenue in 2026 (and not necessarily early 2026) is more likely. SP Angel also show a constant dividend return to investors starting in 2025, the year following "peak debt".

Why does this matter if the job gets done eventually? To my mind, it gives an idea when the share price might actually start to rise. I don't expect much to happen before Phase 2 funding is secured. On the other hand, we won't arrive in 2025/26/27 paying a 26% dividend (based on 2.3p sp) without the price have risen substantially. You'd expect maybe 5/6% yield with the share price having quadrupled to 9p (in line with the SP Angel target). So perhaps a gradual sp uplift starting from the time of FID (which, as I said, I think is more likely end of 2023).

Most of the other stuff from Q&A was a distraction. Renewables? Yeah, whatever ... probably looks good for ticking the ESG box with lenders. Why Graham ever though ANGS was a good idea? ... I think he was having a "nightmare before Christmas". Farmout and drilling? It's the first I heard that SBK might be compartmentalised, and TE-4 tight, while Annoual is a relative unknown. SBK is also another 60km of pipeline, though maybe smaller bore than the Phase 2 one. I wouldn't be counting any of those chickens in advance of further developments.

In summary? SOU doing a good job, timelines sound optimistic, SP Angel valuation looks like it holds water. Just my tuppence worth.

Should we really be setting goals for absolute reductions in GHGs at all? How about reducing the carbon intensity of the economy, i.e. lower GHGs per euro of GDP? Global GDP increases relentlessly, so any target to reduce global emissions needs to factor that in. Otherwise, green policies are just plans for poverty (and continuing poverty for the hundreds of millions worldwide who need access to new energy sources, compared to which Ireland's 0.1% of global emissions is a drop in the ocean).

While I'm here ... I typical misleading headling from the Washington post:

"NOAA predicts 3 to 6 major hurricanes and a busier than normal season for seventh straight year. Its outlook calls for 14 to 21 named storms, 6 to 10 hurricanes, and 3 to 6 major hurricanes, rated Category 3 or higher. The prediction for a busy season follows two of the most active Atlantic seasons on record in 2020 and 2021."

Classic piece of alarmism. It doesn't mention that this follows 11 years of unprecedented low Atlantic hurricane activity which we know correlates with Pacific El Nino / La Nina events. The actual fact is that there is no trend in hurricane activity over the past century:

https://rogerpielkejr.substack.com/p/what-the-media-wont-tell-you-about

And more of the same from the EPA:

Ireland way off target on climate change goals and existing policies are not enough, EPA warns
------------------------------------------------------------------------------------------------------------------------------

Ireland will miss the first two years of its carbon budget targets and will need a range of new policy measures if its 2030 climate ambitions are to be met, the state’s environmental watchdog has warned.

As reported by the Business Post, a new report from the Environmental Protection Agency (EPA) showed that even with the additional measures outlined in the government’s latest 2021 Climate Action Plan, emissions will only fall by 27.9 per cent by 2030 based on 2018 levels, way off the 51 per cent emissions reduction required by law under the new Climate Action Bill

The assessment will be a worry to the government as it is the first independent confirmation that the latest Climate Action Plan, published just last year, will require an effective doubling of measures when it is revised later this year if it is to chart a path to the legally binding target of 51 per cent emissions reductions by 2030. The EPA also outlines a scenario where only existing policies are implemented, not including those new polices outlined in last year’s Climate Action Plan, and in this case emissions would only fall 9 per cent by 2030.

The report, Ireland’s Greenhouse Gas Emissions Projections 2021-2040, confirmed preliminary data for last year that showed a rise of 6 per cent in Ireland’s greenhouse gas emissions, following a substantial drop in 2020 due to Covid-19. In the best case scenario, the EPA projected that greenhouse gas emissions will not fall this year, and instead will stabilise, before beginning to fall next year.

The country’s two five-year climate budgets require annual emissions reductions of 4.8 per cent from 2021-2025 and 8.3 per cent from 2026-2030. Given the targets for the first two years of the first carbon budget will now definitely be missed, emissions will have to begin to fall by 8 per cent from next year, which the EPA’s own projections showed was very unlikely to happen. The report found that all sectors will have to do “significantly more” to meet the 51 per cent emissions reduction target for 2030.

Laura Burke, the director general of the EPA, said there was a significant gap between the 51 per cent ambition in the Climate Act and the realisation of the necessary actions to deliver on that ambition.

“The data shows that a step up in both the implementation of actions already set out in plans and policies and the identification of new measures is needed. All sectors have work to do, in particular the agriculture sector. As the largest contributor of national emissions, more clarity is needed on how and when it will implement actions to reduce methane within the ever-shortening timeframe to 2030,” she said.

More on that BnM statement about missing 2030 goals:

Government ‘deluded’ about 80% renewable energy by 2030
---------------------------------------------------------------------------------

The state’s 2030 targets for renewable energy are not realistic due to planning delays and the severe lack of investment in the power grid over the last decade, a senior executive at Bord na Móna has said.

In an interview with the Business Post, John Reilly, head of power generation at the semi-state, warned the government was “deluded” if it believed 80 per cent of the state’s power would come from renewables by 2030 given the structural problems in the energy sector.

“From a policy perspective, Ireland has done a fantastic job in setting out the direction of travel. We’ve made a very significant bet on renewable energy because we have abundant wind resources. So we’re betting big on wind, both from onshore and ultimately offshore wind too,” O’Reilly said.

“We’ve set really ambitious targets and we’ve done a remarkable job to get to where we are today. To have 40 per cent of electricity demand met by renewables and to have one of the highest levels of system penetration from intermittent renewables is ground-breaking. We’re world leading in that regard.

“But we’re not executing our renewables strategy well. We’ve too many bottlenecks in the system and we’re simply not able to deliver the infrastructure required. I have to say I think we’re mad if we think we can achieve the 2030 targets from where we are today. I think we’re deluding ourselves,” he said.

Despite the strong pipeline of solar, onshore and offshore wind projects coming through, O’Reilly said the rate of build for these projects had slowed considerably in the last three or four years because the system had become “more choked”.

Frightening. Not only should they be fast tracking existing licenses they should be reversing the ban on new exploration. Instead, they are "forming a committee". What an utterly useless shower. What does "doubling down on renewables even mean"? It means the perfect opportunity for them to wash their hands of any culpability for rising energy costs, which they had committed us to long before hydrocarbon prices went mad. And since renewables are not going to displace any significant amount of fossil fuels this decade, they're basically saying: "we're planning to do nothing".