The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
From the 2022 final report:-
FY 2022 average gross daily production from the Nigerian operations was 26.8 Kboepd, a 20% increase from the average gross daily production of 22.3 Kboepd in FY 2021;
·Of the FY 2022 total average Nigerian gross daily production of 26.8 Kboepd, 90% was gas, including a 23% increase in gas production from the Uquo gas field, from 118 MMscfpd (19.7 Kboepd) in FY 2021 to 145 MMscfpd (24.2 Kboepd) in FY 2022
From today:-
Average gross daily production from Nigerian operations was 25.3 Kboepd, a 12% increase from 22.5 Kboepd during H1 2022. Robust customer demand led to a 15% increase in gas production from the Uquo Field to 138.5 MMscfpd (H1 2022: 120.3 MMscfpd)
H1 this year is clearly strong compared to H1 last year but how is H1 this year lower that than the 2022 averages for boepd and UQUO gas? Either H2 last year was extremely strong for some reason or we have had a very poor H1 this year.
I’ve read todays announcement again and being brutally honest, apart from a few crumbs, I am really struggling to take any positives at all. Is it time to put M&A on hold for a bit and straighten out some of the messes we are currently in? Maybe as TiL says just focus on Nigeria 100% for a year or two and bring in a solid deal or two to help Accugas underpin our company before we go in to other countries.
We won’t get it but we really need AK to get on a Webcast with us or as a worst case scenario get an interview with Malcy or somebody.
TiL - Of course I will keep in contact with IR but I can’t do it too often. I usually try and touch base about once a month and only spoke to them a few days ago. I don’t really have a lot more to ask them after what we already know and what today’s RNS says. Adding both of those things together, it is pretty clear where we are at on all fronts apart from potential new deals.
I will probably check in with them again late Oct / early Nov depending on what we see over the next 4/5 weeks.
Mr B - admittedly there could be work-streams still ongoing but I rather suspect that he is playing the long game with the government to watch how they play their hand over a period of time. This is a well used tactic in negotiation / deal finalisation and takes me back a few years to some of my training courses on closing corporate deals.
Morning Z - one quick question if I may please?
If as you say we would be debt free in 2 years, should we not choose to spend NOI on “other stuff”, how can we be in such a pickle with existing debt and desperately need to refinance it before it causes us to stop operating as a going concern?
I know we are looking to extend the debt terms to match our long term gas contacts (are there about 15/16 years left on them) but I am not looking forward to the interest rates. At best i think we will be forced to take 10% + LIBOR.
Oh and one more, although I can’t remember our 2P number, what would you see our valuation to be today with 2P (which I know you will document for me), 25kboepd and next debt of $440m?
RR - this has to be Number 1 priority by a country mile as this is the note on the other board from C7 that Tier alludes to:-
We draw attention to note 2 of the condensed set of financial statements which explains that the Group's ability to continue as a going concern is dependent on either the ongoing support from its lenders to amend the terms of the Accugas US$ debt facility or a refinancing of that the facility. As stated in note 2, these conditions, along with the other matters referred to in note 2, indicate that a material uncertainty exists that may cast significant doubt on the Group's ability to continue as a going concern. Our conclusion is not modified in respect of this matter.
LST - others will differ to my view but we are in a righ load pickle:-
Chad
Cameroon
Niger
South Sudan
I’ve said it time after time, Nigeria can only support all other stuff going on in the business for so long. God forbid should anything go wrong in Nigeria. Yes I think the risks have been a very educated gamble and we could not have possibly have expected to have so much bad luck. BUT WE HAVE HAD BAD LUCK ON ALL FRONTS EXC NIGERIA.
The next steps for AK in this company will be company defining. WE NEED TO TAKE ON SOME SMALLER deals with lower risk profile. I know Zengas will put me right and say even the small deals in the safer countries come with the same risk profile but personally I don’t buy that. Surely there must be some smaller deals with lower risk. And if there are not - we seriously need to review the company strategy. Whinge over but this is a doom and gloom report and apart from a stable situation in Nigeria and a bit of pocket money from Fenisko - I am really struggling to take any positives from this.
I hope AK proves me wrong and gives me a Hugh Birthday present in December - but at the moment, I am not impressed with what I read today. i was expecting higher production and lower debt as a very minimum.
TiL - having reflected on the Caltech saga I think they simply put this impossible deal out there as a final shot to see if anybody would like to come in and make an offer better than ours - throw a spratt to catch a mackerel!!!
How better to RAPIDLY hit the press than to get something out from Kirk being at the UN?
So, highly unlikely that they will get a better counter offer at this late stage, especially with the Sudan war still very much in progress. Even moe unlikely that somebody would fund them unless Perenco want to give it a shot LOL.
So I think thay either have to do nothing and leave the declining asset with Petronas or give us approval.
Anyway we can all pontificate to our hearts content, none of us really have any idea at all with what’s going on.
See you all back on here after tomorrows RNS(s).
Will we issue AD in the morning with relist Monday morning? Not beyond the realms of possibilities that we do this and gain SH approval then sit it out / carry on negotiating to get Gov approval.
Guess the NOMAD busy ATM and would like to be a fly on the wall over the last few days…
Mr B I absolutely share your frustrations along with a multitude of others on here. With being so heavily invested here I do flip flop a lot with my thought train - and by God do I think about this a lot.
But when I look at the risk / reward and the size of the prize should we land a big one, people will hve differing views but at the end of the day, in all honesty, we have been given plenty of info from AK to let us know what he would be trying to do.
One of the ways I look at it is this:- Whilst admittedly, we could have been spending the time and money on something else, but there are no guarantees anywhere and if we'd have done something different, even in Nigeria, we could have hit a similar set of challenges. But all things being equal. I estimate we would hve spent circa $40m on the Exxon / Petronas deals on Chad / Cameronn and on the current SS transaction. If we had not spent that and paid down debt, it would equate to 2.5p on the SP. So as I am in for a lot more than 2.5p, I think this is a risk worth taking.
We have know idea how SS will play out but I genunely belive that we will win the 2/3 x ICC cases and will be rewarded with anywhere between $500m to $1bn - afterall we did pay $400m for the stuff.
I still think AK is right by saying "small deals come with as much hassle as big deals, so we may as well only take on the big ones"! We have recently seen that small deals elsewhere hit the same troubles that we encounter.
Finally, I firmly believe that AK will have known that SS is very high risk and I am genuinely hoping that he has some other stuff 50% to 80% worked though which will either soften the blow should SS fail or be the icing on the cake should it succeed.
Sleep well this evening and let's see what tomorrow brings - MASSIVE FINGERS CROSSED AND GLA
South Sudan’s President Salva Kiir is in Moscow for talks with Russian President Vladimir Putin.
The visit comes at a time when Russia and Western powers are trying to woo African support in the wake of the invasion of Ukraine.
Mr Kiir arrived in the Russian capital on Wednesday and was received by Deputy Foreign Minister Andrey Rudenko Yurevich, according to statement from the president's press unit.
Mr Kiir's office says the meeting with the Russian president on Thursday will discuss prospects for the development of bilateral relations in various areas, as well as regional and international issues.
It adds that the visit aims at deepening diplomatic relations and explore other areas of co-operation on trade, investment opportunities and security.
The two leaders will also discuss the lifting of an arms embargo and targeted sanctions imposed on individuals in South Sudan, the statement added.
In May, Russia abstained in the UN Security Council vote to renew sanctions imposed on South Sudan, which include asset freezes, travel bans and an arms embargo.
I’ve had customers issue letters of intent (UK Police Forces and travel companies such as Airtours, Tompsons & Stagecoach). They are not legally binding here (and I’ve known companies pull out late-on when they have ‘found’ a better deal. They certainly aren’t even worth the paper they’re written on over there. We’ve already seen evidence of that nearly 3 months after we should have completed. I would not hang your hat on that one TiL. Is they want us to have the assets we will get them and if they don’t - we won’t. It’s as simple as that!
T - if this is to fail post another 1 - 3 months or so, at least we can work up other options in the background and get them as oven ready as possible. Additionally, on the assumption that Accugas is performing exceptionally well, the debt number will hopefully be reduced significantly further. Downside would be if this is to fail is that the longer it goes on, the more good money we are throwing at it in transaction costs.
As with many on here, I’ve had enough of this now and am extremely hungry for as much information from the company as possible and as soon as possible - but pretty much 100% now that we will get what we are to be told at 7.00am on Friday.
Z - do you think the relist price would be the same if deal fell through or we come back without approval? Ie if we came back without approval the market would price nothing in for the deal and would assume it would eventually fail anyway?
IZ - I had this convo with IR a few months ago and SAVE / Petronas did an inordinate a mouth of DD and relationship building with the President of SS and key ministers. Whilst (as we know these deals are fraught with risk) I don’t think SAVE could have possibly done anymore before signing the SPA.
However, with all the embedded corruption in Africa along with many changes of ministers, we are forever trying to shoot a very fast moving target.
As we know, we have no real idea what is actually going on but if the news from this week does turn out to be a RED LINE fail for this transaction, I genuinely feel for AK and the team alsong with all the loyal shareholders invested here.
One of my concerns is that SAVE have done all the heavy lifting, helping work on licence extensions, ESG strategies, workovers and future well planning etc etc etc etc and then when everything is straightened out as much as possible, some other entity comes and signs on the dotted line with Government blessing and one or two suitcases being dropped on parachutes to peoples back gardens.
Should SS fail and we don’t have another ‘oven ready’ deal, I do feel that we need to review the SAVE strategy and specifically the ‘Projects that matter’ bit!
Anyway, let’s hope we learn a reasonable amount more on Friday but I guess there is always a chance as they don’t want to go too public on the real situation and we just see another extension.
Finally, although I said on the other board that I’d like us to come back without the explicit Gov consent, another way of playing it could to play hard ball. I.e. say to Gov ‘right we are ready to go but wont do so without your 100% backing and explicit consent’. I now think this would be the best way to go so that we dont end up in another Chad situation. Should SS not sign off and we pull out, it would send a very strong message out to the industry that SS are NOT IN FACT open for business. They probably would not give a toss but at least we would know where we stand and could crack on with come other stuff that would earn us some incremental $$$.
I think they’re either hiding behind this deal or being advised to say as little as possible while ICC cases run. I’m convinced if everything was BAU that we’d have been told more, especially from what’s going on in Nigeria.
As things stand I’d be happy to come back with ad doc and re-list without SS Gov approval. This would hopefully allow us to RNS more news in other areas of the business but more importantly announce new SPA(s) for other inorganic hydrocarbon growth. This would start to build more value into the SP and cushion the blow should SS not complete for any reason. Yes the market would not like this at day 1 but I think we can expect fun and games whatever happens now. This is still a compelling share to hold for me and I know we have to keep trying but the $15m / $20m per transaction costs are starting to build up and given all the ICC costs along with huge expensive FTE growth, we really do need to see a new strong revenues stream in the near future.
Hi K - I do tend to agree to a certain extent. But with all the stuff going around yesterday, including the official FB page it’s always going to be a subjective view of PI’s to ascertain what’s real news and what’s fake. Additionally I don’t think the onus should be on PI’s to scour the new to look for what May or not be official documents. People who don’t read these boards would have virtually no chance of finding all the pieces of the jigsaw that we collectively put together on here.
My main point is that I’m sure if we were trading we’d have been updated but as we are suspended we were not. I’m also guessing that the same applies to other stuff that’s going on. I’d be amazed if more material stuff has not gone on in Nigeria that we have also not been updated on.
This is not a whinge but just a personal view which I have fed back to IR and NOMAD.
Anyway, let’s just wait for Friday which can’t come quick enough.