Member Info for RodneyT

Field operations and revenues continue as going concerns, not pulled into the parent’s administration

estate.

From a financial perspective, Lancaster’s production revenues should remain dedicated to the

upstream unit’s obligations and running costs, rather than automatically getting diverted to State

Oil’s creditors. In the absence of any cross-guarantees or inter-company loans that could entangle the

upstream cash flows, the money generated from oil sales at Lancaster stays within the Prax upstream

subsidiary (which is the entity owing DCU payments). We have not seen evidence of any specific “ringfenced

account” for DCU monies – the DCU is paid from general cash – but the structural separation

means that as long as the upstream company is solvent, it can use its revenue to pay DCU holders

before any value is upstreamed to the parent. (It’s worth noting that in UK oil & gas, taxation is ringfenced

per field; Hurricane likely had significant tax losses that are only usable against upstream

profits, which already limited blending finances with the refining business. This tax regime may have

further insulated Lancaster’s cash flow from being drained to fix refinery losses.)

Lancaster Field Operations and Continuity of DCU Payments

Continued Production: The Lancaster oil field remains operational, and this is crucial for DCU holders.

As of mid-2025, Lancaster is still producing oil (albeit from a mature single well) and generating

revenue. The collapse of State Oil’s refining arm did not interrupt Lancaster’s operations – the Official

Receiver ensured the refinery kept running safely, and upstream production has its own off-take

arrangements. In fact, news reports and official statements around the administration confirmed that

Prax’s upstream unit is continuing business as usual, with employees kept in place and paid .

There has been no notice of shutdown at Lancaster, so oil liftings and sales presumably continue on

their regular schedule.

Because DCU payments are formulaically

Corporate Structure and Ring-Fencing of Prax’s Upstream Unit

Prax and State Oil Structure: Prax Exploration & Production PLC – the entity obligated on the DCUs – is

a wholly-owned subsidiary of State Oil Limited, which was (until recently) the ultimate holding

company of the Prax Group . Hurricane Energy plc itself became a wholly-owned subsidiary of Prax

when the Scheme completed in June 2023 (and has since likely been re-registered as a private

company). In essence, Hurricane’s operating business (the Lancaster oil field) was folded into Prax’s

corporate group, under State Oil’s ownership.

Ring-fencing from Parent’s Finances: In principle, a subsidiary company is a distinct legal entity from

its parent. It maintains its own assets, liabilities, and cash flows separate from the parent’s balance

sheet. Under UK corporate law, the insolvency of a parent company does not automatically make

its subsidiaries insolvent or directly transfer debts between them. Creditors of the parent cannot

pursue the subsidiary’s assets simply because of ownership. This structural separation often serves to

“ring-fence” the subsidiary’s business – a key reason corporate groups use subsidiaries in the first place.

In the case of Prax’s upstream unit (Hurricane’s business), there is evidence that it has indeed been

treated as ring-fenced from the troubles at State Oil’s other divisions. In late June 2025, State Oil

Limited became insolvent and entered administration due to mounting losses in its refining business

(notably the Lindsey Oil Refinery). However, administrators made a point to note that certain healthy

subsidiaries, including the Prax upstream (former Hurricane) business, were “outside of any

insolvency process” . The Official Receiver and administrators are keeping those subsidiaries

operating normally, segregated from the collapse of the parent and refinery entities . In fact, they

explicitly stated that “a key priority is to establish the prospects for subsidiaries… that remain outside

insolvency… including Prax’s upstream business (formerly Hurricane Energy)”, and that there are no plans

for redundancies or shutdowns in that unit . This indicates a practical ring-fencing: the Lancaster

That said, DCU holders are effectively unsecured creditors of Prax with respect to these deferred

payments. There is no collateral or external guarantee ensuring DCU payments, apart from a limited

parent guarantee that was given at closing (discussed below). In the original deal announcement, the

financial adviser explicitly noted that it had not been required to confirm Prax’s resources for DCU

payments, warning that “Hurricane Shareholders will be at risk if, for any reason, these payment obligations

[under the DCUs] were unable to be satisfied by Prax”. In other words, if Prax (or its relevant subsidiary)

fails or refuses to pay, DCU holders have no automatic recourse to insurance or a third party – they

would need to enforce the obligation through legal action or claim in an insolvency process. The

Scheme made clear that beyond the upfront cash, the future deferred payments were contingent and

subject to Prax’s ability to pay.

DCU Representative: To facilitate collective enforcement and oversight, an independent DCU

Representative (Geopoint Advisory, led by Tim Chapman) was appointed pursuant to the DCU Deed

Poll. The DCU Representative acts as a liaison for DCU holders and can engage with Prax or appoint

third parties (e.g. an independent accountant) if there is any dispute over calculations or nonpayment.

This mechanism provides a degree of protection – for instance, if DCU holders believe Prax is

under-reporting revenue or improperly withholding payments, the representative can investigate and, if

necessary, help coordinate legal remedies on behalf of all holders. However, the Representative’s role is

to resolve disputes and ensure transparency; it does not create any security interest over assets.

Ultimately, DCU holders’ enforcement rights are those of contract creditors under English law (subject

to the DCU terms). Notably, the DCUs do not carry interest, so if payments are delayed, the amount

due doesn’t automatically increase – another reason timely enforcement matters to holders.

The DCUs are governed by English law and constituted by a DCU Deed Poll executed by Prax. This

deed poll is a one-way contractual promise: Prax “has created the DCUs by deed poll… [and they] will be an

obligation of Prax”. In other words, Prax (the acquiring company) is legally bound to pay the DCU

entitlements as they fall due. Hurricane’s Scheme documents and Q&A materials emphasize that the

DCU payment obligation is “a legally binding obligation”, enforceable by DCU holders with the “full

force of English law”. The structure was reviewed by Hurricane’s board and advisers to ensure payments

would be transparent and enforceable: for example, Prax and (the now-private) Hurricane must

continue filing accounts publicly, and Lancaster’s production volumes are reported on the UK

regulator’s website, allowing DCU holders to monitor expected payments. Each six-month payment is

accompanied by a detailed statement of the calculation provided to DCU holders, ensuring

transparency.

1

1

In 2023, Prax Exploration & Production PLC (“Prax”), a subsidiary of State Oil Limited, acquired

Hurricane Energy plc via a Court-sanctioned Scheme of Arrangement . As part of the deal, Hurricane

shareholders received Deferred Consideration Units (DCUs) for each share, in addition to upfront cash

and dividends. Each DCU entitles the holder to a share of Hurricane’s future oil revenue over a defined

period, rather than an equity stake in the company. The DCUs were offered because Hurricane’s

Lancaster oil field had ongoing production potential but also operational risks (a single-well field), so

the DCUs linked part of the purchase price to future performance.

DCU Payment Terms: Under the Scheme, DCU holders are entitled to 17.5% of all “Net Revenues”

generated by the Hurricane assets (the Lancaster field and any future acquisitions) from 1 March 2023

until 31 December 2026, up to a cap of 6.48 pence per share (approximately £129.1 million in total).

“Net Revenues” are essentially oil sales proceeds minus certain direct costs (transport, marketing, etc.),

and notably not reduced by operating costs or capital expenditures, meaning DCU payments are

based on gross revenues rather than net profit. Payments to DCU holders are scheduled biannually in

arrears, roughly 90 days after each half-year period ends (e.g. revenues from January–June are paid by

end of September). The DCU instrument was structured as a form of contingent value right common

in UK takeovers, though not frequently used.

Importantly, if any portion of a pre-closing Supplementary Dividend could not be paid by Hurricane

before the takeover, that unpaid amount would be added to the DCU entitlement (payable upon an oil

production “Trigger Event”). In practice, Hurricane did pay its planned special dividends (totaling 5.19

pence) in full, so DCU holders’ main upside comes from the 17.5% revenue share going forward. If the

DCU cap (6.48p) is fully realized, Hurricane shareholders will have received a total of 12.5p per share

from the deal. If little or no revenue is generated, the DCU could pay nothing – the minimum payment

can be zero, as the Scheme explicitly warned.

Enforceability and Legal Status of DCUs

PBOW, Solgold doing well with reduced cash burn so it seems? Nice work there too..

PBOW, Yes, I knew that. Hoping that we can add our corporate advisers Maxit to the list shortly.

PBOW, I try to forget that period of the company's history as much as I can and focus on the present and future. SC gets credit for the FN/OS deal but his reference to a 25p/c sale was a disgrace and disrespectful. What happened at GG and AN with SC in charge/on board? I feel foolish to have discovered that only when I did. Lesson learned. DV has suddenly got things together here and he says there is more to come soon. It's very good.

Stas20 and Needagain did some excellent work a few weeks back covering sensitivity analysis and then through to a fair NAV estimate of 164p based on the company's own brokers' forecasts updated. Something is worth what someone else is prepared to pay for it. We have covered before that, whilst one can buy a few shares at the current share price, one cannot buy a majority stake at anywhere near that number. Tier 1 M & A deals take place at 0.8 to 1.1 x NAV on average. There is no evidence that a sale/takeover will happen anytime soon. What we know is that DV has set out a clean and crisp plan to take Cascabel to production and has also, for the first time, expressed how grossly undervalued the company is at the current share price. In my view, he is doing all the right things in showing potential bidders that the company will certainly proceed on its own if need be and is no lame duck. Boards of companies can offer what they like for a target if it is preapproved with major shareholders. This topic is largely irrelevent to PRC and other government backed companies. Bravo Dan! Playing a blinder now. Keep it going. Would be good to get a few words from PS too.

Well it's a bit different if you announced before or after isn't it Stack? Why don't you have a look at your own posts and let us know.

Stack, did you say in advance that you were selling a few yesterday or did you say it after you had sold when the price had fallen from its day higher earlier on?

:-) A NAV of ca 164p and a current SP of less than 8p? Calm yourself, Jerry, we have a contingency!

???Live mid 7.79

Solgold is a difficult puppy for a shorter right now. Shame :-)

Just review Stas20's numbers from a few weeks ago B.

Let's all try to be objective here and focus on Solgold. Have an opinion and debate it. There are plenty of things going on within the company. Let's think about those. research them and try and build on this momentum. DV has shown leadership. We need to too.

Quady,

Did you think about uniting behind the recent good need? After all, we all want a successful outcome here, don't we? I don't see the point of tittle tattle frankly. Also, whilst DV and his team have indeed set out a clear plan to production, none of us know whether Cascabel or the whole company will be purchased between now and then. There is an opportunity to unite at this stage. Did you think about taking that opportunity? This is a debating board. It is perfectly fine to agree to disagree and what is wrong with that?

:-) stack, :-)

PBOW,

Did you quickly review my post from earlier? We spoke about a 'crossroads' a couple of weeks ago. I think that DV has shown leadership over the last few days so that, as far as I am concerned, there is a much clearer sense of direction now and that the direction is the right one. Concerning the short, let's see if the market creates its own squeeze over the coming days. The structure of today's RNS was excellent in my view, combining confirmation of cash received from major streamers, strong cash at bank (folk were worrying we would run out of money of late!) and a clean, crisp statement about the absurdly low share price and action he is taking to address this. Outstanding. The current agenda and path is much better. Funding, revised PFS, TAM update or short being removed. Let's see what happens next.

The RNS today is an encouraging step from Dan Vujcic and the team. The receipt of the second US$33.3 million tranche under the gold stream agreement puts the company in a stronger cash position and shows continued delivery on milestones. It keeps the early works, drilling and feasibility momentum going.

More importantly, Vujcic made a clear and direct statement about the share price being far too low, and that SolGold is actively speaking with institutions to correct the disconnect. That kind of language from the CEO matters. Volume has jumped above 8 million shares so far today, well ahead of the usual average.

It’s not unreasonable to think we could now see a short squeeze start to form.

By continuing to derisk the project and advance toward production, the company is also putting pressure on larger players like BHP, Jiangxi Copper and others. As Cascabel gets closer to being build-ready, its value increases and so does the risk for potential bidders that they’ll have to pay more or lose out altogether.

This is exactly what shareholders have wanted to see: focused execution, public recognition of the undervaluation, and a firm, direct style. The market still needs to see more such as a PFS/NAV update, clarity on copper financing, and further detail on how shareholder value will be protected but this RNS adds weight to the idea that the board is now moving in the right direction.

I commend DV and his team. Let’s keep it going.