Member Info for spike501

"So ultimately he needed to convince the institutional holders, it is a bit more mystifying that they were not pushing for a better deal if it was out there"

Occam's razor - there isn't a better deal out that, at least not one when there is not a very public notice that I3E is being sold. By going public and recommending this it might bring other suitors out and they now know a ballpark price they can bid at.

Its no surprise insti's will accept this deal - the SP has performed poorly, there aren't any obvious catalysts to boost this, the offer is substantially above the price it has been trading at for some time, so they take the gain and move on.

Most of the property, plant and equipment value is the cost of drilling the hole. i3E buys the actual equipment for $1million, then spends $10million drilling, testing completing etc, etc. - the entire $11million is capitalised to Property, Plant and Equipment.

There would be substantial costs to removing the equipment if someone wanted to sell it - that's why I3E has tens of millions of decommissioning liabilities. The actual standalone sale value of any equipment, after cost of removal, renovation, transportation etc is almost certainly negative.

The value is in the the resources that the equipment extracts.

"Wasn't I3E's plant and machinery alone worth over £200M?"

Cenkman, that is the carrying value on the balance sheet - it is not the value of the equipment if someone tried to sell it.

“ To those more knowledgeable, share capitol reduction in play going through the court currently would release £148M of distributable cash reserves. So to my mind GTE actually paying £26M for the company. These reserves were to help pay dividends and drill or acquire another business.”

The share capital doesn’t release or create any additional cash - it doesn’t create £148million cash. It’s just an accounting restructure that allows for dividends to continue to be paid and not restricted by having insufficient distributable capital reserves.

Probably most people don’t think another offer is coming and take a quick gain of 25% since end of last week, rather than hang on while not much happens over the next few months for another 10% with a risk that if the deal falls through the SP falls back to where it is.

The amount of cash and number of shares GT pay is fixed - so the mix and match will be on an allocation basis depending on how many request a different proportion of cash and shares compared to the standard 90/10

Malcy is mad.

I'd be surprised if this gets over 20-25p - success just raises the question of what next, how do Deltic fund their share of development and indeed does it even get developed?

I'll certainly exit on any reasonable spike - there will be a long news vacuum following this.

Gran Tierra will almost certainly relinquish Serenity - what odds on the current I3E team popping up again in the future with a newco targeting a development there?

Indeed, see if this flushes anyone else out.

The irrevocable undertakings are in the event that the scheme of arrangement for the Gran Tierra takeover goes ahead. If there is a competing higher bid then there will be no scheme of arrangement for Gran Tierra so the irrevocable undertakings are no longer relevant.

I fully understand why people are disappointed at the offer price given the price has been sitting at 2 year lows, but I actually think this offer will do you a favour. I've been mulling selling my stake recently, this will effectively force my hand but at 25-35% more than had I made the decision to sell. I don't think this was going anywhere anytime soon.

Cashflow short term is likely to miss forecasts substantially - gas continues to sit in the doldrums and the longer it sits at these prices the less and less protection there is from historical hedges. Sure from the end of this year, future pricing are looking better, but they are already softer than they were a few months ago, so immediate term there is a dip and no real prospect in mid term of a huge pick up of cashflow from where it is now. Add to that oil prices are looking very weak, with demand questionable and supply relatively plentiful, OPEC are going to have problems defending even $75 - the upside case for oil prices really looks to be geopolitical instability and that is not generally a good basis for holding small cap plays.

I don't see any prospect of dividend increase - the market clearly doubts the current dividend is sustainable hence the yield. Yes I3E does have access to debt, but most of its cashflow is used to pay the current dividend and new drilling and new drilling is not doing much more than standing still - production at the end of this year will only be marginally above Q4-21, despite all the acquisitions, drilling locations and capital spent they are not substantially increasing production.

So I don't see any upcoming catalyst that is going to push this substantially above where the current offer is.

It has no effect, Gran Tierra are acquiring the entire share capital.

No it applied to takeovers where the buyer has already started buying a stake in the company - if they have bought shares with view to a future takeover then the takeover price is determined by the amount they paid for shares over the last 12 months.

“The brokers 12 month target is 30p”

What was the brokers target 12 months ago? I bet it wasn’t 9p.

This is going nowhere fast and there looks more downside risk to oil price than upside.

I’d take the gain now and move onto something else, rather than keep it stuck here bouncing around 10p for the foreseeable future.

"Yes I agree with you let’s find a Lawyer we need to be united"

You need to move on. You've already lost you money, don't waste your time and sanity as well, there is no chance of any recovery.

Forget about it, it'll serve you best in the long run.

It doesn't matter, they are not paying any amount that would see shareholders get anything.

"Would i be right in thinking if this was taken private a mid price in 30's?"

No, I highly doubt it will be taken private but if it is it will be at around today's price, or perhaps lower

"It makes no sense for the big shareholders Spencer and Sneller to give up an asset worth multiples of the current share price and that is without Selene."

Ekimp - its only worth anything if you can get it out the ground and that is the biggest problem at the moment, no one has any confidence on that due to the political situation in the UK. Shell can afford to drill this well as they can fully offset the capex against corporation taxes so its cashflow neutral to them, then they can just mothball it for as long as they want or need to.

History of AIM is littered with companies that supposedly had millions or even billions of resources in the ground but for one reason or another could not get it out the ground and so they died. That the big shareholders don't seem willing to throw good money after bad should tell you something.

“ Also, if it was a done deal that NS is dead, then surely Shell would not waste around $65-70 million drilling Selene and Pensacola (their share)”

Shell can still fully offset the amount they spend against CT so its cashflow neutral for them this year and it’s still worth proving these prospects up to monetize or develop later if/when the political environment changes. Labour’s policy remains to allow existing licences to be developed, Selene will remain attractive, Penascola is a bit more questionable, but probably rather a question of time, than at all.

99icecream, I just read your post further down and you have misunderstood the Selene farm out.

Deltic are not funded to $49million, they are funded for their share of the next well, up to a gross cost for that well of $49million - i.e. up to $12.25million cost to Deltic. If the total cost of the well exceeds $49million then Deltic have to fund 25% of any overrun.