RE: ukog rns2 Dec 2019 10:59
Mirasol + shirleyfraser,
The questions you raise have been answered on this board on the previous occasion upon which a cash call was made.
There is also an answer in today's RNS, part of which is copied below, as you may have overlooked it.
Both DOR and ALBA are fully aware of the forecast cash calls that will arise from Horse Hill.
Previously ALBA included HH in the list of things that would receive cash, when ALBA did a placing.
ALBA do the minimum sized placing that will cover their intended spending plans over the next year.
They seem to have formed the opinion that although Horse Hill is a good investment (which can be demonstrated by the increase in the sale value of parts the project over time), that they might get a bigger/faster return on their other investment projects.
The business choices being made by ALBA and DOR are based on the simple boring mathematics of getting the best return.
Either pay for the HH cash calls with cash (from a placing), or pay for them with shares in HHDL, (or other payment methods which may be permitted in the JV agreement).
A default dispute situation would only arise if the JV partners choose not to pay for cash calls by any method.
"...Furthermore, following recent discussions, the Company now anticipates that its Horse Hill Developments Ltd ("HHDL") co-venturers are unlikely to contribute their 14.365% share of current cash calls pertaining to HH-2/2z drilling, HH-1/HH-2z testing and the production-related costs detailed above.
Consequently, and in addition to the above, the net Proceeds will be used to fund any potential shortfall from the HHDL partners. In this respect, the Company has also submitted a proposal to its HHDL partners to use part of the Proceeds to fully fund their current cash call obligations in return for a commensurate dilution of their holding in HHDL. ..."
The only negative implication from this is that that short term cost of raising money from a small placing (about 15% to 20%), is considered to be greater than the likely increase in the value of shares in HHDL in the short term.
The value of shares in HHDL is also dependant on there being someone prepared to buy them. At the moment that is only UKOG, who part pay in UKOG shares which devalue like Zimbabwe dollars.
Horse Hill really needs to get to the licenced production stage, where it can obtain funding from forward selling oil (reserves based funding). Then the value of HH/ HHDL will attract other cash buyers.
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