bandit - CalE originally did not want to operate , but having seen events unfold, they may feel that it better to control /become the operator. Otherwise their asset investment could be compromised by corporate strategies, even though today you would think they were fully aligned with IOG. So acquiring the LOG administrators equity (at a discount to the value implied in the asset farm-out) would give them a block on the takeout of the company, increase their returns, and allow management to get the job done - thats why I think they should do it. I also think the Harvey results have shown that the reservoir in this part of the SNS is not straightforward (one reason why these assets have never been developed), and this additional risk has complicated the Harvey v equity investment choice. It also would indicate that the IOG NAV should be more heavily risked.
Ali - I have to admit Im one of those that didn't think this would play out like it has - I didn't expect the valuation swing on Harvey results to be this material, and I think what has happened is that trading strategies have had a more powerful effect on the share price than asset fundamentals (but maybe thats me just clutching at straws). I do believe that CalE would be better off buying the LCF administrators equity position to protect its underlying asset investment over any narrow deal on Harvey, and LCF administrators may well have lowered their value expectations in the light of these results.
If I were CalE, I’d be seriously considering taking the LOG administrators equity position instead of the Harvey farmin. CalE have already backed the management and core assets , and so why spend £20 m on half of Harvey ( whatever the reserves ) as opposed to £30/£40m to effectively call the shots on the company’s future, acquire assets at a discount to NAV and clear out the overhang - just a thought.
BUTD - this does look odd I agree. I too cannot see how and when issued shares have increased to this level from 458 million on 12 August. Company should clarify this asap - along with status on Harvey results interpretation.
my point precisely - dont know what the orderly market agreement says about off market deals - probably silent. I'm sure investment bankers are looking at this situation. With 30% owned at a 200% discount to NAV, any bidder would have plenty of room to complete takeout at a discount to 60p NAV
Not sure how the 'orderly market process' agreement works in terms of 'off market ' deals, and what CAL E response would be, but must be a possibility that a third party bids for LOG Administrators position in total as a springboard to an offer? It would be bargain basement pricing today v underlying asset value/share. Maybe this is what the large recent CFD investors are hoping for?
lobs, - this is a big step to closing fully diluted NAV (north of 60p from Finncap I recall). There will definitely be further conversions and warrant subscriptions for short term players to get anxious about , but at the end of the day, the raw economics will prevail now that the company is funded through development. Harvey is a secondary issue - hopefully it will be accretive, but its less important.
thx - you know much more about CFD than me. Re LCG, no implication , just a coincidence that Spreadex tried to acquire LCG 5 years ago. But leaving that aside, it is very good news that a serious investor is taking a positive view on IOG , and seeing value here.
Pure guess - LOG administrator could be the other side of the long CFD - someone needs to be in position to deliver stock. It could be that with the at the money convertible and the warrants , this is a way for the administrator to take away some downside risk? Not sure how the actually plumbing works, but they are a keen seller , and this maybe part of their exit ? But if so I would have thought they would need to disclose something? Also a bit of online research shows Spreadex has had historic dealings with London Capital Group - curiouser and curiouser?
LO will need an exit strategy, and at or near 30% that must mean they believe they will get their return through a takeover. At 30% they will pretty much call the shots (their support required for any scheme of arrangement and to allow consolidation of any minority) and BOD will have to listen very carefully to such a large shareholders views. They are also following a clear NAV/share strategy - they are buying assets at a discount, and I think they'll do well on a 2/3 year view.
Ali, im not sure its necessarily correct to say the reservoir is thicker/ higher than initial calculations. Certainly this appraisal well has found a thicker reservoir section than the Arco discovery well, but that would have been expected, as it was probably drilled on the mapped crest of the structure. This new data will allow a refinement of mapping and reservoir characteristics which will narrow the range of reserves in place and recoverable. As a hub tie in, its going to be commercial, we just dont yet know its value. But in my book its good news .
I have to say im impressed with how the administrators have managed their role. By supporting IOG strategy, and taking a medium term view they have done well for LOG bondholders, without undermining the position of IOG shareholders . Sure we have been diluted, but that was always going to happen, And the NAV/ fully diluted share is still well above the SP which will be the fundamental driver of value from here for investors - new and old.
Before the Farm out and LOG refinancing , the actual project plans were still subject to significant counterparty risk. With the completion of farmout and reorganisation of IOG balance sheet, the situation is stable and I see this RNS as evidence that management has turned its attention to optimising asset exploitation to maximise shareholder value. The CFO clearly knows what he is doing. There will still be ups and downs as in any large project, but I remain a confident LTH.
Agree with all of that - there is still significant value left in the SNS for a committed player - there are no easy pickings, but plenty of incremental assets to build on a hub strategy through exploration, appraisal of old discoveries and clever asset management . The IOG team have done this before, and are now in control of their own destiny.
Aligator - you are correct that the UNRISKED NPV is north of £500m. Finncap apply geological and commercial risk factors which reduce the RISKED NPV to $436m - circa 60p/ fully diluted share. So there is upside from the 60p, but also downside ( as BUTD would point out) ...