Icebergshares: Battle for Planet NWOG.

The market doesn’t do anything out of whim or whimsy. So why did various people take a position in NEW? Why does there seem to be a battle for a company with no assets…? Why is the current SP .26?

So many questions, so few answers…

A few points NEW is cash rich, they have:

1. £400k in the bank.
2. £1m left to be paid  from the Niel deal.
3. £800k owed to them by director loans.

Total £2.2m without a placing..current MCAP without a placing £1.83m, the market stabilised at this level, not through chance, but it’s a simple cash in the bank value.

Given the OO go ahead, we could easily add £1.5m to this.

We’ve also got the Danish CPR due next month, this is expected to put a risk adjusted value of £2m on the resource and is the blocker preventing successful farm in.

The AIM listing for a cash rich shell company should add a further £500k-£1m to the Mcap.

Given all this anybody buying into NEW its lower price is set to make a handy sum of money.

I do wonder whether this was the plan all along, get the SP to its low of the low figure, issue hundreds of millions of shares or warrants to the BOD, see a dramatic rise in the SP, thanks to the valuable CPR, farm in and added highly lucrative new project.

The only problem is that several other people saw this as well, notably Chris and BMD and MTR.  Buying of stock took place. Suddenly it dawned on folks that a short squeeze was on. The price rose to .8p which was the trigger for selling as this was no doubt the exit strategy for a few folks given the above calculations.

Lets make it very very clear that even at the current value the company is still undervalued and could still see a multi-bag even without any short squeeze, don’t believe folks that tell you otherwise.

The company will resume trading very quickly, there is no doubt as to whether or not NEW is a “going concern”.

#NEW New World Oil and Gas – Don’t worry be happy…

#NEW – Don’t worry be happy…

There are lots of rather silly bits of speculation about motives, conspiracy theories etc on the BB’s. I would urge investors to concentrate on the facts and what might realistically happen.

• Private Investors won a fantastic victory with a NO vote for the cheap BOD shares and a NO vote for the placement shares.
• Cornhill has not been given 2.5bn shares it can happily give to its clients or to those that thought they had participated in the placement.
• The BOD know that a majority of shareholders are very unhappy with them, that those shareholders are now a sizeable cohesive block.
• The shares are suspended until the market can function correctly and shares can settle.

 

With 2 billion shares needed in the market, (we know this number as most brokers only have between 10-40% of shares settled), we know that the market can absorb 2bn shares without it effecting anything at the moment.

The only place these extra shares could have come from, are from short positions taken out by folks who thought they have guaranteed shares, but instead have simply taken out naked shorts to the tune of 3 times of the current share base.

If every share currently in circulation was brought by Cornhill and the other brokers it would still leave a shortfall of 1.3bn shares. This would obviously require a very high price to be paid.

The LSE are saying then that the shares will be suspended until and unless they get a guarantee of at least 1.3bn shares entering the market.

The only way the new shares can enter the market is either through a placing (which would need a vote) or an open offer.

No investors like to see their ability to buy or sell taken away from them, but we need to look at the bigger picture. For current investors we have a few things to think about.

How many shares will be issued?

Who will the shares be issued to?

At what price will the shares be issued?

With regards to how many shares, the fewer shares issued the better, however even if 2.8bn shares are issued, the answer to the other two questions will determine how good or bad this is to investors.

The shares will be/must legally be, offered to current shareholders first. Only after this will the leftovers go to Cornhill, or whoever NEW use to underwrite the offer. Current shareholders will snap up most of the shares if the price is .05p leaving maybe .5 to 1bn shares for Cornhill. If we increase the price to say 1p and decrease the number of shares to 1.5bn then it might well leave 800m to 1bn shares for Cornhill but at a much higher price.

This is just my own calculation but I can see around 2bn shares being held by investors who are trying to force the short squeeze. Brokers need 1.3bn shares to settle these trades already made. Flippers and shorters who have found themselves in a naked position need a further 1.5bn shares as a minimum. Given all of this, current holders of stock, and those that take part in an open offer will find their shares very much in demand when the trading resumes.

What price they get on the open market, will depend on how quickly brokers and shorters want to settle accounts and what the current holders decide to sell out at. I am pretty sure it’s far higher than the current price though.

For these reasons I am very happy with how things currently stand.

Ignore a lot of the uncertainty around the share, BMD and Chris might make an offer, BMD is certainly very good at pumping stocks up(although I am not really interested in being in that kind of stock).

Something might or should happen to Cornhill.

An EGM might or might not be called to vote out the current BOD.

But as an investor all we really care about is the bottom line and for me that’s looking healthy when it moves out of suspension. I am genuinely happy, not worried.

#NEW the way out of wonderland.

#NEW the way out of wonderland.

The more it goes on, the more I am reminded of Alice in Wonderland. Mysterious smoking Caterpillars, Cheshire cats and Mad Hatters. I will leave folks to figure out who might be who in this scenario and who is the Queen of Hearts…

Anyway so following on from Ben’s excellent feedback from the EGM. We have an independent count in place for the votes. This is mind-blowingly good news, the BOD have also had to confirm that the register is in such a mess that it can’t even count the votes accurately.

A lot of side line investors kept repeating the mantra, that EGM’s will rubber stamp it, the BOD will get their way they always do….This is true nearly of the time, but is blatantly not true this time, with this EGM.

Going forward we need to find a way out of this wonderland. The FCA/LSE does not like to deal with things “in the open”, instead a way forward will be found which satisfies all parties to a degree and one that keeps everything working. It won’t really care what happens as long as everything is seen to be “working”.

A number of behind the scenes, happenings have occurred. We have a stock that has now been suspended. We have a broker who has supported and organised the placement and the 2bn none existent shares, who has a web site that has been down for “maintenance” for days now. Whether you believe this, in a world of 24hr hosting support, for a small and simple website is up to you.

The only thing we need for a full house is some kind of sanction against the nomad, or for their website to “go down for maintenance”.

The FCA/LSE will no doubt have contacted the nomad of #NEW to discuss the situation of a failed and very public EGM. Having a company suspended simple because it can’t hold an EGM vote is not good publicity for the AIM exchange and I can’t see it happening for long.

So the FCA, LSE, Broker, BOD, Shareholders and Nomad all need a way out of wonderland. For me the majority of the impact will fall on the broker as they must have ultimate responsibility for the placing if it fails.

An open offer will not meet any of the above criteria, it will be challenged left, right and centre due to the mess of the registry. It will take too long. It will not give enough shares to the broker to meet its obligations. It is not in the best interest of the company given the current offer price.

A new placement of shares at the maximum price of the last 10-20 days, would get a passed vote by the current shareholders imho(this is needed for legal and “clean” reasons). It would put the shares in the hands of the broker and enable the various counterparties, funds etc to settle, it would allow the flip floppers to buy the shares they needed from the placing, solving that problem. The share registry would be healthy again and the company would have a large injection of cash to move forward.

The above of course would mean the broker losing out or passing that loss on to the funds or its clients. It would also mean the flip floppers potentially having to take a hit. The FCA and LSE could claim that the markets have worked themselves out, without creating a new precedent.

Anyway just a thought and lots more to happen on this share, I have no doubt. Keep a firm strategy in your mind, at the moment I am happy to hold.

#NEW update 15/05/2015

A few points about T20’s etc and how the flippers expected the placing shares to fill their short positions.

We have the EGM at 1pm on the 19^th(Tuesday), the shares should be tradable i.e settled in peoples account according to the RNS by 8am Wednesday morning.

For a start I can’t see how this would possibly happen as once approval has been given it normally takes 48 hrs for the shares to be admitted to LSE trading, but let’s ignore that. I rather think the BOD thought they could give the go-ahead to the stock exchange prior to a rubber stamping EGM. (This was a very bad thought).

So the flippers will be assuming they can close their positions (and indeed have likely arranged to have their positions covered and closed by Wed or possibly Thursday.

The T20 time is not FRIDAY (today).

However there is a big caveat in the above. The placing shares are now very unlikely to go into the accounts on Wednesday, a “No” vote is almost certain. This means the flippers have a big problem. They have an even bigger problem in that the shares are taking 5 days+ to settle atm. All of this indicates that if they want to meet their T20 obligations they need to start settling now, if they don’t every day adds to the risk. If they wait until Wed/Thur and the SP spikes on a “no” vote news then they really are buggered.

The rise start a couple of days ago imho, with the flippers starting to try and buy the stock they need. It certainly hasn’t finished.

2 Billion short fall in shares.

Now onto the important bit, the short squeeze isn’t just happening because of the flippers, its moved beyond that. Prior to the dilution announcement NEW was heavily shorted by individuals who thought that a placing was going to be needed. These shares need to be covered.

To meet demand the Market Makers will also be heavily short of shares.

To meet clients expectations of settled shares, many, many brokers will also be heavily short of shares.

All of this is an almighty mess, but one fact is inescapable everyone needs shares, if you have settled shares in your account, then your hoarding a very in demand product, keep hold of it.

The open offer and everything else is largely irrelevant. That will be news for latter following week. I do expect though an announcement that an EGM has been called to kick out these cretins, that will likely be Monday and heavily announced over the weekend.

It is not a share to sell out, in fear of bad news over the weekend as simply I can’t see any bad news that might break, but can see plenty of good news that might surface over this time.

#New world silly buggers…..

So NEW has issued the RNS that they dreaded, The Williams now hold over 30% of the company and its settled in the crest account.




RNS “On 8 May 2015, the Company received a communication from Jon Rhodri Williams, Christopher Williams and Judith Mary Williams (the "Parties") purporting to be a letter of requisition, and claiming an aggregate holding of 342,328,669 ordinary shares in the Company.…the Company is treating the Parties' requisition as invalid as the Parties have failed to satisfy the criteria of either article 89”



And then we have…todays holding RNS which states that the Williams really did have 342m shares and now had 250m…..



This seems strange either they had the shares as a holding before or they didn’t. My understanding is that they didn’t have them settled and that the 250m are settled now and the rest will settle by end of play today….RNS tomorrow then. No shares have been sold by the Williams its purely a very disingenuous and misleading, not to mention false way of reporting by the company. We don’t really expect much more from them though.



The NEW BOD knows this means an end to their existence, the only question is when and whether they go out with an ounce of grace and decency.

The blocking vote at the meeting means that the placement will NOT now happen, it really is inconceivable that the BOD will get 300m yes votes…
An EGM can now be called under Jersey Law in June to have a vote of no confidence in the BOD and to sack the lot of them…


The question is really around what happens now.

Well we have two scenario’s.



Scenario 1 is that the BOD follow through with their open offer, given that Chris would have to be stupid not to take shares at 0.05p he will certainly take up his allocation IMHO. Many of the other holders will also take their allocation leaving, if they are lucky 800m to 1bn shares for Cornhill. Will this be enough to cover all the forward sold shares from the now not to happen placing? I doubt it.




Scenario 2 is that the BOD don’t attempt the open offer, they submit to the overwhelming view of shareholders and raise the funds at a much higher price with far less dilution.  Major share squeeze occurs and the SP rises well above 1p.

There isn’t really much else that can happen, yes we might have an offer the company, yes due to a vastly incorrect share register the court might decide that no vote can be taken immediately.




However, under no circumstances, can those that forward sold their shares, close all of their shorts on time.




The rise will happen...Thanks flip floppers...

Icebergshares Quick round up on Election Day

Firstly I’ve not brought or sold any positions for a while, so If I am quiet about a share, it simply means I am busy, or there isn’t much to be said.

The UK election.

People need to pay attention to this, it will effect some shares imho. It looks like nobody will win and even a Labour-SNP or CON-LIB alliance will fall short of votes to get a majority.

This is likely to mean uncertainty, which the markets don’t like and deals which could well effect UK exploration, house building or whatever sectors your in….

Let’s start with the ultra-busy #NEW.

Its getting down to a value where even if there isn’t a short squeeze, with the money coming in NEW could be profitable cash handy shell company. Allowing for a dilution the MCAP isn’t unattractive with limited downside. This could help to derisk the upside.

A hefty warning though that a delisting for the company is possible so definitely one to only invest what you are happy to throw away.

#SAV drill results.

Although a little disappointing, I fully stand by my post on LSE.

“Blimey what a lot of info. I do wish David would spread it out a little bit.
Get the bad stuff out the way.
Zone 5 looks cr*p. I am glad they canned the drilling.
Zone 4 Diamond drilling wasn't great either, they missed the target. Yes there found evidence of VMS mineralisation, but they still need to find the actual mineralisation and that could take a fair bit of time and effort.

The western targets in Zone 4 look good from initial testing, they actually look great re gold target, although weak for copper. For me this looks to be a nice concentration of gold veins, separate to or leading to or from, the main VMS.

The market though does not value rock chip samples(those silly enough to have invested in ORE will know this). They can be very selectively taken and represented.

David needs to hit with the next ground of drilling to prevent SAV from being in danger, the trenching work, if done in enough bulk, might well be an advance to go, collect £200, if its good and it should be really.

Market won't move until we get that trenching work or economic movement on Mozambique imho, I just hope that David raises money post this work in August or September.

If I had to grade the RNS's today it would be a C.”

The gold does look promising but we need it to be AIM proof to allow the SP to recover and expand.

Overall still a nice hold, but I think I need to check with David to see if he can expand on the RNS a little.

#OXS still waiting, we still have definite silence from all involved and concerned.

We also have the usual overhyped and overpriced companies (won’t name them), but I hope folks are careful out there. Don’t get greedy, pick the safe bits and if in doubt don’t hit the button!

Aim higher......

Hope people have enjoyed the bank holiday, lots of #NEW tweets, hope it works out for folks, but also hope folks understand the longer term consequences.

I posted a blog back in March http://icebergshares.blogspot.co.uk/2015_03_01_archive.html

It was a not so veiled viewpoint of something that investors don’t think about too much.

I’ve also tweeted about the frothiness of the market at the moment. The main point I was making about this frothiness, was that the market is not behaving correctly, we are seeing very large rises and falls without too much substance. Yes this always happens on AIM but not..Repeat NOT to this extent.

For me this rings alarms bells. Rome fell due to the decadent nature of their system.

AIM is decadent.

There is far too much of a cozy relationship between nomads, companies and brokers. This impacts the market doubly through a very cozy relationship, between nomads, companies, brokers and powerful private investors and investor groups.

Add on a layer of corruption, from all of the above and we get nomads having to apologise for the rampings of CEO’s, forward selling of placements and market manipulation, to allow risk free high margin placements, the shafting of shareholders al la Afren.

Given all this, what’s happening at #NEW has been on the cards for ages.

I have no doubt that over the next few months we will see more of this, along with suspensions, CEO resignations, court action and warnings from companies.

Make no mistake fortunes will be won and lost. But most investors (notice I say most and not all), will be playing a game of Russian roulette.

As a private investor you need to make a decision, play the game, take the risks and gain the rewards. Don’t play the game and perform a level of due diligence on any investments.

So what can investors do?

Find out who the nomad, broker and advisers are.

Is the company “friendly” towards certain private investors? (this is a bad thing).

Does the company act professionally at all times?

Are leaks common?

Does the company survive on hype?

Personally, I’ve been steering clear of dodgy companies, despite favourable sentiment, for a few months now. For those wondering the boring, high growth, professional companies such as #AEG are the ones I am hinting at as good companies to invest in!

Hope whatever peeps decide works out for them.

Icebergshares #AEG Seeing the wood for the trees.

I’ve been following AEG for a few weeks now, it’s a company that I know is familiar to a few of you PI’s.

Quite simply they make products from wood. They use cheap plentiful resources in Ukraine and ship this is fast growing developing countries such as Turkey. So far so good. They have been on a steady progressive restructuring to reduce debt payments, increase margins and grow the core market.

There are two aspects that make AEG particularly attractive as an investment at its current share price.

The first of these are the phenomenal growth rate that it’s currently achieving. AEG produced 67k tons of wood chip bio fuel in 2013, this rose to 280k in 2014 and I have been told will be around 1m tons (estimate) in 2015.

Revenue is set to increase from 8.4m in 2013 to 21.5m in 2014 to an estimated 70m in 2015.

Profit is set to be round 4-5m in 2015.

Unofficial figures for 2016 indicate revenue breaching 100m with profit of 15-20m.

The second reason for wanting to invest into AEG is a particularly good deal in Canada. AEG managed to negotiate the setting up of a new company of which is owns 45% with local tribes owning the other 55%, AEG’s role is to commercialise the forests under the agreement. 250K hectares are in the agreement with 100k been the most prime commercial. This was in July 2014 and by the end of the year full commercial evaluation was undertaken and AEG went on a roadshow across the world to find potential suitors for the forestry licenses.

Three potential suitors were found willing to pay $300m for the rights to the 100,000 hectares. A formal offer is set to be made in the very near future.

Along with the current Canadian forestry deal, there are strong rumours that further tribes within Canada have approaching AEG to help new set up further multi hundred million forestry deals.

AEG has a current Market Cap of £31m currently. It’s currently a profitable, very rapidly growing, AIM company with a strong revenue stream.

I am not a chartist and don’t really put much faith in technical analyst, but its bouncing along a break out imo ready for a rise to 8-9p based purely on continued “no news” but rapid growth expectation.

News of further Canadian deals could push it to 10-12p and news of a confirmed $300m bid would push it to 15-20p.

This is purely my opinion but there is plenty of scope to buy, hold as a long term for good profit with some risk attached to a much larger potential reward. i.e  a win or big win scenario.

Icebergshares: UKOG More than it can chew.

Well I’ve been on holiday and got back to UKOG mania, firstly well done to all those that made a fortune on the sentiment rise. For those that brought in recently on the rise, I wish you the devils luck on making money, leaving with your money, or even not losing too much.

UKOG has commissioned an American company to produce a report on its oil reserves, not only has it done this based on a single drill, but also without 3D. It reported 158m of reserves per a sq mile and even felt it was able to update and come up with a figure of upto 100bn for the entire weald across Southern England.

It has been interesting to watch the media reaction to start with we had newspaper style headlines, however as the day progressed the BBC received information that questioned the massive figure and a more sceptical reporting angle was given.

http://www.bbc.co.uk/news/business-32229794

Quotes such as “CIBC strategist Jeremy Stretch says we should treat the estimates with caution. He said: "There remains a considerable divergence between estimates of reserves and the potential degree of extraction”

And let us not forget “Last year, the British Geological Survey (BGS) produced a report suggesting there were 4.4 billion barrels of oil trapped in shale rock under southern England - which would need fracking to get it out.”

So within a year based on a single drill an American company paid by a rampty ramp company came up with an estimate that’s 25 times higher than the estimate by the BGS which was based on hundreds of drills and samples.

We need to get Nutech in perspective, it’s been ramping the hell out of Shale production in the UK for a couple of years. However lets ignore that and look at the actual figures.

Nutech compares the Weald with Bakken, Wolfcamp and Bazhenov in Russia. In all of those areas TOC’s of 4% or so are the commercial minimum’s.

If we look at the UKOG figures produced by Nutech we only get 17.4m down from the 158m where the TOC is higher than 4%, so a pretty big drop then.

As mentioned in a previous blog, reports from British Universities generally support the idea that TOC’s of 10%+ are needed to support natural extraction in the Kimmeridge layer with a sweet spot of 20%+ needed.

Given an actual recovery rate of say 5% that gives us 850k per sq mile.

Now let’s play a little more…..Kimmeridge is known for good fracturing exactly as UKOG have mentioned, what they haven’t mentioned is that the fracturing tends to be heavy but with small lateral expansion, ie a fracture might extend 5-50cm, this is unlike some other sandstone and mud stone types where the fractures can extend 100’s of metres. 

This means to extract even a fraction of a sq mile, very large laterals (probably 5-10km) will need to be drilled. If UKOG get permission to drill these kinds of laterals in the populous areas around Gatwick then I am a monkey’s uncle.

The final point is the pressure. As mentioned by David in a BBC interview the weald has no pressure…..

This means flow testing will be problematic and will require industrial level permission. Any flow will likely be measured in the 10’s of barrels a day imho. With no guarantee that the hole is commercial.

This morning UKOG had an MCAP of £50m after rising up from £5m. This is a madness figure. The news released doesn’t really change anything. A tremendous amount of poor quality posting is on the forums showing a total lack of geological understanding. Personally I put a realistic mcap of around £5-8m on UKOG at the moment, this will change in Q4 depending on the success or failure of any flow test.

Well done again for those that made money on sentiment, but whenever money is made on sentiment and not on real added value 4 out of 5 investors lose money. Personally I prefer to make money on value adding news….

Icebergshares; Nomads, Brokers and Market Makers (NBM’s).

I’ve contacted a few of these in the last couple of weeks, some with compliments, some with complaints and some with just advice or opinions.

This article is not about exposing anything, giving opinions on any companies in these arena’s (good or bad). All I want is for private investors to be aware and keep the roles these companies play in focus.

NBM’s are often the same companies, most of them perform all these roles and the 4 character market maker codes you see for your exploration company in Level 2, will often be a nomad for a different exploration company.

There are around 40-50 of these companies, they raise money, they ensure the companies meet the legal requirements of the LSE. They should have a detailed knowledge of the company they represent, visit the sites and provide PR for the company through well written research notes and broker targets for the share price. They advise on positive ways to represent information in RNS’s and can advise on the actual strategy the company might follow.

It’s easy to see that NBM’s are very important to the success of your investment.

The role of the NBM provides a raft of possibilities for conflicts of interest and they need to work hard to ensure this doesn’t happen. Sometimes this fails spectacularly, such as with Seymour Pearce and hefty fines and disqualification can occur.

There is considerable variety in the type and niche capability of the NBM’s. Some specialise in technology, some mining, some oil etc. Nomads should have an “Industry expert” on their field/s they represent. A further layer of niche specialisation occurs with come NBM’s dealing mostly with lower cap companies, an average of less than 25m MCAP, some have a much higher MCAP average(100m+).

NBM’s are NOT charities they make considerable money from companies. The more a company shouts about itself, the more liquidity exists, the more dilution, the more money the NBM’s make. I’ll leave it to you nice folk to imagine the kind of characters that might fall into this category. It’s nice for a company to make money for investors and be successful, but it’s not essential to the NBM’s as long as the investors continue to believe the dreams.

NBM’s can be further characterised by their aggressive strategies. Some NBM’s look to grow their client pool rapidly, they tend to sell themselves more and promise more…Therein lies the first large pitfall of a conflict of interest. Is the nomad well balanced? Or is paying more attention to the needs of the company than the company meeting its LSE obligations? How far is the nomad prepared to bend the rules for the company?

The next topic to think about is fundraising, Do you, as an investor, see the use of facilities provided by Bergen, Darwin, Yorkville as a good thing? It won’t take you long to notice that certain NBM’s have a preference for certain fundraising. RFC for example have led to several miners/explorers using Bergen. I am not inferring in any way that RFC benefit from suggesting the use of Bergen however it’s clear that certain NBM’s suggest a preference for certain fundraising.

You might also have been wondering about RNS’s, sometimes they are very bland and give out very specific highly technical information. Sometimes they are filled with possible, maybe, potential statements suggesting that the company is on the verge of the greatest find this decade. The Nomad does review every RNS that gets released, some are very firm about forward looking statements, some less so…..This “style” does help influence the variability of the share...

Many investors don’t consider the NBM when investing, personally there are some companies represented by a Nomad that I would never consider investing in. There are some where I would only invest short term. When reading an RNS or examining a new funding facility try and take note of who the Nomad is. It will help you realise whether something is a pipe dream or a likely reality.

Do NOT be afraid to contact the nomad, they should be there for you, they should want the opinions of investors, they should be holding companies to account.

Finally take note of when a company changes their Nomad. Is it because the nomad really is useless or it is because the company wants to push the barriers and is saying no?

Weekend Round up #OXS, #AFR, #UKOG, #FOGL, #SAV

Very Busy so didn’t want to go into each stock with too much detail.

#OXS – saw some high volume this week with many large trades particularly on Thursday. I made a call on twitter to buy at something like 3.3 (current buy 3.5), Still the big unknown risk of the arbitration but still very much worth taking with a  portion of your PF that your prepared to write off. A bit of excitement from the Jerooy contingent asset in the coming week, board holders have probably sold out now so a rapid rise off the 50 day SMA to a classically overbrought signal of 4.5p could well occur. As could a year making multi-bagger if the arbitration news comes in.

#AFR looks to have stabilised in the 3’s, this stock was always a risk and it really depended on how corrupt you think the general market would be to a FTSE 250 company…The Answer came in loud and clear. Investors should contact the company and make various points very clear to them.

From this level it seems to make sense to hold for me, I won’t be selling or averaging down, just holding to see what happens.

#UKOG – lack of understanding.

I posted about HH last year here

http://icebergshares.blogspot.co.uk/2014_10_01_archive.html

The latest news pretty much confirms what I said. HH IS NOT COMMERCIAL. Its drilled into the same “world class” source rocks that exist across much of southern and southern central England. I fully standby my comment that I could drill under a Tesco’s near to where I live and get the same results.

A study was undertaken a while ago that took rock chips from a variety of beaches around Dorset. Half of these samples had higher TOC’s and S2’s than Horsehill, some higher than anything Horsehill had as a max.

The source rocks tested have always been and will nearly always be organically rich, generally TOC’s of 10-20% are needed with TOC’s of 25% for sweet spot convectional extraction. S2’s of 100 or so are also probably needed for free flowing. I am not saying I know more than the experts but the experts are purely commenting on the potential and giving industry facts and figures rather than commerciality.

Horse Hill is such a “normal” underachieving southern England drill its almost scary. Don’t believe the crap and hype this will NOT make you a fortune.

#FOGL Things are starting to get interesting now on FOGL. The drill bit will be churning through the rock, possibly hitting oil and successful hit will put a lot of confidence into FOGL, unsuccessful will create a great buying opportunity for the rest of the drills.

#SAV some very nice gold grades coming out of SAV, Gold is still an extra on top of the principle copper and so is all a bonus, adding to commerciality. At this stage the gold alone looks like it could be commercial, with the copper as well this looks almost a certainty. Just like Mr Archer to pick a certain highly safe project in Oman to go along with the now highly certain Mozambique project. Massively undervalued share.

Open Letter to Toby Hayward

Toby Hayward.


Open Letter to the Interim CEO of Afren plc.


As a shareholder i have read the recent announcements with regards to re-capitalisation and trading updates with interest.

I wish that i could say that i read them in anything but disappointed interest.

As an Interim CEO I am sure you are aware that you, the Board of Directors and the Chairman have a duty to act in the interest of shareholders who are the owners of the company.


Before I vote and attend the EGM, I would like some clarification on a few points.


Point 1. Why did Afren not try to undertake a placing or rights issue when the share was many times higher than they currently are? As a shareholder this seems to be a colossal mistake costing Shareholders dearly.
Are any of the BOD, or yourself agreeing to a salary sacrifice for its failure ?


Point 2. In 2014 Afren produced 31.8kBOPD, why under its current financial problems is it then spending a Capex of $500m to achieve a production of 29-36kBPOD for 2015? It seems very strange to spend this money without predicting any firm increase in production and it seems strange to spend this money if the company simply doesn't have it?


Point 3. Can you confirm whether any of the Ad Hoc Committee members had shorted the Afren Share either pre or post its creation ? again shareholders would be happy to see "everyone all in this together", but only if Bondholders have not benefited from the collapse of Afren.


Point 4. You mention I believe for the first time that the Hedging facility was closed in Dec 2014. Can you confirm this was the case, can you also confirm why this has only been notified to share holders now? I believe this to be very price sensitive information when it occurred in Dec, for which the company had an obligation to inform the shareholders in a timely manner.


Point 5. Why are we re-finacing and diluting for the 2019-2020 debt? Trying to refinance debt due in 4 or 5 years time, when the company is at its weakest seems to be inadvisable.


Point 6. Am i right in saying that money will be raised by giving cheap shares to the bond holders, and then this money will be used to pay off the interest due on those bonds i.e given back to the bond holders? Surely this is a zero risk transaction for which the bondholders are being rewarded.


Point 7. Will Afren forgo the ability to issue share options or pay in shares for its senior managers and Board of Directors? it would seem inadvisable for the very people who are largely to blame for not raising funds when times where good to benefit from a low share price.


I have to say as a shareholder it appears to me that the Bond Holders will have made somewhere between 100-300% profit when all is said on and done on these Bonds. The Board of Directors and Senior management have and will continue to benefit from nice wages and secure jobs.


As a shareholder I am certainly not scared to vote NO in the EGM for these proposals, I would be happy to take the risk that the assets are worth more than the debt to certain parties, or that the bondholders would increase there offer.


If you can answer the questions above that would be appreciated, if not then I will try and ask them at the EGM, before I vote.


Thanks


(Awaiting response)

Afren They got it wrong again

I’ve written a series of blogs now on Afren for a host of different reasons.

One of the main reasons has been some of the most diabolical posting ever on bulletin boards.

They will know who they are, they are folks that came on this morning before 7am saying the Afren SP would drop to 1-2p straight away so folks should just sell and get whatever they can for the shares. They are folks that said that the shares in Afren are now worthless.

They are also the folks who said that the Bondholders would own 100% of the company, or that Afren would be delisted.

They quite simply prey on the fear of investors, by stocking up that fear and coming out with some pretty dire comments. They are simply scum….
The truth is that the SP is now currently higher than the end of Jan, despite everything that has been thrown at it

Anyway now that’s out of the way…

Afren fired the starting gun this morning, first offer out of the blocks is for current shareholders to maintain around 10-11% of the company(for a company that fell 95% due to fears it might go bankrupt that’s a reasonable achievement). The Market obviously priced in a larger fall. Also obviously the market had priced in this news to keep the SP at around 6p, it looks like as I type the SP is around 4.85p due mainly to the selling out of PI’s, but who do we think is buying the shares….

The offer is stupidly low and for a number of reasons I certainly wouldn’t and won’t be voting for it.


So the negative points.

Why pay now and convert now for debt not due until 2019 or 2020 ? This makes no sense, by 2019-2020 the company will be much stronger. Why this pigs ear of a very complicated set up, whereby we /Afren borrow money from the bondholders to pay back the bondholders? The cost cutting is due to create a pathetic reduction in total spend. It needs to go much further….Why no disposal of none core assets? Are any of the current BOD going to see a wage reduction or will we find them loading up on cheap share options? (IMHO they should be banned from any share options below last nights SP). The RNS has obviously been worded to paint the worst possible picture of Afren. The BOD want to keep their jobs and this will ensure that..They should be sacked as soon as possible. Finally many of the bond holders have brought the bonds at sub issue price (i.e at 40-50% of the $) yet they get 100% of the bond value…there should be at least a nominal haircut for the bondholders.

Now the positives.

We have bondholders who are prepared to invest hundreds of millions into the company. This is now the low ball offer, we have security that a delisting will not occur, we also know that the lowest the SP will likely go to is around 5-6p in the medium term (nice feeling for me as 6p is the point where I start to lose money in Afren this year). The bondholders always had to make the first move, now that is done the very vocal bidders can come in and put offers to the table. The bank has agreed in principle to a considerable extension to the RCF, this will be good news for any potential bidders.


My final points are vote NO to the bondholders, we need to tell them to go and bully somebody else.
Sack the current BOD, ask the BOD to suspend ALL discussion with any group involving JP Morgan.
Ignore the cretins who keep saying 1p or 2p, its so not going to happen....
Keep a note of the names of the BB idiots, they are same folks who pump shares, the same folks that talk down all the shares and the same folks that feel its right to sell a car without breaks to a single mum and her family....


Enjoy...Relax...and finally now wait, remember if the BH's are prepared to invest money and loan the company money to pay back to themselves then other folks would be more than happy to do this. Also remember the BH's are not Oil Company investors, they simply want to take the shares, let the SP rise 100% or so and then sell as quickly as possible..


BTW Sorry but I will be removing ALL replies to this post. Normally I am happy to allow free opinions, but I know this simply won't happen on this blog post..

The living market. Learning from #FOGL

I thought I would put a bit of a blog together about this fine racehorse. I’ve been investing in FOGL for a few years on and off and it’s interesting how it has developed and how as an investor we need to realise that the market has developed at the same time.

The first time round back in 2012 when we had the first round of drilling for FOGL we saw the share price rise massively to £1, this was reached around the time of first spud, optimism was a high and it wasn’t until the September well results came in that the SP dropped from the 90p mark down to the low 60’s. The following Scotia well was a failure and the price then stagnated around the 30p mark.

This time round the market learnt and developed. Buyers saw a low risk opportunity, they brought in the mid 20’s sold pre spud or on spud news and the SP has pulled back to a lower level (equivalent back in 2012 to the SP falling back to the 60’s during the drill…..)

For people not yet invested it gives us quite a few possibilities. We can take advantage of this learning market, sit back and take a lower risk position by buying in now that the Share price has fallen due to the sell on spud crew. My recommendation would be to invest a portion of it now, if drill 1 fails, you have the ability to average down on what would most likely be a massive over re-action if the drill isn’t a success, (maybe 20p). With plenty of upside on the potential of future drills. If the drill succeeds you can ride the wave and pocket some very nice profit, leaving a portion in to ride the rest of the drills.

I hear from Macy’s blog that FOGL will need to raise money and this is very correct. However the targets have been chosen in my opinion to allow a window of opportunity for this probably between the results of drill 2 and the spud of drill 4. It makes no sense to fund pre potential and likely good resource news before the results of drill 2 but equally makes lots of sense not to risk waiting before the more risky wildcat drills in the southern license area.

The risk of dilution then at this time, must be pretty minimal. A window of opportunity has developed for more canny investors…. Live and Learn and have a bit of fun along the way.

Happy Halloween Afren Holders.

I wasn’t going to say much about Afren, but it was a really interesting set of events this morning from a market psychological point of view.

Let’s get things straight, Afren had a silly leak. It happened outside of working hours. It happens and lots of different companies fall for it. Indeed you can download software which will search a website for any files that do not have permissions and simply haven’t been linked to yet. It is not illegal to go to a publically accessible website and look at a file which isn’t linked to yet is accessible to the public. So a bit of a mistake but nothing too bad.

Now on to the actual news event..The RNS!

In light of the Company's current liquidity position and in order to preserve cash while the review of the Company's capital structure and funding alternatives is completed, the Board has decided, at the expiration of the 30 day grace period, not to pay US$15m of interest which was due on 1 February 2015 under its 2016 Notes.  While such non-payment will result in a default under the 2016 Notes, this will not result in an immediate obligation to repay such 2016 Notes or any cross-default under its 2019 Notes or 2020 Notes or its other debt facilities.

This makes two important points. The board has decided to default on its bond. This is not good news. However this could be for several reasons. It could be that the RCF deferral was dependent on stopping bond payments. It could be the company has simply decided to call the bluff of the bondholders and are saying, so what if I default. IMHO this reduces the pressure of the bond holders as it shows their scare stories of administration and calling in collateral are simply not going to happen at least in the short term.

For me the last sentence is the most important…A default in the 2016 bonds, does not trigger any kind of automatic default or consequences elsewhere in the business or its debt profile. This leaves the 2016 bond holders rather toothless.

The Company has received assurances from the ad hoc committee (which members hold in aggregate approximately 55% of the principal face amount of the 2016 Notes and 44% of the total principal face amount of the 2016 Notes, 2019 Notes and 2020 Notes) that the committee has no current intention to take enforcement action with respect to the 2016 Notes held by its members as a result of the failure to make payment of interest due under the 2016 Notes, in the hope and expectation that agreement can shortly be reached with the Company and its key stakeholders on the terms of a consensual restructuring that would preserve the Group and its business as a going concern for the benefit of all stakeholders.

The bond committee is not made up of the majority of  2019 and 2020 note holders….this is important. Any deal will pay off the 2016 bond holders and the RCF. Even then the adhoc committee is barely 50% of all the holders. This again weakens the hand of the bondholders.

Again of most importance is the last part of the sentence where the bondholders have no intention of enforcement actions because it hopes a deal can be made for the benefit of ALL stakeholders. This indicates that there will be a benefit to Share Holders as they are a major stakeholder. This is NOT what the bondholders have been saying up to this point. It now becomes very very unlikely that shareholders will be “wiped out” to quote a certain news article.

The Company is continuing constructive discussions with the advisers to, and members of, the ad hoc committee of its largest bond holders, the coordinating committee of the lenders under its US$300m Ebok debt facility and its other lenders regarding the immediate liquidity and funding needs of the business.  It is expected that any agreement with the Company's bond holders and debt providers regarding the provision of interim and longer term funding and a broader consensual restructuring is likely to result in economic terms associated with the new funding and/or the issue of new equity which will substantially dilute the interests of the Company's current shareholders.  

So there will be substantial dilution….Yes we have always known that. Nobody invests $300-500m in a company with a Market Cap of less than £100m without there being substantial dilution. The substantial dilution was always the reason why the Share Price fell from 100p to the sub 10p. The question is how much dilution is going to happen? For Afren to maintain its stock market listing 25% of the company must be in public hands. So a realistic assumption is that we will end up with 75% of the company in the hands of the a third party and 25% with the current shareholders….

Given this the real question is what is an Afren, with no debt due before 2019, with 40-50K BOPD output and with a capital injection of $300-500m for 75% of the company actually worth….

Personally I would put a minimum price of 1bn on the above, this would give the current shareholders a share worth approx. 250m or 20p or so a share. Of course the dilution could be lower than this and a firm case could be made for the company being worth considerably more….But this is far above the current trading price.

While the Company is also having discussions with its other stakeholders and third party investors regarding interim funding and recapitalising the Company, the Board believes that an agreement between the Company's creditors presents the most likely solution to the immediate issues facing the business.  There can be no certainty that an agreement will be reached.

Code for any third party investors need to get their act together and put in a firm bid pronto.!

For investors the RNS doesn’t make particularly good reading, particularly for those people who have had their heads in the sand with talk of £1 a share. However in reality it actually reduces the risk of a total wipe out of shareholder value and anybody below 20p is likely to see a profit if they hold over the short term and probably a much better profit longer term.

Dilution was always going to happen.

For those that believed the vultures and scum who came on the board at 7.00am until 8.00am talking about 2p, sell straight away etc and sold for sub 6p only to see the SP rise above 7p 30 mins later, then I hope you learnt an important lesson.

Do your research, stick to your plans unless something material happens and remember share trading is unfortunately dominated by crooks, greedy liars and people you would never listen to if they came knocking at your door, so don’t listen to them they are simply dressed up to scare you!