Reabold Resources Share Discussion Threads

[solo4yous] 12/12/2024 21:04

The involvement of Connaught Oil & Gas Limited, a Canadian company, as the primary manager of Rathlin Energy may have posed challenges to securing funding, particularly in the UK. Here's why removing Connaught's 20% stake and consolidating ownership under Reabold could make a positive difference:Key Considerations:1. Access to UK FinancingRathlin's majority ownership under a British entity like Reabold simplifies its identity as a UK-focused company. This alignment with UK investors and financial institutions may improve its ability to attract funding, as investors often prefer clear jurisdictional and regulatory alignment.Canadian management might have caused hesitation among UK lenders due to unfamiliarity with the project's operational environment and market context.2. Streamlined Decision-MakingConsolidating ownership removes potential bureaucratic or strategic conflicts between Canadian stakeholders and UK operators. Unified decision-making by Reabold can accelerate funding applications and project execution.3. Improved Investor ConfidenceReabold's acquisition of the 20% stake demonstrates confidence in Rathlin's potential. This bold move could signal to investors that Reabold is committed to developing the asset, potentially increasing market confidence in its ability to deliver.4. Elimination of Cross-Border ChallengesManaging a project with stakeholders across jurisdictions introduces complexity, including tax, legal, and operational hurdles. Removing the Canadian entity simplifies Rathlin's structure, making it more attractive to UK-focused financiers.5. Asset Accretive PerspectiveThe £700,000 investment to acquire the 20% stake increases Reabold's overall interest in Rathlin and its assets. If Rathlin succeeds in its well stimulation program or future projects, the returns on Reabold's larger stake could far outweigh this initial cost.6. Enhanced Strategic FocusWith complete control of Rathlin, Reabold can prioritize funding and operational strategies that align with its broader portfolio, improving synergies between projects like West Newton and Rathlin.Why This Move Makes Sense:Cost vs. Control: While £700,000 is a notable expense, it secures full ownership, enabling better alignment with UK financing opportunities.Perception Shift: A UK-led management team may increase transparency and confidence among British investors and regulators.Long-Term Gains: By resolving past funding difficulties, this move lays a foundation for Rathlin to become self-sufficient through eventual production revenues.Conclusion:Acquiring the 20% stake was likely a strategic move by Reabold to remove barriers related to Rathlin's cross-border management. This simplification and UK alignment could significantly enhance Rathlin's financial and operational prospects, setting it up for future success. While it required upfront expenditure, it strengthens Reabold's position as a fully integrated owner-operator.

[uggy100] 12/12/2024 20:19

Malcy is as clueless as the 2 idiots running the show.

[likeawalrus] 12/12/2024 19:00

"recompletion of one of the wells early next year"

clearly malcy doesnt read my LSE posts

...consultation ends 24 Jan, well over 20 days so must be of "high public interest" - based on a 16 weeks time-frame from 24.01, a decision may not be forthcoming before June 2025

...not exactly early next year malcy!

[solo4yous] 12/12/2024 18:49

Collateral and Alternative Financing:While it is true that securing debt for undeveloped assets can be challenging, energy companies frequently use reserves-based lending (RBL), where estimated reserves are treated as collateral. Even if production has not yet commenced, the potential recoverable reserves at West Newton offer significant value and can serve as leverage for funding.Alternatively, farm-out agreements or joint ventures are industry-standard approaches to securing capital for high-potential assets without incurring debt. Reabold has a track record of such deals, which mitigate risk while enabling project progression.2. Strategic Adjustment, Not Desperation:The shift from a £12 million horizontal well to a £700,000 recompletion is not necessarily a sign of failure but rather a pragmatic, cost-effective way to de-risk the project. Recompletion provides an opportunity to test flow rates without committing large sums, preserving cash while gathering valuable data.The recompletion can validate the asset's viability and lay the groundwork for scaling operations. If successful, this low-cost approach could catalyze renewed investor interest and unlock further financing options.3. Industry Precedent for Secondary Attempts:Recompletion and re-testing of wells are common in the oil and gas industry, especially in promising formations. Success stories often come from perseverance and iterative testing, as geological complexities may require multiple attempts to optimize production techniques.4. Reserves and Regional Importance:West Newton is one of the largest onshore gas discoveries in the UK, with significant estimated recoverable reserves. The project aligns with the UK government's focus on domestic energy security, making it strategically valuable and potentially eligible for fiscal incentives or grants.These reserves provide a compelling value proposition for future investment, as energy security concerns heighten interest in local resources.5. Investor and Market Sentiment:The fact that Reabold continues to advance its projects suggests a belief in the long-term value of the asset. The recompletion plan may represent a turning point, where success could dramatically shift market sentiment and share price, delivering returns to investors.

[kim_clay] 12/12/2024 18:34

Perhaps you could educate us all with the inaccurate information??

[simon_64] 12/12/2024 18:32

Shorter's getting worried it seems, trying to muddy the waters by disseminating inaccurate information, buy as many as you can.

Thanks for the info and updates Han.

[kim_clay] 12/12/2024 18:09

You can't raise debt when you don't have any collateral to secure it against. When the collateral is the asset you're trying to develop it isn't actually collateral is it? If it fails or doesn't produce as expected there's nothing left for the debt provider to collect against. The simple fact is that until they prove it can actually flow something it's a non starter anyway. Changing the plan from a £12mm 1500m horizontal well to a £700k "recompletion" of a formation damaged well is the cheapest way to try and save the project. If that well fails to flow at an appropriate level then the game is up, because clearly nobody was prepared to finance another £12mm attempt to get it to flow, another failed attempt isn't going to change that.

[currypasty] 12/12/2024 18:02

malcy

"For those of us who have been long term bulls of West Newton this makes for very good news, Reabold has increased its involvement in the project to 69.9% and more importantly bought a material resource at what can only be described as a bargain price.

This is also a great piece of timing given that the partners had already agreed on the recompletion of one of the wells early next year and will I’m sure make good news for Reabold who will now be in a really strong and influential position now that they have bought out the original owners who now leave the process.

With this commitment Reabold shares should start to outperform as we move into 2025 and with it action at West Newton very much long awaited and where I see significant underlying value, way ahead of the current Reabold market cap."

[uggy100] 12/12/2024 17:52

Yes Kim, yet again our 2 fools have proved how useless they truly are.

[solo4yous] 12/12/2024 16:15

1. Tax Pools Are a Long-Term Advantage: While it's true that tax pools accumulate and can only be offset against future production taxes, this creates a significant long-term benefit for the project. These tax pools essentially allow the company to shield its future profits from tax, enhancing the financial returns once production begins. The temporary lack of income does not negate the value of this deferred tax advantage.2. Strategic Positioning with Ring-Fence Relief: The ring-fence tax system was designed to encourage investment in UK oil and gas projects. By investing in the development stage, companies like Reabold can build substantial tax pools, ensuring they retain a higher proportion of future revenue. This positions the project to be more profitable over its lifecycle, making it attractive to potential partners or buyers.3. Raising Funds Is Standard in Development: Reabold's strategy likely includes a combination of debt, equity, and potential farm-out agreements. The £12 million figure is a manageable target, especially with incentives in place, such as the UK's investment allowance.4. Potential Impact of Government Incentives: Recent fiscal policies emphasize the UK's commitment to domestic energy security, offering incentives like the investment allowance. These can directly reduce upfront costs or provide additional tax reliefs, offsetting some of the risks during the development phase.5. Future Production Upside: If the project achieves its production potential, the long-term cash flow far outweighs the initial development cost. The estimated recoverable reserves and current energy prices suggest significant upside, especially as demand for local energy sources grows amid global supply uncertainty.6. Mitigating Project Risk: Reabold Resources has a history of securing farm-outs and partnerships to spread development costs and risks. If they succeed in bringing a partner into the West Newton project, the £12 million requirement could be shared, further enhancing the project's feasibility.

[kim_clay] 12/12/2024 15:47

You clearly don't know or understand how the ring fence tax system works. You still have to raise and spend the 12 million, you won't pay tax on the production until you've used your tax pools. If you don't have any production income whist developing the asset then you simply accumulate further tax pools which can be offset against any future production taxes if or when it comes on stream.

[farrugia] 12/12/2024 15:46

what stops this by turning into another Parkmead - I mean the big names like Serica could do with something like this and it would be peanuts for them?

[solo4yous] 12/12/2024 14:11

Beware that the rookie desktop brokers are shorting this alongside TWThis will 5x bag in progressive terms imo

[farrugia] 12/12/2024 14:04

Looks like an opportunistic stake increase due to liquidator - I BOUGHT 8k worth!

[solo4yous] 12/12/2024 13:10

New Videohttps://www.brrmedia.co.uk/broadcasts/6751bc5f139c6b2fd9c44f62/event/

[solo4yous] 12/12/2024 12:59

Regarding the £700,000 payment for the 20% stake in Rathlin Energy:Considering the interest earned since the start of June 2024 (approximately £50,000-60,000), this effectively reduces the out-of-pocket cost of the stake acquisition to around £650,000.This makes the net cost approximately £650,000 in this scenario, assuming some of the interest offset applies specifically to this transaction.While this doesn't eliminate the expenditure, it does soften the financial impact of the investment. However, the long-term viability of such an acquisition depends on Rathlin Energy's ability to generate returns or secure funding for its projects.

[solo4yous] 12/12/2024 12:27

The percentage of ownership can matter in obtaining multimillion-pound financing for a capital project like this, especially when dealing with uncertain returns. Here's why:---Key Considerations for Financiers1. Control and Decision-Making:A 79% ownership stake gives Reabold Resources clear control of Rathlin Energy's decisions. Financiers often prefer a single, dominant stakeholder who can make swift, unified decisions about project direction, funding, and strategy, minimizing disputes with minority shareholders.2. Perceived Commitment:A higher percentage of ownership (e.g., 79%) demonstrates to financiers that the majority shareholder has a substantial vested interest in the success of the project. This is often interpreted as a sign of reduced risk since the controlling party has more to lose if the project fails.3. Risk Sharing and Guarantees:When the primary shareholder owns a larger percentage of the project, they are seen as more likely to provide additional support or guarantees to secure the loan. At 59%, the ownership may seem less significant to lenders, as there might be room for blame-shifting to minority shareholders.---Financial Structuring and LeverageDebt-to-Equity Ratio:With a higher equity ownership stake (79%), Reabold can show a stronger balance sheet for Rathlin Energy, making it easier to secure financing without diluting shares.Lenders may look at this as a sign of financial stability, reducing perceived risk.Loan Security:Lenders may seek guarantees or collateral from Reabold directly. A higher ownership percentage increases the likelihood that Reabold will step in as a guarantor if Rathlin cannot repay.---Practical Example in This CaseIf Reabold were seeking a £12 million loan:At 59%: Lenders might view the remaining 41% of Rathlin's equity as a potential risk since minority shareholders may not contribute equally to funding needs or liabilities.At 79%: The larger stake simplifies negotiations and reinforces Reabold's commitment, giving lenders greater confidence in repayment likelihood.---ConclusionWhile owning 59% is already a majority stake, increasing it to 79% enhances control, demonstrates commitment, and potentially strengthens the company's position in securing substantial financing. For multimillion-pound projects with uncertain returns, this strategic move can improve the perception of reliability and reduce perceived risk for potential lenders.

[solo4yous] 12/12/2024 12:25

By increasing their stake in Rathlin Energy to 79%, Reabold Resources may indeed be strengthening their position to access debt funding or other external financing without needing to dilute existing shareholders further. Here's how this might play out:---1. Enhanced Commitment and ControlGreater than 75% Ownership: By owning 79% of Rathlin Energy, Reabold surpasses the 75% threshold, giving them:The ability to make unilateral decisions, including financing arrangements and operational direction, without needing approval from minority shareholders.A demonstration of increased commitment to the project, which could reassure potential funders that Reabold has "skin in the game."---2. Debt Financing PerspectiveWhy It Matters to Funders: Funders, particularly those providing debt or structured financing, often look for:Majority control by the borrower (in this case, Reabold) to ensure alignment of interests.Demonstrated commitment in terms of increased equity ownership or cash investment.Leverage for Financing: With 79% ownership, Reabold could present itself as fully committed to the project, potentially making lenders more comfortable with extending credit. This move might have been calculated to avoid diluting existing Reabold shareholders while securing the necessary capital for Rathlin Energy.---3. Cash Reserves and Interest EarningsInterest Offset: Your calculation regarding interest earned on Reabold's cash balance is valid. With approximately £6.5 million at the end of June 2024, earning 3% annualized interest, Reabold could have generated around £150,000 in interest by now (mid-December 2024). This partially offsets the £700,000 used to purchase Connaught's 20% stake, effectively reducing the real cost of the acquisition.Remaining Cash Cushion: Even after this transaction, Reabold still holds a substantial cash reserve (approximately £5.8 million), providing them with financial flexibility.---4. Strategic PositioningInvestor Confidence: By increasing their stake, Reabold signals to the market and potential financiers that they are fully invested in Rathlin Energy's success. This move could:Bolster confidence among external stakeholders.Create a stronger negotiating position for debt or partnership discussions.Leverage for Government Incentives: With the new onshore gas project incentives announced in late 2024, Reabold may see this as the right time to position Rathlin for development funding.---5. Potential DownsidesOperational and Financial Risks: The West Newton project still faces regulatory and funding challenges. If external financing cannot be secured, Reabold may have to inject more of their cash reserves, which could strain their financial position.Market Perception: Some shareholders might view this move as speculative, given Rathlin's lack of progress over the past two years.---ConclusionThe decision to increase ownership in Rathlin Energy may be a calculated move to strengthen Reabold's negotiating position with potential financiers and demonstrate commitment to the West Newton project. While the £700,000 spent did not directly fund Rathlin, it enhances Reabold's control and positions the company for potential debt financing or other funding avenues, leveraging their remaining cash reserves and anticipated government incentives. This strategy appears designed to secure the significant capital required to develop the project without diluting existing shareholders unnecessarily.

[solo4yous] 12/12/2024 11:46

To summarize, the £12 million investment required to bring one of the wells in the West Newton project online could be advantageous due to the potential tax relief from the UK government's incentives for onshore gas projects. Here's a breakdown of how the financial advantage could play out:1. Government Tax Relief (Capital Investment Allowances)Enhanced Capital Allowance (ECA): If the £12 million investment qualifies for this relief, Reabold Resources (through its 80% stake in Rathlin Energy) could potentially claim 100% tax relief on the qualifying capital expenditure. This means the full £12 million spent could be written off against taxable income.Investment Allowance: On top of the ECA, the UK government offers an energy-specific tax allowance, which can reduce the effective tax burden. If Reabold and Rathlin qualify for this allowance, it could further benefit the project.2. Tax Relief CalculationAssuming a corporate tax rate of 25% (as of 2024 for UK-based companies):£12 million investment could potentially result in £3 million in tax relief (25% of £12 million). This means that Reabold or Rathlin could pay £3 million less in taxes, improving the project's overall financial position.3. Effect on Project FundingThis £3 million of tax relief is not direct cash inflow but reduces the need for external financing (such as loans or equity dilution) to cover some of the project's costs.Financially, the project is effectively reduced by £3 million, so the remaining £9 million could be sourced from internal funds, partners, or debt, making it less burdensome for Reabold and Rathlin.4. Overall Financial BenefitWith the £12 million in required capital to develop the initial well, and assuming the government incentives apply:£3 million saved through tax relief.The net effective investment cost for Reabold Resources could be around £9 million after accounting for the tax relief.Thus, the £12 million investment to bring the well online could be effectively reduced to around £9 million for Reabold and Rathlin combined, thanks to the potential government incentives.Conclusion:This tax relief directly enhances the financial viability of the West Newton project, particularly for Reabold Resources, as they work to advance their position in Rathlin Energy. If the project proceeds according to plan, the reduced upfront capital cost can contribute to better long-term cash flow and reduce the overall financial strain on Reabold, making it a potentially more attractive investment moving forward.

[simon_64] 12/12/2024 10:26

I think we might have a small run of good news, hence heir confidence in increasing W.N stake.

[solo4yous] 12/12/2024 10:17

Don't rule out even better news with Itlai

[simon_64] 12/12/2024 09:40

The Daybreak settlement will be a few million dollars.

[kim_clay] 12/12/2024 09:35

Of course they don't.According to companies house records: there are 16.5mm Rathlin shares, Sunderland holdings Ltd (Connaught) owns 3.4mm shares. The last time Rathlin sold shares they were priced at £2.75, meaning this holding was worth over 9mm GBP. They just sold the lot for 700k that's 21p per share. At the end of 23 they had 2.4mm of cash (2.2mm of working capital) down from 3.8mm. The current balance will be likely between 1 and 2mm, they have well abandonment obligations of 1.7mm to Rathlins share, plus the cost of the upcoming well re completion. It's clear that Connaught want out as it could be difficult to get a going concern from the auditors for the 2024 accounts as it's very likely the 1.7mm of obligations is more than the cash at hand.