Ruspetro Share Discussion Threads

[rcturner2] 14/1/2013 13:14

I made 50% on Exillon buying under 100p. You have to be careful obviously with Russian companies. Petroneft is an Irish company and does not have any large and dodgy Russian shareholders.

[rcturner2] 14/1/2013 13:01

If you want a good Russian oil play, I suggest Petroneft (PTR). A massive turnaround story for 2013.

[cricketeer2] 14/1/2013 12:51

meijiman - go through the RNSs and look at the inconsistencies I pointed out to Darcon. It is all there in company released information, I have not made anything up.

[meijiman] 14/1/2013 12:18

I cannot believe that Chris Clark the chairman would be involved if this was a load of old tat. Still its amazing what people will do for money, and the Board, inc the non-execs, are well rewarded. Merrill Lynch need to step up to the plate here. I think a number of valid issues have been raised and hopefully these will be addressed.Did they give any thought to the after market post IPO?? the pain for some will be compounded by the crazy share price hike post the IPO.

[cricketeer2] 14/1/2013 12:07

JONNO1 - lets see, could it be because Bank of American are joint brokers of RPO! They were the advisors on the IPO.

They have lot to answer for here. Reserve numbers that even the Russian authorities do not even believe! No independent verification of these reserves as of yet.

Few months or even sooner, RPO will be less than 50 million mcap once people start to realise the extent and ramifications of the issues with this company.

[2bung] 14/1/2013 10:53

Looks like we're near the bottom - I'm in.

[jonno1] 14/1/2013 10:50

PetroFac (PFC LN), RusPetro (RPO LN) added to most preferred oils at Bank of America

[ranj79] 14/1/2013 08:45

Someone believes.. Huge sells, so someone is buying big!

[cricketeer2] 13/1/2013 21:27

Darcon,

I like the way they break down and provide quite a bit of information in their reports. But saying that, some of the things just do not add up.

Go through the RNs over the year and you will see that things donot add up.

Goto interim management statement in Nov, you will find they say, well head revenue from crude is 22 dollars and condensate 42 dolars. Now go back to half year results and they are reporting well head revenue of 47 dollars to make 33 million in revenue. Now in the same report, they tell you that they sold 680'000 crude and just 45,000 condensate. How on earth did they get 47 dollars well revenue per barrel when 95 percent of sales were crude oil. Did they even make 33.8 milion or is that just a lie? Even if all the sales were condensate, they still do not make 47 dollars per barrel.

There are inconsistencies galore with this company. This company is doomed with current management. They are lining their pockets and keep telling you a about jam tomorrow. I have seen to many parallels with previously doomed companies. Hence my short on this company.

Who is to say, insiders dont have massive shorts on here?

Large debt holder to convert money to shares. Conveniently, you can have large shorts and then have stock read in waiting for you when you want to close it. It is similar to what death spiral companies do.

There might be dead cat bounces along the way, but underlying trend is down.

[darcon] 13/1/2013 15:15

Some more questions:

1. NPV calculation assumption: Base case discount rate of 10% looks too low

According to Nick Antill and Robert Arnott in the valuation handbook "Valuing oil and gas companies" (page 136 of 2008 edition), "The discount rate used by a company ... should at least exceed the average cost of capital to the company."

Have RPO done so?

Doesn't look like it. The DeGolyer and MacNaughton ("D&M") reports have each used a base case discount rate for their NPV calculations of 10% (see page 10 of their latest report. No explanation is given as to the reasonability of such a 10% discount rate). But RPO's prospectus at page 100 notes that loan interest rates vary between 13.6% to LIBOR +10%.

As the debt is above 10% and equity should get a higher rate of return over debt, a base case discount rate of 10% for the reserves looks too low.

Granted, the D&M reports also give total P1 and P1 + P2 valuation figures for 12% and 15% discount rates, but surely the base case (and all the numbers for it) should have been set at the weighted average cost of capital to the company and not an optimistic lower figure of 10%.

2. Economic assumptions: Reserves report may be using an oil price that is too high

According to Nick Antill and Robert Arnott in the valuation handbook "Valuing oil and gas companies" (page 129 of 2008 edition), "It is also important to base the economic scenarios on a long term view; after all, most of the fields to be evaluated will have a life of over 10 years, so there is little point in basing the evaluation of a field on an unrealistic spike or trough in the crude oil price."

So what are the oil price assumptions used in the D&M reports of 19 Jan 2012 and 30 Jun 2012.

The D&M report dated 19 Jan 2012 used an oil price assumption of US$100 (see page 4 of report). This is despite the prospectus noting at page 96 of the risk factors that the average price for Urals crude oil in 2008 was US$95.11, in 2009 was US$61.33 and in 2010 was US$78.23.

The D&M report dated 30 Jun 2012 does not state clearly what the oil price per bbl assumption is. Presumably that is because the new oil price economic assumption in the report is below the oil price assumption used in the prospectus less than six months earlier.

D&M states at page 9 of its 30 June 2012 report that "export prices were held constant at US$728.00 per metric ton". However, we can work out what conversion factor for bbl to metric ton D&M are using in the report by reference to table 1 by dividing the English unit figures by the metric unit figures to arrive at 7.578 bbl per metric ton. Then we can divide the export price figure of 728 by 7.578 to get US$96.067.

Is this new 30 June 2012 oil price assumption reasonable for a long-term project?

3. Do forecast export and domestic oil sale allocations match actual allocations?

D&M have used a 50/50 export market / domestic market allocation (see table 3 of the D&M report dated 30 June and page 28 of the D&M report dated 19 Jan 2012). However, the company in the risk factors at page 97 of its prospectus stated that "The Group expects to export approximately 60% of its crude oil production in future periods".

If so, then why do D&M use a 50/50 market allocation, particularly where there is an economic difference in netbacks for export and domestic oil sales?

[ranj79] 13/1/2013 09:17

@Darcon, I know, I fully understand that. But some of the things have been present here before the 40% drop. I wasn't getting at your comments.. They have been informative for sure.Reading all this seems like everyone should get out! Lol

[darcon] 13/1/2013 07:03

ranj79 - it's because after a 40% fall in the price since a shock RNS announcement by the company some investors are trying to understand what other potential surprises there may be lurking and whether to sell, hold or add.

[darcon] 13/1/2013 06:56

The lock-up arrangements affecting the Directors, certain "Existing Shareholders" and Sberbank described at pages 211-212 of the IPO prospectus will expire shortly at the end of "the period of 12 months from the date of Admission."
According to RPO's RNS announcements Admission occurred at 8am on 24 January 2012.

[ranj79] 12/1/2013 20:17

Amazing how all this news comes out when the stock dives.. You have to laugh sometime.

[darcon] 12/1/2013 12:17

The Degolyer & MacNaughton reports have slightly different statements on information used in their reserves reports from the prospectus and more recently as of June 30, 2012.

The D&M report dated 19 Jan 2012 in the Prospectus includes the statement: "Although we have not had independent verification, the information used in this report appears reasonable." The D&M report dated 30 Jun 2012 no longer has the same statement of opinion by D&M regarding the reasonableness of the information provided to them by Ruspetro. Why was that? Did D&M remove the statement in Jun 2012 because they began to have doubts?

[rcturner2] 12/1/2013 10:54

I would not buy a stock like this until it was back above the SMA 50.

[rcturner2] 12/1/2013 09:04

salpara - agree with you 100%. The production is nothing special at this level of market cap, so the only thing backing up the price is the reserves.

[salpara111] 11/1/2013 22:56

difficult to know how to value this.
If you take it just on production then it is clearly trading at a premium to similar companies like JKX.
So the big question is.....what sort of reserves do they really have.
I am keeping an eye on them but dont feel that there is any urgency in terms of getting involved.

[ntbb] 11/1/2013 18:35

things may not be as bad as some thinks




"Our cash generation during the final quarter has been strong"

Despite the production shortfall, the differential pricing of condensate has worked to the Company's favour. Our cash generation during the final quarter has been strong and has proven the merits of changing the focus of our drilling operations towards the condensate rich area of our field."

[darcon] 11/1/2013 18:16

At page 63 of Prospectus regarding the Sberbank facility the RPO prospectus states: "On 25 November and 1 December 2011, RusPetro and Sberbank amended the Sberbank Facility. Pursuant to these amendments, annual interest of approximately US$25 million is payable in twice yearly installments in May and November each year beginning in 2012. All remaining accrued interest and
principal is payable in April 2015. In consideration for such amendments, RusPetro agreed to pay Sberbank 20% of the proceeds of the Global Offer, not to exceed US$45 million, in respect of (i) accrued interest of approximately US$27 million for the period 26 December 2010 to 25 December 2011 and (ii) a
portion of principal under the Sberbank Facility up to a maximum of US$18 million. The Company intends to pay up to a maximum of US$12.5 million of the interest payment due in May 2012 out of proceeds of the Global Offer."

So investors should have in mind that RPO will need to pay approx US$25m in May 2013 and another US$25m in November 2013. There is also the Makayla facility repayable in August 2013. So a total of almost $70m repayable in May through Nov 2013.

If cash-flows are lower than forecast as a result of production shut-ins and the share price continues to remain below the IPO Offer Price of 134 pence per ordinary share, then the refinancing the market ought to be concerned about in my opinion is the question of how RPO will finance the interest payment to Sberbank in May.

[darcon] 11/1/2013 18:06

Found the RPO prospectus.

At page 3 (risk factors) it states: "Limolines will have significant influence over the Company after the Global Offer, and its interests may not be aligned with those of the other shareholders of the Company."

At page 10 it states: "On 17 January 2012, Limolines and the Company agreed that the Company will issue new Ordinary Shares to Limolines on the date that is 13 months from the date of Admission (the ''Conversion Date'') in full and
final satisfaction of all principal and accrued interest outstanding as of the Conversion Date (the''Limolines Redemption Amount'') under the Limolines Facility. The number of Ordinary Shares to be issued will be calculated by reference to the sterling equivalent of the Limolines Redemption Amount
(calculated by reference to the average of the closing midmarket USD:GBP exchange rate as published by the Financial Times on the 10 Business Days prior to the Conversion Date) and the volume weighted average price of the Ordinary Shares for the 30 day period immediately prior to the Conversion Date (the
''Conversion Price''). Conversion of the Limolines Redemption Amount is conditional upon (i) the Conversion Price being equal to or in excess of the Offer Price, (ii) receipt of shareholder approval,(iii) the Company still having more than 25% of its Ordinary Shares in public hands following the issue of such Ordinary Shares as required by the Listing Rules and (iv) receipt of a waiver from the Takeover Panel from the obligation on Limolines to make a mandatory offer for the Company's shares pursuant to Rule 9 of the City Code.
If the Limolines Facility is not converted on the Conversion Date, the Group will not pay any amount due under the Limolines Facility in the near term."

If the price remains at this level then Limolines will not be able to convert the $55m debt as per condition (i) because the Conversion Price will be less than the Offer Price in the IPO.

[ireminisces] 11/1/2013 17:47

Cannot work out what this company is up to, would not be suprised if the Russians with their english friends in the city take this to 5p before the recovery starts, RPT comes to mind..

[darcon] 11/1/2013 17:44

Eastwind, that's a very good observation re the Limolines debt. From the 2011 annual report page 26 it states that the company has the following long-term borrowings as of 31 March 2012:

The Company has a long term borrowing facility with Sberbank and two outstanding shareholder loans from Limolines Transport Limited and Makayla Investments Limited.

The Sberbank loan is for US$295m with maturity in April 2015 and interest of US$25m.

The Limolines loan is for US$55m with maturity in February 2013 and interest of LIBOR +10%.

The Makayla loan is for US$17m with maturity in August 2013 and interest of LIBOR +10%.

Where did you find the info about the conversion at volume weighted, average price of the ordinary shares for the 30-day period, immediately prior to conversion date, subject to LSE regulations?

One easy way of assuaging investor concerns (whether justified or not) of market manipulation would be for Limolines and the company to agree on an extension of the maturity period (eg, for a further 12 months). If they convert on the terms you mention it will leave a rather nasty taste in the mouth for investors.