Sirius Petroleum Share Discussion Threads

[hansen5] 24/4/2018 20:13

Dr Rosso, I think you underestimate Mr Kuti and his team.
I wonder who it was that brought this Consortium together, you have really answered your own question.
It’s certainly taken a lot longer than anyone envisaged I will give you that but a blind man can see what’s really happening here , quality projects of this nature take time and will always incur bumps in the road.

[dr rosso] 24/4/2018 19:36

I remain unconvinced that a CEO who really hasn't the foggiest when it comes to first drilling can effectively be the main man on a multi-billion barrel project. A complete novice in O&G production world is going to be the mastermind, supervising Schlum, BP and COSL, the latter just having pulled Force off an Iranian gas field which is just about the biggest in the world.

[dr rosso] 24/4/2018 19:33

COSL Force was being used on a huge Iranian gas field

[1alfi] 24/4/2018 16:25

Minichris - thank you for your link, much appreciated.

[vatnabrekk] 24/4/2018 16:24

I presume they are still writing it!

[shez20] 24/4/2018 15:42

Where is the update from the bod for another missed deadline??

[minichris] 24/4/2018 14:51

@1alfi



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[x1000] 24/4/2018 13:20

Sherlock
Thanks for enlightenment

[astralvision] 24/4/2018 12:47

Sherl0ck

Many thanks for that full reply, very much appreciated.
You have a far greater grasp on the overall deal and the complexities and interdependencies that I do, although I'm trying to get up to scratch and your posts are very helpful in that respect.

I would agree with all or most of your points, clearly there are risks, operational and financial risks, but if SRSP can pull this off, then the 'appropriate company value' should be one that we will all be very happy with and that would surely trounce any low ball premature offer.

I also agree it makes no sense whatsoever to spend years stitching this plan together just to transfer it over to another party who, as you say, would be most unlikely to need the funding anyway.That would be a waste of three years and I don't think that's what the bod have in mind.

I've never bought the argument that you have to pack the board with O&G people in order for the bod to be relevant and/or carry out it's duties. I don't see the O&G business as any different to any other business, sure it's got its own set of unique properties, but the CE of GSK doesn't have to be a biochemist or whatever and it's the same in many other industries, its finding the right person(s) with the right skill set for the task in hand and that may or may not be directly related to the business activity, relevant experience is not hard to acquire, if required.

thanks again for taking the time.

[xerot] 24/4/2018 12:34

Time for another podcast? Drilling on track for some point in the future. Crikey

[1alfi] 24/4/2018 12:28

minichris - re rak details - where was that image uploaded from ?

[sherl0ck] 24/4/2018 12:18

Astral - yes the capitalised wording was my own and I’m certain that the plan will be applicable to other assets and not just Ororo.

I really don’t know the answer regarding the delays, but sensing the wider picture can certainly help alleviate some of the natural anxiety. I really can’t see the consortium panicking too much over the Ororo spud date when they’ve signed up to and constructed something that will impact multiple sizeable Nigerian fields over the next 25-30 years.

My other observations on everything if this is indeed reality:

- The BoD have always talked about huge complexity and lots of interdependencies and if you take the announced project funding/securitisation strategy as fact rather than theory (observed actions do appear to support this) then I think we can indeed sense this. Refer to the more financially complex elements and flow diagrams in the documents if you really want to delve deeper.

- I don’t think the assets have ever really been in question and with the support of expert tech advisors and the consortium partners, the critical jigsaw piece has been how we efficiently fund development... as such I’m less convinced that filling the BoD with O&G experts would have added as much in this particular context as hiring corporate finance people and those with experience of bonds, derivatives & hedging. People who can talk the same language as the structured finance experts at Reyl and develop/negotiate the right deals will have been more valuable during this long exhaustive phase.

- With the strength of the consortium, it also wouldn’t concern me greatly if the BoD composition remained the same as we move into operations. Similarly, if it was felt important to bolster with more O&G expertise then it really isn’t at all difficult to hire others when the time is right.

- The project funding approach might be seen as overkill for a single, relatively modest oil field, but it really starts to work well when you replicate the model across multiple assets; which is what securitisation allows and exactly aligns with Bobo’s comments at GM. What we need to make this work is exclusive options on proven fields that have previously flowed... Rockflow conduct the CPR and we work out the volumetrics & anticipated oil/cash-flows... BP offtake acts as security and then Reyl securitise this and raise the money.

- you could end up with multiple assets at the point of production, all with full field development funding aligned and a powerful consortium of expert partners ready to exploit. What would the market then ascribe as an appropriate company value? Surely we would very quickly become a leading player in Nigeria.

- No burdensome debt held on the balance sheet. As long as the assets flow at the minimum anticipated levels, the funding structure works, the financiers receive their anticipated returns and everyone’s happy.

- shows just how critical the BP deal really is. It matters not one iota that we don’t get a penny from them until operations, their agreement to take all the oil (and we might assume gas & NGLs when applicable) is fundamentally what underpins the structurisation and makes it all work

- one assume that the structurisation does actually involve our BoD/Reyl examining the anticipated cash flows from each individual project and then raising the money by ‘selling’; the investment case (and actual developed ‘financial product’) to institutions, fund managers, wealthy individuals and other financiers, perhaps via some sort of private debt deal.

- this approach should minimise the level of equity dilution going forwards.... and one assumes further equity would only be raised at higher prices anyway

- The time and effort involved in constructing everything indicates that it isn’t merely a back up plan... it IS the plan. Barring one or more of the consortium members buying us out, I can’t imagine a scenario where you’d spend the best part of 3 years developing & executing on this plan only to then quickly disembark / transfer over to another independent entity who likely wouldn’t need the financing anyway. If we were to be imminently taken out by an independent party then it would have made more sense for this to happen prior to constructing the consortium/financing.

- And with multiple funded assets all potentially ready to go, the obvious question is why on earth would you want to exit at such a key stage? Especially not for a measly 10% agents fee! Lowly Sirius is only seen as a minnow in the eyes of some. Soon enough I think all will see the reality. It’s been hard to grasp at times but most of us have always sensed big potential... but I think there will soon be no mistaking it. Delays aside, I reckon we’ll all eventually be very glad we took an equity stake in this huge project.

[astralvision] 24/4/2018 12:06

Given the RAK contract then clearly April spud was impossible.Some explanations required methinks.

[minichris] 24/4/2018 11:49

Here is the RAK contract details as promised -

[bumhammer] 24/4/2018 11:41

Swiz 77901
Totally agree.

[openfield68] 24/4/2018 11:29

Surely not cauliflower cheese WITH tomato ketchup?

[astralvision] 24/4/2018 11:27

duplicate post, sorry.

[drrichard] 24/4/2018 10:48

Nice one Sherlock, every quote you pasted cites SRSP to a T.

[sherl0ck] 24/4/2018 10:39

‘The CLF is expected to involve the establishment of a Special Purpose Vehicle (“SPV”) to contain a proposed liquidity facility of up to US$100m, backed by SECURITISING the BP oil offtake.’ (Dec 17 Presentation).

The big challenge seems to have been how does a tiny company that holds very unique access to multiple proven fields, efficiently raise ample development funding without losing a high degree of control and financial interest.

From 2015, Sirius has pursued a strategy of off-balance sheet, or ‘project financing’, particularly focused on ‘securitisation.’ I found the following links useful and have copied a few bits below:





‘A "project" is usually a large-scale, capital-intensive, long-lived collection of ring­ fenced assets, liabilities, and related construction and operation contracts.....The project sponsor is the company or entity that initiates the project.’

‘...projects that require asset development... generally have a prime or general contractor that supervises and/or undertakes the bulk of development work in the project. The prime contractor gener­ally acts as a turnkey, engages other contractors as required, and functions as a type of custodian for the assets of the project.’

‘A project might involve a large number of potential service providers, broadly known as contractors..... Contractors are generally engaged by and responsible to the prime contractor. They are usually compensated at a fixed price...’

‘....offtakers are the intended purchasers of the output from the completed project. Rarely is a large-scale, capital­ intensive project initiated without securing at least informal commitments from a few large potential purchasers in advance, and often these commitments are sought formally through long-term contracting.’

‘...project finance is the process of raising capital..... where the assets dedicated... and/or the future cash flows... serve as collateral for the financing.’

‘Securitization... a transaction structure whereby the owner of a pool of assets, “packages” or “bundles” assets, producing one or more income streams, in order to monetize these assets through a public offering or private placement of securities which is dependent...on the income streams generated from those assets’

‘Once the assets that are to form the basis of the securitization have been selected, those assets generally are transferred from their owner (sponsor..).... to a special purpose vehicle...’

‘By transferring its assets to an SPV, the sponsor effectively segregates its credit rating... thereby minimizing credit risk that otherwise would increase the cost... of obtaining asset-based financing. In this way, segregation may not only enable the sponsor to access capital, but also enable it to do so at an acceptable cost.’

‘future-flow securitization is a structured project financ­ing in which future revenues are securitized and monetized to raise cash for immediate use by the project sponsor. In many cases, that cash is used to finance the same project that later generates the future flows on which the securitization is based. In other cases, the future flows on one project are securitized to FINANCE A NEW, BUT SIMILAR PROJECT.’

‘In a prepaid forward contract, the purchaser pays for its future delivery at the beginning of the transaction instead, and thus is essentially combining a traditional forward with a money loan to the asset seller.’

‘The most significant disadvantage of securitization transactions is their potential complexity. As a consequence of their complexity, these transactions generally require more time and cost to implement than many other financing structures.’