Bayfield Energy

Friday, Jun 17 2011 by
14

Bayfield is a private company which was started by Finian O'Sullivan and Andrei Pannikov, both directors of Burren, when that company was taken over by ENI in 2008. Most of the other directors are ex-Burren, with the exception of  David MacFarlane, previously FD of Dana. The management team below board level is mostly ex-Burren.

Bayfield has assets in Trinidad, South Africa and Russia.

Website is here.

An RNS issued today
announces intention to float.

I'll be looking more closely with a view to participating in the IPO. I did extremely well out of Burren and like the idea of tagging onto Finian's coat-tails again.


Filed Under: Oil & Gas Producers,

Disclaimer:  

The author may hold shares in this company. All opinions are his own. You should check any statements that appear factual and seek independent professional advice before making any investment decision.


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26 Posts on this Thread show/hide all

tournesol 11th Jul '11 7 of 26
1

TGG

yes you're quite right they've mis-spoken

T

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tournesol 11th Jul '11 8 of 26
2

I called the company and pointed out their error as noted by TGG.

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tournesol 11th Jul '11 9 of 26
1

Report in Upstream Online

"......the final sum is in and around the company’s expectations.

“... “Bayfield may seek to acquire additional acreage in Trinidad and Tobago or in other favourable jurisdictions,” ...“Opportunities sought in relation to exploration or existing producing fields will have low entry costs and high equity participation to permit Bayfield to exercise control.....”

 

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thegreatgeraldo 12th Jul '11 10 of 26

No correction. Hopefully the broker hasn't done as stated in yesterday's release & placed the entire issued capital of the company!!

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tournesol 12th Jul '11 11 of 26
2

problem is that attempts to call the company are switched thru to the PR firm, who do not seem to appreciate the subtle difference between accuracy and an incorrect statement that people could probaly correct for themselves given time and inclination.

I pointed out that the statement as to how many shares had been placed was incorrect.

they responded that the market cap as stated was accurate - which is true enough but is the answer to a different question than the one I raised.

I left it with them to "look into" the error

We all know what the RNS meant, as opposed to what it said, life is too short to fixate on this issue.

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mudpump 16th Jul '11 12 of 26

Perhaps this is an indication of the foolishness of not having an FD on the board?

I think we need scooter-man :-)
http://www.thisislondon.co.uk/standard/article-23877262-i-wish-id-smiled-says-boss-who-beat-tube-strike-on-a-scooter.do

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tournesol 16th Jul '11 13 of 26
1

I wonder if David Macfarlane will be elevated from his current non-executive director role to that of FD? The incumbent FD doesn't look right to be FD of a quoted company, whereas David is perfectly qualified.

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tournesol 16th Jul '11 14 of 26

Incidentally, trading is due to start on Monday.

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tournesol 18th Jul '11 15 of 26

www.cityam.com/news-and-analysis/bayfield-energy-raises-54m-through-uk-listing

"....The company expects Trintes to achieve production of about 2500 barrels of oil per day (bopd) this year and aims to peak at 8000 bopd in 2013....."

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tournesol 18th Jul '11 16 of 26
2

The prospectus and the pricing announcement have now both been posted on to the company website

http://www.bayfieldenergy.com/pdf/Bayfield%20Admission%20Document%20FINAL.pdf

http://www.bayfieldenergy.com/pdf/Bayfield%20Energy%20Pricing%20Announcement%20FINAL.pdf

The CPA by Gaffney (in the prospectus) calculates the NPV of the Trintes field as $104 million = approx £64 million

The placing has raised £54 million

At the placing price of 60p the market cap is £129 million which means there is nothing in the price for the exploration acreage in Russia or the acreage in South Africa which is waiting for ratification of the licence

So, an E&P company underpinned by production with proven management and nowt in the price for the exploration potential.

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emptyend 18th Jul '11 17 of 26
4

In reply to tournesol, post #16

So, an E&P company underpinned by production with proven management and nowt in the price for the exploration potential.

They aren't alone in that of course, especially given the market of the last 6 months.

It seems to me that the key to the investment potential is demonstrated ability to add value on the part of management - and that is very tough for new companies with shortish track records (though the market is willing to back the likes of Tony Hayward on blue sky situations....and Tom Cross plainly has a loyal retail following, who have proven themselves capable of creating a "management premium" in a tiny company at Parkfield).

There are very very few situations where management have (to the satisfaction of the market!!!) actually demonstrated the ability to add value. But there are certainly a few situations where value has actually been added but the market doesn't really recognise it (SOCO International (LON:SIA) being a good example IMO in the last 2-3 years). And unfortunately there have been many more situations where the market perceives that managements haven't done anything exceptional with the assets....including most of the smaller E&Ps (unless they have had major drilling success).

It is a debatable point, of course, but my guess over the Bayfield team is that they may be perceived as having been "lucky" to find M'Boundi and then "lucky" to have ENI take them out (at a reasonable but not massive premium)....and, if that is close to the market's view, then it seems likely that the markets will await some proof of the potential to add value to Bayfield rather than merely taking it on trust.....

....which of course they may well get, given that management are (as you note) well experienced - but the shares may perhaps do little until some clear ("sexy") progress is being made?

FWIW

ee

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tournesol 18th Jul '11 18 of 26
4

Hi EE

fair enough, I suppose Burren did get lucky in M'Boundi - as Soco hope to do on the continuation of the same geology.........

but they were astute enough to position themselves to get that luck......

And of course they played a blinder in Turkmenistan, where they a) added value b) drove down costs and c) sweated the assets. I see that as a direct analog for Trinidad.

You might remember that just before Burren was taken over Finian said he was working on a new project in Russia. I'd point out that Bayfield has subsequently acquired Burren's Russian assets from ENI. And Andrei Pannikov who was Burren's well connected wheeler dealer in Russia is now a major shareholder in Bayfield

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emptyend 18th Jul '11 19 of 26
2

fair enough, I suppose Burren did get lucky in M'Boundi......

but they were astute enough to position themselves to get that luck......

And of course they played a blinder in Turkmenistan, where they a) added value b) drove down costs and c) sweated the assets. I see that as a direct analog for Trinidad.

I did say that they "may have been perceived to have been "lucky""...rather than that being my own view.  The point here is that the City often seems to feel that success with the drillbit is merely a matter of odds and chance.....and that therefore any success has little to do with management skill......

.........I don't share that view, for the reason you allude to - namely that managements need to put themselves in a position to benefit (on reasonable terms!!). But it doesn't really matter in the short term what you or I may think - because the market price of the shares will be set by those who perhaps have less exposure to some of the management issues in E&Ps.

Good points re Russia.

rgds

ee

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tournesol 19th Jul '11 20 of 26
7

I think I'd better make this my last word on this subject for a while, don't want to be seen as ramping.

Thinking about the points raised by EE and more generally, I'd respond as follow.

Bayfield is effectively the "son of Burren". The management team is ex-Burren with the exception of David Macfarlane who is ex-Dana. Burren and Dana both did pretty well for me and I have a high opinion of both management teams. Much of the 50 million cash invested pre-IPO came from the management's own pockets having been generated by the sale of Burren. Nobody took any cash out at IPO.

2 of Bayfield's 3 assets used to belong to Burren. The Trinidad assets and the Russian assets were both originally bought by Burren.

AIUI Trinidad was seen as a combination of
a) low risk opportunity to squeeze value out of developed legacy assets which had been somewhat neglected by their previous owners. The basic concept was very similar to Burren's previous approach in Turkmenistan - work over old producing assets; infill drilling; drill neglected prospects; drive down costs; drive up productivity/efficiency.
b) low risk development opportunity for 5 undeveloped discoveries contained in the same block. These were found years ago but in an era of low oil prices were left undeveloped.

Key differences between Trinidad and Turkmenistan: Trinidad is not a Kafkaesque totalitarian state which makes life difficult in a zillion ways; more importantly, Trinidad contains oil as opposed to the gas in Turkmenistan. And another thing, the Trinidad acreage already has platforms in place which will make it very fast and cost effective to bring on-stream any new production. And another other thing is that Trinidad is making a very determined push to boost its oil industry. In this respect it is worth pointing out that Bayfield has been warmly praised by government ministers for its initiatives wrt innovation and collaboration. Seems to me that Bayfield is positioning itself to be at the front of the queue for new licences etc.
.
The Russian acreage is under-explored but is on-trend with neighbouring petroleum rich areas. Shortly before the ENI take-over Finian O'Sullivan said that he was spending all his time in pursuit of a very attractive new opportunity in Russia. We didn't hear the outcome of that activity at the time. However, it now transpires that the Russian acreage which Burren acquired as a result of Finian's labours was sold by ENI to Bayfield. And it also transpires that Burren's man in Russia - Pannikov (a co-founder of Lukoil) has joined Bayfield and is the biggest shareholder - 25% before the float, 17% afterwards. I think that Mr P is a canny fellow who is putting his money where his mouth is.

And the level of financial engagement by Bayfield's directors/managers seems to me to be a bit of a USP here. I've seen a lot of new company formations where outside investors provided the set-up capital. It is not that common to see the money coming from management.

Anyway, EE, you are quite right to point out that there is an embarrassment of investment opportunities out there at the present. I am enjoying myself immensely getting my head around companies I'd never heard of just a few months ago.

Time to get back to stripping the staircase, I think. Gosh it's boring. And slow.

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tournesol 20th Jul '11 21 of 26
2

mentioned in this week's Investors Chronicle

"...worth a close look because of ...management's track record of creating value....chairman ...O'Sullivan founded Burren ...in 1994. Burren floated in 2003 capitalised at £175m and was sold to Italy's Eni in 2008 for £1.7bn. ...O'Sullivan is joined ....by ex-Burren colleagues Hywel John and Andrey Pannikov.

...core assets in Trinidad and Tobago, and an exploration block in Russia. Placing proceeds of £54.4m will finance a work-over programme that aims to double output from the Trintes field to around 2,500 barrels of oil per day (bopd) this year, rising to a peak of 8,000 bopd in 2013..."

 

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fuiseog 22nd Jul '11 23 of 26
1

This won't do any harm to their Russian ambitions.

"On July 21st, a new bill to encourage the development of smaller oil fields in Russia by reducing the Mineral Extraction Tax (MET) payable was signed into law by the Russian president. The law comes into effect on January 1st 2012."

"The law allows for a sliding scale reduction in the MET for fields below 5m tonnes, roughly 37m barrels. The maximum reduction will result in a halving of the MET rate. This will occur for fields up to 7.5m barrels, whereas fields containing 30m barrels will receive only a 12.5% discount. Fields containing 22.5m barrels will receive a 25% discount and so on."

http://www.davy.ie/LR?id=1262

Mr Osborne take note!

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emptyend 25th Jul '11 24 of 26
1

All looking very strong today - currently in auction at c.77p. Clearly there is some money that likes them!

So far, so good, tournesol!!

ee

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jseth123 15th Sep '11 25 of 26

Having been on (a rather extended!) holiday for July and August, yesterday's Notice of Results (due 30th September) spurred me to have another look at Bayfield and I ended up buying a few at 57p ish.

It's a good story, and I'm glad to get in below the IPO price of 60p. Having had my fingers burned chasing DEO up post restructuring, I was eager to avoid the same mistake here.

Now waiting for the results (which hopefully will include some operational update)!

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jseth123 6th Oct '11 26 of 26
1

Lot of time for this:

Bayfield Energy Holdings plc ("Bayfield" or the "Company"), (Ticker Symbol: BEH), an upstream oil and gas exploration and production company with interests in Trinidad and Russia, announces that it was informed on 5 October 2011 that The O'Sullivan Family Charitable Trust has bought 444,000 ordinary shares in the Company at an average price of 46.36p per share.

Following this purchase, Finian O'Sullivan, Chairman of Bayfield, is interested in 36,261,665 ordinary shares in the Company, representing approximately 16.90 per cent. of the issued share capital of the Company.


Bayfield Energy Holdings (LON:BEH) looking cheap to Mr O'Sullivan perhaps? ;-).

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