| BREAGH SALE - Before & After Discussion | Oilretire

16th Jun '09 by oilretire

46 comments 5574 reads

A thread to discuss the widely publicised sale of the Breagh field.

The 5 owners have decided to get together to sell their stakes in the discovery to one party (in Sterling's case to reduce from 45 to 30%).

Post sale Breagh will be owned 30% Sterling & 70% New Co.

EO. hold 15%

One example of recent press speculation http://business.scotsman.com/energyutilities/Sale-of-one-of-North.5298262.jp

15th June, Stratic confirmed at their AGM that details of the sale should be known in 2 to 4 weeks

http://www.straticenergy.com/documents/20090613AGMPresentationJune2009.pdf

Page 4 of the presentation

- due diligence complete for asset sale
- exclusive negotiations
- expect to execute sale and purchase agreement within 2 to 4 weeks
- targeted completion date by end 3rd quarter

The figures mentioned in the press suggest Stratic's 10% is worth $100m, but an unconfirmed attendee at the AGM meeting has posted elsewhere that

To quote Mr. Watts , "we are very pleased with the price we received, we think its fair and reasonable". Having said that he made it clear that some of the numbers floated on this and other boards are unrealistic and inflated. I came away thinking our share is in the neighbourhood of $40 million. But don't hold me to this number, it is an impression I got from questions and the presentation. He did say categorically the $100 million figure to us was far too high.

So for Encore's share the wide range of values appear to be $60m to $150m or 12pps to 30pps.

I'm thinking 15-20pps will be the likely range.

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deucetoace

22nd Jul '09

Marben,

the RNS today says

We do not expect to commit to further exploration drilling activity in the near term other than on Catcher and Cladhan which we expect to be drilled in 2010.

ohisay

In reply to madmix (post #22)

http://www.reuters.com/article/rbssEnergyNews/idUSLM42634120090722?rpc=401&

"RWE did not say how much it paid for the stake but four of the five companies said they had been paid, in total, almost $270 million for a 50 percent stake and other assets, implying a total consideration around $350 million."

My crude valuation allowing for the additional fields around Breagh suggests around 4.5$ per boe.Anyone concur ?

doverbeach

regarding Cladhan/Bowstring, here are my notes from last year's AGM.

The most likely exception is Bowstring appraisal. Talking to Paul [?name? Encore geophysicist) afterwards he said that recent well cost £12m. A new appraisal well would not be needed, they could re-enter and drill two horizontal wells, one 1100 m downdip to find extent and one 400 ms updip to find oil/water contact (nb I may have got the up and down sizes the wrong way round). Paul thought both horizontal wells could be drilled for £12m and 15% of that for Encore isn't huge.

manzanilla

davjo

The options to be considered will include seeking shareholder approval for a share buyback

I sincerely hope they don't go down that route. They presumably already have shareholder approval for buying back up to 10%, as normally granted at AGMs. That's not so bad but seeking further approval suggests they might be looking for more...perhaps a lot more? Hate the idea! Great for institutions to offload large slugs of shares without hurting the sp. Great for directors' options. I'd rather cash be returned to shareholders as a whole through a special dividend, except I don't see any way round a tax liablity being incurred for all...not good! Best, imo, to either invest in distressed assets offering decent upside, whatever, or hold the cash on deposit until the company is sold in its entirety so that all shareholders get to share equally the benefits, leaving each to deal with their own personal tax issues.

emptyend

23rd Jul '09

In reply to davjo (post #30)

I'd rather cash be returned to shareholders as a whole through a special dividend, except I don't see any way round a tax liablity being incurred for all...not good!

There are surely lots of ways to achieve a similar result without subjecting people to tax by calling the payment a "dividend". I'm a bit surprised that this comment in the RNS.....

The Board will meet shortly to consider a full range of options for the application of the sale proceeds in line with its previously stated strategy of returning value to shareholders. The options to be considered will include seeking shareholder approval for a share buyback and/or a capital restructuring scheme and also the potential for opportunistic investment in strategic assets.

....implies that they haven't yet considered it. But, instead, it implies to me that they already have pre-conceptions about how they will"spend" the money - and the fact that they mention a share buyback first is IMO a worrying sign, for the reasons dj alludes to. I can't think of a more inappropriate way to disperse the proceeds than a share buy-back (other than perhaps buying bad assets).

27th Jul '09

Some discussion by of the Breagh saleand its effects on participants.

http://www.4shared.com/file/120345861/ea3f51da/BREAGH_and_SE.html

marben100

28th Jul '09

Surely the buyback option could include a tender offer to shareholders? Other companies have used this as a tax efficient means to return cash to shareholders. I can't see any objections to a tender, which strikes me as fair.

Regards,

Mark

lowersharpnose

26th Aug '09

http://www.londonstockexchange.com/exchange/prices-and-news/news/market-news/market-news-detail.html?announcementId=10166947

Completion of Disposal of EnCore SNS Ltd (Breagh Gas Discovery)

EnCore Oil plc (LSE: EO.) is pleased to announce the completion of the sale of its 15 per cent. interest in the Breagh gas discovery on Block 42/13 and surrounding acreage in the UK Southern North Sea.

In line with the announcement on 22 July 2009, RWE Dea has paid a total cash consideration to EnCore of US$44.7million plus £14.7m (in repayment of inter-company debt). 20 per cent. of the consideration for the sale of EnCore (SNS) Ltd (US$12.8million) will be held in an interest bearing escrow account for 12 months as security against any potential warranty or indemnity claims by the purchaser.

There is not expected to be any tax payable by EnCore on the sale proceeds.

There is not expected to be any tax payable by me on the sal proceeds from his EnCore shares.

lsn

tingtang

27th Aug '09

I think that i read somewhere that Darron is now out of this share and i have now become disillusioned to the point where I am also looking to exit.

Why do we buy these small e&p shares, is it to anticipate dividends or to look forward to share buybacks? The answer is an emphatic NO on both counts. We buy them to create value through identifying good exploration, farm-in, or other investment opportunities.

The gas storage project aspect was a disappointment but did not persuade me to sell, That field is still an asset, albeit of unkown value at the present time, other than costs of appraisal for future usage it is not eating any meat. I want out because management appear to have lost focus and with this share buyback decision have displayed an attitude of 'job done' They have a wad of cash and there are countless small co's out there with prospects who need to raise cash, some because they cannot as they would dilute themselves away to nothing and others who are waiting for bankers brown trousers to come back from the laundry.

NOW is the time to get out there and take the pick of the best of those distressed opportunities, the time is NOW when great deals could be made, by golly with around 50 million quid to spend they should be cleaning up, even to consider buybacks was an indicator to me that the companies objectives were no longer the same as my own.

The benefits of buybacks are illusury, 'now you see it - now you don't'. You know it should be there somewhere but where is it? There is sp movement up and down for reasons of co success/failure, market sector sentiment and overall market /economic swings. Whether a buyback sheme was ever successful nobody will ever really know. Guys who want dividends or share buybacks should invest in other sectors, not oil e&p co's. Encore now create an impression that they have run out of ambition and want to be out and there is little more to look forward to here.

tt.

oilretire

In reply to tingtang (post #36)

I want out because management appear to have lost focus and with this share buyback decision have displayed an attitude of 'job done'

Maybe you have your op to get out with today's rise ;-)

I'm thinking they know more about Cladhan than we or the market does. The buyback will increase shareholder/director gearing to the success of Cladhan appraisal. IF they are that confident Cladhan will prove up successful, then they can cash up on that afterwards.

But, IMO they know they have more cash coming too... sale of Ceres, sale of Ireland........??

I'm sticking to see at least Cladhan appraised and possibly the farmout/appraisal of Tudor Rose - and by that time GS options should be clearer.

>>Maybe you have your op to get out with today's rise ;-)

It will take rather more than the sp we are seeing right now before I can move- just venting my frustration. (((

I am of the honest opinion thet the mm's may walk the share up whilst the buying goes on and then walk it back down in response to no news as each little dribble of a sale comes in so we shall be back where we started. I may prove to be wrong but i doubt it.

Accept all you say about Cladham, Ceres etc but the point i was making is that now is the time to be replacing/adding properties, that is what one would expect to see from a company going forward. I didn't want a dividend option either but that would have been better than a buyback, at least you could touch, feel and smell it, even if the taxman has had a nibble along the way. He gets his take in the end anyway so why an aversion to paying that now on a dividend rather than later on ultimate disposal as an unidentifiable amount embedded in the sp?

Iv'e had my say, some will agree,some wont and i shan't hog your thread any further.

All the best

Alan Booth is only 51 years of age. Do you really think he's ready to give up the fast lane? You might think so if the company is considering a share buy-back but for me, successful guys like AB don't give up the kudos of making mega bucks in the oil business in exchange for a 'boring life' sitting on the beach very easily. In my view, there will be more to come from Encore in due course. As ever, patience is a virtue. Watch and wait before deciding on what to do with your shareholding is my advice.....fwiw ;-)

28th Aug '09

I'd agree with that having watched him presenting at the AGM last year.The thing is he doesn't have much to work his undoubted magic on .

I ask myself if Cladhan had been a duster what he would have to get his teeth into .Thank God we have it .

The corollary of that is I can't see EO being in existence beyond 2011 - once Cladhan has been appraised .I will certainly be out and I'd expect AB to be elsewhere too.

How much will they spend on a buy back I wonder - my guess is £20M .

In reply to ohisay (post #40)

>>The corollary of that is I can't see EO being in existence beyond 2011 - once Cladhan has been appraised .I will certainly be out and I'd expect >>AB to be elsewhere too.

So what is wrong with the vehicle (EO.) that he has already? Your view suggests he will move to another sector. Anyway you seem to agree that the co are winding down.

>>How much will they spend on a buy back I wonder - my guess is £20M

My impression was that all of the Breagh proceeds were to be returned via the buyback and I have stated elsewhere that all such purchased shares be cancelled with none going into treasury, it is our money, albeit they decide how to dispose of it.

thebuffoon

In reply to tingtang (post #41)

My impression was that all of the Breagh proceeds were to be returned via the buyback and I have stated elsewhere that all such purchased shares be cancelled with none going into treasury..

It wasn't mine. I think that they will hold some money back. They need it.

it is our money, albeit they decide how to dispose of it.

Indeed it is, but you have empowered our board to run the company for us. You either trust them or you don't. This is not GKP*; if you don't trust them sell!!

Buffy

* There was an obvious trading opportunity that didn't rely on the integrity of the board...

29th Aug '09

In reply to thebuffoon (post #42)

In fact as Whackford in t'other place has pointed out ,the 2009 accounts indicate they want to buy back up to 100M or around 1/3 of shares leaving themselves around £30m cash at the current share price.

I think this is a little lower than most folks were expecting and gives them enough flexibility to look at futher deals.

http://www.encoreoil.co.uk/assets_cm/files/PDF/encore_ra_09.pdf

(see item 8 on P 47.)

tiswas

In reply to ohisay (post #43)

I must be in the minority here. Whilst I am clearly disappointed with the share price and events I do actually have faith in the management to redeploy the cash in buying distressed companies/assets to grow that value rather than handing it back to me. Astute asset managers with a pile of cash must be more qualified to recycle that money than I am.

However, I have 2 nagging doubts. Looking at the small caps these are getting more and more expensive by the day although I am sure there are still opportunities aplenty. I am also not convinced that we are out of the woods just yet, in other words if we do a get a double dip recession there is a danger of buying POO related assets at a minor top. Without wishing to sound too much sound like Isaac I am getting quite nervous about a serious pullback in equity and commodity markets once the summer doldrums come to an end.

Isaac

Without wishing to sound too much sound like Isaac I am getting quite nervous about a serious pullback in equity and commodity markets once the summer doldrums come to an end.

I am expecting the markets to correct the recent up move and then motor north again. I told everyone long time ago this would happen, do you remember I talked about a STOCK MARKET MELTUP? Not many thought it would be possible but i was right!!

STOP!

Please, only comments relating to what Encore will do with the Breagh cash.

Leaving posts as is, as the tiswas post was related to the decisions cash rich co's like EO face in the current market and Isaac was hooked good and proper by the comment ;-)

Any more posts off topic will be removed.

BREAGH SALE - before & after discussion

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