DANA takeover bid - KNOC makes preliminary approach.

Just a historical note on the takeover, from today's FT:

In its latest accounts, Dana is set to report a 30 per cent increase in production last year, from just under 40,000 barrels a day in 2010. Revenues are expected to be up by about 50 per cent on 2010’s £598m, boosted by sustained high oil prices during its last year of independent ownership......

The company continued to operate autonomously from its owners, maintaining its own lending facilities and holding a “war chest” of $900m for acquisitions and investments in ventures where it could act on its own account or alongside KNOC and sister companies

 

You may recall my expectation that Dana would be used as an EMEA hub by KNOC....

ee

The story referenced by SirL contains significant errors

"...She invested £400 in 1995 and was getting a cheque for £720,000...."

The maths is based on the erroneous proposition that the disabled pensioner paid 1p/share in 1995 and eventually sold for £18/share - a gain of 1800x

The first problem with the story is that there was a 15:1 consolidation between 1995 and 2010. So the pensioner's 40,000 shares at 1p were converted into just 2666 shares at 15p. That means she would have received just under £48,000. This would be a great investment return, but only 1/15 of the £720,000 claimed.

The second problem is that Dana shares did not trade at 1p at any time during 1995. According to Sharescope, the lowest price they traded at during the entire year was 3.8p (after adjusting for the consolidation). So our Irish lady could not possibly have bought her shares for 1p each.

I don't know what was going on during the reported interview but somebody has made two very silly mistakes here.

I bought my own first shares* in Dana around 1996~7 a few years after Mrs O'Really and have been a shareholder almost continuously ever since - indeed for long periods I had 60% of my portfolio invested in Dana. As you might expect I am more than a little pleased with the overall return, so I'm not finding fault, but I think it is good to keep our facts straight and our feet on the ground. My own overall return, augmented by 2 or 3 exits and subsequent re-entries (which all worked out happily), is in the region of a 25 bagger. That's more than enough to make me happy without embellishing the story with exaggerated claims of an 1800 bagger.



*According to memory I paid 8p/share for my first purchase - allowing for the 15:1 consolidation that equates to 120p/share.

More thoughts from TC:
http://www.telegraph.co.uk/finance/financetopics/profiles/8113069/Dana-Petroleum-chief-Tom-Cross-reflects-on-the-deal-of-the-decade.html

Personally I wonder about someone who's taken in £54m+ less CGT and chooses to carry on working in the oil industry which is not one of the more beautiful ways to spend your time on Planet Earth. Longer-standing bulletin boarders know I've followed a different path in my life - I hope I know when enough is enough.

I missed that TC "doubled my holding in Dana over the last year at between £9-£11". Was that well known hereabouts?

Nah, he's going to spend his time building up Parkmead into a multi-billion pound oil services company :-)

Anybody spoken to TC since the takeover, or maybe seen any news ? Presumably he'll stay with the company in the interim to hand over, wonder if KNOC will want to hold onto him & his team longer term?

Comsserations to those who held on....

Dana is a great company, I made a good buck or two from this over the years. Pretty sad to see it go. And a Fantastic achievement by Tom Cross and his team.

lol - Sterling Resources

.....and now we're all out!

http://www.digitallook.com/news/rns/3709571-11594/DNX-Recommendation_of_KNOC_Offer_html

And now the board have recommended the offer.

But they haven't been taken out cheaply!

50% premium sounds about right to me.

I'd settle for the same with Soco, post TGD and Fan success

Just for the record. The offer is now unconditional.  Acceptances and shares owned totalled 64%+

No surprise in that respect....just disappointing overall. But it was always a risk that Dana would get taken out "cheaply" and at the wrong time.......

Thanks for the reply.

It hedges the price.

What is the main thing which affects price? Tax? Is the main advantage of having a wide variety of oil assets over a concentrated portfolio a hedge against a sudden tax hike like happened in the North Sea a few years ago? Or its diversification in case a field goes into declining production? Or something else?

Why did KNOC choose Dana over producing assets near South Korea?

Why is Dana a good strategic fit?

I don't understand ... I understand South Korea wishes to buy oil assets because it is a net importer.

But how does it help to have production many thousands of miles away? I don't know the details of North Sea production but I know SOME is piped ashore and put into storage in Scotland.

Better than none at all ... but why Dana over producing assets nearer South Korea?

I thought the exit strategy always was, to sell the business, however the timing of bidder interest - as we can see - rarely coincides with shareholders' best interests.

We are not in a lending crisis or oil prices plunging, there is a sense for increasingly rare oil & gas reserves, so if no one else is prepared to table an offer then it must be a verdict on the suitability/attractiveness of Dana's assets. Presumably Schroders and others have pondered, where is the bidder likely to come from, hence motivation to ease KNOC's way in here.

It's some breakdown in investor relations also, where the principal shareholder feels it best to act this way, also those institutions who caved in to the hedge funds buying in the region of £12-15.

Dana's announcements this week reflect vigour but unless the bid is not declared unconditional and something stupendous happens at the Anne Marie drill bit...

Apologies for flogging a dead horse but I really think the problem with Dana in the eyes of instos was the absence of an obvious exit strategy, emphasised by the mixed approach of growing by multi acquisition and somewhat obscure overseas explo. As I see it, TC's expertise is in the N.Sea and he's made a pretty damned good job there for Dana. Trouble is, venturing beyond has clouded the picture. As I've said before, it's as if he's been more intent on creating an empire and in so doing almost trying to make the company unattractive to suitors, rather than focusing efforts to crystallise value for shareholders. That was his mistake imo.

Paladin had not dissimilar N.Sea assets but prepared their portfolio for an orderly recommended sale in the open market. Others like Encore and Soco are very clearly focused in their policy to sell when the time is right. TC was not in control of events because he had not seriously taken on board the risk of being taken out unexpectedly. KNOC have clearly outmanouevred him leaving much egg on his face...albeit he'll still be much the richer in cash terms :-)

Anyhow, I now draw a line as my last post on this thread. Good luck to all reinvesting the proceeds. It wasn't so bad a result in the history of all our portfolios performance was it? ...a rare situation where there are no losers in sight ;-)

Cochin

I doubt there are many/any PI's angrier than I at this cheapskate bid and the aggressive/hardball/hardnose tactics of KNOC. Nor are there many people feeling more contempt for Schroders et al. And there can be few if any PI's who have been more vocal than I in their support of Dana mgt than I but the realpolitik of the situation is as SirL said that if you added us all up together we would come to half of diddly sqaut compared with the institutional investors who decided ages ago that they would sell Dana down the river for a quick cheap profit because that way their abyssmal investment returns across their whole portfolio get covered up and they qualify for the vast and utterly undeserved bonuses that this parasite class are awarded.

So having got all that off our collective chests there are things to do and they do not include breast beating and weeping and gnashing of teeth.

Sic transit Gloria Dana.

The E&P is dead, long live the E&P etc etc etc

I'm going to do what is in my own interests given the regrettable situation. IE I do not want my capital tied up in a bureaucratic tangle controlled by KNOC. I'd rather cut the umbilical and walk away and do other things with my intellectual/emotional energy.

I note that other holdings in my portfolio are doing interesting things at present -NPE and XEL to name but 2

Not every PI agrees with my/your assessment. But all of us benefit from open communication and fromunderstanding the dynamics of investor thinking. We do not gain anything from beating each other up.

By Thursdays close Dana is dead unless Anna-Marie is flowing profusely

cochin,

What exactly are you suggesting? If it is that, if people here think the bid is insufficient they should refuse it, wake up to the fact that almost everyone here is too small a holder to make any effective difference! This bid was always going to be decided by the institutions and hedge funds, and it makes little difference what any of us do. Our only possibility was/is to try to see what the bigger players are going to do, why do you think what the people here do actually makes any difference?

It's not that Fangorn, I'm my normal self today!
Anyone who has held the shares over the long term has presumably had some faith in the board's judgment and competence. At a time of crisis for the board they have asked shareholders to trust them and reject the offer. Instead of showing that trust 'reluctant' sellers have simply folded under the bully boy pressure employed by KNOC.
The offer is either full value or it is not, depending on your own view. If you don't believe that it is then surely you await developments.
The argument that delay in acceptance is an opportunity cost appears to me to be a fig-leaf for grabbing a share of the cash whilst its still on the table for fear it goes away.

Fangorn.

There's poss some recycling but I'd say the main driver is PI interest being reawakened by the stunning successes of catch/cladhan/kraken thus fuelling the rises.

Pmg presentation this am highlighted again their excellent story. I'd also highly recommend looking at Niko Resources.

And what's the point of that post.

There were two camps:

1. Those like me, who were of the opinion dnx would fall and no counter. Thus prob sold at 1790+ (could have got over 1800p) and moved on.

2. Those who felt the co was worth more on its own or a counter would arrive. They were happy to continue to hold and bear any opportunity cost.

Of course the market could have tanked whilst the offer was on the table (like the Imperial Energy scenario) and then the second camp would be laughing. That it hasn't is one of those things. So it hasn't worked for group 2.

Both approaches were perfectly valid.

So why the sniping?

As a holder of the stock I have been following the debate on this thread from the outset. After many weeks of hot air being spouted by the over inlated ego's on this site, you know who you are, you all run like rabbits at the sound of gunfire. Pathetic!

Agreed EE,

I have thought from the start that they dealt with the situation well. Apart from getting snared into the insider information bit, they had a plan, a price they were willing to pay, and knew they might have to pay a whole lot more if they let the drilling campaign get results. I would be astonished if they hadn't let it be known they were going to pay a premium to the share price privately before announcing publicly and the investment banks were only too happy to buy up the stock knowing there was a big premium in it. Knoc didn't get their hands dirty or buy any stock. This left them free to walk away if need be. At the same time as long as no counter bid appeared they were sure to get the business for 1800 by going hostile, no state company had ever done it, they might have been scuppered if someone else had bid, that's a chance they were willing to take, and unfortunately for us they called it right.

they could have got tangled up in offering 1900 or 1950 would even that have been enough for the management recomendation ? who knows, looks like they have saved 100's ?M of dollars,

Not happy about it, but if it was me launching the bid I would be,

what is the date for acceptences ? Friday I guess ? any idea when we might get paid ?

depending on price I may well sell into the market the last bit of my position, I never had a significant position,
and I bought a large chunk of it this year, so it hasn't worked out too badly for me, though if the drilling campaign had worked out, it would have been much better, we shall see.

From Knoc's point of view they have got a good potential upside at limited cost,

K

I guess it doesn't really matter now............

http://www.investegate.co.uk/Article.aspx?id=201009210714320178T

Dana Petroleum plc is pleased to report that the Dana operated Cormoran-1 exploration well has begun drilling offshore Mauritania, West Africa, just 2 kilometres southeast of Dana's existing Pelican-1 discovery.

The conductor has been run and Dana has already drilled the 26 inch hole section down to approximately 2,226 metres. The current operation is preparing to run 20 inch casing, before drilling ahead.

Cormoran-1 is being drilled by the Maersk Deliverer drilling rig and is located in Block 7 offshore Mauritania. The planned total depth of the Cormoran well is approximately 4,600 metres and the well is being drilled in a water depth of 1,632 metres.

Cormoran is the largest prospect in Dana's 2010 exploration programme and, based on 3D seismic mapping, has a target reserves range of between 400 million barrels and 780 million barrels of oil equivalent.

Dana holds the largest working interest in this Block 7 Production Sharing Contract area with 36%. The well is expected to encounter three discrete zones of interest between approximately 2,890 metres and 4,600 metres.

When I worked in a major independent N Sea E+P Co some years ago, it was well understood that tax credits/losses made a huge difference to the net value of acquired assets and that the tax treatment differed very significantly from one potential acquirer to another

So it was entirely correct to state that a target asset had a value which was radically different depending on which co was acquiring it and what their own tax situation was.

This meant that an asset could be worth far more to one co than a rival.

_________________________

on a different tack it is not many years since Hardman and Woodside exercised their pre-emption rights to stop JV partner ENI (I think it was them) selling their stake in Mauritania to was it Mobil? Having deployed their pre-empt rights Hardman flipped the stake they bought for a profit of $100 million in a 2 week period. So there is proof positive that assets can be bought at less than their market value in some cases.

Your point is irrelevant to the price paid which was clearly the best available in the market. That's indisputable unless you think the sale process was rigged, which I imagine you don't? Of course, Dana or anyone else would expect to profit from such deal otherwise they wouldn't buy it, but it's only 'worth' what it'll fetch in the market and that's what some people are getting confused about.

Hi davjo,

My point about the competitive nature of the auction is, I think, relevant. Clearly Dana feel they've paid less than the asset is worth to them. Dana may, indeed given the CPR, it's not unreasonable to believe that they would, have paid more for the asset. Other bidders may have wanted to pay more but , if they were using finance for their bid, have been constrained by terms imposed by their lenders. Banks may have wanted a minimum level of cashflow above financing costs or not attached much value to P3 for example ?

Apologies if I was in a grumpy mood when posting my original comments.

Who knows what you know?

I think this thread really drives home the point that the value of anything is only what the market will pay. If the market is uninformed - or indeed, has different information than you - then the price it will pay is different. Over time I've witnessed discussions here and on TMF that have centred on how a particular share is undervalued, and of course these are the discussions that PIs and bulletins boards thrive on.

However, the ultimate question is whether the market will 'get it' or not. 'Getting it' will mean that either the market will identify those same reasons and then price them in, or whether some other kind of event will 'out' the value. A clear example of the second case is investors trying to evaluate their own CoS for a given well and then placing the appropriate bet on a positive outcome, an outcome which should later become readily visible to anyone, namely flowing hydrocarbons.

How can the market price a secret?

However, for as long as these reasons (let's call them secret ingredients) remain locked out of sight to the majority of investors, their value won't be priced in. That's not too much of a problem for the LTBH invesor, as long as she's confident that those ingredients will be revealed at some stage in the future whilst she's still a holder. The problem comes when someone else cottons on, someone with enough cash to buy a significant proportion of the company's shares, and tempts other holders to sell at premium to the existing price - but yet still a price that doesn't factor in the magic ingredients. The LTBH investor feels hard done by - forced into a sale before the secret ingredients were revealed.

You would do the same

And that's what all of us would like to do, given the resources, isn't it? We buy shares where we think we know something others don't, and therefore buy those shares at what we consider to be a discount. It may be that the seller doesn't have the same view as us and is happy to sell - or it may be that the seller has the same view as us but other circumstances are forcing him to sell at what he considers to be a discount. In that example, we've used the fact that we have available cash when the seller hasn't to buy his shares. He may even feel hard done by - forced into a sale before the secret ingredients were revealed.

How to get the secrets out - if they exist at all?

I haven't been a Dana holder for some time now, and actually one of the reasons I sold a few years ago was because it always seemed that the management knew a great deal more about the company than I did - or ever reasonably could do. Clearly there are PIs who established excellent relationships which enabled them to get hold of the information they needed - and I'm sure the instos did the same - but I didn't have the time to engage in that level of rapport.

Nevertheless, I still feel that the danger of the secret ingredients which are never revealed or understood exists with other companies - and perhaps davjo's post illustrates that rather well. We know that the directors of SOCO occasionally express frustration that the market doesn't seem to be 'getting it,' despite their efforts and apparent openness. Until now, this hasn't mattered too much to me because I've always thought the end-game would be decided on the basis of a decent open competition.

The lesson here seems to be that I should keep a discount in mind - just in case someone with financial clout manages to surround and hug enough shareholders before the secret ingredients are revealed.

SW10

repo,
The indications are that most shareholders didn't even think the offer was on the low side. They effectively accepted it quickly with unusually low support for management. If it were a close call there'd have been sub-50% acceptance and extension of timetables and all that, but since that hasn't happened I think it's fair to say that the offer wasn't even a close call.

It's perfectly fair enough for TC to fight, but IMO there have been moments where his tactics didn't make sense without him having another card to play. Rather than insisting that KNOC sign an undertaking to not go hostile as a precondition to negotiating in Calgary, he'd have been better advised to try to negotiate up the 1800p that was on the table then. We know at Calgary he didn't negotiate, as distinct from did try to negotiate but couldn't get more - it seems there's never been a serious effort to get the 1800p up. He thought 1800p hostile was defensible, but actually the big shareholders indicated quickly that it would be enough. Bearing in mind where most (but not all) analysts price targets were, him thinking 1800p hostile was defensible seems optimistic.

ee,
Could you send me a copy of that GS note please?

Later edit: Thanks for the GS note, and you're quite right that GS are a respected broker showing a price target of 2106p, well above the bid level.  Perhaps they may be alone in that though??

Tom Cross clearly has egg on his face

As do certain Oil experts on this board.

As I said many weeks ago it makes a lot of sense to sell out when a bid appears as most of the value would be realised. Sure there could be another 10-20% to make by holding but why risk losing a chunk of the profits if the bid fails or if you get a director whose determined to push for more money when the market is saying otherwise? There are many stocks in the FTSE 350 that have gone up by 10-20% in the past 1-2 months that people could have bought rather then holding Dana.................

The problem with listening to certain experts on this board is they have been holding for such a long time that they become emotionlly attached and therefore IMO their opinion is clouded.

I don't care about Soco management. They don't care about me. If a bidder manages to convince PointOil to sell and can launch and aggresive bid I will sell out even if it is a 20% premium to the current share price.

I'm here to make money. There are always opportunities out there. I don't need to be emotionally attached to a single company.  

IMO there's a fair amount of faulty analysis, claiming the moral high ground and playing to the gallery just above here, but I'm choosing to not get involved. I'm moving to the repobear line that the best thing is to leave this behind and look for the next investment.

I think Schroder genuinely did think £18 was fair value. I expect they did ask for more information, but probably got fobbed off, so I tend to agree that S didn't have field by field info. Philosophically, I'm not sure that such info has much value if it's not in the public domain and never will be. If I have secret information that some share is worth twice as much as the market price, but the rest of the market will never know that info, is the info actually of any value?

Tom Cross clearly has egg on his face - we've agreed that someone will do at the end of this bid.  He didn't want to sell out now and the suggestion that losing this bid battle is OK because he wanted to sell out is improbable.  He's overvalued his hand, leading to very odd tactics - higher on this thread you'll read several moments when I thought he had to have an ace up his sleeve because his tactics wouldn't make sense unless he did.  It's because his behaviour suggested there had to be a twist to come that I've stayed in Dana shares for this long.

All the fussing here about controlling the shareholder register and the behaviour of CFD holders misses the point that AIUI (corrections welcome) no mainstream analyst had valued the shares at more than £17-18 within the last year, then along comes a £18 cash bid, which most shareholders quickly accept.  This isn't the complicated situation that some writing above suggests - it's a simple cash bid at a big prem to the preexisting price that was accepted quickly without any of the trauma that is suggested on this thread.  There aren't any legal/operational lessons to be learned about the way takeovers work in the stock market.

"One might fairly wonder why, if that was the case, the defences weren't better-prepared - but I think it was simply a case of a well-timed approach"

"management lost touch with investors or suffered delusions of grandeur or simply were not doing their job properly....[leading to SP volatility] and the opportunity for a well timed bid"
My point has been that investor relations should have been consistently more informative over the long term.  Short term timing of approach or SP volatility isn't relevant to my issue, which is that if management really believed value was five or ten quid more than the SP, they should have been (more effectively) doing what it took to get the SP consistently five or ten quid higher.  "the normal volatility of a volatile sector in a volatile market" isn't what I'm writing about, which is that if management are right to believe the shares should have been five or ten quid higher, why didn't they do what it took to consistently get the shares there.  Sure, there is always volatility, but it should have been from a consistently stepped up level.

I think much of the "fait accompli" is as I said in Ventures case, and EE has said above is the inability of the companies to control the shareholder base actions.

I receieve on my door mat almost daily investment guides saying why I must get into Aberdeen/Schroders/Artemis funds.
These guys simply have to make a fund return, no sentiment, no ownership.

A low ball hostile bid was allways a danger for Venture and Dana as long as the shareholder mix was not controlable, and all along the two companies making themselves all the more attractive to a hostile bid.(ie Venture developing its gas business specifically to interest a utility)

As for all the current sentiment, its simply for want of a better word a grieveing process. Some of the pillarstones of the BB's conversations,excitement and gain over the past few years has gone. Presumabaly existing ones are further under threat.

I wonder where Schroders are putting the Dana money?

Tournesolf puts it neatly-he felt an owner,not investor. The only problem here is that owners usually have some end game in sight. If you become an owner its hard not to become sentimental. Change is created for you when you dont want it.

Its hard to know whether Dana management or Ventures were unlucky as both have fallen(or will) to unwelcome bids. Each company could have or perhaps tried and failed to go private in the recent past,but it appears defence is hard to put up and expensive.

FH

Hi davjo,

You've provided , as ever, some salutary warnings re expectations management ! Accepting that the Soco portfolio isn't such a mish-mash of assets and management/board can control the bidding process, where would you put a realistic price range for Soco, in the evnt a bidder comes calling.....

RC spoke in his interview of the VN and DRC progs potentially raising reserves by a 5x or 6x multiple......even allowing for a more conservative trebling, to around 350-400mm bbl, where would you see a likely takeout range ?

I'd been mentally thinking of GBP 40-50 in 'old money', but maybe that'll need revisiting ;

Tournesolf


Why are you spending so much time writing a post that defends Dana? It's a share. Shes gone. Dana does'nt love you. Let's move on....

Not really understanding why people are making such an effort in their posts and talking about Dana so much, I just think all this energy would be more useful if focused on looking for the next Dana....

I'm often surprised by the way people confuse the general with the specific and vice versa. In the context of markets and investment that means they confuse stock specific situations with those that affect a sub-sector or larger sub-set of the market.

Quite a few people have pointed to the weakness in Dana's share price earlier this year as evidence that management lost touch with investors or suffered delusions of grandeur or simply were not doing their job properly. "If only those people in Carden Place had communicated better, the company's SP would have been less volatile and the opportunity for a well timed bid would not have arisen" goes the argument.

The proponents of this argument point to the fact that Dana's SP had fallen to 1050p or thereabout around the time of the AGM so KNOC's bid at 1800p represented an irresistible exit opportunity.

But, but, but.....

Look at other similar companies - that's not all that easy since VPC fell to an opportunistic, hostile bid which took advantage of SP volatility to present itself as generous. In fact I can only think of one similar company and that's Premier.

Look at Premier's share price. Earlier this year it was around 1025p. Today it is just shy of 1700p. Notice a surprising similarity to Dana? In fact if you superimpose the two charts you find a very close correlation between the two.

So what does this tell us? Would it be fair to criticise PMO's management as "out-of-touch"? as behaving "like the king of the castle" ? as being awful at communication with investors? Would it be fair to regard the SP before it was boosted by the KNOC on effect of the Dana bid as a proper reflection of asset value as communicated to the market?

Of course not. The weakness in the SP was not company specific. It was not the result of management shortcomings. It reflected the normal volatility of a volatile sector in a volatile market. It reflects the simple fact that Mr Market is NOT efficient but behaves in the stereotypically bipolar fashion much discussed by eminent investors.

KNOC's advisors simply waited for a low point and took advantage of investors inability to differentiate between company specific and more generalised circumstances.

If anyone disagrees then perhaps they can explain why Premier is so very different. ISTM that the main difference is that Premier management had built a less attractive company with less attractive assets. But that does not support the charges levelled against Dana does it?

Do me a favour tgg, are you really suggesting the highest bid of £240m in an open auction didn't previously have anybody seriously nodding the price up?

As I said previously,


"The key word is competitive. Without knowing who else was bidding, clearly the level of competition is unknown."

  If you have inside knowledge of the auction, clearlty you can shed some light on its competeitive nature, or lack thereof. Otherwise it sounds as if you're continuing your very dull agenda

As to Dana, it is clearly nonsensical to claim the Suncor purchases are worth more than they've paid at competitive auction.

The key word is competitive. Without knowing who else was bidding, clearly the level of competition is unknown.

Reflecting on the disappointment expressed as to KNOC's offer(takeout) price, I'm wondering whether private investors are missing a trick here. SirL has implied that Dana left itself vulnerable by failing to communicate fair value to the city. I don't think that's the case at all. I think the city simply has a different idea of value than PIs, after all, Schroders, with support of other major funds, emphasised the point that £18 was full and fair in their opinion. Why should they say that if they didn't mean it?(no conspiracy theories please). How were they to judge if they didn't have the sort of reserves info etc. that SirL was calling for? The answer must be that they did. If SirL was managing the Schroder position and he rang up TC asking for a reserves update, do you suppose he'd be refused? Unquestionably not imo!

So why the disappointment? It's quite interesting to review SOCO's asset sales over the years to compare BB contributors expectations vs price achieved :-

Russia Aug 2001 : £35m. Speculation on TMF following the sale of AEX's Komi asset reckoned SOCO-Permtex was worth more per bbl for well argued reasons, maybe £50m.

Tunisia Nov 2004 : £13.5m. Previous speculative TMF estimates of £17.5m.

Mongolia Apr 2005 : $40m + $53m contingent (£49m total). £50-£100m in PI spreadsheets.

Yemen Feb 2008 : $465m. Nearest to PI expectations but still $35m short in some quarters.

Thailand Jul 2010 : $105m. Even several analysts were way out on this one.

Strikes me that PIs need to revisit their assumptions when valuing E&Ps. All these glib $/bbl figures plucked from thin air should be treated with a pinch of salt. M&A prices are the be all and end all measure imo. As to Dana, it is clearly nonsensical to claim the Suncor purchases are worth more than they've paid at competitive auction. In fact, it looks very much like the price they have paid isn't so far removed from KNOC's offer on a booked 2P basis. In respect of upside from explo/appraisal, of course pretty well all producing assets have a portion of this but what is the pure explo worth to the buyer of a company like Dana? Maybe Schroders did an analysis of Dana's explo record over the last say 10 years and found the investment showed a poor return in terms of newly discovered booked 2Ps and concluded the future didn't hold much promise with such record?

Given the above and Dana's strategic move to grow by acquistion via competitive auction over the last few years, you can understand Schroder and other instituitions thinking that Dana is paying through the nose to boost cashflow in order to invest in explo which they're not very good at, hence the game is up. I wouldn't be surprised if Schroders let it be known to the likes of ML a while back that they're looking for a sale and the wheels were set in motion. I think it's entirely typical of TC that he didn't see it coming because he completely lost sight riding aloft as king of the castle. IMO, KNOC were advised by those who know, that competitive bids for mish-mash assets were extremely unlikely.

Anyhow, the message I'm trying portray is that PIs need to downsize their expectations in respect of reserves/explo as valued in the marketplace through M&A. The price being paid by KNOC is fair value because nobody else wants to pay more. There's absolutely no reason to complain....as if it would get you anywhere ;-)

Doubt you'll get a chance to savour spaniel & poodle kebabs at the party celebrating the bid victory either

Well there it is - 29.5% acquired:

KNOC announces that it today acquired, subject to settlement, 27,297,954 Dana

Shares, representing approximately 29.5 per cent. of the issued share capital of

Dana, from Dana Shareholders at a price of 1,800 pence per Dana Share.



Dana Shareholders are encouraged to accept the Share Offer immediately and, in

any event, by no later than 1.00pm (London time) on 23 September 2010.



The procedure for acceptance of the Offers is set out on page 6 and in

paragraphs 15 and 16 of Part I of the Offer Document.



Terms defined in the Offer Document have the same meaning when used in this

announcement.



*KNOC's Share Offer of 1,800 pence per Dana Share is full and final and will not

be increased save that KNOC reserves its right to increase the Share Offer if a

competitive situation arises (including if a third party announces an offer or

possible offer for Dana).



Enquiries:

http://www.investegate.co.uk/article.aspx?id=201009171231268971S&fe=1

KNOC with ~29.5% today.......

Well it will be interesting to see who supplied the stock - if it was just those covered by the LoI's then not a lot has changed but if its other parties, add them to the LoI's and it looks lie KNOC are possibly home and dry.

Schroders have just announced that they've got rid of 10.5 mill shares this morning, so quite possibly FTA were right for once!!

According to FT Alphaville, KNOC have grabbed a 29.9% stake in the market this morning.....

Welcome to Stockopedia. I'm very glad you joined and hope you share your wisdom on these boards.

Just need to convince WShak and Bertee now....

TMF is still more active for non-oil stocks.

KMcK

Welcome to Stockopedia. I'm very glad you joined and hope you share your wisdom on these boards.

Just need to convince WShak and Bertee now....

I'm out, but not too happy!

Having bought from 260p upwards I can hardly complain, but the price isn't exactly a triumph.

The big question is where to invest next!

Goodbye Burren, Paladin, Venture... all good stuff...but hey!, the list is shrinking.

Still in DGO and MRS (serial disappointer)

By the way, I hope you are all considering coming to the Scottish Social on Wednesday 3 November, following the afternoon session of the IC Roadshow in Edinburgh.

Please say so on the relevant thread in 'another place' (if you're still allowed on :-) Otherwise an e-mail to me please

KMcK

There's not a lot I can add to such a detailed and erudite discussion.

I would say though, I think it probably reflects a sea-change in attitude to risk when investing since the 2008 crash. The future feels much less certain - it probably never was but the illusion was strong.

Future production counts for almost nothing i.e there' a huge discount for future earnings - and we can see this effect on several other shares that we know well.

No matter how much we might wish things to be different I have a feeling this state-of-affairs may last for years.

Recognising that makes me also feel that I need to be more short -term, willing to trade more on news and be less wedded to a particular share.

This is hard to swallow for some - especially if you feel that you are an owner rather than an informed gambler.

Bugs

Schroder Investment Management are close to the most "old-fashioned", patient fundamentally- and value-driven pension fund investment house in the City. They are not part of the hedge fund CFD-orientated fraternity. The hedge funds and CFD traders only entered after the bid appeared.  Schroder's presence as largest shareholder pre-bid suggests to me that S had done some in-house fundamental non-broker research to identify an unCityfashionable company whose SP was lagging its fundamental value by some way.  Value investing, if you like, in the sense that the City (but not Pyad) uses the term.

I've written before, and let's not get started again, that IMO what's happened here looks to me like an investor relations failure.  If Dana management really believed the shares were worth at least £22 a few months ago, why didn't they do more to persuade investors of that before the bid appeared?  If management doesn't market the shares at City presentations, this is what happens.  If the SP had been up close to fundamental value, whatever that might have been, there'd never have been a bid, hedge funds or CFDs in the first place.  Why is it that large shareholders were so much less supportive of management than in most bids?

If the "block" imposed by KNOC being made insiders hadn't existed, this bid would have been done and dusted fairly rapidly, helped by the big premium over the pre-existing SP that KNOC offered.  In the sense that this has actually been a fairly straightforward cash bid without competing bidders, changes in valuation of a bidder's paper offer, late increases in the offer etc, I think the comments above about CFD holders rights are a red herring.  There have always been and will always be arbs where the bid premium is generous, and before the CFD era those guys owned the actual shares on leverage.  That they "hold" these days via CFDs doesn't really change them or their behaviour.

Reflecting on the discussion on this and other threads, I have had some thoughts about why my own attitude to Dana is somewhat different than to other stocks in my portfolio both past and present.

As stated elsewhere I've had a large stake (in terms of % of my portfolio) in Dana for 10-12 years and the growth of the share price coupled with a few judicious (lucky???) tactical exits and re-entries have delivered somewhere around 28% pa compound sustained for a period of 10-12 years.

In that time I've assiduously followed the company as closely as I could - attended almost all of the AGM's, read almost every brokers/analysts note, read every mention in the media. I've found Dana management very open, friendly and helpful and have spoken with them on many occasions. I've even had breakfast with the chairman.

The simple truth is I've not been a shareholder/investor at all. I've been an owner. OK I admit only an owner of a very very tiny slice. But nevertheless an owner rather than an investor. In other words I've been invested for the very long term with no intention of exiting and my eyes on the horizon.

I've bought and sold many other stocks in this same period. With almost all of them I've been either a trader (not so often) or an investor (typically) and only very rarely have felt/behaved like an owner, In most of the latter cases my period of ownership has come to an end when concerns have arisen which have triggered my re-positioning into short term mode.

In my mind an investor is rather like someone who buys a CFD. Their interest is not fundamentally in the underlying company - but instead they are effectively betting on the share price. They are to all intents and purposes exposed to a derivative of the business rather than to the underlying reality of the business itself.

In contrast I've been betting on the underlying business - or to be more precise on the management team. And I've worked on the basis that they will continue delivering operational results and that the financial markets will eventually recognise that and price the "derivative" share price appropriately.

Given that I view myself as implicitly owning a small piece of the underlying business, rather than simply having an interest in a financial derivative, I feel as if my business is now being nationalised by the Korean Government via a kind of compulsory purchase scheme engineered by hedge funds and Schroders and other people who don;t have any real interest in the underlying operating business but make their living by financial engineering using derivatives and leverage. And whose interests are entirely out of alignment with my own. They get rich by meeting short term targets. I get rich by being patient.

It looks like its a done deal but that doesn't make me feel good about it. And being lectured about objectivity and logical analysis doesn't help either. I've funded an exploration programme that might come up trumps at AM - I want to be exposed to that. I like the look of Guinea (via Hyperdynamics) and I want to see how that pans out too. And probably most of all, I am very comfortable with T Cross & co and I am more than happy to let them get on with making me 28% year after year after year. I don;t think it will be easy for me to find another opportunity which will do the same at anything like the same low level of risk.

Jock,

KNOC "wins" if it gets unconditional letters of acceptance for more than 50% of the share capital. If if only reached slightly above 50%, even then there would be a second flurry of acceptance letters coming in to push the total up. If it reached more than 75%, KNOC would apply for the shares to be delisted, so you'd carry on owning unlisted shares that would be eligible for any dividend but you'd struggle to sell ever again to anyone but KNOC (for £18). Above 90% KNOC would apply for compulsory purchase of your shares for £18. All though this process, KNOC would be very likely to accept your shares for £18.

I'm a new boy where stocks and shares are concerned. What happens to my Dana shares if KNOC wins and I havn't accepted?

On the subject of online acceptance for nominee a/c holdings, I've just dug out the paper advice I was sent & TDW have the final date as 20th Sept , although no time is specified

Just checked  - last time for acceptance online with TDW is 23:59 on 20th Sept.... obviously other brokers will/may have different deadlines

On the assumption that KNOC get above 50% acceptances, wouldn't their first acvtion be to extend the offer to allow further acceptance?

u,

If you want to accept, the best thing is to do it by tomorrow. Even if you don't, assuming the bid succeeds, there's a very good chance that KNOC will accept requests to buy stock on the offer terms for many months to come. KNOC want your stock at £18, you shouldn't have much trouble getting £18 from them.

I'm holding my remaining DNX shares with the broker selftrade and according to the broker, I have to notify them on whether I accept the KNOC offer "no later than 5.00pm on 16 September 2010." which is tomorrow. My plan is to accept tomorrow.

Is there anyone not accepting? What happens if you don't accept by the deadline...is it likely to be a chance of selling in the market close to 18 pounds (without any rival counterbids)?

I didn't suggest an external CPR monthly. I was hinting at monthly IR efforts, to pay "enough attention to trying to ensure that the share price reflected the underlying business".  You tend to be seeing the problem as not the right response after the KNOC offer arrived.  IMO whilst the response after the offer arrived could have been a lot better, the best defence is to maintain informative IR continuously so the SP maintains a higher level and an opportunistic bid never does arrive.

"I believe that they hadn't got their CPR ready-to-go.....obviously made more difficult by the two asset purchases that were under way with Suncor"
If their entire asset portfolio is independently valued each year, surely a CPR can be prepared at very short notice as a simple update on last year's valuation?  Presumably detailed work on the Suncor assets has just been done, that can be inserted without too much difficulty?  Hasn't Dana's problem been willingness to release detail until it's too late, rather than inability to do so?  Shouldn't the Preparation be something that's done month in month out before any bid appears, rather than being just a speedy response to a bid arising?

"I had expected KNOC to try a friendly deal and retain Dana as effectively their EMEA division, with some autonomy to grow by doing more deals. That would seem to have been wrong"

I don't see why, with the exception of two or three senior people and the IR, every other Dana employee including the exploration and any directly employed production staff can't stay to form KNOC's EMEA division.  If others want to go, fine, but there's no reason they can't stay to carry on exactly the same job. 

t,
Surely one's own opinions can turn around rapidly, certainly within 24h, so there's no need to prepare your own mindset?

I read EE's reference to being prepared as a "note to self" when wearing his other hat.

ee,

If the lesson "Be Prepared" is one you mean corporate management specifically should bear in mind, could you enlarge on how you think Dana management were insufficiently Prepared on this occasion, and how, in a parallel universe, you think Dana management should have been more Prepared?

What IYO did "lead KNOC to bid in the first place" as you refer to it in your final para? The shares being particularly undervalued?

Surely if Dana's functionaries are spending time telephoning small investors holding about "a quarter" of 1400 shares [no criticism at all of that holding!] held in a HBOS high st account, then that demonstrates they aren't working on any white knight counterbid?  Seems v unlikely that they'd be doing both simultaneously.

Having looked through the offer documentation I cannot find any direct reference to the percentage level where KNOC would declare the offer unconditional, which appears to fall short of the textbook.

At day 21 the offeror would review the percentage accepted 'with regard to its declared acceptance level at which the offer becomes unconditional' and if reached then declare the offer 'unconditional as to acceptances'. Any offer must then remain open for 14 days to allow dissenting shareholders to sell their shares - however I do not know if that means in the market or by accepting the £18 offer.

All this may seem unduly technical and quite irrelevant to those who would rather jump elsewhere ASAP, but applies to those seeing this offer through to its conclusion - yet wishing to avoid a delay getting money out of KNOC.

There's been plenty of knockabout fun on this thread, and though I agree plenty of syllables have been written that haven't been optimised on making money, it's been entertaining. I now know what "romantic" investing is, for instance.  I no longer have any involvement in Dana, but it's entertaining to hang around until the denouement. IMO repo's a bit harsh, but i can relate to the point he's making.

However I've been wised up on that one somewhat by this thread which has added less value per syllable than just about anything I've read for a long time. The ones who have made money, made their point after getting in on the news of the bid and made their point after getting out, took their profits, and moved on to make more money again.

I disagree repo.

Whilst the share price hasn't done much that doesn't mean the value in what's been posted here hasn't enhanced everyone's understanding. I've learnt a lot about the mechanics of bidding for example.

But I've also been reading atuff elsewhere as well. Surely you don't have to read this thread if you don't want to but what's the harm in others discussing the pros and cons.

It's not 100% about making money.

Debate here has been informative, emotional and very straight as well.

Dunno if I posted this here (Or elsewhere) but I sold up all DNX (spreads and paper) approx 2 weeks ago for 1807p or so and put 80% of this into EO at 78p and rest as my ISA 2010/2011 contribution which remains unspent for now.

I suppose if you wanted to call a winner here you could say the DNX sceptics/agnostics have been clear winners so far (unless a WN appears or AM comes in and TC/Shareholders reject the KNOC approach).

I was tempted at 1650p and 1700p to get out and only hung in/clung on as a result of some excellent posting here which reassured me somewhat to stay on longer (I am not a big DNX fan and would definitely fall into the agnostic camp).

It will be a shame when DNX does go under the hammer as it will concentrate the UK listed pool again with one less stock that I can invest in without having to do too much of my own research. I am seeing in near term a similar situation develop with TLW, a company in which I am a devotee (maybe not quite on T's level though!!), but this thread has taught me to be much much colder and detached when deciding when its time to bid adieu and sell up.
£20 for TLW and the oral foam will be very visible from a distance.

Anyway onwards and upwards. GKP is looking a bit hot lately....recently overtook TLW as my largest holding.

JPGH

Yes indeed tournesol,

I do give at toss about making money and thought that was the main purpose of bulletin boards.

However I've been wised up on that one somewhat by this thread which has added less value per syllable than just about anything I've read for a long time. The ones who have made money, made their point after getting in on the news of the bid and made their point after getting out, took their profits, and moved on to make more money again.

There has been some serious, well thought through debate but really it has gone on far too long, been overloaded with emotion and has had an opportunity cost for the particpants.

DJP is the best example of those who have contributed to his thread, read the sitaution well and made money from it and with the money taken out of it, I reckon. His thread in where to go after Dana which for weeks has been more deserving of response than this one has been virtually ignored.

I hope you find some suitable home(s) for your Dana money and don't take the points I've made personally.

repobear

Re. Rule 31.8,

Splitting hairs but quite important as to timing perhaps, there is a difference between being declared conditional and wholly unconditional? i.e. those who accept the offer may not be waiting 14 days from it being declared unconditional, but wholly unconditional, which could be some weeks later.

This is relevant in terms of the opportunity cost i.e. consider not accepting the offer in order to retain flexibility to sell in the market (for a stock switch). The price won't fall back significantly, this being a centre of arb attention.

Not to get into an extended debate on semantics but the man keeps promoting via the media, his point that £18 a share is full and fair, I think investors need some humility as to judging a complex industrial situation - especially when he hadn't even seen the defence document. That summed him up philosophically, for me, he was not prepared to wait for the defence document - and jumped to dismiss it sooner than he could have digested it.

All this from a man who thinks one of the best UK stock picks is Taylor Wimpey... credibility is quite lost there, for me!

Still, if the industry does not offer better terms, what we would then know in terms of industrial valuation is that control can pass at £18 a share. Intrinsic value is obviously higher otherwise KNOC would not be so motivated.

EJ,

I'm sure the SIM fund manager is a busy man, and he's just (probably slightly reluctantly) responding to media questions, rather than proactively going out and "insisting" on stuff. There is no quote in which the word "know" is used, the nearest is "We think that the 1800p offer price is fair". Looking at the actual quotes he's quoted on, none of them seem "too full of himself" to me. Which quoted phrase exactly do you think is out of order?

Does anyone know how long it will be before those who accept the offer in the next week actually receive the £18 in their bank accout?

Because he keeps repeatedly insisting in the media, £18 is full and fair, and is on the record for 'encouraging' KNOC.

I don't see how a fund manager can 'know' this is objectively true, relative to industry, the process is not over. He is too full of himself.  He was insisting the offer was 'full and fair' even before allowing the company to publish its defence document; this strikes me as arrogance.

It does prejudice the situation. I am considering accepting the offer purely because Schroder has created this consensus among institutions and the media, such that (without a competitive offer) the deal is likely to go through.

Unless one sells in the market, it could be months before a dissenting holder recieves dues, I would not trust KNOC to observe any timetable to pay out to those not accepting the offer (my SIPP nominee is not even able to send me the bid information).

Every hour that goes by without news looks more like game over.

In football terms Dana are 2-0 down with ten minutes left. I don't fancy their chances much because KNOC look more like Chelsea than ManU of late.

The big question is will we get to a 1000 posts before the finishing line is crossed. Looking unlikely imv.

Meanwhile Sterling and Encore have struck the equivalent of 15k BOPD on Cladhan and I'm thinking maybe the stratigraphic trap may get to half Buzzard proportions if they find theoil/water contact on the downdip sidetrack.

If they don't find it and go looking with the stepout well planned to be brought forward to Q1 2011 who know?. Not that anyone here gives a toss.

repobear

EJ,

What phrases exactly in that article are "fawning on KNOC"? How's he "talking up KNOC"?

IMO he's just talking up 18 quid. If there were someone else offering 19 quid that would be even better. He just wants the cash, as much of it as possible.

PS I've never heard of ringing around small shareholders before.  Dana must be struggling.  Slartybartfast, in which broker's account is your holding please?  Oilretire, could you give some hint about how large your holding is please - larger or smaller than 1400 shares?

Does this Schroder fund manager keep fawning on KNOC because he wants some kind of business from them?

I began to wonder this in recent days and here he is talking up KNOC and doing down Dana (yet again) in the Korean press:

http://www.koreatimes.co.kr/www/news/biz/2010/09/123_73070.html

Or maybe he just wants his quarterly performance bonus.

Dana are ringing round even the small shareholders to garner support ( I hold 1400 in the account they phoned regarding).
I saved them the trouble of spouting their spiel to confirm that I currently wasn't intending to accept the offer.

When it comes to DNX I'm small time, very small time and my 0.00000000000000000000000001% (or whatever) holding is held via a high street dealer (HBOS), so it was a wee bit of a surprise to find an answer message on my home phone today from someone representing DNX 'urging all share holders to take no action'

I'm I really that important? Oh what a power trip ;-)

Then again, maybe it's a safe bet phoning all Aberdeen numbers ;-)

Anyway FWIW, still holding for the last scene to play out.

Some chunky numbers being traded since the blip up following KNOC's announcement........

....485,000 share has just gone through at 1788p......wonder if that is KNOC buying? Or a hedgie? or.....

ee,

No doubt there's plenty of Dana and KNOC going around to institutions offices to present why the institution should go their way. At the end of the hour the institution says what it's thinking of doing, and some KNOC functionary keeps the score as verbally told to them informally. Isn't that likely to be the basis on which KNOC think they're over 50%, though binding commitments have not yet been received, to be RNSed?

I'm expecting to see another rap over the knuckles for KNOC shortly. Apparently there is an article in the Korea Times  which claims:

The Korea National Oil Corporations (KNOC) bid for Dana Petroleum has gained the support of shareholders who account for over 50 percent of the British oil firms stocks, an official said Monday.

 

Passing the 50-percent threshold is expected to boost KNOCs efforts to take Dana private through a tender offer, company officials said with a hint of caution.

 

The figure is easily over 50 percent. We are comfortably progressing with the takeover bid, said a KNOC official, though he wouldnt disclose the exact number.

KNOC, KNOC

TC: Who’s there?

Mid to large oilco with strong SP and good prospects.

TC: What can we do for you?

We’re interested in the Company. It would have to be a paper deal I’m afraid, we want to conserve our cash because we have such great development opportunities ahead. And we don’t feel we can go better than £19.50. We could justify sweetening that a little if AM comes in.

TC: You’re twisting my arm here, but come in, there’s no harm in having a wee chat

--------------------------
Pure fantasy of course, but one never knows……this ball is still in play.

Evening Standard comment last night:

TRADER TALK

American investment house P Schoenfeld has made a last minute bet that the battle to take over Scottish oil group Dana has further to run. The firm — owned by former Schroders manager Peter Schoenfeld — bought 3.05 million shares, or 3.3% of the company valuing its stake at £55 million the day Dana said an 1800 per share offer undervalued its potential. But KNOC has since said it will not raise its offer. Dana has said it believes it is worth nearer 2500p per share. With advisers to the Korean firm saying the majority of Dana's shareholders are willing to take the present offer Schoenfeld might have acted in haste. His firm specialises in making money from mergers as well as corporate restructuring and spin-offs. Then again with a firm offer on the table maybe the firm is happy with a small return if the Korean company does stick to its guns and no rival suitor emerges.

FWIW

The alternative to Faroe being taken over would be for KNOC to be a ready buyer for Faroe's stakes in undeveloped discoveries, which might suit Faroe and KNOC perfectly well in their different ways. Faroe has a steady stream of %shares of discoveries it would like to recycle into capital.

t,

Well yes but Parkmead only has 3% of Faroe, and there's ~70% free float out there of which KNOC would only need ~23%.  Parkmead's 3% is too small to matter.

Re the possibility of KNOC moving its attention to Faroe, Parkmead (PMG) owns about 3% of Faroe. It's worth remembering that Tom Cross and his wife own about 30% of PMG between them. Furthermore the chairman of PMG is Colin Goodall - currently chairman of Dana.

Something tells me that in the event of a hostile bid by KNOC for Faroe, PMG is unlikely to side with KNOC.

With Dana, and it's 30% of Faroe, as good as in KNOC's hands, doesn't that make Faroe the prime bid candidate in the UK-quoted sector? KNOC has no shortage of capital to develop Faroe's prospects.  I bet Graham Stewart's p'd off that his independence looks finite.  I give Faroe less than a year to remain quoted.  All that remains is to guess the takeover price.  A nice investment, particularly for those who believe AM will be successful.

ee correctly describes Soco's large shares of nowhere-near-exhaustion assets as "strategic". Looking with the same perspective, wouldn't it be fair to think of davjo's "mishmash" as meaning Dana's assets are "non-strategic"? KNOC would quite like the management team currently managing a hub of N Sea assets, but most other companies large enough to do corporate acquisitions either have withdrawn from the N Sea or already have a management team there, so would they want to buy Dana's management infrastructure? Perhaps the only rival bidder might be another Asian national oil company, but is a NOC v NOC bid battle credible?

I don't know much about LTIP's. ee's the local expert on them!

At about 1785-1787 the SP seems locked on to the trajectory towards acceptance. If the market saw any hope of a counter bid or likelihood of independence being preferable to KNOC then the SP would be up away from the locked on level. Being pragmatic, I think that if any corporate finance house anywhere in the City were in the advanced stages of working on a counter bid, there'd be enough leakage of that for the SP to show some life and for the odd mention in the gossip/tip columns of the business sections.

In reply to Davjo#705
I guess thats the last card left in the deck to play,with the DNX board voting through all the awards that crystalise on chabge of control(LTIP's etc )before being removed from office,but KNOC dont have enough momentum yet so dont think it will be played just yet..
FH

I note an article in Business week where KNOC plans to sell as much as $1 billion of debt to fund takeovers.

The Yonhap News Agency reported today, in the latest sign Asia’s largest economies are competing to secure global energy resources.

http://www.businessweek.com/news/2010-09-12/korea-national-oil-to-sell-bonds-to-fund-acquisitions.html

Further to SirL's comment about TC potentially losing out financially from the absence of a loan note alternative, I wonder what his position would be in respect of LTIP shares if KNOC win the day? Ordinarily for a recommended offer, one would expect LTIP shares to be awarded in full regardless of unfulfilled performance relating to future release dates. Would that apply in a hostile situation though?

I see that TC has 480,000 LTIP shares due for release in November this year and October next. That's several million quids worth. Will he lose out on these? If so, in the absence of a counterbidder surfacing, will he change tack and recommend acceptance? Seems there might be an incentive for him and fellow directors to do so.

IMO, the market believes a counterbid is all but out of the question because of the mish-mash nature of the assets. They never were that attractive to anyone other than a unique lone buyer such as KNOC. I remain of the view that AM is irrelevant without a counter offer in prospect.

I don't well know that actually. All the other E&Ps I invested in have, sometimes in a bit of an obscure way, allowed out enough information to let me do a NAV spreadsheet. Dana is the exception.

Let's agree to differ on this.  Continuing this same old Dana discussion isn't going to get anyone anywhere.  IMO it's all over for Dana anyway.

How can the shares be valued without detail of remaining reserves on a field by field basis?

How can TC complain that the shares aren't valued at what he thinks is the right level if the information isn't made available?  Isn't it a bit like asking structural engineers to calculate the size of RSJ required, without letting them into the house?

"The valuations attributed to Dana by different analysts are very different from each other."

That tells me not that the analysts are idiots or not trying, but that there's something wrong with the way the company is giving out information.


"Even worse than the lack of quality in the raw numbers was the fact that the conclusions reached by the different analysts bore such little relationship to the analysis on which they purported to be based.....It was abundantly clear that the conclusions/recommendations had a different agenda to the "analysis" and had been inspired by someone other than the author of the detail"

Agreed. All professional readers of brokers analysis know all about corporate finance pressure, and read the analysis with that in mind. I have consistently tried to get BB amateurs to not even look at the headline B/H/S recommendation, and hardly at the top paragraph, but that message isn't always received.


"If I asked 6 structural engineers to calculate the size of RSJ i needed in a roof, I'd expect a narrow range of answers"

If you don't let them into the house, or give them the most fleeting of looks, or course you'll get a wide range of answers.

"As it is I sold just 4 times at times when there was no "sell" consensus and made money every time"

If every analyst says Sell, to me that's the time to buy.  You shouldn't be looking for a Sell concensus as a time to sell.  You've got to read the analysis knowing the game they play and how the system works.  The time to sell is when excitement is hot and every bit of research suggests a Buy.

"the quality of assets is frequently not a matter of fact, but is very much a matter of opinion!"

I'm very well aware that the number of how many barrels of oil remain in a field is very far from an exact one.  There's no dispute from me that there's a lot of soft judgement required.  What I'd like is just a opening number of the companies best estimate put out, and if any analyst wants to dispute that he's welcome to do so in his text, but at least there's a workable starting position.  If the numbers are independently checked every year, the "it's too subjective" line doesn't hold water.

"If company B publish their view, then they alert the entire market to the opportunity. But if they keep it to themselves then they may be able to buy out company C and/or company A for much less than the real value....so it is clearly in their shareholders interests not to publish their opinion"

I accept this argument, where perhaps there's a nearby block to be bought, but it should apply only to a few fields and only for a short finite time.  Dana consistently almost never gives out detailed information on any of its fields, so that limited argument barely applies.

Incidentally, tournesol has in the past characterised my disclosure issue as being simply that the AGM presentations should be made available.  I've seen a couple of AGM presentations, thanks to t himself who's sent them to me (or was it Dana IR, I can't remember).  The AGM presentations don't contain the info I was after, which was reserves remaining analysed by field, and so whilst they were nice reading they weren't what I was after.  It's not just a matter of publishing the AGM presentations more widely.

PS I've given up using the inverted comma tool for quotes.  It's too difficult manipulating text from more than a screen upwards as the screen doesn't roll down if you pick up text and hold it at the bottom of the page, and copy/paste is not available.  I'll just use italics for quotes from now on.

I am in complete agreement with those comments. And I have noted with other companies the precise criticisms that you make here:

I used to contact Dana to inquire a) which of the analysts was closest to the company's own view and b) what Dana was doing to remove misunderstandings. The answers I received were consistent over many years. The co told me that they supplied the same info to every analyst but some analysts simply did not respond - they did not attend briefings, did not take calls and never contacted the co with questions. Once an analyst published a report which I found alarming in its pessimism. When I discussed it with Dana I was told that the co had not spoken with that analyst for over 2 years. There were many significant and obvious errors in that analysis. I myself tried to contact the analyst to point these out. After failing to get through I wrote him a letter. I'm still waiting for an acknowledgement some years later. His reports have continued to misrepresent the facts.

....indeed it is the case that horses can be led to water, but they cannot be made to drink.

Some analysts do an excellent job - and the average analyst generally tries his best in what is a fairly complex business sector (and he may be covering 15 companies or so). However - the tail of analysts is extremely long .....and much of it is complete and utter rubbish. Genuinely some of their comments are often not worth the paper they are printed on (if anyone bothers).

Turning back to the comments of Marben and SirL, I can obviously understand the wish to have full and complete information. However, the situation just isn't as straightorward as that......because one of the MAIN aspects of the E&P business is that the quality of assets is frequently not a matter of fact, but is very much a matter of opinion! And that is REALLY important - and a vital distinction between the E&P business and, for example, making and selling widgits.

Let me explain why, using a hypothetical example (but where, with a little thought, you can see plenty of real world parallels - unconnected with any responsibilities I hold, incidentally):

Company A and company B drill an exploration well in Africa. It has results that seem inconclusive. The G&G people at company A are discouraged - but the G&G people at company B can see some real opportunities (having fully analysed the results), including on some nearby acreage owned by company C. If company B publish their view, then they alert the entire market to the opportunity. But if they keep it to themselves then they may be able to buy out company C and/or company A for much less than the real value....so it is clearly in their shareholders interests not to publish their opinion, despite the fact that their assets really do have more value than the market credits them with.

Examples:

a) Wintershall's purchase of Revus in 2008 for a 145% premium......check what has been discovered on those assets since ;-)

b) Tullow's acquisitions of Hardman and Energy Africa

c) Cairn buying out Shell at Mangala for about $8mn (IIRC)

Similar considerations will apply to things like development of discoveries, especially when one needs to negotiate access to third party infrastructure. I surmise that may have been the case with the Western Isles Development Mark refers to above:

Western Isles (WID), OTOH, will add 30kbopd gross, ~20kbopd net. [Figures based on a rough average of 1st 5 years production]. Pre- the two recent deals, that means that WID was highly material relative to current production of ~40kbopd. However, that production was never shown in analyst reports that I saw, NOR AFAICR DID TC EVER DISCLOSE THOSE FIGURES IN ANY PRESENTATION.

There is always a natural tension in an E&P company between:

a) telling shareholders everything and ensuring that the market value of the company is as full as possible

b) telling shareholders the absolute minimum and thus protecting the real value of the company itself and the opportunities available to it

Some may say that Cross erred more towards b) than was wise in retrospect. But that is REALLY not surprising for a company that has been a regular buyer and seller of assets. Information is money....and that money is the company's - and, indeed, the shareholders'  !!!

And, in Cross's defence, I would say that is PARTICULARLY understandable  to err towards b) if one cannot trust analysts to include all the value elements in their estimation of value. It is completely obvious that indeed analysts can't be trusted to include all the elements of value, even when they are made fully aware of them ...because they NEVER take account of drilling plans or developments that are planned to occur in a year or two's time, IRRESPECTIVE of how significant they may be.

A good illustration of this structural error in the analysis of E&Ps can be found in Goldman's May 2010 note on the E&P sector, which said of Dana (my bold):

Dana is trading at a more than 35% discount to its core assts at the
forward curve on our estimates. We believe that this level of discount is
unsustainable and that its reserves are attractive to investors looking
for leverage to the oil price. The exploration programme is also
attractive in our eyes – there is no exploration value discounted in the
shares and we believe that 2011 should see a material uptick in terms
of potential impact, with material wells likely in Guinea, Mauritania,
Senegal and Norway. Although this activity is currently too far out in
the future for the market to price in, this should roll onto an investible
time horizon in the next two quarters, further benefitting the shares.

So....Goldman (who were the only analysts I saw who even bothered to make the point) were flagging up future value that was ALREADY in Dana and in Dana's plans,  but which the market wasn't taking any notice of!

No doubt the bid from KNOC has been driven by a very similar calculation, arriving as it did a mere 5 weeks after Goldman's note was published!

emptyend

SirL

Indeed. If the analyst NAVs are wrong, as has often been asserted on BBs, one has to ask: is that because they've done a bad job, or is it that they struggle to get information? Is it necessarily the analysts' fault if their work is illinformed

 

  I understand your POV but it is not supported by the evidence. My criticism of analysts is based on empirical evidence.

 1) The valuations attributed to Dana by different analysts are very different from each other. (and have been for 10 years) This tells us that analysts are either using incomplete and/or widely varying data or are making very different assumptions from each other. Each of them has access to the information which Dana publishes and also to the additional information which is made available via analyst briefings. And each of them should be reading their peers work and taking notes. I used to contact Dana to inquire a) which of the analysts was closest to the company's own view and b) what Dana was doing to remove misunderstandings. The answers I received were consistent over many years. The co told me that they supplied the same info to every analyst but some analysts simply did not respond - they did not attend briefings, did not take calls and never contacted the co with questions. Once an analyst published a report which I found alarming in its pessimism. When I discussed it with Dana I was told that the co had not spoken with that analyst for over 2 years. There were many significant and obvious errors in that analysis. I myself tried to contact the analyst to point these out. After failing to get through I wrote him a letter. I'm still waiting for an acknowledgement some years later. His reports have continued to misrepresent the facts.

2) For some years I used to tabulate the analysts' output on Dana so I could compare and contrast their different figures. I found that there was no consistency at all across the analyst community. Even simple financials were often different to a very material extent. Even when the reports were prepared close to the year end - when most of the numbers were already actuals rather than forecasts - they were still widely different from each other.

3) Even worse than the lack of quality in the raw numbers was the fact that the conclusions reached by the different analysts bore such little relationship to the analysis on which they purported to be based. Looking at 6 or 8 analyses I used to find that the person most pessimistic about the numbers was often mmost optimistic about future prospects and vice versa. It was abundantly clear that the conclusions/recommendations had a different agenda to the "analysis" and had been inspired by someone other than the author of the detail.

4) I used to publish my observations on the above - initially on iii and later on TMF. Evebntually after years of diligent cross-comparison on my part I realised that the exercise was futile. The material I was looking at was not of marketable quality. The analysts were getting away with shoddy work because its consumers - presumably fund managers - were too busy to spend more than a few minutes on it. And also because those same FM's would see through the recommendations as self serving anyway.

5) I stopped doing the very detailed tabulation years ago but the point of the above remains evident from a simple comparison of the valuations published by the different analysts.  See www.stockopedia.com/content/analyst-coverage-and-related-media-comment-29834. That alone tells you that whatever the analyst community is doing it cannot be regarded as the serious and objective pursuit of truth.

6) If I asked 6 structural engineers to calculate the size of RSJ i needed in a roof, I'd expect a narrow range of answers. Or 6 doctors for a diagnosis of an illness. I can;t respect a profession where there is no consistency and no consensus. You might as well ask taxi drivers for a view.

7) Had I listened to analysts I'd have sold my Dana holding on any of 50 ocasions over the past 10 years and woudl have made very little from it. As it is I sold just 4 times at times when there was no "sell" consensus and made money every time.- whilst overall I've been pleased with the long term return. The combination of LTBH plus judicious trading at inflexion points has worked wonders.

I think you and I are effectively doing similar things here. You are sticking up for members of a community (fund management and equity analysis) to which you yourself once belonged. I am doing the same (oil co management). But I'm not asserting the vitues of everyone in the oil industry - just some individuals I have had direct dealings with for years and have got to know and respect.

An interesting question is: how has this situation arisen? Rightly or wrongly I suspect that there is an element of paranoia or control freakery in TC's investor relations. One of TC's arguments, when broaching this subject to him in person, was concern about giving too much away to competitors. Until KNOC came along, that was fine - and may have been an integral part of TC's deal-making strategy. After all, when negotiating it is generally advisable to keep as many cards up your sleeve as you can.

Unfortunately, this secrecy may also have led to a disconnect between analyst valuations and TRUE value. After all, we know how bad such disconnects can be, even in the case of Soco, who I have found to be a much more transparent & straightforward to analyse company, by comparison.

A couple of years ago I was looking at getting back Into Dana - I have about 40 stocks on my watchlist and they seemed on the face of it to be attractively priced .However I always like to see the detail so went to the website to find out a bit more.

I have to say it was like wading through treacle .AlI had to guide me was masses of text - I started making notes on what I thought were the essentials and then after about an hour when I realised I was not much further on I just gave up.

My thought was why does this company make it so hard for me to be interested in it.?

I'd been used to seeing voluminous presentations from the likes of Tullow and Venture which gave me information in a nutshell and encouraged me to invest .I'm now looking at Dana which on the face of it doesnt want me to see the wood for the trees and I think what is their problem.?

Result - I didn't invest.I'm not surprised the price was 1100p in May or whatever.I thought about it then but thought if I went to the website I'd have the same experience because of TC's confidentiality issues.

Can I go to Aberdeen ?.Er no because I have mobility issues sometimes.

I don't doubt TCs professional ability but I'm afraid the opaqueness of their communication to the average punter like me has finally bitten them on the butt.

If they'd done a Tullow on communication they'd have every chance of not being in this position.

More in sorrow etc etc ...

Curiosity got the better of me (despite no longer having a Dana holding) and I downloaded the CPR. Certainly haven't read all of it but did find the answer to a key question I had been wondering about: what will the "Arran" (Barbara/Phyllis) and "Western Isles" (Melville/Rinnes) development add to production post 2012/13?

The answers were quite interesting. According to my calcs, Arran will only add 60mmscf gross,i.e ~2.2kboepd net to Dana's production. Western Isles (WID), OTOH, will add 30kbopd gross, ~20kbopd net. [Figures based on a rough average of 1st 5 years production]. Pre- the two recent deals, that means that WID was highly material relative to current production of ~40kbopd. However, that production was never shown in analyst reports that I saw, NOR AFAICR DID TC EVER DISCLOSE THOSE FIGURES IN ANY PRESENTATION. [see pp329-330 of the CPR for Arran & WID production profiles]

Unless I've got this wrong, I can see very clearly where SirL is coming from. I can also well understand tournesol's POV - who has developed a close relationship with TC over many years and has seen the business perform exceptionally well & deliver great returns (though much less great, until KNOC came along, over the last 4 years than the preceding 15+). However, for an investor like me, SirL or probably even Schroeders, we like hard numbers. Tournesol, were you aware of the figures I have quoted?

An interesting question is: how has this situation arisen? Rightly or wrongly I suspect that there is an element of paranoia or control freakery in TC's investor relations. One of TC's arguments, when broaching this subject to him in person, was concern about giving too much away to competitors. Until KNOC came along, that was fine - and may have been an integral part of TC's deal-making strategy. After all, when negotiating it is generally advisable to keep as many cards up your sleeve as you can.

Unfortunately, this secrecy may also have led to a disconnect between analyst valuations and TRUE value. After all, we know how bad such disconnects can be, even in the case of Soco, who I have found to be a much more transparent & straightforward to analyse company, by comparison.

In the absence of the data now disclosed in the CPR, investing in Dana boiled down to whether or not you trusted TC & his team to continue to deliver value [except when Dana appeared patently undervalued, as it did @ £11 & below, based purely on analyst numbers which we knew did NOT take Arran & WID into account].

Best,

Mark

"there isn't even the slightest press rumour of any white knight!"

I should certainly hope not, than to be so unprofessional, however there was this in August:

http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7945838/Rival-bidders-line-up-for-Dana-Petroleum.html

If there is any credibility in this story, potential rivals would in any case would wait for KNOC to make its position clear, which it finally has.

I would expect Morgan Stanley to be working the phones/networks now the defence doc is public - given the success fee they'd make as intermediary - so there is still a chance of a higher/paper alternative, worth holding out for by some.

As the 23rd gets closer, obviously the chances recede.

If I were a white knight then I'd quite like to let things stew a day or three to see how the land lies.

Fair enough to try, but that's what I've been waiting for for months, and there isn't even the slightest press rumour of any white knight!  There have been very few contested hostile bids in the UK E&P sector in history.  It might happen, but maybe your guess of the likelihood is higher than mine!

It would be a fair question to ask me why I don't wait until the bitter end to take 1800p rather than the mid-1780s that I have done.  The answer is that my shares were in an ISA account that requires a UK address (I have a kind sister) to which I don't have easy access for the paper mail, and so doing the paperwork with confidence doesn't really suit my geographical location.  There's often a bit of a delay in receiving the sales proceeds cash as well, but for a UK-based person just hanging on in order to get the full 1800p would be a fair decision.  Hanging on to the bitter end involves uncertainty that the bid really does succeed as well.

Wouldn't it be politic not to mention polite to wait just a little longer to see the fat lady move centre stage and wait for her cue from the lead violinist?

If I were a white knight then I'd quite like to let things stew a day or three to see how the land lies. The weaker the SP in that time - the lower my counterbid need be pitched. Or have I misunderstood the rules of the game? (not for the first time)

Agreed this is almost certainly a gonna at 1800p

I don't believe there's any significant chance of a white knight appearing, and since KNOC will not pay any more for AM I can no longer see any serious prospect of upside, and so I've just sold my whole holding in the mid 1780's. I think it was the correct decision to hold whilst there was a respectable chance of upside, but that's now over so as discussed yesterday "I'm out". IMO this will be over with irrevocables over 50% on 23 Sept or market purchases by KNOC before then. And the one with egg on his face will be Tom Cross.

There are some very high volumes now  on the order book, more than 700k unfulfilled orders to buy on the book now.  Perhaps a lot of business is being done to be reported with a delay after the close today(?)

Bon voyage and drive carefully.

The purpose of todays KNOC announcement is to kill off any hopes that AM success alone would lead to any higher offer. There is no point now holding out hopes for that, ie there is no point the market pricing the shares at a premium over the offer price for that. What you see is what you get, the only options are £18, a white knight, or reject the bid and see the SP fall to the low teens.

I think it's a good tactic to get rid of the over-£18 premium that was blocking KNOC. Thinking that the chances of a white knight were low and that any success at AM wouldn't lead to a large increase in the offer, I wrote yesterday that I was surprised the SP wasn't already say 1790-1792, and that's effectively what's happened now.  There is little reason (white knight only) for the shares to be above £18 now, so I expect KNOC will shortly start buying in size and it will be over soon.




t,

"tell me again why you are determined to blame Cross for the impasse that has developed"

A third precondition in Calgary, as discussed on this thread shortly after, was that Dana required KNOC to sign an agreement not to go hostile, ie giving Dana management a veto.  It was that precondition that led to the Calgary meeting falling apart.  I don't accept such a precondition is reasonable.

Unlikely as KNOC will not want to whack it straight back/above £18 when there could well be a steady exit of holders seeing opportunities elsewhere (if no higher offer) until the 23rd.

One possibility surrounding today's announcement is it partly being done to knock the price enough to allow Merrill to buy on KNOC's behalf, this being a recent frustration.

Another, which is logically implicit in KNOC's willingness to increase its offer in the event of a competitive situation, is that it DOES see strategic value as higher than £18 a share.

KNOC's stated intention quite contradicts its words!