Malcy’s Blog – FAR Ltd and more…

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Oil price, PetroTal, Far, Remus. And finally…


WTI $60.05 +58c, Brent $63.35 +92c, Diff -$3.30 +34c, NG $3.13 +22c, UKNG 43.5p +1.9p


Oil price


The weather in Texas and Louisiana ain’t going away, indeed the weather chart shows 1,600 miles of wintry storms headed all the way to Boston…Things have got worse since I wrote yesterday, there are some 3m b/d of oil and a good deal of natural gas offline right now with 4m b/d off their refining capacity, 20% of US capacity and some say with the conditions expected to stay for another few days, not back for 2 weeks…


Last night the Houston Ship canal was closed and traffic movements anywhere near on the water have been severely curtailed if not closed in. This obviously means that all the inventory data for at least a fortnight will be obfuscated by this and will let the imagination run wild..


It wont stop me reporting on the retail gasoline price, this week it is over a key mark at $2.501 across the US but already $3.30 in California which puts it up 4 cents on the week, 12.2c m/m and +7.3c y/y. This ain’t coming down.


PetroTal Corp (AIM:PTAL)


PetroTal has announced that on February 16, 2021 it completed the issuance of the US$100 million issue of senior secured bonds, previously announced on February 2, 2021. ‘The new bond issue will be PetroTal’s only interest bearing debt and will be used to retire the existing derivative liability with Petroperu, continue development of the Bretana oil field, support the Company’s crude oil price hedging strategy, and finance potential acquisitions’. Details of the 2021 capital budget will be released on February 18, 2021.


Douglas Urch, Chief Financial Officer, commented:


“We are pleased to finalize this inaugural US$100 million bond issue for PetroTal. This funding supports the ongoing development of the Bretana oil field, building on the success achieved to date, and that is expected to achieve production of 20,000 barrels of oil per day during H2 2022. The confidence shown by the bond investors supplements the existing equity investment of our shareholders.”


This puts a sizeable piece in the current PetroTal jigsaw puzzle, it has opened up the Bretana field and is now well placed to increase production which is well funded to get to 20,000 b/d by 2H next year. It has opened up new export routes which give scope and flexibility and in terms of oil sales different opportunities. I see significant scope for PTAL in the coming months and decent upside in the share price.


Far Limited (ASX:FAR)


Far has announced that it has received a Non-Binding Indicative proposal from Lukoil at A2.2c per share in cash which values the company at A$220m. Far cautions that the Lukoil Proposal is not a legally binding offer, it is subject to’ targeted and timely corporate due diligence on FAR’, it is subject to final Lukoil board approval, and that there is no certainty that the Lukoil Proposal will necessarily eventuate.


I say this because I am somewhat perplexed as to why the Lukoil interest in a Non-Binding one, I can’t imagine Woodside being delighted to have the Russians as partners even if they didn’t play the sanctions card…


BUT, it does represent higher value than the RSSD sale to Woodside and the ‘incomplete’ proposal from Remus

Horizons PCC Limited*. It is worth noting that FAR has not received a binding offer from Remus despite publicity in recent weeks. In these circumstances, ‘FAR has determined to postpone the shareholders meeting currently scheduled for 18 February 2021’.


Far is looking in a much better position than had been the case a little while ago, although the Remus approach is still looking a touch flaky it would be incredibly helpful to them if that offer was made firm and of course raised slightly to be competitive with Lukoil. The assumption is clear, a brace of offers that would mean that whilst they would be taken over it would get Woodside out of their hair and if they had a choice of the other two offers Remus might offer an ability to continue in some way shape or form in the other parts of the portfolio.


*Remus Petroleum


I have written about Remus a number of times in recent weeks as they have popped up in a number of situations. They were primed to buy a 26.7% stake in PetroTal from Gran Tierra but that deal for some reason fell apart and then some of their (GT) shares were then placed in the market by GT, leaving them with 16.8% and who knows whether Remus might return.


They then put a non-binding bid on the table for Far Limited worth circa. A$200m but as can be seen above it appears to be ‘incomplete’ and somewhere between Lukoil and Woodside suggestions. Finally Remus announced a rack of appointments across the company which seemed to confirm their arrival on the international oil stage and is described in their mission statement as follows.


‘Our senior management team is made up of nearly 30 high-profile professionals with collective proven expertise of more than 500-man years in energy project investments, development, and management. Their careers span four decades working with major oil companies in 20 countries across four continents with collective responsibility for assets worth at least $100 billion’.


So there was every sign that Remus were going to make a mark on the market and that it had started at or near the bottom of the oil price but some signs of delay became evident. The original PTAL deal was lost and the Far deal may or may not happen, indications from the company were that it was a paperwork blockage due to Covid and that progress would be resumed before long.


If that is the case then I would guess that they are still interested in Far, especially given that the Lukoil ‘offer’ is only scraps above its own indication of interest. Indeed, with the game far from over (apologies for the pun) I suspect that Remus are definitely still in play, haven’t gone away and remember that their ‘offer’ is very close to that of Lukoil.


I hope that this is the case, the company seem to be ambitious and keen to invest in the hydrocarbon sector and although the oil and gas prices have risen I’m sure that asset prices don’t yet always reflect that. They have hired a really good team and are truly international and based in London, I’m really looking forward to meeting with them when Covid regulations are lifted.


And finally…


In the Champions League last night it was business as usual for Liverpool who won 0-2 away at RB Leipzig. Barca lost 1-4 at home to PSG…

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