In a way the interims both confirm and contradict the previous thread, 'A Reckless Gamble?'
CRA are just what you expect in an Activist, much Sturm Und Drang as they take positions in poorly managed companies being run for the benefit of Directors ahead of Shareholders. Sutton Holdings looks like one clear success in the latest period. Northgate and Ocado are unresolved but claimed as positive, but there are some disappointments too: not sure I like handing over cash to a company(Leaf) to fight a legal dispute and GI Dynamics has lost its first battle for access to its primary market.
Hurricane was a very successful investment as the sp climbed, and CRA have taken some profits. But they were blindsided by the capital raising and perhaps missed their chance to take more profits, betting wrongly on a farm out. That would have supported the sp at the same time as reducing the long-term opportunity. Perhaps it was never an ideal investment for an Activist, but so far it has not been reckless. There is also a clear path with HUR to a FTSE350 listing - however that happens it may offer a chance to reduce the holding. There is speculation on HUR bbs is that a new Chairman will soon be announced, which might light the path to the main board.
CRS has not gambled 33% of it fund in HUR;it currently has marked to market price about 25% of its fund in HUR;at its cost about 20%.CRS has also taken out around £16m profit from selling HUR shares which it has invested elsewhere.
Most of CRS shares are held by other funds.It is not a suitable share for any private investor who may need to sell the share within a specific time frame due to its illiquid nature.
There has been lots posted on Richard Bernstein, but perhaps the key issue that should be highlighted is his reckless gamble of over 33% of Crystal Amber Fund's money on an AIM listed oil company.
HUR didn't even have the money for the 2016/17 Lancaster and Lincoln drilling campaign at that stage. Even on the assumption that this was a winner, there was no finance lined up to get HUR to FOIL, and we all know that's where AIM listed oil companies can fail miserably. RKH is a classic example.
So whatever you think about RB's petulant twitter ramblings, you have to ask yourself, has this supposed professional investor committed a truly spectacular rookie error and painted himself into a corner on a reckless gamble that HUR would secure a suitable FO deal before FOIL.
It certainly looks that way to me and if I was a CRS shareholder I would be furious.
On that note, if you do hold CRS (23% OF NAV Is HUR), then you have to ask yourself the question, do I believe that the HUR EPS will be successful ?
If the answer is no, then you should sell CRS.
If the answer is yes, then you should still sell CRS and buy HUR at this crazy price and get the most out of the bonanza that will surely follow
So in my view, Bernstein is a reckless gambler who has staked far too much on one small AIM listed oil company and it has backfired badly.
He has painted himself into the proverbial corner this time and will just have to wait patiently with the rest of us. A truly amateur error Mr Bernstein, stop the distraction tactics your mistake is clear for us all to see.
Kerogen and $530M have bought the long term plan laid out by the BOD to take HUR forward to FOIL, an income stream and potentially a great FO deal. CA can't change a dicky bird with an 8% holding.
I was also at the AGM when the infamous "sell Lincoln for $500M" question was asked by RB (second row, right hand side as you walk in and next to the aisle with Malcy two thirds of the way back on the left and on the actual aisle seat FWIW) and it was all very hypothetical. RT said no because he felt it was worth far more in time. At any rate Lincoln has been drilled only once, not even flow tested and as such is worth peanuts at this stage in the game. To even think of selling a potentially huge field that has not even had a basic appraisal drilling campaign done on it shows how little RB seems to know about getting true value out of an oil discovery of this magnitude.
This is just another example of just wanting to bump up the CRS SP in the short term. Bernstein is no friend of the HUR shareholder. In my view he hasn't done anything to support HUR. Happy to buy shares on the cheap at 10p-20p (just as I and many others were) and got a nice touch on the back of the Kerogen equity raise. We have Kerogen to thanks for financing the drilling campaign and the new investors ($530M) to thank for getting us to FOIL.
To add some balance to my post, this is not to say that I don't think Rob Trice moving to a COO (Chief Operating Officer) type role and bringing in a heavyweight CEO is a bad idea. I agree with this and it wouldn't surprise me if Rob Trice agreed too. However, I don't have anytime for the way RB is trying to achieve this. Totally unprofessional.
Fundamentally nothing has changed with HUR. The oil is still there, the funds to get to FOIL haven't evaporated and the plan is being executed on time (so far). This is all just noise and unless you are heavily leveraged on a spread bet or the like, then the fall in the SP should be of no real concern (irritating though it may be). It does however provide the opportunity to sell your CRS shares and increase your HUR shareholding at a great price, if you are so inclined.
The main problem is Hurricane;although CRS is still on paper in profit on this stake it is totally illiquid & constitutes about 25% of CRS portfolio.
There is an additional problem in that CRS shares are themselves very difficult to sell in any number at anything near the spread,you can buy easily of course!
I sold the larger part of my holding at an average of 230p and at a decent profit as I felt its exposure to HUR was too high & the then price of HUR was high.CRS holdings including that @ HUR probably have long term potential but I don't see profitable realisation of significant positions in its investments in the near future.
Crystal Amber notes the recent decline in its share price. The Directors believe it primarily reflects the decline in the share price of its largest investment, Hurricane Energy plc ("Hurricane"). The Fund currently holds 150,000,000 shares in Hurricane at an average cost of 23p a share. In addition, the Fund holds warrants over 23.3 million shares exercisable at 20p a share. The Fund has previously realised profits on Hurricane of GBP15.7 million.
The Fund attributes Hurricane's share price decline principally to the poor handling of its warrant issue announced on 12 May 2017 and comments at its AGM on 7 June 2017, which referred to the near term focus being on funding and delivering the Early Production System.
As Hurricane's largest independent shareholder owning 12.2% of the issued share capital, Crystal Amber is supportive of monetising Hurricane's assets, which are valued by Crystal Amber's external consultants who have been its consultants for the last two years, on a NPV10 basis and assuming a $55/bbl flat nominal oil price and that contingent resources "trade" at a discount to reserves by 50%, at 219p a share. The Fund also notes comments at the AGM regarding the reopening of Hurricane's data room to a limited number of oil companies that have the requisite development credentials to take the Rona Ridge project to full field development. The Fund also believes in the strategic value of Hurricane's asset base.
UK activist investor Richard Bernstein reduced his holding in the UKs largest listed residential landlord Grainger (GRI), which recently reported a 39% jump in earnings growth, benefiting from record levels of renting.
Bernstein and co-manager Jonathan Marsh reduced their stake to below 3% of the business. The companys share price is up 19.5% over the last six months. The shares are held in their £214.5 million Crystal Amber fund.
Grainger recorded a 13% rise in pre-tax profits in the six months to 31 March to £41.2 million, from £36.6 million year-on-year.
In its half-year results, CEO Helen Gordon said the company is expecting to complete a new private rental sector building every two months over the next year and has secured £439 million from a total £850 million target set for 2020.
She added: Our strategy to grow rents and simplify and focus the business puts Grainger in a strong position to deliver further sustainable income led growth.
CRS presently has around 11% of HUR;at peak it was about 15%.It has been & remains its best investment to date.The shares remain at a multiple of the price it subscribed for the shares & it has realised significant profit from sales.CRS also has warrants to take up further shares @ 20p.
It is very difficult to put a valuation on HUR at this stage & I expect that we will see substantial movements in the share price as HUR progresses its development plans.
· Unique investment approach Crystal Amber is managed by Richard Bernstein who employs an activist investment approach to invest in UK special situations where he believes value can be released regardless of the market direction. Ideas are generated through screening processes and the managers network of contacts, which includes the funds institutional shareholders.
· Small cap bias The fund tends to invest in smaller companies in order to take meaningful stakes and therefore exert greater influence. At 31 March the average market cap of the funds top 10 holdings was £313m and they ranged from £22m to £1,026m.
· Concentrated portfolio The portfolio is concentrated with just 17 holdings and at the end of March the funds largest five holdings represented 75% of NAV, while the top 10 represented 92%. As at 31 March the funds largest holding was Hurricane Energy, which represented 34% of the funds NAV.
· Strong performance record The fund has a strong performance record both in absolute and relative terms. Over the last five years its NAV is up 148% compared with 59% for the FTSE All Share and 96% for the NSC Index. The fund has also outperformed the average returns of the UK All Companies sub-sector (+81%) and the UK Small Cap sub-sector (+117%) over the same period.
We believe that Crystal Ambers activist investment approach offers the potential for idiosyncratic returns independent of the market direction. This is also demonstrated by its low beta to relevant UK equity indices, which the manager attributes to his focus on asset-backed businesses. The fund has a strong performance record, although we would highlight that the concentration of the portfolio and the long-term approach mean that performance can be lumpy. With the funds shares currently trading on a discount of around 4%, the fund is not necessarily a value proposition at present, however, discount risk is alleviated to a certain extent by an active share buyback programme that has maintained the discount tighter than 10% since 2013. Crystal Amber has been backed since its launch in 2008 by a number of leading institutional investors and we believe this reflects Richard Bernsteins reputation both in identifying attractive special situations and effecting change. In our opinion this fund is a specialist vehicle that should prove complementary to mainstream UK funds through its activist investment approach.
Completion of Halifax Well Operations and Release of the Transocean Spitsbergen Rig
Well Results Indicate that Lancaster and Halifax are a Single Hydrocarbon Accumulation
Hurricane Energy plc, the UK based oil and gas company focused on hydrocarbon resources in naturally fractured basement reservoirs, announces that operations on the 205/23-3A well (the "Halifax Well") are complete.
The Company can confirm that the well is an oil discovery with initial data analysis indicating Halifax is linked to the Lancaster field forming a single large hydrocarbon accumulation.
The information below relating to the Halifax Well is preliminary and will be updated following detailed analysis once the final well data and third party reports have been received and analysed.
The principal purpose of the Halifax Well was to support the Company's view that the Lancaster Field and the Halifax prospect are one large connected structure. Well results support the Company's opinion. The Halifax Well has successfully identified an extensive oil column, significantly below local structural closure. The reservoir interval encountered is pervasively fractured with porosities similar to those at Lancaster. The Company believes that the deeper oil down to ("ODT") at 1,846m true vertical depth subsea ("TVDSS") identified in the Halifax Well, compared with an oil water contact ("OWC") at Lancaster at 1,678m TVDSS, is most likely caused by a tilted OWC.
The Halifax Well was drilled and cased to 1,179m TVDSS in accordance with the Company's drilling programme which was designed to isolate a potential gas cap and oil bearing column to a depth of 100m true vertical thickness ("TVT") below structural closure. It was subsequently drilled to 1,801m TVDSS and a Drill Stem Test ("DST") was undertaken. However, constrained by budget, available time and the safety requirement of drilling overbalance, the well was unable to clean up and recovered only traces of formation oil to surface. The well was finally TD'ed at 2,004m TVDSS, with no confirmed OWC encountered.
Following discussions with the Oil & Gas Authority, the Halifax Well has been suspended to allow for potential future operations to either deepen and/or undertake further testing of the well, the programme for which will be determined following analysis of the well results.
Preliminary third party analysis from the Halifax Well indicates:
-- a very significant hydrocarbon column of at least 1,156 metres is present within the basement extending well below local structural closure (which is at 1,040 metres TVDSS);
-- that the basement reservoir below the final casing point (1,179m TVDSS) is pervasively fractured (based on initial analysis of borehole image logs processing); and
-- that porosity is consistent with that at Lancaster (based on initial petrophysical analysis.
The Spitsbergen rig has demobilised and is no longer on hire to Hurricane.
Dr Robert Trice, Hurricane's CEO, commented:
"This is a highly significant moment for Hurricane and I am delighted that the Halifax Well results support the Company's view that its substantial Lancaster discovery has been extended to include the Halifax licence. We believe that the GLA is a single hydrocarbon accumulation, making it the largest undeveloped discovery on the UK Continental Shelf.
The discovery of a 1km hydrocarbon column at Halifax validates the efforts the Company undertook to acquire the licence and drill, test and log the Halifax Well through the winter months. Given the positive well results, the Halifax Well has been suspended to provide the Company the option to return to undertake further testing as well as provide the option to deepen the well and thereby establish a definitive oil water contact.
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