City of London Investment Group plc (LON:CLIG) is the topic of conversation when Zeus Capital’s Research Director Robin Savage caught up with DirectorsTalk for an exclusive interview.
Q1: Robin, you’ve just published a research note on City of London Investment Group entitled “Update and KMI deal approved”, what were the key points in this update?
A1: On Monday 13th July, at its EGM, shareholders approved CLIG’s all share acquisition of Karpus Management Inc, which can be called KMI. The morning after, Tuesday 14th, the company published a trading update, which they normally do just after year-end on which was the 30th June. The updated confirmed that CLIM is trading “business as usual” & has been throughout the global pandemic.
In summary, if we break it down into the parts:
KMI acquisition is scheduled to complete on 1 October this year:
– Consideration is 24.1m new CLIG shares which will increase the number of CLIG’s shares issued by 91%.
– KMI will add US$3.4 billion of Funds under Management and will increase the diversification of the Group, adding exposure to US balanced portfolios and reducing CLIG‘s Emerging Market exposure from 70% to around about 43%.
– KMI has a high revenue margin, 85 basis points so that will lift the Group revenue margin from around about 75 basis points to around about 79 bps & it should enable the Group operating profit margin to rise above 60%.
– Importantly, there’s a really good fit with CLIG’s investment philosophy and its management philosophy. Essentially, it is very vigorous in terms of how it choses its investments for its clients in a similar way to the way in which CLIG does for its institutional clients. In terms of management philosophy, they are careful about spending shareholders money.
In terms of the trading update for CLIM, it’s been very good but they have only released information about the net inflows & the Funds under Management so this year they have not given a clear indication to what the revenues & the profits are because they think that’s appropriate in light of the acquisition that is going through:
– In terms of net inflows, there were US$338 million of net inflows, that is 6.3% of opening of Funds under Management so an attractive percentage of net inflows. It’s more than I expected at the beginning of the year, it’s more than I expected at halfway through the year & a very large amount, nearly US$600 million flowed into FUM) with the Opportunistic Value and Developed strategies which now have US$1.5 billion under management.
– The Emerging Markets and Developed strategies outperformed so that is 92% of the Funds under Management, outperforming benchmarks.
– In the last 3 months, in the fourth quarter of their year, the Funds under Management rose 25% riseto US$5.5 billion. That was slightly ahead of the market because of the inflows they got.
– The Board has made a comment about the final dividend, they say they intend to at least match the same level as last year, last year the final dividend was 18p.
– With the 10p interim, CLIG shareholders should expect total dividend for the last 12 months to be 28p.
Q2. How does this update compare to your forecasts & expectations?
A2: The really important point is that CLIM’s Diversification strategies now contribute 30% of Funds under Management. In December, six months ago, it was 26% & a year ago, it was 22% so a very significant increase in diversification of CLIM business.
The second point is the acquisition of KMI which was announced on the 9th June, this will further diversify CLIG’s exposure away from Emerging Markets & enhance CLIG’s earnings:
When KMI completes, Emerging Markets will be, as I mentioned earlier, 43% of the assets managed by the Group.
KMI manages balanced portfolios which typically have 60% of assets allocated to bonds so it’ll mean the assets are much less sensitive to movements in equity markets and the emerging markets in particular.
The acquisition will enhance Group earnings.
Next point, in terms of the actual expectations, the update for CLIM was encouraging because these net inflows of $338 million, they were 20% above my expectation so significant.
With US$182 million net inflows in the first half, that means that the second half net inflows were US$156 million net which was 59% better than my estimate of US$98 million so that’s very encouraging.
The flows into these Developed and Opportunistic Value funds were strong which improve that diversification.
The financial markets were much stronger than we expected when we last wrote about the company which was in April, the peak of the COVID crisis in terms of the contaminations. So, when we’re looking at the way in which the business is developing, we are very encouraged.
In terms of the actual Zeus Capital forecasts, while the fourth quarter net inflows in the financial markets were stronger than we expected, we are going to leave our forecasts for the year to June broadly unchanged. This is because there is little benefit of putting in an upgrade at this stage &, of course, that increase in assets in only benefitting that final quarter & we already have had the first half numbers & the third quarter indication.
So, essentially the year to June is done, that should be good, people will have the actual numbers coming out on the 14th September.# & then the question is, what are our numbers for June 2021 & in June 2022.
We are now going to include KMI from the 1st October because that’s when they e4xpect to join CLIG & the KMI acquisition is expected to enhance the increased earnings of CLIM because of the higher markets. We’re expecting it to enhance earnings by 4% so without KMI, we would be expecting 43.9p & with KMI, 45.1p. These forecasts are done with the current US dollar exchange rate at US$1.25 to a £1 and with no change in financial markets & importantly, no net inflows even though there has been a very good recent flow of net inflows.
For 2022, with a full year from KMI, we are also expecting earns to be enhanced; with KMI we’re expecting 47.1p we would expect a 32p dividend so we expecting probably 7% growth over the next 2 years in the dividends which his very encouraging & we’re expecting the net cash to move from around about £10 million at the end of June to £20 million in June 2021 & £30 million by June 2022.
Q3. How does the update inform shareholders and market’s valuation of City of London Investment Group shares?
A3: On our new forecasts, with only a 9 month contribution from KMI in the current year to June 2021 & at £3.85 a share, CLIG shares trade at a PE multiple of only 8.5 & they offer a 7.8% dividend yield so that is quite attractive.
With a full year contribution from KMI, the earnings multiple falls to nearly 8 and the dividend yield rises to over 8.
I think there are 3 points for investors to consider when they’re thinking about investing in CLIG:
The first is that shareholders should be very confident in the CLIG dividend flow ticking up to 28p or more for this year & ticking up next year & the year after.On a 6.0% dividend yield, CLIG shares would trade at £4.67p which is 21% above the current price.
The second point is the higher Funds under Management imply growth in revenues and profits supported by the KMI acquisition and the CLIM’s Diversification strategies. Without net inflows, we see scope for the 7% growth in dividends over the next two years. With net inflows, it should be higher & with a very comforting increase in cash pile. So, total shareholder return over the next year should be very much supported by those dividends but also by the improvement in the PE multiple.
That’s the third point really, in terms of what sort of PE multiple & the increasing diversification of CLIG revenues and profit streams should increase the earnings multiple.
When CLIG was “predominantly an Emerging Market only fund manager”, its valuation was directly linked to the MXEF Index & it was supported by its ability to generate dividends. With over half of its Funds under Management now coming from Diversification strategies, CLIG’s valuation should become less linked to the MXEF index and more related to its ability to generate distributable returns and grow through Diversification. This should lead to an improved double-digit low-teens, or even mid-teens PE ratio.
To be resilient, a bank needs three things – low risk assets, strong capital and surplus deposits. Arbuthnot Banking Group plc (LON:ARBB) has all three. The low-risk assets are reflected by the small percentage (and falling) Stage 2 and Stage 3 loans in the private bank as well as low loan to values. Surplus capital is now £66m and deposits exceed loans by £0.6bn. Profits before tax, though, fell from £2.9m to £0.2m as the decline in base rate squeezed margins (£2.7m cost) and with a £1m incremental COVID-19-related impairment. Our 2020 base-case scenario is now for a small loss (previously breakeven). The shares trade at 64% of NAV, implying value destruction to perpetuity.
1H’20 results: Gross interest income rose from £35.2m in 1H’19 to £39.0m while interest expense rose from £6.5m to £9.3m. Fee income was flat. Costs rose from £33.8m to £35.1m; net impairments increased from £1.3m to £1.7m, including £1m incremental COVID-19-related effects. As expected, there was no dividend.
Outlook: There are too many moving parts to rely on single projections. We have introduced a range of scenarios. Our central case is a £1.5m pre-tax loss in 2020. Given news flow, we have narrowed our expectations, so the upside scenario profit is now £3m (was £6m) and the downturn scenario is a £10m (was £15m) loss.
Valuation: Our forecast scenarios, and multiple valuation approaches, see a broad range of valuations. Our base-case range is 871p to 1,658p, the higher end down with the fall in STB value. Our upside scenario is 1,044p to 1,918p, and our downside 783p to 1,412p. The share price is 64% of the 1H’20 NAV (1,248p).
Risks: Short term, the impact of lower base rates is critical. Going forward, the key risk is credit. Historically, ABG has been very conservative in lending criteria and security taken. Its financial strength means that ABG can take time to optimise recoveries. Other risks include reputation, regulation and compliance.
Investment summary: Arbuthnot Banking Group offers strong-franchise and continuing-business (normalised) profit growth. Its balance sheet strength gives it a number of wide-ranging options to develop organic and inorganic opportunities. The latter are likely to increase in uncertain times. Management has been innovative, but also very conservative, in managing risk. Having a profitable, well-funded, well-capitalised and strongly growing bank priced below book value is an anomaly.
Syncona Ltd (LON:SYNC), a leading healthcare company focused on founding, building and funding a portfolio of global leaders in life science, has noted that its portfolio company, Freeline Therapeutics Holdings plc has filed a registration statement on Form F-1 with the U.S. Securities and Exchange Commission relating to a proposed initial public offering in the United States of its American Depositary Shares, each representing one ordinary share.
All ADSs to be sold in the proposed IPO will be offered by Freeline. Freeline has applied to list its ADSs on The Nasdaq Global Select Market under the ticker symbol “FRLN”. The number of ADSs to be offered and the pricing terms for the proposed IPO have not yet been determined. The offering is subject to market conditions, and there can be no assurance as to whether, or when, the offering may be completed or as to the actual size or terms of the offering.
The Registration Statement relating to the ADSs has been filed with the SEC but has not yet become effective. The ADSs may not be sold nor may offers to buy be accepted prior to the time the Registration Statement becomes effective.
The Registration Statement can be accessed through the SEC’s EDGAR database and contains further information relating to Freeline.
This announcement does not constitute an offer to sell or the solicitation of an offer to buy securities, and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of that jurisdiction.
The securities referred to in this announcement are to be offered only by means of a prospectus. When available, copies of the preliminary prospectus can be obtained from any of the joint book-running managers for the offering, J.P. Morgan Securities LLC, c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, NY 11717, or by telephone at (866) 803-9204, or by email at [email protected]; Morgan Stanley & Co. LLC, Attention: Prospectus Department, 180 Varick Street, 2nd Floor, New York, NY 10014; or Evercore Group L.L.C. at Attention: Equity Capital Markets, 55 East 52nd Street, 36th Floor, New York, NY 10055, by telephone at (888) 474-0200, or by email at [email protected].
Syncona Limited is a leading FTSE250 healthcare company focused on founding, building and funding a portfolio of global leaders in life science. Our vision is to build a sustainable, diverse portfolio of 15 – 20 companies focused on delivering transformational treatments to patients in truly innovative areas of healthcare, through which we are seeking to deliver strong risk-adjusted returns for shareholders.
We seek to partner with the best, brightest and most ambitious minds in science to build globally competitive businesses. We take a long-term view, underpinned by a strategic capital base which provides us with control and flexibility over the management of our portfolio. We focus on delivering dramatic efficacy for patients in areas of high unmet need.
Allergy Therapeutics plc (LON:AGY) is a long-established specialist in the prevention, diagnosis and treatment of allergies. Pollinex Quattro (PQ) is an ultra-short-course subcutaneous allergy immunotherapy (SCIT) platform, which continues to make strong market share gains in a competitive environment. Several products using the PQ platform are in late-stage development in order to move them to full registration under new EU and US regulations. Another reassuring trading update states that the company has hit new records and has the resources in place to fund its pending R&D investment programme required to get its products approved by the regulators.
Strategy: AGY is a fully integrated pharmaceutical company focused on the treatment of allergies. There are three parts to its strategy: i) continued development of its European business via investment or opportunistic acquisitions; ii) the US PQ opportunity; and iii) further development of its pipeline.
Trading update: Sales in the past quarter were affected by the difficulty associated with patients attending hospitals during the COVID-19 lockdown. Despite this, June returned to “normal” and underlying sales in fiscal 2020 have grown 7% to £78.2m. AGY has strong gross cash of £37.0m to fund its future R&D investment.
COVID-19 test: With financial support from government and official institutions in Spain, AGY has invested into expanding its microbiological diagnostic facilities (AT Immunolab) to run COVID-19 tests. At full capacity, its real-time SARS-COV-2 test is expected to be able to perform 200,000 tests a year.
Risks: Over the next two years, AGY will be running several important clinical trials which, by their very nature, have binary outcomes. This is mitigated to some extent by the company’s long-standing experience. Forecasts must be viewed as provisional in the event of a second wave of the COVID-19 pandemic.
Investment summary: Despite COVID-19, Allergy Therapeutics has reported another record year for sales in fiscal 2020, with June reassuringly returning to “normal” levels. Operating efficiencies and the timing of R&D investment have led to a strong EBIT performance. AGY is trading on an EV/sales of only 0.80x 2021E, which, in our view, is too low for a company with a long and profitable product history, and well below the multiples commanded by its direct competitors.
Touchstone Exploration Inc (LON:TXP) has announced highlights of its independent reserves evaluation of the Cascadura Assessment Area prepared by GLJ Ltd. with an effective date of June 30, 2020. Highlights of our total proved, total proved plus probable and total proved plus probable plus possible reserves from the Cascadura Reserves Report are provided below. Unless otherwise stated, all financial amounts herein are rounded to thousands of United States dollars.
The Cascadura Assessment Area is located in the Company’s Ortoire exploration block, onshore in the Republic of Trinidad and Tobago (Touchstone 80% working interest operator, Heritage Petroleum Company Limited 20% working interest). The Cascadura Assessment Area represents the geologically and geophysically defined reservoirs which were evaluated by the Company’s Cascadura-1ST1 exploration well drilled in the fourth quarter of 2019 and tested in the first half of 2020.
The Cascadura Reserves Report evaluates the Cascadura Assessment Area on a stand-alone basis and provides a reserves estimate of natural gas and natural gas liquids, as well as a before income tax estimate of net present values of future net revenues as of June 30. 2020. The Cascadura Reserves Report should be considered as supplementary to, and reconciled with, the volumes and future net revenues disclosed in the Company’s 2019 Annual Information Form dated March 25, 2020 which has been filed on SEDAR and can be accessed at www.sedar.com.
Paul R. Baay, President and Chief Executive Officer, commented:
“We are delighted to report that the independent reserves report verifies the material size of the reserves yet to be produced in the Cascadura structure and provides the groundwork for a multi-year future onshore development program in Trinidad. Through the excellent work of the Touchstone team in the drilling of our first two exploration wells, we have successfully proven up the hydrocarbon bearing turbidite model in Ortoire. This model will be further evaluated by our next two exploration targets at Chinook and Cascadura deep, with drilling at Chinook on track to commence within the next few weeks.
We could not have envisioned a better start from the first two wells of the Ortoire exploration program, and we look forward to updating the market and our Trinidad stakeholders as we progress with our Ortoire exploration and development activities in the coming months.”
Cascadura Reserves Report Highlights
· Gross Discovered Petroleum Initially-in-Place is estimated to be between 571.5 Bcf of natural gas in the High Estimate and 241.2 Bcf in the Low Estimate, with a Best Estimate of 398.5 Bcf.
· Company working interest 3P reserves of 73,190 Mboe (85% recovery of High Estimate DPIIP), 2P reserves of 45,030 Mboe (75% recovery of Best Estimate DPIIP), and 1P reserves of 23,622 Mboe (65% recovery of the Low Estimate DPIIP).
· Net peak production is estimated to be 22,600 boe/d in the 3P forecast, 15,108 boe/d in the 2P forecast, and 10,266 boe/d in the 1P forecast.
· Estimated before tax 3P 10% discounted net present value of future net revenues (“NPV10”) of $802.9 million, 2P NPV10 of $519.2 million, and 1P NPV10 of $287.7 million.
· Net future development costs associated with the development of the Cascadura Assessment Area is estimated at $11.6 million for 1P reserves and $15.8 million for both 2P and 3P reserves.
James Shipka, Touchstone Exploration Chief Operating Officer, commented:
“GLJ’s independent evaluation of the Cascadura-1ST1 production test results and the subsequent reserves evaluation of the Cascadura Assessment Area confirms the tremendous potential of the Ortoire exploration block. The Cascadura Reserves Report combines both the pressure and flow testing of the Cascadura-1ST1 well with the 3D seismic data which covers the entirety of the Cascadura structure as we now understand it. The team is currently working hard to design the facilities and infrastructure required to bring the Cascadura gas and liquids to market as quickly as possible, and with GLJ estimating there is in excess of 500 Bcf of discovered natural gas in place in the Cascadura area, it is evident that we have a clear pathway to a multi-year development program.”
Cascadura Reserves Report Summary
Touchstone’s petroleum reserves for the Cascadura Assessment Block were evaluated by independent qualified reserves evaluator, GLJ, in accordance with definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation (“COGE”) Handbook and National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”). The reserve estimates set forth below are based upon GLJ’s Cascadura Reserves Report dated July 17, 2020 with an effective date of June 30, 2020. All values in this announcement are based on GLJ’s July 1, 2020 forecast prices and estimates of future operating and capital development costs as at June 30, 2020. In certain tables set forth below, the columns may not add due to rounding.
Summary of Cascadura Assessment Area Company Gross Reserves as of June 30, 2020 by Product Type(1),(2)
Reserves Category
Conventional Natural Gas (MMcf)
Natural Gas Liquids (Mbbl)
Total Oil Equivalent(Mboe)
Proved
Developed Producing
–
–
–
Developed Non-Producing
41,602
1,061
7,995
Undeveloped
81,313
2,074
15,627
Total Proved
122,916
3,136
23,622
Probable
111,402
2,841
21,408
Total Proved plus Probable
234,318
5,977
45,030
Possible
146,530
3,738
28,160
Total Proved plus Probable plus Possible
380,848
9,715
73,190
Notes:
(1) Gross Reserves are the Company’s working interest share of the remaining reserves before deduction of any royalties.
(2) See “Advisories: Reserve Advisory, Oil and Gas Measures and Definitions of Petroleum Reserves“.
Summary of Cascadura Assessment Area Company Net Present Values of Future Net Revenues as of June 30, 2020(1),(2),(3)
Reserves Category
Net Present Values of Future Net Revenues Before Income Taxes Discounted at (% per year) ($000’s)
0%
5%
10%
15%
20%
Proved
Developed Producing
–
–
–
–
–
Developed Non-Producing
161,557
128,781
105,583
88,572
75,714
Undeveloped
330,677
241,377
182,167
141,328
112,193
Total Proved
492,234
370,158
287,749
229,901
187,908
Probable
477,556
324,397
231,458
171,836
131,760
Total Proved plus Probable
969,790
694,555
519,207
401,737
319,668
Possible
653,133
416,464
283,674
203,110
151,106
Total Proved plus Probable plus Possible
1,622,923
1,111,019
802,881
604,847
470,774
Notes:
(1) Based on GLJ’s July 1, 2020 escalated price forecast. See “Summary of Pricing and Inflation Assumptions“.
(2) See “Advisories: Reserve Advisory and Definitions of Petroleum Reserves“.
(3) GLJ did not forecast after tax net present values of future net revenues in the Cascadura Reserves Report given the Cascadura Assessment Area is an asset owned by a Trinidad corporate entity. Calculating income taxes on cash flows derived from a stand-alone asset would not be indicative of business entity level income taxes.
Summary of Pricing and Inflation Assumptions
The following table sets forth GLJ’s forecasted benchmark reference pricing and inflation rates reflected in the Cascadura Reserves Report effective June 30, 2020.
Forecast Year
Brent Spot Crude Oil ($/bbl)(1)
Conway Condensate ($/bbl)(1)
Henry HubNatural Gas($/MMBtu)(1)
Inflation Rates (%/year)(2)
2020 Q3-Q4
43.50
36.90
2.08
0.0
2021
48.00
39.60
2.55
0.0
2022
51.50
42.75
2.65
1.0
2023
56.50
47.25
2.75
2.0
2024
60.00
50.40
2.85
2.0
2025
62.95
53.06
2.95
2.0
2026
64.13
54.12
3.01
2.0
2027
65.33
55.20
3.07
2.0
2028
66.56
56.30
3.13
2.0
2029
67.81
57.43
3.19
2.0
Thereafter
+2.0% / year
+2.0% / year
+2.0% / year
2.0
Notes:
(1) This summary table identifies benchmark reference pricing schedules that might apply to a reporting issuer. Product sales prices will reflect these reference prices with further adjustments for quality differentials and transportation to point of sale. See “Advisories: Reserve Advisory”.
(2) Inflation rates for forecasting pricing and costs.
Cascadura Assessment Area Company Future Development Costs(1)
The following table provides information regarding the development costs deducted in the estimation of the Company’s working interest future net revenue using forecast prices and costs included in the Cascadura Reserves Report.
Year
Proved Reserves ($000’s)
Proved plus Probable Reserves ($000’s)
Proved plus Probable plus Possible Reserves ($000’s)
2020
–
–
–
2021
1,000
1,000
1,000
2022
6,464
6,464
6,464
2023
4,121
4,121
4,121
2024
–
4,203
4,203
Total undiscounted
11,585
15,788
15,788
Total discounted at 10% per year
9,347
12,218
12,218
Note:
(1) See “Advisories: Reserve Advisory“.
Reserve Advisory
The reserves estimates prepared herein have been evaluated by an independent qualified reserves evaluator in accordance with NI 51-101 and the COGE Handbook. The disclosure in this announcement summarizes certain information contained in the Cascadura Reserves Report but represents only a portion of the disclosure required under NI 51-101. In accordance with Canadian practice, production volumes and revenues are reported on a Company gross basis, before deduction of crown and other royalties. Unless otherwise specified, all reserves volumes in this announcement (and all information derived therefrom) are based on Company gross reserves using forecast prices and costs.
The recovery and reserve estimates provided herein are estimates only, and there is no guarantee that the estimated reserves will be recovered. Actual reserves may eventually prove to be greater than or less than the estimates provided herein. This announcement (i) summarizes the reserves of the Company’s Cascadura Assessment Area only and the net present values of future net revenue for such reserves using forecast prices and costs as at June 30, 2020 prior to provision for income taxes, interest, general and administrative expenses, the impact of any financial derivatives or liabilities associated with the abandonment and reclamation of certain facilities and wells, and (ii) should be considered as supplementary to, and reconciled with, the volumes and net present values of future net revenues disclosed in the Company’s 2019 Annual Information Form dated March 25, 2020 which has been filed on SEDAR and can be accessed at www.sedar.com. The estimates of reserves and future net revenue have been made assuming that the development will occur. The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation. It should not be assumed that the present worth of estimated before tax future net revenues presented in the table above represent the fair market value of the reserves. There is no assurance that the forecast prices and costs assumptions will be attained, and variances could be material. The term “future development costs” does not have a standardized meaning and should not be used to make comparisons.
The DPIIP set forth in this announcement has been provided for the sole purpose of highlighting the recovery factors used by GLJ in attributing reserves to the Cascadura Assessment Area effective as of June 30, 2020. As disclosed below, DPIIP is defined by COGE as that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. The recoverable portion of DPIIP includes production, reserves and contingent resources; the remainder is unrecoverable. It should not be assumed that any portion of the DPIIP set forth in this announcement is recoverable other than the portion which has been attributed reserves by GLJ. There is uncertainty that it will be commercially viable to produce any portion of the DPIIP other than the portion that is attributed reserves.
In the Cascadura Reserves Report, GLJ estimated conventional natural gas revenues referencing Henry Hub natural gas forecasted pricing and natural gas liquids revenues based on forecasted Conway Condensate reference pricing. The Company is currently negotiating a marketing agreement for all petroleum products produced on the Ortoire property, and accordingly, such revenue estimates in the Cascadura Reserves Report may not be attained, and variances could be material. In addition, GLJ forecasted reserve volumes and future cash flows based upon volumetric interpretations and extrapolations based upon well testing. Notwithstanding contractual options for the extension of the Company’s Ortoire block production and exploration agreement (the “Licence”) upon a commercial discovery, the forecasted economic limit of individual wells and the net present values of future net revenue therefrom is currently beyond the initial exploration term of the Licence.
Definitions of Petroleum Reserves
The reserves have been categorized accordance with the reserves definitions as set out in the COGE Handbook, which are set out below.
“Reserves” are estimated remaining quantities of petroleum anticipated to be recoverable from known accumulations, as of a given date, based on the analysis of drilling, geological, geophysical, and engineering data; the use of established technology; and specified economic conditions, which are generally accepted as being reasonable. Reserves are further classified according to the level of certainty associated with the estimates as follows:
“Proved Developed Producing Reserves” are those reserves that are expected to be recovered from completion intervals open at the time of the estimate. These reserves may be currently producing, or if shut-in, they must have previously been on production, and the date of resumption of production must be known with reasonable certainty.
“Proved Developed Non-Producing Reserves” are those reserves that either have not been on production or have previously been on production but are shut-in, and the date of resumption of production is unknown.
“Proved Undeveloped Reserves” are those reserves expected to be recovered from known accumulations where a significant expenditure (e.g. when compared to the cost of drilling a well) is required to render them capable of production. They must fully meet the requirements of the reserves category (proved, probable, possible) to which they are assigned.
“Proved Reserves” are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.
“Probable Reserves” are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.
“Possible Reserves” are those additional reserves that are less certain to be recovered than probable reserves. There is a 10 percent probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves. It is unlikely that the actual remaining quantities recovered will exceed the sum of the estimated proved plus probable plus possible reserves.
“Discovered Petroleum Initially-in-Place (“DPIIP)” is that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. The recoverable portion of DPIIP includes production, reserves, and contingent resources; the remainder is categorized as unrecoverable.
“Uncertainty Ranges” are described in the COGE Handbook as low, best, and high estimates for reserves and resources as follows:
The “Low Estimate” is considered to be a conservative estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate. If probabilistic methods are used, there should be at least a 90 percent probability (P90) that the quantities actually recovered will equal or exceed the low estimate.
The “Best Estimate” is considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.
The “High Estimate” is considered to be an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities recovered will exceed the high estimate. If probabilistic methods are used, there should be at least a 10 percent probability (P10) that the quantities actually recovered will equal or exceed the high estimate.
Oil and Gas Measures
Where applicable, natural gas has been converted to barrels of oil equivalent based on six thousand cubic feet to one barrel of oil. The barrel of oil equivalent rate is based on an energy equivalent conversion method primarily applicable at the burner tip, and given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different than the energy equivalency of the 6:1 conversion ratio, utilizing the 6:1 conversion ratio may be misleading as an indication of value. The boe rate is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalent at the wellhead. Use of boe in isolation may be misleading.
GlaxoSmithKline plc (LON:GSK) and CureVac have announced the signing of a strategic collaboration agreement for the research, development, manufacturing and commercialisation of up to five mRNA-based vaccines and monoclonal antibodies (mAbs) targeting infectious disease pathogens. The collaboration complements GSK’s existing mRNA capabilities with CureVac’s integrated mRNA platform.
mRNA (messenger RNA) technology is a rapidly progressing, cutting-edge platform for the development of new vaccines and medicines, potentially expanding the range of diseases which can be prevented or treated, while also promising to significantly speed up development and manufacturing. mRNA enables protein synthesis in the human body, carrying the genetic code required for cells to manufacture and express proteins. By using mRNA technology in vaccines and medicines, specific proteins, or antigens, can be produced by the body’s own cells, enabling the human immune system to prevent or fight disease.
CureVac’s leadership in mRNA technology, along with its mRNA manufacturing capability, complements GSKs existing scientific leadership in vaccines, including GSKs own self-amplifying mRNA (SAM) vaccine technology platform, and further builds on GSKs growing capability in mAbs innovation, aligned to its R&D focus on the science of immunology. Advancing mRNA-based vaccine and treatment technologies is also expected to play a role in further improving response against future pandemics.
Roger Connor, President GSK Vaccines, said: “GSK’s self-amplifying mRNA (SAM) vaccine technology has shown us the potential of mRNA technology to advance the science of vaccine development, and CureVac’s experience complements our own expertise. Through the application of mRNA technology, including SAM, we hope to be able to develop and scale up advanced vaccines and therapies to treat and prevent infectious diseases quicker than ever before.”
Dr. Franz-Werner Haas, acting Chief Executive Officer of CureVac, added: “We are delighted to partner with GSK. With this collaboration, we are gaining a world-class partner whose expertise and global footprint will allow us to further develop and translate the value of our platform into potential products for the world.”
The companies will combine their mRNA expertise on development opportunities across a range of infectious disease pathogens, selected with the potential to best leverage the advantages of this platform technology, while addressing significant unmet medical need and economic burden. CureVac’s existing COVID-19 mRNA and rabies vaccines research programmes are not included in the collaboration announced today.
Under the terms of the deal, GSK will make an equity investment in CureVac of £130m (€150m), representing close to a 10% stake, an upfront cash payment of £104m (€120m) and a one-time reimbursable payment of £26m (€30m) for manufacturing capacity reservation, upon certification of CureVac’s commercial scale manufacturing facility currently under construction in Germany.
CureVac will be eligible to receive development and regulatory milestone payments of up to £277m (€320m), commercial milestone payments of up to £329m (€380m) and tiered royalties on product sales.
GlaxoSmithKline will fund R&D activities at CureVac related to the development projects covered by the collaboration. CureVac will be responsible for the preclinical- and clinical-development through Phase 1 trials of these projects, after which GSK will be responsible for further development and commercialization. CureVac will be responsible for the GMP manufacturing of the product candidates, including for commercialization, and will retain commercialization rights for selected countries for all product candidates.
NQ Minerals plc (AQSE:NQMI) has announced that it has appointed DGWA, the German Institute for Asset and Equity Allocation and Valuation, a mining and resource focused European investment banking boutique, as its Investor and Corporate Relations advisor in Europe.
With offices in Frankfurt, Berlin and Vienna as well as representatives in Australia and Canada, DGWA will focus on the growing interest in mining and exploration within the European financial community due to Europe’s considerable investment commitments in the clean energy, electric vehicle and energy storage systems industry.
DGWA will collaborate with NQ Minerals to help gain investor awareness and drive investment opportunities from the European financial markets and will provide investor relations services to help NQ position itself in the German-speaking financial markets.
NQ Mineral’s Chairman David Lenigas said, “We are delighted to be partnering with DGWA to attract European and especially German-speaking investors and bring the NQ Minerals opportunity to the European capital markets. Due to the increasing imperative for sustainability throughout the value chain from EU governments, the industry as well as consumers, NQ is well positioned to capitalise on these developments in the EV and Energy Storage Systems (ESS) space. NQ’s conflict-free metals production from Australia will resonate well in German investors.
“Moreover, the commercial production and expansion plans of our Hellyer base and precious metals mine, as well the Company’s plans to bring its Beaconsfield Gold Mine back into production provides an excellent opportunity, particularly for precious metals investors in Germany. Germany’s gold demand per person is one of the highest worldwide according to the World Gold Council.”
Surface Transforms plc (LON: SCE), manufacturers of carbon fibre reinforced ceramic materials, has provided the following trading update for the six months to 30 June 2020.
Revenue for the six-month period grew 55% to £902k (six months to June 2019: £581k). This revenue growth was achieved despite the impact of COVID-19 on the Company and our customers. Cash at 30 June was £2,018k (December 2019: £770k) to which can be added the R&D tax credit, in excess of £300k, expected in September 2020.
The Company expects to report its interim results for the six months ended 30 June 2020 in September 2020.
Progress with Potential OEM Customers and New Capital Equipment
The Company updated shareholders on progress with customers and operations in the recent statement issued on 22 June 2020. It is encouraging to report that since that date all key customer personnel have now returned from furlough and with unchanged objectives for the contract opportunities for the Company.
David Bundred, Surface Transforms Chairman commented: “This sales performance is most encouraging against the background of the most difficult economic conditions in recent memory. The combination of this performance and our most recent customer discussions enables the Company to reiterate the key outlook statements made in the 22 June 2020 announcement. The Company remains on track to reach positive adjusted EBITDA in 2021, report a profit before tax in 2022, and still expects to make further new contract announcements during 2020.”
Investor Presentation – 9:40am on 24 July 2020
As previously announced by the Company on 26 June 2020, following completion of the forthcoming AGM that will start at 9:30am on 24 July 2020 and expected to finish at 9.40am, Kevin Johnson, CEO, will provide an online presentation on the business. Access will be available through the Investor Meet Company platform. The online presentation is open to all existing and potential shareholders alike. It will be possible to ask online questions of the Board both before and during the presentation. To attend this online presentation, investors can sign up to Investor Meet Company for free via https://investormeetcompany.com/surface-transforms-plc/register-investor and register their attendance. For those investors who have already registered and added to meet the Company, they will automatically be invited.
KEFI Minerals plc (LON:KEFI), the gold exploration and development company with projects in the Federal Democratic Republic of Ethiopia and the Kingdom of Saudi Arabia, has announced the appointment of Adam Taylor as a Non-executive Director of the Company with immediate effect.
Mr Taylor is the founder, Chairman and former CEO of FirstWave Group BV, Africa’s leading vertically integrated aquaculture group, which he established in 2011. He was previously Managing Director of Oakfield Holdings, an Africa focused investment company, and prior to that a Portfolio Manager at Liongate Capital Management, where he was responsible for commodity sector hedge fund investments.
Mr Taylor has been appointed to the KEFI Board following the recent investment in the Company by RAB Capital, an international investment company, which holds approximately 12% of the Company’s issued share capital. As announced on 11 May 2020, RAB Capital is viewed as a long-term shareholder and has been granted a right to nominate a director to the Board of the Company for as long as RAB Capital’s interest remains at 10% or above.
Harry Anagnostaras-Adams, Executive Chairman of KEFI Minerals, commented: “We are delighted to welcome Adam to the KEFI Board. As well as cementing our relationship with KEFI’s largest institutional shareholder, RAB Capital, Adam brings a wealth of hands-on business experience in Africa, coupled with significant international investment expertise, which will be invaluable to the Company as we progress our projects in Ethiopia and Saudi Arabia.”
