TIDMCRS
RNS Number : 2012Q
Crystal Amber Fund Limited
26 October 2021
26 October 2021
CRYSTAL AMBER FUND LIMITED
("Crystal Amber Fund" or the "Fund")
Monthly Net Asset Value
Crystal Amber Fund announces that its unaudited net asset value
("NAV") per share at 30 September 2021 was 152.85 pence (31 August
2021: 138.78 pence per share). Over the quarter, NAV per share
increased by 4.1 per cent and by 5.8 per cent. reflecting the
dividend payment. Since 30 September 2020, NAV increased by 42.1
per cent and by 46.8 per cent. reflecting dividend payments.
The proportion of the Fund's NAV at 30 September 2021
represented by the five largest shareholdings, other investments
and cash (including accruals), was as follows:
Five largest shareholdings Pence per share Percentage of investee equity
held
------------------------------------- ---------------- ------------------------------
De La Rue plc 49.0 11.4%
Equals Group plc 29.3 21.4%
*GI Dynamics Inc. 24.6 *
Hurricane Energy plc 21.7 25.9%
Allied Minds plc 11.9 18.5%
Total of five largest shareholdings 136.5
Other investments 15.7
Cash and accruals 0.6
------------------------------------- ----------------
Total NAV 152.8
------------------------------------- ----------------
* GI Dynamics Inc. is a private company and their shares are not
listed on a stock exchange. Therefore, the percentage held is not
disclosed.
Hurricane
Hurricane is an oil exploration and production company targeting
naturally fractured basement reservoirs in the West of Shetland.
The Fund has been an investor in Hurricane since 2013 and has to
date realised profits of GBP43 million.
Following the High Court's refusal to sanction the previous
Hurricane board's attempt to force through a highly dilutive debt
for equity swap, in August 2021, after a further request from
Crystal Amber, Hurricane finally launched a tender offer for up to
50% of its outstanding bonds. Allocating up to $80 million of its
cash, initially the tender was priced at up to 72 cents, but this
was increased to 78 cents. Ultimately, Hurricane purchased just
over one third of the bonds in issue, reducing Hurricane's capital
and interest obligations by approximately $22 million. This
represents an important and material saving. Without the Fund's
successful intervention at the High Court, the Fund believes this
would not have happened.
Production information from Hurricane is that for September
2021, its P6 well produced an average of 10,642 barrels per day.
This compares well with the company's production forecasts
(released in May 2021) estimating production for the month at 9,400
barrels per day. Production for June, July and August were also
ahead of forecast. The Fund estimates that simply beating
production forecasts is now generating approximately $36 million
per annum in additional revenue.
For the six months to 30 June 2021, Hurricane generated $75.9
million of operating cash flow with a cash production cost of $24.8
per barrel. At anticipated production levels, the Fund estimates
that by 30 June 2022, 2.6 million barrels will be produced,
generating more than $200 million in revenue. Based on Hurricane's
management production forecasts, the Fund estimates that the
remaining bonds due for repayment in July 2022 will be redeemed at
par and at that time, net cash will be around $40 million.
Thereafter, by March 2024, the P6 well should yield a further 4.9
million barrels and generate revenues of $350 million. Based on
historic margins, this should generate around $175 million of
operating cash flow to Hurricane.
The Fund notes that Hurricane is evaluating options to bolster
production from the Lancaster field, as well as pathways towards
development of the substantial Lincoln discovery asset. The Fund
believes that in addition to the existing P6 well, substantial
quantities of oil can be recovered from the Hurricane
portfolio.
In September 2021, the Fund wrote to the board of Hurricane to
request under Article 92, that a committee (comprising of the
non-executive directors) be established with the mandate to
investigate what happened as regards the previous board's proposed
financial reconstruction and to engage external advisers (should
that be needed) for that purpose. The committee would then make a
recommendation to the board.
Since September 2020 (when the convertible bond was trading at a
70 per cent. discount), Crystal Amber has urged Hurricane to use a
significant proportion of its cash to buy in bonds. The High Court
of Justice stated that "the possibility of buying back bonds in the
market is, on the face of it, an attractive one, given that the
Bonds have been trading at a substantial discount to face value".
The Fund estimates that had the buyback been carried out in
November 2020 and if two thirds of bond holders had sold at a 55
per cent premium to the prevailing market price, approximately $94
million of capital and interest could have been saved. Together
with the $17 million spent on a restructuring plan that both
Crystal Amber and more importantly the High Court found to be
inappropriate, the Fund estimates that the Company has suffered
losses of approximately $111 million, equivalent to more than 4p a
share. The Fund believes that an investigation should determine
grounds for redress and recoverability of this amount.
The Fund also notes the potential for shareholders to benefit
from Hurricane's taxation position. At 31 December 2020, Hurricane
had ring-fenced trading losses of $468.7 million and supplementary
charge losses and investment allowances of $707.8 million. In
addition, capital allowance pools of $383.5 million were available
to be used against ring-fenced trading profits. The Fund has asked
Hurricane to assess the financial implications of these tax losses
and allowances in the event of a corporate transaction. The Fund
believes that the quantum may be very substantial.
Over the last year, the Fund has increased its shareholding in
Hurricane from 11.6 per cent to more than 27 per cent. 12 months
ago, the price of Brent Crude was $37.50 a barrel. It is now $85 a
barrel. With production now running at more than 3.5 million
barrels per annum, the Fund believes that Hurricane's prospects
have been transformed.
Equals Group plc ("Equals")
Equals is an e-banking and international payment services
provider. It serves retail and business customers mainly in the
United Kingdom under an e-money licence. Equals provides faster,
cheaper and more convenient money management than traditional
banking services with bank-grade UK domestic clearance.
Equals' proposition to SMEs is compelling relative to that
offered by legacy banks. The company's assets include over one
million customers, an upgraded technology platform and licences and
industry relationships built over many years.
The record start to Q3-2021 that Equals reported at the time of
its Interim Results announcement issued on 14 September 2021 was
sustained throughout the remainder of the Period, generating
revenues of GBP11.7 million. This represents a 33% run-rate
increase on the prior quarter (Q2-2021: GBP8.8m); a 62% increase on
the prior year comparative period (Q3-2020 GBP7.2m); and a 47%
increase on the pre-Covid comparative period (Q3-2019.
GBP8.0m).
Revenue growth was broad based across all products augmented by
the strong demand for the 'Equals Solutions' proposition, the new
multicurrency product aimed at larger businesses.
The Fund believes that for the year to December 2022, Equals can
deliver EPS of more than 5p. With GBP10 million of net cash and
operating cash flow now building, Equals is ideally positioned to
be a part of FinTech consolidation.
For further enquiries please contact:
Crystal Amber Fund Limited
Chris Waldron (Chairman)
Tel: 01481 742 742
www.crystalamber.com
Allenby Capital Limited - Nominated Adviser
David Worlidge/Liz Kirchner
Tel: 020 3328 5656
Winterflood Investment Trusts - Broker
Joe Winkley/Neil Langford
Tel: 020 3100 0160
Crystal Amber Advisers (UK) LLP - Investment Adviser
Richard Bernstein
Tel: 020 7478 9080
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END
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October 26, 2021 02:00 ET (06:00 GMT)
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