As much as it pains me to say this, I’m considering FRR a write-off. Different set of circumstances but it reminds me a lot of what happened with Xcite – great asset, NPV £2.5Bn in addition of £250m of losses which could be netted off future revenues for tax purposes. Company had been in talks with majors but eventually succumbed to liquidation. Even during the liquidation process, you had die-hard LTH’s who refused to believe that we were in a worse situation than a firesale……instead almost expecting somehow for an industry value to materialize despite the highly precarious circumstances. A collective group of LTHs started a shareholder group drive their agenda – some good communications went out and the BOD were willing to engage. Eventually – everyone got wiped out, loads of noise thereafter, loads of phone calls to the Cole and the management team (previously good shareholder engagement had long ceased). The writing was on the wall long before wipe out.
On FRR – apparently great asset and there can be no complaints that they haven’t had sufficient time to monetize (look with BLOE have achieved in a fraction of the time). If we take a step back from the in-situ resource (which everyone was blinded by in the case of XEL) and look at the cold facts on recent developments:
The much lauded star Engineer Dustin Aro slipped away quietly during, what should have been approaching the company’s most existing period. Am surprised if he didn’t want to hang around for the breakthrough watershed moment when 2 majors became partners. His derisory investment in FRR shares perhaps shows his caution around the company.
Arbitration proceedings with the state (the company stated they weren’t aware of the context around this)
Default and subsequent dispute with Hope
Nomad Resignation (the company stated that they weren’t aware of the context around this)
- delisting - unable to resist within timelines and almost zero comms since.
Court proceedings – Caymans case starting, quickly switched to Cali when proceedings did not go to plan. Cali – possibly lacks jusidiction, TRO thrown out, latest commentary doesn’t appear overly positive. Asset moved out of the vehicle which we are owners of (is this legal – does this open a complete new can of worms).
My guess is that this will rumble on for months and I don’t see any resolution on the horizon. Meantime – how does this impact on FRR being able to prove commerciality, the clock is ticking. What Major / Funder in their right mind would be willing to partner with any company with all this going on unresolved!? This is super high risk for all stakeholders and, given the profile of the legal team on board in the US, this can easily go into the millions. I’ve met Zaza on a few occasions over the past 2 years and genuinely believe his interests were aligned to LTHs –I’m sure those who attended the Shareholder meetings will agree. I’m sure there was a plan to going down the legal but its transpired to be a lot more complex than imagine and adjudication risk is very apparent. Personally I think we need more than luck at this stage but I think we all need to prepare ourselves for the downside scenario.