ROS .. the gamblers anonymous thread !!!

Until the above post was made from rigzone (I think), it wasn't exactly crystal clear who was part of the management buy out. Clearly I stand corrected and both Remp and Bertram will remain with Ramco. Good news for Ramco as they won't be splitting their time, or salaries, with the new oil services company.

If you head back through this thread and read previous discussions surrounding the sale of gas from 7H, I have always worked under the assumption that the gas has been sold, in part at least, on an index price. The reason behind this is that this is a common way of selling or buying gas in the market. The most common indexes used are Day Ahead, Week Ahead and Front Month. Sometimes a combination of the three. I don't ever believe that I have stated that the gas was sold on spot prices and have tried to point out to those that are excited about high prices that it is unlikely that Ramco will receive spot prices for the above contractual reasons. Newspapers who run stories on the rising gas price often quote Jan or Feb spot prices but as these are, especially several months before delivery, unlikely to be the actual price of delivery in that month, somewhat misleading. I've tried to explain this, perhaps unsuccessfully. I quote spot prices to demonstrate the volatility in the market over the past few months and as part of a wider discussion on the future of gas prices in the UK that has gone on at times on this board.

There is a hedge in place for the gas production from 7H but not knowing the current production from the field, it is difficult to work out what % of the production is sold at the fixed price. One would hope, especially in the current market, that a fair chunk of the production has been left floating using one of the methods above. We also know that the sales agreement was re-negotiated last year (and this year?) but I can't find any further details on this. The accounts state that the price has been fixed which suggests the gas being sold forward in the market although doesn't rule out the possibility of the deal being a floor price. It could be possible that Ramco have bought options to take advantage of future upward price movements.

The fixed sale prices are (from the 2004 accounts),
2004 - 19.61p/th
2005 - 19.3p/th
2006 - 19.05p/th
In today's market, those are very weak prices. If we knew what the current production is, and what the sales contract was re-negotiated to, we'd have a better idea of how much Ramco are making. It also doesn't state who signed the agreement, was it Ramco or Ramco Seven Heads Ltd. I'd guess the latter. You'd also have to question, seeing as the fixed price runs until 2006, what bearing this has on any sale of 7H gas any whether any future owner would have to honour the remainder of the fixed price.

As for my motives, Ramco first came to my attention when I read about the Montenegro acreage. I'm very excited about the possibilities here and have stated so previously. Ramco is the easiest way for me to gain exposure to this and I have been monitoring the company since. At present, and for the last 18 months to 2 years, the risk profile of Ramco doesn't fit my portfolio or my investment strategy and so I have remained out. The current problems, until they are resolved, will mean that for me, the company is not an investment option. I'm not a recovery investor and neither am I a trader, I've demonstrated to myself on numerous occasions that I'm poor at both and I leave that to others to get involved in. I'm very happy if, at the end of the year, my portfolio has returned more than 10%. Again, if you go back through this thread far enough, this is all there in one form or another.

For the record, both technically and fundamentally 25p looks like the current base and until the current problems are resolved, I believe that it will remain close to this level. Whether it rises significantly on the conclusion of the issues is, in my opinion, a gamble. I do believe that additional cash will be required early in the new year resulting in dilution and until that becomes clear, again, I feel that this is more of a gamble than I am prepared to take. If it suddenly rises to 50p on news announcements, well done, holders who have accepted the risk deserve the rewards. That's not a reason why we can't discuss the risks though.