Caverton Offshore Support to raise N16billion through PP

[solainvest]

Proshare News

-As offer opens July 28



PETER OBIORA

Proshare NI

July 25, 2008 at 06:35 GMT



The Caverton Offshore Support Group (COSG), is set to raise N16 billion through a Private Placement (PP). This was contained in a strictly confidential document made available to Proshare NI in Lagos Nigeria.



The Marine and Aviation Logistics provider in the Oil and Gas industry intends to raise the N16 billion by offering to investors 2.0 billion Ordinary Shares of 50 Kobo each at N8.00 per share.



The Caverton Group is offering a minimum of 125,000 Ordinary Shares and in multiples of 25,000 thereafter.



However, the Directors may allot shares to prospective investors who are staff or other stakeholders of the Company and who wish to subscribe for less than the minimum units of sale.



Existing capital structure of the company indicates that the Caverton Group has an Authorised share capital of N2, 500,000,000.00 comprising Ordinary Shares of 50 Kobo each. While its issued and fully paid up is N1, 500,000,000.00 comprising 3,000,000,000 Ordinary Shares of 50 Kobo each.



However, the Caverton Group affirms that the Offer is an important step in the Group’s drive towards achieving its strategic objective of becoming a leading Marine and Aviation Logistics provider in the Oil and Gas industry in Sub-Sahara Africa.



Proceeds of the Placement will be directed towards financing the acquisition of jack up rigs, off-shore support vehicles and helicopters as well as the acquisition of an existing Marine Company with operating assets in the Gulf of Mexico and the North Sea.



The company further affirmed that following the completion of the Placement, its Management intends to list its shares on the Floors of the Nigerian Stock Exchange (NSE) within 12 Months from the date the Placement closes.

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However, the document has affirmed that 437,500,000 Ordinary Shares representing 21.875 percent of the Placement are underwritten by Vetiva Capital Management Limited on a Stand-by basis.



The Caverton Group Placement which will open on July 28 and close August 18, 2008 respectively; has as its Financial Adviser/Issuing House Vetiva Capital Management Limited.

[solainvest]

Guardian Newspapers

The Punch: Caverton Group welcomes Daukoru, Bakare on board

[muranay@yahoo.com]

See the attachment for teaser for the PP

[hispy99]

Originally Posted by muranay@yahoo.com

See the attachment for teaser for the PP

thank you!

[hispy99]

REACTIONS to Private Placement for Caverton Offshore
Posted Monday, July 28, 2008

As a professional Petroleum/Drilling Engineer with 19 yrs experience in the oil and gas industry, I feel it pertinent to share my thoughts on the report below on Caverton Offshore Support’s Private Placement.

It was stated inter alia as follows:

"Proceeds of the Placement will be directed towards financing the acquisition of jack up rigs, off-shore support vehicles and helicopters as well as the acquisition of an existing Marine Company with operating assets in the Gulf of Mexico and the North Sea."

I have not sighted the prospectus to see the breakdown of how the PP proceeds will be channelled to the planned acquisitions, however, from what I know the total proceed from the PP will not even cover the acquisition of a jack-up rig (average cost of a jack-up goes for between $80 mln-$100mln for a "second-hand" and $150mln-300mln for a new build, depending on type). Except what they meant is offshore support jack-up barge, which is completely different from a jack-up rig.

The average cost of offshore support vessels is $3-5mln(shallow offshore vessels) and $5-10mln for deep offshore support vessels. My guess is that an helicopter will cost nothing less than $10mln.

The cost of the planned acquisition of a marine company in the US will depend on the asset base of such company and could be somewhere around $40-60mln for and average sized company.

Furthermore, capital intensive acquisitions not linked to firm contracts are not common in the industry as contracts are typically competitively bided. You may acquire equipment with no contract to utilise such equipment and that is suicidal. So Caverton needs to provide details of firm contracts to support the acquisitions.

In addition there is no synergy in trying to be a rig contractor and offshore logistic support contractor at the same time. It is a rare practice in the oil & gas industry.

Maybe the acquisitions will be financed through bank facilities(debt). More details will be required to reach a conclusion on this.

I am not a expert on financing, but I doubt whether the N16bln ($130mln) will be able to cover all the planned acquisitions, except the Caverton intends to finance these through bank debt (details of this required). In that case don't expect dividend payout for the first 3 yrs.

[larez]

Hipsy:

There is a numerous number of factors involved in an acquisition and growth program. You are right for questioning this proposed plan. I have recently done an extensive research in the area of issue, and have acquired a great amount of insight into the industry. I find it somewhat amusing that the first thing you stated were your qualifications as an Engineer working in the industry. This is an inconsequential qualification. In Nigeria, we get caught up in qualifications rather than substance. This is not to take credit away from you for raising questions.

A successful acquisition and growth program is founded on research, and interpretation with some discernment of the research. Many Directors and CEOs fail to realize that this is a continuous process. This leads to some people using information that is outdated in making decisions. The Oil and Gas industry is an area where management needs to stay on it's toes at all times to remain competitive. It demands leadership based on futuristic trend analysis, as well as quick movements at the right time.

At the moment, I am seeing Nigerian firms acquiring outdated technology to to position themselves in the Nigerian Oil industry, while the multi-nationals are dumping outdated technology in their hands at overpriced figures. The current high price of steel globally, is an indicator of the race to update facilities to today's technology, especially in the Offshore oil industry, and the global shipping industry. We should be part of this race, instead of being part of the dumping grounds of old technology.

As you are aware, Brazil, which is relatively ignored as a technological source, is the most advanced in deep-offshore drilling technology. Brazil has hence been rewarded with recent premium mega field discoveries. Brazil will overtake many OPEC countries in production within the next 5 years. Brazil deserves this, because they have focused on learning high-tech, and implementing indigenous solutions in their application.

Nigeria, and Nigerians fail to realize that Technology transfer should be defined with date, and avoid archaic technology that is in the public domain. i am amazed that we continue to aid and abet capital flight to the demise of our country, while a few get rich at the expense of Nigeria's real growth.

A Nigerian company seeking Nigerian finance should be stringently measured by how they address technology. They should be mandated to reveal their R&D plans. They should be questioned about being able to grow outside of Nigeria into neighbouring countries with tangibles to offer. they should have acquisition plans that import up-to-date technology into Nigeria. Our paradigm needs to shift to thinking globally, while beginning locally. I hope we can all pay attention.

In conclusion; I have to say YES. It is possible for a company to leverage the amounts that they are asking to raise, and thus acquire some new-builds. There are shipyards in China that are ISO 9001 certified and are capable coming up. The West is noticing and beginning to trust the quality being provided by these new shipyards. However, with limited funding, it will take genius to be able to pull it off. But if the Caverton group is relying on outdated technology being purchased, then their competitiveness will be limited to the local market and based merely on their connection to acquire mediocre laden government contracts.

Femi Animashaun

[japo]

Femi,

well writen well tot tru, l tel you my bro this is the way to go men, this is the way... the industry of the average nigerian is craze, the desire for success deep and without question......economies are becoming smaller and we nigerian should start thinking of how we can dominate and forget aha brother na me be dis oh or padi padi...this can no longer work in a competing economy which nigeria will become whether baba goslow likes it or NEVER, cant stop a moving train... imagine the $3.6m scan with respect to the ID card issue and the ashwipe keeping the money in funds abroad when he can create massive wealth here in naija, peps are running about with lava in their heads with no support to let it flow...........Nigeria and Nigerian Business need help, l like what the banks are doing now with respect to expansion in Africa and abroad that is the mind set our companies need, the need cash and correct humna capital which they must be willing to pay well and we will haze shit...........if you have taken time follow the FOOD CONEPT CREW then all we require would be for people like you to take in and help........we all have a duty to create value and dominate our sectors...nice one Femi nice one...just hope your lave will flow forth men

[hispy99]

Originally Posted by larez

Hipsy:

There is a numerous number of factors involved in an acquisition and growth program. You are right for questioning this proposed plan. I have recently done an extensive research in the area of issue, and have acquired a great amount of insight into the industry. I find it somewhat amusing that the first thing you stated were your qualifications as an Engineer working in the industry. This is an inconsequential qualification. In Nigeria, we get caught up in qualifications rather than substance. This is not to take credit away from you for raising questions.

A successful acquisition and growth program is founded on research, and interpretation with some discernment of the research. Many Directors and CEOs fail to realize that this is a continuous process. This leads to some people using information that is outdated in making decisions. The Oil and Gas industry is an area where management needs to stay on it's toes at all times to remain competitive. It demands leadership based on futuristic trend analysis, as well as quick movements at the right time.

At the moment, I am seeing Nigerian firms acquiring outdated technology to to position themselves in the Nigerian Oil industry, while the multi-nationals are dumping outdated technology in their hands at overpriced figures. The current high price of steel globally, is an indicator of the race to update facilities to today's technology, especially in the Offshore oil industry, and the global shipping industry. We should be part of this race, instead of being part of the dumping grounds of old technology.

As you are aware, Brazil, which is relatively ignored as a technological source, is the most advanced in deep-offshore drilling technology. Brazil has hence been rewarded with recent premium mega field discoveries. Brazil will overtake many OPEC countries in production within the next 5 years. Brazil deserves this, because they have focused on learning high-tech, and implementing indigenous solutions in their application.

Nigeria, and Nigerians fail to realize that Technology transfer should be defined with date, and avoid archaic technology that is in the public domain. i am amazed that we continue to aid and abet capital flight to the demise of our country, while a few get rich at the expense of Nigeria's real growth.

A Nigerian company seeking Nigerian finance should be stringently measured by how they address technology. They should be mandated to reveal their R&D plans. They should be questioned about being able to grow outside of Nigeria into neighbouring countries with tangibles to offer. they should have acquisition plans that import up-to-date technology into Nigeria. Our paradigm needs to shift to thinking globally, while beginning locally. I hope we can all pay attention.

In conclusion; I have to say YES. It is possible for a company to leverage the amounts that they are asking to raise, and thus acquire some new-builds. There are shipyards in China that are ISO 9001 certified and are capable coming up. The West is noticing and beginning to trust the quality being provided by these new shipyards. However, with limited funding, it will take genius to be able to pull it off. But if the Caverton group is relying on outdated technology being purchased, then their competitiveness will be limited to the local market and based merely on their connection to acquire mediocre laden government contracts.

Femi Animashaun

Femi,

Thank you for your write-up. However, if you read my post again, it was clearly stated at the top that the piece was from Proshareng.com and not my own. All I did was copy from the website and paste for the education of everyone.

[tonidol]

Originally Posted by muranay@yahoo.com

See the attachment for teaser for the PP

Only people with thick liver will go for N8 PP at this time. Considering the scope of business, returns will take a long time to come.

[larez]

My Apologies Hipsy. It wasn't meant to be personal anyway. Cheers.

Originally Posted by hispy99

Femi,

Thank you for your write-up. However, if you read my post again, it was clearly stated at the top that the piece was from Proshareng.com and not my own. All I did was copy from the website and paste for the education of everyone.

[Avocado]

From the "teaser", we confirm the purpose of this placement:

- Financing & acquisitionof jack up rigs (that's a least 2 jack up rigs)
- Off-shore support vehicles (that's at least 2 Off-shore support vehicles)
- Helicopters (that's at least two helicopters)
- Acquisition of Marine company with operating assets in the GoM & North Sea

Using an exchange rate of N115 to the US dollar, N16bn comes to about USD140million. This is lower than the cost of two jack-up rigs, old or new.

The comments from the drilling engineer with two decades of experience are right on the money. The Vetiva people have presented sloppy research, and, like the UBAGM people in the Orient PP, appear not to know what the heck they're writing PDF documents about. The engineer's comments deserve attention; Vetiva would need to reword and revise for an improved document. Perhaps they could contact the experienced engineer for consultancy. And hispy99, thanks for the heads-up.

Per logistics and facts, this documents ranks down there with the one for the Orient PP. People form impressions based on these documents.
.

[larez]

Originally Posted by Avocado

From the "teaser", we confirm the purpose of this placement:

- Financing & acquisitionof jack up rigs (that's a least 2 jack up rigs)
- Off-shore support vehicles (that's at least 2 Off-shore support vehicles)
- Helicopters (that's at least two helicopters)
- Acquisition of Marine company with operating assets in the GoM & North Sea

Using an exchange rate of N115 to the US dollar, N16bn comes to about USD140million. This is lower than the cost of two jack-up rigs, old or new.

The comments from the drilling engineer with two decades of experience are right on the money. The Vetiva people have presented sloppy research, and, like the UBAGM people in the Orient PP, appear not to know what the heck they're writing PDF documents about. The engineer's comments deserve attention; Vetiva would need to reword and revise for an improved document. Perhaps they could contact the experienced engineer for consultancy. And hispy99, thanks for the heads-up.

Per logistics and facts, this documents ranks down there with the one for the Orient PP. People form impressions based on these documents.
.

Avocado:

I concur about the sloppiness of the details, and as an investor, I will require more facts before contemplating acquiring stocks of this company. Especially since it is obviously a heavily leveraged deal. However, if they are sophisticated enough, this can be pulled off.

In the United States, you can leverage a ratio of 1:5 to a ratio of 1:20. This means heavy debts, and the finance provider will want to see contracts at the least to justify the leverage. This means high debt, but the terms can be very doable if negotiated right. From your calculations, this will mean a total of $700M at the minimum at 1:5. Remember that these acquisitions become assets of the same company. I have decided to include the following facts as well from my research:

1. Most International jack-up deals are done with operator coming up with little of the money upfront, while seeking funding elsewhere such as equity shares of straight finance. If you can find a shipyard that will build before the bust, then upon completion, you can even make money by selling the new-build. As a matter of fact, many new-builds have been sold in the yard before completion due to urgent needs by others, at a high profit rate. The potential for this sale is based on the technology of the jack-up. There are even dual drill platform jack-ups that can have 2 drilling operation going on at a time, if a high number of wells need to be drilled. Finally, on the Jack-ups, there are people like Wilhelm Blystad who speculatively build drillships at $640M only to find a buyer or get a long term lease from a Driller before completion. Usually, the lease itself pays for the ship within 5 years. The question here should be about the method of acquisition that the company will use.

2. On the offshore support vessels: Many big companies are replacing their older vessels, hence discarding them. Nigeria, India and the Far-east are the markets for these older vessels. They should check companies such as Bourbon for these. I suspect they might have some issues with acquiring AHTS vessels that are capable of 120 bollard pull, but there are some coming to the market soon. But there should be no problem with PSVs. Many are already in the market. My advice to them is not to create a market demand through publicity which will raise prices immediately because the people who deal in these are very shrewed business men. What I am saying is that they should avoid a bunch of Nigerians getting out there and saying that they are searching for vessels. The acquisition cost will definitely jump up. My approach will be to check the quarterly returns of companies, and seek an opportunistic acquisition. They should only approach cash-strapped companies.

3. On the Helicopters: This should be an easy one, because luxury-based aviation which this falls under it's category is in the decline. The U.S. will have a large inexpensive inventory of that. I can think of a Canadian company, but can't remember it's name, that will provide finance facilities for such acquisition and may in-fact partner in the deal. They will surely offer to provide many value added services, or may even provide the equipment, logistics and service based on a charter rate with a minimum agreed activity per month.

There is also the possibility that their company acquisition might provide all the other assets listed. This company might be playing with words as a strategy to deny their competitors from the details. In other words, they definitely know some things that we don't. This will be a beautiful strategy and I wish I knew of Nigerian companies that could do this in late 2005 to early 2006. i had been monitoring the activities of some American companies who sat on their rigs in GOM and refused to redeploy to places like West Africa. Hence they left rigs cold-stacked while still keeping their overheads. In any case, they got acquired real fast for pennies on the dollar. I still see such foolishness happening and scream within wishing I had a company to spear-head into these opportunistic acquisitions.

Finally, if this company is very sophisticated, they should be able to pull off their plan. They are attempting to raise the minimal in equity stakes, for a very aggressive campaign, which I suspect is backed by contracts. I will advice them to do their homework properly, such as sticking with the names that are recognized like Keppel Fels, Le Tourneau, SingMarine and others. They have to overcome the inexperience new driller thing by employing the very best talents, and invest highly in HSE. They cannot afford any mishaps within 3 years of operations, and should get their ISO 9001:2000 certification.

[Avocado]

larez,

the good point you make is close to what the engineer quoted by hispy99 did make: there should be firm contracts to justify these capital acquisitions; if these contracts exist, the advantage in keeping them secret isn't very clear. With competitive bidding, the risks increase significantly if such contracts don’t already exist. Anyway, the present situation, and further into five years, at least, appear to favour a company like Caverton.

It is true – as you write – that offshore drilling in Brazil has resulted in overcoming exciting challenges; some of the companies involved in these are operating in, and participating in activities offshore Nigeria; not quite very deep waters, but it's happening; project Agbami recently delivered first oil, a synergy of a number of companies. There’re very good examples of applications of such advanced technologies in Nigeria in the relevant industry. We all know that money helps; where there’s good money to be made, applying new/advanced technology is hardly a big problem. Indigenous research activities are almost not existent though. This failure appears to be systemic; as an example, the PTDF recently announced that endowed chairs in seven Nigerian universities reported poor performances; clearly, there’s a new direction needed here.

Going back to the Caverton PP document, it’ll be interesting to see how Vetiva updates what’s been published in this poorly presented “teaser”. Perhaps there’re details they’ll provide, but it’s not looking good. Take the case of the stated intent to acquire 12 BELL 412 EP & Sikorsky S76 D helicopters, all for USD 41million. They state a 24-month acquisition period – to their credit, it should be added – but even then, they won’t be getting any used Sikorsky S76 D in two years; they’ll need at least USD 10million for one; and what sort of 412 EPs do they hope to get for USD 3million each? The arithmetic of the utilization isn’t adding up, especially after deducting USD 26million for their bridging facility, and adding that they would be acquiring a marine company; except, may be, Caverton will then own less than 50% of all they wish to ‘acquire’. Hopefully, Vetiva ’ll include the minimum details of these in the full document.

I’ll agree that almost anything is possible; Caverton must be wished every success; but when we have a document, we work with this. If the plans don’t look good on paper and in numbers and the arithmetic doesn’t check out, it casts a shadow of sth negative on expected delivery. Of course, if their presented plans do add up, one ‘ll be very ready to recant.
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