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In the news with RFC Ambrian: Gemstone Auctions & Global Petroleum

Published: 11:05 12 Nov 2015 GMT

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INTRODUCTION

In the news: Gemstone Auctions & Global Petroleum
So, the ‘flawless’ Blue Moon 12.03ct blue diamond sold at auction in Geneva yesterday for US$48.5m. It has subsequently been (highly originally) renamed as the ‘Blue Moon of Josephine’ after the purchaser’s (we’ll come to him later) seven-year-old daughter. This follows the previous day’s sale of a 16.08ct pink diamond, since renamed ‘Sweet Josephine’ (you may be spotting a theme here) for US$28.5m. While both of these were record prices, they were pretty much in line with what they were expected to go for.

What’s going on here then? Obviously, both stones were bought by the same person. It is none other than the Hong Kong billionaire tycoon Joseph Lau Leun Hung. Is he flashing the cash or what?

He has apparently bought both stones for his daughter Josephine. Nice, but I hope little Josephine isn’t anything like my seven-year-old daughter. If she is, then I suspect those stones are going to be lost within about five minutes of her getting hold of them. They’ll probably turn up at some point though, possibly stuffed down the back of a sofa, under the front seat of the car or in a drawer in her bedroom crammed with other little trinkets given to her in party bags or from a McDonald’s Happy Meal.

I don’t want to gossip, but this Joseph Lau seems to be a ‘colourful’ character. According to The Guardian (a self-righteous, puritanical rag at the best of times), Mr Lau has been convicted of bribing officials in Macau (well how else are do you get things done?), but surprisingly he won’t spend any time in the slammer as Hong Kong and Macau (which are rather close and, I thought, both now part of the same country) don’t have an extradition treaty. Also, little Josephine is his daughter through a relationship with his girlfriend and former PA, while he also has two children with his long-time and — by the sound of it — still current partner. I wonder what those other kids are going to get as presents? PlayStation 5s? Lego? When you’re worth US$11.5bn I suppose juggling these personal issues becomes a lot more straightforward.

OIL & GAS EQUITIES

Global Petroleum*† (LON:GBP) — Grant of Namibia Licence Renewal — The AIM-quoted and ASX-listed oil and gas company engaged in Africa and the Mediterranean has announced the renewal of its Namibian licence for a period of 24 months. The First Renewal Period, as agreed with the Namibian Ministry of Mines and Energy, will commence on 3 December 2015, and covers the company’s two offshore blocks 1910B and 2010A.

The original terms had entailed a commitment for Global to drill one well during the First Renewal Period; however, the company has negotiated a revised Minimum Work Programme on the acreage to enable cash conservation in the current market conditions. This will entail seismic reprocessing and the acquisition of 800km of long offset 2D over the retained acreage (after a mandatory 50% relinquishment of the area on transition to the Renewal Period). Seismic and gravity modelling work undertaken by the company on the two blocks under the current licence extension to December 2015 have facilitated the delineation of the areas to be relinquished.

Global is the licence operator and holds an 85% interest through subsidiary Jupiter, with Namibian NOC NAMCOR and Bronze Investments holding the remaining 10% and 5% respectively as carried interests.

RFC Ambrian Comment: We consider that Global’s robust balance sheet (US$11.9m of cash and no debt as at end-September, with a low cash burn of just US$0.6m for the last quarter) places it in a strong position relative to peers, both in terms of withstanding current market conditions and undertaking prospective M&A activity. The extension of the Namibian licence period without the capex burden to drill in the near term should enable the company to maintain both its interest in the licence area and balance sheet strength as it continues to engage in discussions regarding transaction opportunities in the space.

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