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The interim period adjustment from Jan 2020 to June 2021 was $273m, this comes off the $460m. Standard practice of course as we're eating through the reserves and keeping the cash flows, so at the end of H1 we would have received $187, which is less than I thought. Add in another $100m of cash flow between the end of H1 2021 and the completion date (end of Nov?) and the amount payable by Waldorf reduces to less than $100m.
Okay, we'll get a decent amount from the additional consideration ($60m for 2021?) and further payments in other years (if oil prices remain high) but we're selling tax free producing barrels in a great price environment. It makes no sense to me, especially considering FCF next year would likely be around $250m at 15kbpd and $75 oil. As an energy company we should be maximising the value of our assets, not selling them to someone else to do just that.
I've voted against, but really doesn't matter what I think, the major shareholders will decide.
The figure of $273m was an interim period adjustment for half a year which CNE stated as an example because the period from announcement to deal completion is roughly equal to 1/2 year. Please correct me if I'm wrong but what you're suggesting is the price of assets will be lower at the time of closing due to higher spot price/bbl?
But it isn’t $455m Stanley, that was based on a transaction date of 1st January 2020. Since then, Waldorf have benefited from the higher oil prices by bringing the consideration to $273m at half year. Add in another 5 months at $70/$80 oil and that becomes less than $200m net to Cairn at completion.
The additional consideration is okay, but selling tax free producing barrels in this oil price environment is crazy imho.
Dark like Emerald you have strong opinions in one direction. This board has been through this a few times and saev who is knowledge and balanced like Stanley presented that case for a sale increased opp ex and declinng yields and heavy decommissioning costs.
I think on balance it must still be a good deal unless key shareholders have some blurred conflict of interest with Waldorf as I suggested
stanley at this price of oil, is CNE not making half a billion a year ? No idea what the net profilts would be per year maybe you have a better set of calculations ?
"They have lost their minds. "
or have they? $455m + uncapped contingent for 5 years which at the current price would be ~$270m$. Mind you this is without touching or smelling the oil (no operations costs). How much FCF do we expect to generate over the next 5 years if the deal does not go through?
Knight i ask myself that a lot - potentially conflicted interests re Waldorf. Not illegal as they rank pari passu with us re voting rights. And board has no responsibility to declare this if the themselves and wholly independent
Megla why would the big shareholders then be in favour of it ?
They have lost their minds. These are tax free producing barrels adding mountains of FCF at current oil prices in a stable part of the world. Yet the benefit of the higher oil prices is going to Waldorf in reducing the sum payable at completion. Okay, there's some future decomp liability to consider, but that's less than half this years FCF.
The board should realise this is a mistake and pull the vote.
megla that's 19000 barrels of oil per day * $85 = $1.6 mill dollars per day * 365 days assuming oil stays at this price over 1/2 a billion per year. The board have lost their mind IMHO... Wallies !!!
agreed, it would pay to keep it for another 18 to 24 months and then dispose of it (if it is still required) for a lower sum and still be up on the deal overall. i assume the big boys will vote the deal through but i dont think it is in the best interests of the company/shareholders esp. with the current cash position or the cash to come in from India, etc.
I hope everyone’s voted against the North Sea asset sale, or is planning to do so at the GM.
The deal is utterly insane in the current oil price environment, especially considering the UK tax loss position.
The final consideration payable by Waldorf will only be about $150m when the working capital adjustments are taken into account, which is crazy for 19k of flowing barrels with oil prices at $80+.
It should have never been recommended to shareholders in the first place in my view.