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"The best way to attract more buyers is to make the company look more attractive to invest into, I would much rather that £30m be spent increasing production and unlocking the long term potential of the company and not wasting it on short term measures that have no guarantee of success."
Except its very clear that investors in the E&P space, especially institutional and other serious investors are also equally focussed on capital discipline and return of capital. They actively don't want excessive amounts of free cashflow to be spent on capex. Its also additional questionable whether I3E have capacity to ramp up capex that much further - they already have an extensive program and more drilling requires planning, permitting, supplier management, etc etc.
Buybacks are a very useful use of excess cash when valuation is perceived to be low as it permanently increases the return of capital as there are less shares to spread the returns over.
Everyone is approaching this from the viewpoint of what can management do to try and prop up the share price short term - I'd prefer to look strategically at longer term what is going to be the best use of excess cash and right now, given the metrics buybacks look very attractive, more so than dividends or extra capex which does not meet the markets requirements for capital discipline. The other alternative is to keep some powder back for the down cycle which may be coming, to go back and pick up more assets at attractive long term valuations - but at the moment the market does want a return of capital.
Oil down 6%. Wow wasn't expecting that . Let's see if it bounces back.
Here we go again..... Below the 25p line
Ffs!
Share buy backs are not the magic bullet that some people believe they are, to buy back 10% of the issued equity that some posters are talking about would cost around £30m at current share price. Firstly there seems to be an assumption that buying 10% of the shares will increase the share price by 10% or more when there is no evidence of such a correlation existing, the latest example of this I can note is AWE where a director has just purchased around 13% of the company and just look what has happened to the share price.
Secondly what you are actually doing is creating a false market by introducing a buyer so market makers and other participants can actually ramp the price knowing they can sell higher which then brings in more selling and you end up with a price that is lower after the buy back than when you started.
The best way to attract more buyers is to make the company look more attractive to invest into, I would much rather that £30m be spent increasing production and unlocking the long term potential of the company and not wasting it on short term measures that have no guarantee of success.
I think G G G has a very well argued case for the preferred route ahead. So much potential around the i3E resources that a continuing policy of developing them has to be right given likely forward prices of O & G. Bitcoin and Co. are suffering catastrophic reverses at present, so traditional investors will be shunning them.
I believe the point GGG is that the market continues to significantly undervalue Canadian oil shares. If the buyers aren't there (and might never be) because of Greta and investors now preferring ponzi stuff like Bitcoin/Tesla/Gamestop/AMC/ARKK etc Only way to get share price to fair level is do the job yourself and buy the stock at price which represents significant value.
Should get an RNS tomorrow confirming July's dividend payment. So far this year, the divi RNS has been on a Wednesday in the first / second week of each month, which makes this one due (hopefully) tomorrow.
DYOR
Share buy-backs would be a complete waste of time and money. Buying back 10% of shares - do the math. You wipe out a large amount of cash reserves to maybe increase the sp by 10%. And to increase the divi payout by 10%. Hardly worth it. Plus it doesn't do anything for protecting dividends in future. We're on-shore. We have vast reserves and over 100 drill targets mapped. We have a huge amount of land that still needs to be appraised. And we're in a bull market that's likely to last for another year at least. And people are talking about throwing $40m at a buy-back that MAY increase sp value, and dividend value by 10%. F@cking madness.
You drill the @ss out of Canadian locations. By doing this you're better prepared for the inevitable pull back in oil prices in future. Whilst other companies have been wasting their precious cash resources trying to make Eric Nuttal et.al happy, they're missing on the longer term stability of increased production. We could add 2-3kbopd for $40m. If oil heavy it would almost double our output. The added production protects your dividend in future, not just because of the extra revenue, but because we have low decline wells. You also get the benefit of extra company value assigned with the additional reserves being proven up. And you get a better idea of the land you own, so you can better prioritize drilling in an environment where oil is say $75. I 'm guessing Graham and Majid agree with what I'm saying, which is why they're not doing it. They could commit to a higher monthly dividend for the next 12 months. This in itself would increase the sp, and put very little pressure on our cash reserves. Drill more wells in Canada, put a wildcat in the Nth Sea (Minos High) and increase the dividend for 12 months by 10-20%. We can then enjoy significant dividends now and if poo drops by 20%, alongside knowing our reserves are being replaced and growing, plus mgt knowing where to put the next wells to maximize returns, and we have 2 x Nth Sea lottery tickets. All of these things can be instigated now, and all of them will add value to the sp immediately and for the near future. A buy back would be a complete waste of cash. And as Bunkatron points out, it would also p!ss governments off. AIMHO
I think there is a small political risk in going the Eric Nutall way, once people start losing jobs and you see the high O&G prices and suddenly this guy is shouting how every penny should be distributed to shareholders before expansion. I mean 75% of FCF… in an environment we all know investment in O&G is needed. That is not something to brag about, its selfish.
Its very easy for a politician to put a big fat tax on that behaviour and get the general opinion to agree with it.
Other than that I still believe in the I3 way, expansion, dividends and a safety margin by the end of the year.
Tony - Amazon and Tesla are doing share splits to provide more shares in issue and hence make each individual shares cheaper, not share consolidations, which is reducing number of shares. However, I agree I don't see any merit in a consolidation here - there isn't so much liquidity, especially in Canada so I wouldn't take any more liquidity out the share.
G_G_G - shares buybacks certainly do increase value if done at the right time and I would say now is definitely the right time. There is a big advantage over dividends as it is a one off relatively short term exercise as opposed to continued dividend increases that require long term capital planning and especially for a cyclical business like oil and gas. A 10% buyback can be accomplished in a number of months and that automatically increases dividend by 10% without having to increase actual cash paid out - its much more difficult to return that much cash quickly to shareholders unless its via a special dividend which is probably the least likely to boost share price in the long term - sharply increasing the regular dividend puts it at risk in the future if O&G prices and cashflow decrease and again the last thing a company wants is a volatile yield.
At current valuations a buyback is for me the most compelling use of some of the excess cash, the CAPEX program for this year already looks pretty full so I'm not sure there is much more room to allocate addtional.
For what's it's worth Eric Nuttall disagrees with anyone that says buys backs dont work - he's calling for 75% minimum return of FCF to shareholders via buybacks and dividends and i think I've heard him mention roughly 50/50 buybacks v dividends.
Half year results - are they going to move the needle bearing in mind they're reported 3 1/3 months past the cut off date and after several intermediate operational updates including NOI - I think its doubtful.
I would also like to see them increase the dividend and plough money back into development as longer term I see this as better value for SH and I think i3e Management have said similar - so no worries there - I personally think we will see another 20-30% dividend raise before year end.
However - I think it would also be positive for Management to draw a line in the sand and say we are not going to dilute shareholders anymore and have a plan to offset options and warrant exercise by having a small buy back program. I think it would also be positive to bring the share count below a billion - typically blue chip companies and growing companies with a market cap of UKP 300m dont have a share counts of 1.1 billion and growing.
Also - share consolidation - no effect on earning per share so theoretically no impact on SP. However it should be borne in mind - its typically done in 2 scenarios:
1) Rapidly growing companies such as Tesla and Amazon to make there share more affordable to the general investor.
2) Weak Companies with a declining SP and increasing share count.
Most of us recognize that i3e don't slot immediately into either category but what would new investors think looking at the long term graph - its not immediately clear - in my opinion a consolidation would not be a good look !
Agree buy-backs do little for sp appreciation, but do cost a lot of money. So a pointless exercise imo. I'd rather they stick the cash into increasing Canadian production, in particular oil focused areas where we can prove up more reserves. This provides an immediate revenue return, and with current oil prices incredible IRR / payback periods. Plus there's the added benefit of greater reserves, which increase the underlying value of the company. The next place I'd like them to invest is another well in the Nth Sea. This would give us two cracks at adding +10p to the sp. In a high success scenario each well could deliver +20p to the sp, and the outlay is quite small for the upside. And finally I'd like them to modestly increase the dividend. The benefit of increasing the divi is the low cost nature of it, and the fact that it will add a good 10-15% to the sp. All of the above will add immediate value to the sp, plus make us a little harder to swallow for a bigger fish.
People also need to keep in mind the market has **** itself over the past 2 months, and we're holding up quite well all things considered. We've had a 20% decrease from our multi-year high, which been compensated by a divi currently paying a 7% yield. The fact they've made it monthly is the reason we haven't experienced even more volatility. We just need to wait for the half yearly results and the sp will be back to 30p in a flash. There's a long list of good news that will accompany that update, and knowing mgt they will probably have an ace up their sleeve as well. I couldn't be more relaxed having my money here. AIMHO GLA
Gusto1, agreed.
Well they need to provide something.... Or the SP will drift down.
The dividend isn't enough for some to hold this share.
They may well decide to provide a bit of news on the drill results, but they haven't for a long time outside of standard operational updates and there is no need for them to do it as they aren't material in terms of overall production.
Definitely overdue some drill results.... They should be RNS's separately and not with Q2 Results..
Come on I3E get this news out.... Or buy back some shares at this cheap price!
Based upon the timing of the previous quarterly updates it will likely come in mid August and it’s been a while since I3E released individual well updates as a standalone RNS so I assume those updates also come with the update
I was expecting an Rns stating the flow results from Simonetta and other wells by now, however it looks as though we might get that news and Q2 news together next week
Gives us time to top up and buy some more