The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
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I should add, they don’t need to pay creditors $1bn in 2022, they need to get to a position where they can of revolve the debt - same as any other indebted company. My understanding is the exploration assets they have been targeting are among the riskier part of their resource, so there is a decent chance that by targeting the less risky but smaller parts of the field they will get a result. All of this isn’t an end point in itself, but would buy them further cash flow and time to prove up the rest of what they have. DCF’s are an unsatisfactory approach to valuation imo - because you make one decent discovery and suddenly your base year cash flows jump and the discount rate crashes. As far as I can see, NOG have enough in the bank and enough in the field to fund quite a few holes out to 2022. ATB ..
With respect nickel, NOG will generate over $200m in op cash flow this year, they have $100m+ cash on the balance sheet, they have multiple promising exploration avenues and, if commercial, the cash to bring them to market. The end target is to pay off debt by selling the hydrocarbons they find and processing material for third parties. Goldman’s may be helpful structuring how this strategy is optimised, but ultimately the means by which value is created here is not particularly complex or different to that of any other e&p.
Someone please tell me how you return $1bn in cash to the creditors?
Yes , ever present here since the 100p days. Wish I had seen this at higher levels as would have been all over on the short side too.
Fair play to you nickel. If you’ve been short since 100p then very well done to you. ATB :)
THought they doing an acquisition re:RNS 24 June 2019 and that’s why Goldman’s Sach is engaged.
Many buys are going through in the last 10 minutes .. it looks like it hit the rock bottom
It’s a case of getting out , grabbing what you can salvage before the inevitable
It totally makes sense . You can have reserves but as evident today not always proven ! Extracting costs money and the discounted cash flow analysis suggests that at these oil prices there’s not a chance they can find over $1bn ! Hope that clarifies
But your point still doesn’t make sense in the context they do eventually find hydrocarbons. They still have time and cash flow to do so.. ”The hydrocarbons May be there but you have to spend money to get them out , have a strong price environment and have more future cashflows than the $1bn debt.”
And it gets worst. Big hopes were pinned on this well and its not even able to maintain a flow rate . I’m sorry but this is a dead duck. Now who followed me short from 100p?
So you think the hydrocarbons are there. And the report and accounts show they have cash and op cash flow at current price levels to find and extract them. They then pay down the debt with the ensuing cash flows. This is the model followed by successful emerging E&P businesses through history. Standard Life are possibly selling before handing assets over to Blackrock. Combine that with a couple of retail shorters and you can explain the weakness. Of course, it is the high financial leverage that has taken the share price down. In the event they find hydrocarbons, or come up with a convincing plan to do so, then the same leverage will go into reverse and the price will rise aggressively. ATB :)
The hydrocarbons May be there but you have to spend money to get them out , have a strong price environment and have more future cashflows than the $1bn debt. Therein lies the major issue !!
Well the market agrees and I’ve been calling it from 100p.
How on earth is the business going to find $1bn in cash to service the creditors ?
Well done on the shorting play. But now there is no doubt the share price is undervalued and there is a high probability that there will he a TAKEOVER at a premium to current SP. The infrastructure and reserves are decent. GTU3 will make a big difference and reduce costs while increasing treatment capacity. There are also wells that we should here about soon. This month is going to be pivotal and the huge decline in share price means that there could be a huge bounce with good news. Also Schlumberger technical study is also due. With chevon and shell both located in close proximaty to NOGs infrastructure, pipelines and operations. So it would make sense for them to buy the operation a the hugely discounted price that it stands at today. With $2 billion spent of the infrastructure and exploration in 10 years the fact that it has a billion debt doesn't make any difference really. A major can just pay that of instantly and the business as a whole pretty cheap. Your a brave man yo continue yo show this share when it's so low. Even berenberg valued the business at 25p which is 100% higher than current SP.
Downtoearth - I called the short at close to 100p and remain short . The enterprise value is absurd , this one has major issues at bay, chances of survival or any shareholder value are practically zero because of limited cash, the capex needed and the monster debt load of over $1bn ! Oil going to new lows today isn’t going to help
Why is it unlikely? I've been watching this for just a few weeks now and the SP has almost halved in that time. Another 30% off and it will be in single digits, doesn't seem that unlikely to me.
Lol... Very unlikely, nice try though
Single digits coming next
Basurman - they generate sufficient cash flow currently to service debt and pay for extensive exploration work. If they find hydrocarbons then the same geared effect that has taken the price down will work in the opposite direction. Regarding your previous point about a shareholder vote prior to the acquisition, they have clearly stated that shareholder approval will be required. It isn’t clear why shareholders would approve an acquisition that results in their stake being wiped away. My guess is - people have been waiting for the results of wells 41 and 631 since early September and no news is being taken as a bad thing. Perhaps they are right. My view is that even if the wells aren’t commercial, the company will have cash to drive exploration in its proven areas over the next 2 years. The shares may fall further but medium term a positive story remains - aided by the imminent reserve reports and completion of GTU3.
Even if the current pace remains stable, they will need to attract new loans for the development and infrastructure of the acquired Stepnoy Leopard field. Given the steadily declining capitalization and ratings, attracting new loans will be extremely problematic. In addition, servicing current debt devours all profits.
No reason to buy and little chance of recovery
That’s why I called this a short close to 100p and have kept it open !
It seems that the seller is not going to stop until the price drops to a nominal value of 0.01
Oil needs to go to about $150 and stay there for this to stand any chance of survival !
Thanks basurman. Certainly worth reflecting on :)