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Majority of the time, I perceive a person's rudeness or arrogance a sign that they are not really happy with life or losing money on stocks. Well played with Tullow OWLS, I am in there too with that company albeit a bit late.
Fair point owls, well done. Let's see where are in three months though. Enjoy tlw.
SODER,
"You basically sold pmo (a company that just went through the pain of repairing its balance sheet) to buy tullow (a company that needs to do what pmo just did)
Congratulations. Probably the most stupid trade you could have done."
So far TW up 13%, PMO 5%.
Not bad for such a "stupid" trade.
It may turn out to be a poor decision but I wouldn't be so arrogant as to call other people's trades stupid
SODER, thanks for your kind words about my "stupid" trade but I don't think I'll pay much attention to someone whose main investment, a dodgy AIM stock, is down 43% in the last 6 months.
Aker BP market cap is £7.5b and not the $53b noted by other posters. There are features of Aker BP that are more attractive than Harbour (their producing assets are less mature than Harbour and cost of production is lower) and there are features of Harbour that are more attractive such as much lower tax rate (particularly with Premier’s tax losses) and higher BPD.
We should achieve parity with Aker BP which would result in a share price of 40p at current oil price, but I don’t believe this will be realised until Q3/Q4 when dividend has been declared and half year results are published demonstrating profitability and cash flow of new business.
If oil price pushes above $65 then all boats will float higher.
My gut feel is that we should not expect share price to move to much above 30p on 1 April. The declaration of dividend will add to price and a solid set of results for 1/2 year to June will be final step to 40p price. A little patience is needed.
Jefferies Price target of 30p was set when oil price was trading at $59+. PMO SP should be well above 30p based on fundamentals.
JUST BUY & HOLD!
@mswatz, Pearls, Soder, Valew, and others; thanks for your replies. The basic answer to my question is as Pearls put it, being that Jefferies' estimated market value of $5b underestimates the company. Even with a market value of $7b the upside from the current SP (29p, but let's see shortly... what today brings) cannot be more than 10p.
Tullow has a 21 convert and a 22 and 25 bond. The 21 and 22 maturity bonds will need refinancing within next few months or the business will restructure. Best case they will do a hugely dilutive big rights issue to repair the balance sheet.
You basically sold pmo (a company that just went through the pain of repairing its balance sheet) to buy tullow (a company that needs to do what pmo just did)
Congratulations. Probably the most stupid trade you could have done.
Owls good luck, as with all divestments, dont look back to check whether you were right or wrong. Hope tlw does well for you. BM
I've finally bailed out having suffered a painful 71% loss. I will be glad to see the back of PMO, I lost 34% the last time I was invested in them.
I have reinvested in TLW, out of the frying pan in to the fire !
Definitely solt out - too cheap. Almost skinned alive. My opinion
Good catch Kenni. It was back in my mind thinking how AKER is a peer with $53bn Mcap! I just got too excited thinking how big is the Harbor group based on the reuters article.
They certainly seem to be cash rich. They made $10bn take over offer in 2018 and I think at that time POO was in $60+? With oil now back to $65 and going above, they certainly seem to be generating billions of FCF!
LoL another one...
Aker is in NOK.. so mcap is £4.4bln not 53bln
6x would value PMO at 34p. MMs had PMO at £1 in 2019 with oil at half its current price. What is the real target?
HE was compared to Aker and other peers. If you look at the current MCap of AKER, it is 53bn!
Harbour energy made a $10 Billion take over offer for an Australian company -
https://www.reuters.com/article/us-santos-m-a-harbour-idUSKCN1IN10S
PMO was sold out too cheap compared to the above?
Anyways re-rate started here. Onwards and upwards. GLA
If the mkt cap is $5bn the EV would $8.2bn. With all the hedging in place and current spot oil you know ebitda is at least $2.2bn.
Hence a 5bn mkt cap would imply an ev ebitda multiple of 3.7x. I would be my house, car, worldly possession, kids, wife, mistress etc the mkt does not value this at 3.7x. All the relative value comps are 5-6x. Assuming a worst case 5x would give a worst case mkt cap $7.8bn which is currently £5.5bn and 5% of that is £270m
In reality a low levered, highly cash generative oil biz with spot oil at 65, paying a dividend and with good growth potential is likely worth at least 6x.
Dumbly, the $5bn estimate is clearly wrong and materially underestimates the new company. As discussed on here some time ago, Harbour would instead appear to be worth £6bn to £7bn according to many of our estimates.
I expect Harbour to be worth between 35p to 40p prior to end of March 2021.
If the newco, HE, is estimated to be worth $5b, and PMO shareholders get 5.5% of the newco, and 5.5% of $5b = $275m = £196m, how can PMO be worth more than £196m? And yet its MC today is £270m.