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Roxbury,
Always enjoyed a 3 way.
GLA
@MatchKing: TLW also has a tranche of 3-way hedges to capture some oil price upside: for example, at June 2020 they had 12k bopd hedged with a floor of $56.42, paid for by selling a cap at $77.82, but TLW also bought back a call at $87.68, so they have gave away upside on this tranche between $77.82 and $87.68.
Will be interesting to see next week how much more of these 3-way hedges they will execute for 2021 (12k bopd is only c20% of 2021 production).
12,000 $56.42 $77.82 $87.68
unlike many here, who are singularly focused i see TLW having problems with the bond holders, or at least the convertibles.
$300 million due July, one holder has a blocking stake or so its reported. They are looking for parity to convert, and were way off the money. if i'm not mistaken SP today is about 1/3 of the issue price. so how do we deal with that, barring a massive rise in SP. some here have said that the banks will permit the company to pay out, but somehow i don't think so. i wonder why Odey continues to raise short, are they investing in these convertibles, is there some arbitrage going on. PMO had a problem years ago with converts, and it ended up causing significant dilution albeit reducing debt somewhat but ......
would like some real opinions on this, not the drivel from the fanatics
you are 100? correct, and that is a concern. but its a risk that all oil companies make, last year we benefited this year due to sentiment and macro changes we will likely lose out if upside revenue is capped by hedges, it all depends on actual sales. so we wont know about it really till late in year, but if oil remains above 70 and reaches 100 for example we have some exposure to that. i usually use 50% as exposure but now i will use 40%. i do hope that this frenzy on oil lasts a while, but watching over past 7 or 8 years they magicians in finance can do what they want with it, policy, war etc also impact. i reckon oil over 80 will hamper the recovery of economies, its certainly irritating the indian's at the moment, so 80 will really **** them off.
long term i see oil going very high, as it will achieve the reduced travelling that the green lobby is after
Oh alright then. Where do other oil majors and mid caps stand versus tullow's numbers I suppose is the only question
Everyone has to start with post number 1.
LTH here and certainly not Odey.
Wasn’t meant to raise a worry. Just mentioned it to temper the soon to be $100/bbl and it’s limited benefit to cash in bank. Anyhow I hope you’re right and it works out positively for decision making going forward.
I guess it’s the better hedging problem to have rather than flirting with the floor.
Surely the point of these boards is to bring collective info (sources) and thoughts together for discussion to help analysis. We want eyes wide open. wouldn’t want people to be put off posting through fear of being shot down.
It's really interesting these one post wonders. Really interesting. I mean they go to all this trouble to write something to make you worry in vaguely nice positive language. So far so clever. But then they throw it all away with that first post count of one. It's, I dunno, like Odey got back from a tough day at court, had a glass of claret maybe two, and thought he had a good idea...
But let address the point. Oil companies hedge, tullow does it better than most, as evidenced by their average price in 2020 versus spot at most given points. the point is then the current price will govern future decisions and play out positively for tullow too.
Where have you been all our lives?
https://www.tullowoil.com/application/files/9616/1467/8250/21-7653-1_Walnut_Circular_OKTP_v1.pdf
Page 13-
“As of 31 December 2020, Tullow had 60 per cent. of its 2021 sales revenue hedged. 2021 is hedged with a floor of approximately US$48/bbl, whilst retaining good access to upside in oil prices with caps averaging US$67/bbl. As of 28 February 2021, 2022 sales revenue is currently hedged at 16 per cent. with a floor of approximately US$41/bbl.”
Every time I check the hedging position I wish it were better for 2021. Even with the rising oil price towards the end of last year we seem to have lowered the floor from $52 to $48.
Although pleased with the oil performance so far. Slightly disappointed to see we’re running out of upside to benefit from with caps averaging $67/bbl.
Let’s hope the uncapped 40% benefits greatly and that we sure up a much higher floor for 2022 than the current $41/bbl