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Some Apaches info...
https://www.offshoreenergytoday.com/total-farms-into-apaches-suriname-offshore-block/
Tornadotony
I see what youre aiming at but it is not quite so straight forward. To say the 70p drop from 235p to 165p is Guyana related is to presume that Guyana was being valued at £900m plus prior to any drilling.
However, Tullow was at 189p in Jan 2019 and 207p just before the **** hit the fan and traded fairly consistently in and around that range in the interim.
The drop in value was shorters jumping on the bad news bandwagon, a phenomenon which alas exacerbates any bad market news nowadays. Their.management of production shortfalls was cack handed and their management since of comms not great.
It is impossinle to say what was attributed to Guyana and how much to production woes.
It is possible to see the value of the Apache farm out and what such a deal could mean to Tullow on either Guyana licence. Headroom for debt repayment, some extra drills and a carry on a field which may be capable of producing 200k bopd inside 2 years with a fair wind.
That adds significant cashflow in the 3-5 year forecast and improves NPV quite some margin.
Total are paying around $3.75bn in carry to Apache in Suriname that is.of huge value on fields that maybe cost $2.5bn to take to.production...
Hi Torndotony,
Thank you for a quite brilliant explanation. Well written and clear even for a numpty like me.
Heres to a good journey for Tullow and all her investors.
Hawkey
Just to clarify that the free cash flow adjustment on the write down is also sharply reduced from $350M to say $250M. The company has guaranteed 150M at $60 per barrel and at $65 this would be FCF at $250M. Hence why there is no price cutback on the drop to 75,000 barrels per day in what I said before.
Bloody well written!!
To Hawkey and others with similar concerns,
Tullow had very high initial forecasts coming into 2019 and a number of exciting drill prospects. The oil price was also higher in 2018. Consequently valuations became rather lofty at 235p. The company gave a lot of hope on those wells and the kick back to 165p was taking out all the Guyana value. It was punished another 20p afterwards as recovery from earlier production reductions was not on the cards. Fresnillo in the silver miner sector was delivering similar disappointments and was getting a 1/3 knocked off and I suspect other UK commodity companies missing results do get smacked down hard. Centamin saw a vicious drop with poor results early in 2019. So the base case price of 141p-145p is the real starting point after the $50M drop in FCF for the close of 2019.
Since then the company valued its assets down $1.3B after tax relief. The share price was valued $2.6B approximately and this gives $1278M share valuation afterwards and this takes us to 69.9p share price. Since then oil has dropped $5 per barrel which is $100M drop in valuation according to Tullow. This gives a share price of 64.4p. We know Carapa was valued at zero but the write down on all wells was around $80m so that gives 60p. The remainder drop is probably speculation on future oil dropping to $50 Brent allowing for Tullow hedges to kick in. The upshot is that the kitchen sink has been thrown into this. I believe 56p or below is a Tullow buy.
As for the future we have to see what it brings. The Kenya blocks may just sit there and nobody buys them but the banks know that Tullow has a good $750M-$800M of value just sitting there. That itself is a confidence measure. We may soon get a second value boost from Uganda. To end up with a route to market with 20,000 barrels of oil for 20 years has a future 2P value of $1100M. Guyana also does not have a value of zero and Ghana oil fields is probably above $2B despite current issues (245M barrels reserves $9 each) . Hope this all helps and all the above is my opinion of course but I share why I am staying with it and know 2 good oil strikes and this share moves up quite a bit as it has done in the past. Tony
The current market punishes missed targets 20/30%. If you cut your div, sack your ceo and exploration director and kitchen sink your forward looking forecasts, its easy to see why iis don't like TLW and the SP discounted down more to move volumes
Having said that, TLW has since given 95% confidence the net assets are c 90p per share. Kenya sale will take cash issues off the table and TLW can reposition for growth.
If TLW drop from the ftse 250, the SP will go lower so they need the sale between now and March to kill any short attack imo
On 23rd Oct Tullow shares were £2.10 or there about.
Then on 13th Nov we have the trading update and the share price dropped to approx £1.50
The on 9th Dec we have guidance changes and resignations.
Share are now just over 50p.
Heres the bit I can't work out or understand.....
Was the news we received in the last few months worthy of an over 75% drop in the share price?
Ws production down by 75%, or cash flow or future income. I honestly don't understand and would be greater for any thoughts ??
Many thanks
Hawkey