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Yes a farmdown is better, it reduces your upside but also how much you have to invest.
Tullow has a lot of debt and a low oil price environment would want to avoid adding more. Oil price wont stay around like this for long, will be higher as a price needs to be achieved to encourage investment which has been taken off.
When the oil price recovers hard to predict as air travel has been impacted and a second wave possibly happening.
Thanks Slift, you have misread the gain is $2.5bn, value is $4.4bn, as per below.
Also price is often valued at average forward price not a current price.
Value of sale
Although Mr Adam said the ministry could not tell the value of the transaction, two sources at the Ministry of Finance and the Ghana Revenue Authority (GRA), who asked not to be named, told the Daily Graphic that an estimate showed that the gains accruing from Anadarko’s operations in the Jubilee Field and the TEN project prior to the sale amounted to $4.4 billion.
'I would not expect a complete sale of Kenya, a farmdown could happen.'
Would a farmdown in kenya be a better result? We avoid impairment, carry forward assets to recover investment and still secure +ve credit rating within context of $1Bn poryfolio management initiative this year?
Anadarko's share of TEN and Jubilee according to the article was valued at $2.5b, when the oil price was ~$60-65/barrel.
Also according to that article, the total value of Ghana, Mozambique, Algeria and South Africa was $8.8b.
The sale of Mozambique assets was completed in Sept 2019 for $4.2b.
That leaves Ghana, Algeria and South Africa assets valued at $4.6b.
Ten - 17% (Tullow 47.8%)
Jubilee - 24.8% (Tullow 35.48%)
TEN is a lot less valuable now due to the reduction in the 2P reserves last year.
Tullow's 2019 annual report values the Ghana assets at $4.1b, at a time when oil price was ~$65/barrel. This valuation also takes into account the reduction in the reserves in TEN fields.
Currently at $43 Brent price, I'd say that Tullow's Ghana assets are valued at $3.5-3.7b after depreciation and impairments. But the price companies will be prepared to pay in the current market conditions is probably less than $3b, or a 15% discount.
ALL IMO.
Yes there is, but you offset with losses and you do not know how much the gain is?
Doubt early investment monies have been recovered, if they had Tullow wouldnt have $2.8bn net debt still
There is a big difference between the sale price of an asset and how much the vendor gets after paying capital gains tax to the government if early investment monies had already been fully recovered.
scaredy I would not expect a complete sale of Kenya, a farmdown could happen.
Yep Tornado but sale price was assumed as $4.4bn in the article, also Tullow being the lead operator does not carry all the costs, it is shared across all equity owners (Except governments)
So you would agree Ten and Jubilee you are probably looking at $6-7bn here then at least.
Tullow wont go bust, if the banks are supportive, they were deleveraging before but had a mountain to climb.
Shorts will get burned if Uganda is approved next week, followed by Kenya, aimo
Shorters are knobbling the SP you can argue without the shorts it would be 40 p however shorts control this .
So for however long this will continue to flounder stuck in the mud and annoy holders
Hi Betrayed,
You kept saying that the CEO needs to be LION.
If you follow shorters, wouldn't that make you a sheep?
Be a LION. DYOR.
Of course the deal broke down in May and Anadarko kept its asset, but as the title states the sale profit would be $2.5B. An issue with Tullow as the operator is that it has other costs that have to be discounted and I can not ascertain entirely what they are. I therefore took a conservative view as to not be accused of ramping. The higher values given for Tullow need a higher than $55 oil Brent price and some prospect of it staying there. The second factor is really finding new reserves and resources out in Guyana and Suriname. I they get one decent hit the valuations go up 6-10p for just finding a discovery. If they sell an entire block on the back of it $300M plus of debt gets paid off and the enterprise value goes higher and profits per barrel go up another 30 cents or so.
Who? not me?
I am making the point to him and asking for clarity if I misread his post, hence why i shared the percentages.
Just wondering if you've contredicted yourself ....if tullow has the higher percentage interest in jubilee and ten then surely their stake would receive much more from a similar sale of assets to what Andarko received.
Thanks Tornado, i have not seen this article before thanks for sharing.
I dont agree with your analysis of the sale price if Andarko received $4.4bn for respective share of the following fields.
Ten - 17% (Tullow 47.8%)
Jubilee - 24.8% (Tullow 35.48%)
Would Tullow receive $3.6bn for a smaller share? also unlikely they would sell to Total as they would be a majority owner, most likely the chinese in Kenya and Uganda with the syndicate would buy.
Hey Jmax, was in this for a while and then sold out over a year ago have been trading this and Premier recently, think these times are good for trading.
There is a lot of pessimism around at the moment, I thought years ago Tullow could get taken over by Total or the chinese, still think they may. Surprised Total ended up just buying Uganda, they could have bought close to 100kbpd business with lots of reserves in Uganda and Kenya to bulk up what they already own.
I am interested to see where the rest of the $1bn is coming from as they stated that they are looking at rest of portfolio? could they cut there share of Kenya also?
My valuing Jubilee and Ten related to this article at end of February for what its worth.
https://www.graphic.com.gh/business/business-news/anadarko-sells-ghana-assets-to-total-for-2-5bn.html
Tony
Akhtar
I haven't seen you on this board for a couple of years - I value your input, thanks.
It is hard to value the business, as oil is at the bottom of the cycle, yes Tullow debt hasn't helped and with the low oil price is forced to selling the family silver, Uganda would have commanded a higher valuation but the dog mire or the previous deal that didn't happen have forced its hand.
The previous CEO was nuts to have reinstated a dividend, good riddance he has left. You are forgetting that there are contingent after oil income potentially also and if a pipeline can be created that helps to transfer oil from Kenya, not sure as the previous route chosen avoided this, would help with the Kenya case.
Tullow has a lot of oil in Ghana and rights for more acreage and neighbouring Ivory coast. This share a few months ago was £2+ and in fairness this should be higher.
Breakeven is $35 and if oil can get back to $50 that will help Tullow a lot. I have always said Tullow would be a takeover candidate and still think it is, the company can always say it is difficult but it is nonsense.