George Frangeskides, Exec-Chair at Alba Mineral Resources, discusses grades at the Clogau Gold Mine. Watch the full video here.
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That should have a positive effect on oil price and hopefully filter through the SP this week along with new leader in place . Must be looking good for us. Least I can offset my Petra Diamonds loss
Hi spinng,
Absolutely not!
Imo, any company is valued on assets as well as growth. E.g. you don't have to make a profit if you can show that the company can grow in the future.
The negative "net assets" may look bad on paper, but Tullow can grow from this along with the market conditions.
E.g. if oil goes up in value --> growth in assets. Or if Tullow finds new assets or additional oil reserves --> growth in assets.
The main reason why "net assets" will most likely be negative by year end is due to impairments in non-current assets (property, plant and equipment).
In 2019, Tullow suffered net impairments charge of $781m. This was due to a downgrade in the Enrenya field (reduction in oil reserves and hence value) as well as downgrade in long-term oil price assumption (from $75/barrel to $65/barrel).
Likewise, this year, there'll probably be another downgrade in the long-term oil price assumption due to COVID19 and the impacts it has had in the oil industry.
But obviously, this is just a number on paper. When oil price does increases, the value of the non-current assets (plant, property and equipment) will adjust itself upwards.
Hi Longish,
"The worst case scenario only happens in B movies"
Yeah. The worst case scenario provided in the circular isn't possible unless Tullow loses over 56% production. But that doesn't change the total borrowings provided at 3255m.
The net debt with the uganda sale (486m cash on completion) will then be $2325m. Also, if you include FCF from Q3 and Q4 (assuming $45/barrel), you can expect net debt for YE 2020 to be approx $2.1b.
The values stated in the circular is using values from YE 2019 (very outdated).
"Assuming we get Kenya too, and why not, well, we must be looking at 80p net assets by year end"
I don't think so.. The value of Kenya assets as at 31st December was $679m. This has probably been downgraded in line with oil prices and market conditions. Selling Kenya would make the balance sheet worse (if sold in a fire sale like Uganda).
Net assets is more than likely to be negative by YE due to impairments (e.g. value downgrade on assets due to oil prices).
"If all the boxes have been ticked and oil back above $50 and CEO explains 2021 and beyond outlook, we must be well over £1?"
I think the biggest challenge for Tullow in 2021 is debt restructuring (as well as oil prices). If Tullow achieves this, then huge returns can be expected.
$300m bond repayment due in July 2021, $650m senior notes due 2022.
Tullow will also have to reduce debt facility by $420m by year end 2021 (Current facility at $2.2b with $1500m utilised). If Tullow doesn't withdrawn from now --> 2021, facility headroom will be circa $300m by YE 2021.
ALL IMO.
'Okay, so correct me here if you think it's wrong.'
Hi Slift. The part where 31 May we have a major terrorist event and all the BoD are shot before approving Kenya RNS. The worst case scenario only happens in B movies ;-)
Net debt is more like $2.3bn after uganda, at least thats what the circular says. Then we can expect all the hedged and unhedged cash from sales>$35 oil. Assuming we get Kenya too, and why not, well, we must be looking at 80p net assets by year end. Adjust for enterprise value if all the boxes have been ticked and oil back above $50 and CEO explains 2021 and beyond outlook, we must be well over £1?
Okay, so correct me here if you think it's wrong.
RBL facility (total including undrawn) as at 31st December 2019: $2.4b, undrawn facilities of $1055m
RBL facility (total including undrawn) as at 31st March 2020: $2.2b (following voluntary reductions), undrawn facilities at $700m
Tullow withdrew (from undrawn RBL facility) $148m.
Total borrowings as at 31st May 2020 confirms this withdrawal, with total borrowings at $3255m.
RBL facility borrowings at $1505m out of $2.2b available (leaving undrawn headroom of circ.$700m)
So Tullow has increased RBL borrowings in Q1 through widrawing from facility.
So as at 31st May 2020:
Cash in bank = (YE2019 + FCF Q1 - unforeseen costs), <$364m
Net debt at end of Q2 2020 (After FCF from Q1 and Q2): Approx. $2811m
The above is assuming that Tullow has spent the $148m it has withdrew.
Net Assets YE 2019: $963.4m
Net Assets Q2 2020 (including cash $561.8m Uganda Sale and assuming Tullow spent the withdrawn amount of $148m): $350m
Net Assets YE 2020: Likely $0 to -$200m due to impairments.
DYOR.