Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
The board is completely detached from the shareholders, never speaks or makes any attempt to give guidance. This confirms to the market that the company is Khotins. Oil price can continue to fall. Putin can still do a crazy. 100p is possible I guess.
excellent commentary as usual. I am in Afren and agree that it is a better bet than exi but still hope that we will get a half decent price in the end whenever that may be. tempted to dip in at a low level at this price as how much lower can it go????????
The recent SP falls are independent of Exillon fundamentals but related to the worries associated with the fall in the rouble. Additonally, the recent SP falls are based on trades in the hundreds of pounds - this is now a highly illiquid stock. The disconnect between the rouble depreciation and Exillon fundmentals has been simplified today by Bloomberg: The freefall ruble that symbolizes Russia’s economic crisis is also shielding its most important industry.Russian oil and gas companies are benefiting from earning dollars from sales of their products, while paying for expenses in rubles that have lost about half their value against the U.S. currency in the past five months. "The devaluation of the ruble under the same oil price is actually positive for all exporters, including oil companies," said Alexey Bulgakov, a Sberbank CIB fixed-income analyst. The producers, in addition to gaining from a weaker ruble, can also thank a tax system that partly pegs charges for energy companies to the oil market, reducing rates paid as prices fall. “In the current spooky economic environment, with falling crude oil prices, oil companies are more or less protected,” said Alexander Kornilov, an energy analyst at Alfa Bank. There’s “ruble devaluation which helps them as exporters, and a taxation regime that assumes the burden” of falling prices, he said. “Most of the oil producers in Russia have foreign currency debt which results in an enormous foreign-exchange loss effect dragging down their earnings,” Kornilov said. THIS DOES NOT APPLY TO EXILLON - IT HAS A 'LOAN FACILITY' WITH CREDIT SUISSE AT A COMPETITIVE INTEREST RATE ABOVE LIBOR, WHICH IT HAS NOT AND WILL NOT NEED TO DRAW ON BECAUSE OF CASH RESERVES AND BEING CASH GENERATIVE. It is highly probable that Exillon profitability will remain the same as the beginning of the year and remain independent of recent falls in oil price.
For what it is worth, my guess is this gets taken over in the next month or so. Price? I really don't know anymore, depends on the appetites of russian oligarchs.
Exillon has no debt and instead a significant cash surplus. It has no requirement for infrastructure so capex is negligible. The low value of the rouble simply means that operational costs are reduced from an already low amount to an even lower amount. As such Exillon has no problems of its own, it could in theory carry on operating at current oil prices for years whilst maintaing a healthy cash surplus. The risk that I think the market applies to commodity companies based in Russia is the risk of a Putin enforced nationalisation. This is highly unlikely if you compute the consequences: BP, Total et al have hundreds of billions of dollars tied up in Russia, if Putin was to take all this through force it would lead to an instant collapse of the Russian economy and I would see himself disposed of within months. Furthmore, this is not the Russia of twenty years ago, they now have a powerful middle class and significant gold and currency reserves. Russia stocks are becoming uninvestable by association. Those like Exillon with excellent fundmentals cannot attract large institutions to invest. My view is that anybody who places high value on minimal risk has no place investing in Russian stocks. My view is that anybody who wants to make a longterm growth investment has no place investing in Russia. Corporate governence is poor and so unpredictability is high. Invest in Exillon now? Only if you think Khotin et al are looking to make a takeover bid soon. He will get it for a song if he did, but remember, there were three oligarchs who officially took part in last years sale process, he can't go too low without being outbid. You might double your money from this price post bidding war, but this is Russia and the most crazy things are possible. If you are looking longterm I think Afren, Enquest and Rockhopper look great companies with minimal risk. Exillon roulette wheel might let you double in weeks but you have to take the gamble. Either way, this share has been a great disappointment.
is this still too risky to buy? It is so cheap????? Gambier what do you think
Two more days and Khotin can start buying again. The price was low before, now it's ridiculous!
.....no one seems to be selling here
Once oil price starts to rise again which it will then exi will go up as well and hopefully we will get the £2.40
see that this is the 4th consecutive month that ave daily production has increased albeit by small amounts. Still think an offer for circa £2.4 will be made soon???????????? With oil price in steep decline a lower offer might look good value now??? Hope not.
Related to three trades of a few hundred each. Low volumes, limited share issue, off the radar share = meaningless intraday movements.
is this just because of oil price decline?
Fitch Ratings-London-30 October 2014: The decline in the rouble and a progressive tax regime should offset the impact of weaker oil prices on Russian oil companies' profitability, Fitch Ratings says. As with any exporter, Russian oil producers benefit from a lower national currency, while the fall in oil prices over the last few months is hurting US dollar revenues. Costs will adjust downwards leading to a lower overall effect on cash flows, but the impact of taxation is even more important. Russia's progressive tax regime means that the effective tax rate paid by Russian oil producers falls as oil prices decline, and vice versa. Taking all these factors into account, we calculate that if the rouble stabilises and oil prices hold steady at USD85/bbl next year an average producer would report 2015 rouble operating profits broadly in line with 2013, when oil prices averaged USD109/bbl. A further decline in oil prices, however, would start to hurt profitability, as would a recovery for the rouble while oil prices remain weak. Most Russian oil companies have solid liquidity and would comfortably survive without new borrowing for at least the next one or two years. However, they may need to reconsider their financing model should access to international debt markets remain blocked for a long time, because of sanctions and overall uncertainty over the Ukrainian crisis. Nevertheless, their fundamentals remain strong, and we expect them to maintain flat oil production and generate stable cash flows for at least the next three or four years, even with lower oil prices. Our analysis is based on the assumption that the state will not attempt to increase its share of oil revenues by raising taxes. The government is implementing some changes in the tax system aimed at re-balancing the tax burden between upstream and downstream operations. But the principles of the taxation system should remain unchanged. We believe a significant increase of industry-specific taxes is unlikely. Oil taxes in Russia are already reasonably high and the state seems to realise that Russian oil companies need resources to proceed with the greenfield projects necessary to maintain output at least at the current level. Since the beginning of the year the rouble has weakened by almost 30%. Crude prices started to slip in the middle of the year and are now trading at around USD87/bbl, more than 20% lower than at the end of June.
From my understanding the 12 months runs from when the offical sale period closed, which was 18/12/2013, however I don't know this for sure. Either way, I agree, Khotin risks more by not moving quickly. Khotin has significant investments in russian banks, I am sure he could source the funds easily enough. If EXI does finally get bought out, I think it will be the last of the Russia IPOs on our markets, Russia has become uninvestable for so many people.
I believe Khotin bought his shares on, or slightly before, the 4th December 2013 at 377p. I think that means in less than two weeks he could make an offer at whatever price he likes. As gambier01 has said, that price is likely to be painfully low and in the region of 220-240p. I think Khotin has been riding his luck this year and will want to bring it to a conclusion just as soon as he can. He's been risking that another suitor won't make an offer before his 12 month period has passed. But, if it goes on much longer somebody surely will. There's too much to gain, or for Khotin, there's too much to loose. Put another way, he's got to consider himself a very lucky boy indeed that he's got this far with less than two weeks to go. Perhaps he has some sort of hold on the market that effectively prevents others making a bid. We can only speculate! It could get very interesting or very messy!
> 18.12.2014 Oil price is down killing oil stocks, Russian foreign policy killing Russian stocks, will have to reveal new reserves early next year. Will they ever get it any cheaper? They will go for the lowest premium against current SP that prevents another bidder coming in. My bet 220p - 240p, which of course would be the lowest price ever paid in recent times in Russia for very large producing 2P reserves.
When is the 12 months up from when Khotin et al can make a new bid. Must be soon
Eight wells drilled adding an extra 3066 bbl/day. The average flow rate per well was 383 bbl/day. A further well will be drilled and connected this month adding around 220 bbl/day. Approximately 750 bbl/day were not connected until October. Approximately 2000 bbl/day were not connected until the middle of September. Now production increased in September by around 700 bbl/day from the July/August average, which would make sense if the new wells only contributed during the last half of that month (assuming some natural decline from old wells). If we take the July average of 16,678 bbl/day, round down to 16,500, discount the ninth well for Nov (220bbl/day) and then add the 3000 bbl/day, we get 19,500 bbl/day. Still not an acceptable drilling campaign. Ten wells is a paltry number at this stage of development. Thirty wells per year is the bare minimum for this sort of company. Additionally they have chosen easy wells, not the TP area or more difficult areas of WS. The board behaviour is quite bizarre, it's cloak and dagger manner and randomness is impossible to interpret. It is made very difficulty for anybody to invest in Exillon, yes it a great asset and has a excellent financial position, but quite frankly - it is Russian. After news the SP went down after most of the day having zero volume, the market is not interested. It is still my guess that it gets bought over in next few months at a below market average price.
Nov 07 2014 Production Update Solid, Future Brightening Today's announcement, that production for the period has shown an updated trajectory is pleasing, and should bout the shares. What is more important for us is that the recent exploration wells have also made discoveries with oil flowing to surface. Given that reservoirs in this part of the world rely primarily on expansion drive and are relatively shallow, they can be characterised as "low energy." As such, to maximise recovery rates from these types of reservoirs, it is best that a pressure support programme be undertaken as soon as is practically possible, so given that one of the Company's exploration wells "failed" by intersecting an aquifer is actually positive news too. We now need to understand the forward programme better and have an update on the Company's future expectation for production and exploration, and perhaps start looking further in to the future, now that the cash flow in the Company has started to make it permissible. The only headwind for the Company is the geopolitical situation in Russia. However, here too there is a silver lining, as the depreciation of the rouble has slashed fixed costs significantly, further boosting cash flow. All a management team can do is ensure that their businesses are in the best condition possible and that every opportunity is maximised, and this operational team are doing that. As a consequence, this is one of the Russian companies that investors should consider holding when the Sovietisation of Russia's outlook is reversed.
i guess an email to the russian finance ministry for the attention of the minister would at least draw their attention to it though i doubt they would act on it . Given the current isolationist mood in Russia they might even applaud their actions!
The West have never had any confidence in Russian markets, that is why Russian stocks have such low values. There is still a chance of other oligarchs wanting this asset, so they can't go too low. There are takeover rules and minority shareholder rights to be taken account of. Anything over 200p keeps them out of trouble, they won't be offering anything near 365 again.
Has anybody got any contact details/email addresses for someone in the Russian Finance Ministry? I think a comment from them regarding the possible consequences of breaking stock exchange rules might be quite interesting. I just can't believe the Russians are so stupid that they'd allow one individual to profit from shady practices that could so easily destroy all western confidence in their markets.
|Excellent analysis and unfortunately you are probably right on the price. Anything we can do to draw attention to this to a wider audience which would probably make no difference to the price but it might cause some bad publicity for Russian business and put off others from investing there in future. there was the Sibir energy scandal a few years ago and small investors got screwed here as well. Might make a good case analysis for anyone wanting to publish in a well known business publication about the perils of investing in Russia!
A very unexpected year for Exillon with, what is in my opinion, a rather predictable endgame. We are now approaching 12 months (Dec 2013) since offer period officially closed. According to the takeover rules, only after the twelve months can a new tender offer be made that is lower than what has been previously paid. Alexei Khotin has 29% of the issue, followed by his friend Alexander Klyachin who is known to assist him, who has nearly 25%. Now Khotin bought Arips stake for 379p. Klyachin's purchase was all the more complicated. Mikhail Gutseriev sold his 14.9% stake for $132 million, to Gazprombank. Gutseriev bought that stake November 18 for $106 million. So Gutseriev made $26 million. Gazprom bank sold Gutseriev's former stake for $132 million and the 12% it already had - and had purchased for $88 million - for $118 million thus making $30 million from the sale.The buyer of the two stakes was Klyachin. By paying £157 million for 43 million share, he effectively paid 365p per share. Of course this flipping of shares is all very Russian and you would expect nothing less from a country with such corrupt business practices. Importantly the board now consists of Khotin puppets and this can explain the failure to drill or more importantly publish the new Miller and Lents reserves report. Following last years drilling which discovered much better oil - water contacts than previously thought, the 1P and 2P were due a substantial upward revision. Further drilling would have brought us to 25 bopd with excellent net backs. This has all been done to minimise the value of Exillon as much as possible. They have claimed a Q1 2015 publish date for the reserves report which makes no sense. They were ready in July and should have been published as a matter of course. There is no legitimate reason to not have released the report. This date is conveniently after the 12 month period in which they can make a reduced offer. They have been utterly silent about anything to do with drilling or company direction. They will obviously make a reduced offer in the next few months. It is unlikely the board will demand a market price as they are Khotin stooges. Together they have 55% of the share issue so there is little other share holders can do. Of course a third party may enter with an improved bid but this is not likely considering the failure to sell the company last year. It is hard to know how much value they will be able to steal from other shareholders. $1 per 2P barrel reserves is considered normal for undeveloped fields with no infrastructure and $2 to $3 dollar for those, like Exillon, that are well developed, fully understood and with complete infrastructure. Most recent sales in Russia equivalent to Exi have been for over $3 per 2P reserves. There is also the Exillon cash pile to consider, which would be 20p a share. I will guess that we will get $1 per barrel which is around 200p, plus cash giving around 220p.
Excellent analysis about Russia and Oil, from Seeking Alpha: http://seekingalpha.com/article/2581505-8-major-reasons-why-the-current-low-oil-price-is-not-here-to-stay