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TXP have got a great deal here it will rerate 69 million a year turn over .2700 bopd .When u compare jse buying 2000 bopd plus for 100 million u see how cheap theses assets are . Dont forget txp can cut out a lot of dead wood here .I THINK PEOPLE will look back and wished they bought early 30/s . txp has been good to me trading .
Pfft... you could also compare this with #PTALs aquisition; 900 BOPD for 5 million USD including a facility to handle 5.500 BOPD. And with TRUE synergi: Oil from the new block will act like a diluent/blend and reduce costs + increase sales options.
Or, if you dare, you could look at Valerura's #VLE acquisition and the 6-7x they have reached so far (still underpriced) last year or two.
TRIN is a dead asset. It's tax; it will be there to buy in 9 months aswell. There's no true synergi since the business is very diverse. You could argue risk is smaller.... but is it? IMHO I'd rather have a ton of gas at fixed price instead of fluctuating oil, with high maintenance costs in a tax environment that's toxic. Sure, they might save a little on having one board instead of 2 and the same with listings, but you also have high transaction costs and will likely have a more complex, bureaucratic and inefficient organisation when it's done. Buying TRIN in an all-share deal, paying with underpriced TXP shares is just foolish. You really, really can't argue against that. TXP alone has a billion worth of CAPEX to spend before they've exhausted their exploration. You think we need more acreage in a high tax environment?
Trinity isn’t a dead asset and there are considerable synergies.
Trinity will produce about 2,650bopd in 2024 and Cavendish’s latest forecasts are that it will generate $14.5 million of free cash flow. It has 2P reserves of 12.91 mmstb and 2C resources of 38.68 mmstb. The existence of large tax losses (around $225 million) doesn’t make it a dead asset, but rather is the result of significant investment over the years that will protect further profits from taxation.
As to synergies, last year Trinity’s directors and senior management were paid over $1 million. That cost is going. Last year Trinity employed 107 administrative staff (versus 170 production staff) and I imagine much of the 30 to 40 % staff losses will fall on them. Total administrative expenses were $7.37 million last year (the directors, the admin staff and all the costs of running a listed company). That figure is going to be massively reduced. Admittedly there will be limited scope to reduce the $22.4 million of production costs, but it’s cutting the admin costs that makes this deal pay.
And of course, by the time the Trinity acquisition completes it’ll bring with it about $10 million in cash.
Silly argument. TXP pays for the cash Trinity ‘brings’; it’s not free. TXP might as well dilute the existing base by 20 million shares to ‘bring’ more cash to the bank. But why would they? It’s not needed to move TXP forward.
The tax asset is a dead asset. And it's the most usefull thing TXP is buying. Rest is just noise and BS the next years; bought with shares that's basically giving a part of TXP away for two - three times less than it's worth.
Study after study puts the failure rate of mergers and acquisitions somewhere between 70% and 90%. A lot of researchers have tried to explain those abysmal statistics, usually by analyzing the attributes of deals that worked and those that didn't. Just google it. So you're really arguing that the TXP board has a proven track record when it comes to business combination and obtaining synergies? They don't. PB hasn't got the skill set.
It's management BS. They might save a little on BoD and management, but they'll create new management and middle management layers and report systems and feck around with other business systems. Plus you have the high transaction costs and costs of letting senior people go, so you have higher costs to begin with. The new TXP is just going to be more complex and will likely have the same high combined G&A.
That PTAL acquisition is spectacularly cheap though.
Reading both balanced points which is way above my station I have to admit.
Why are the Trin investors clearly unhappy ??
Why would PB an the Team do this if they didn't at least believe it was good deal for TXP
Trinity shareholders aren’t clearly unhappy with the takeover and will overwhelmingly vote for it. Our unhappiness is that the takeover was necessary following the collapse in the share price over the past 15 months. In October 2022, Trinity was buying its shares back at 120p on the basis that the board thought they were undervalued.
However, both companies will benefit from the takeover. Trinidad’s oil sector is ripe for consolidation and this won’t be the last deal (I suspect one of the next will involve Galeota).
Of course, if you don’t think Touchstone can handle a basic merger like this, it’s not an investment for you and good luck investing elsewhere.
Sturm, I'm in PTAL as well and don't understand how you can think 900bopd for $5m is fantastic value, and the TRIN deal is poor. For 20% dilution (currently valued at $20m), we get 3x the production value of PTAL's deal. Scaling this alongside TRIN's net cash position, and simple synergies worth a few $m annually, and there's no difference in value. Don't get me wrong, PTAL's acquisition is excellent, but I don't see much difference in overall value if you're buying TXP shares now.
Another thing worth considering is TXP have an ability to scale production quite quickly without any of the delivery issues / constraints that PTAL encounter at various times of the year. This means the TRIN net cash position, and immediate / on-going cash generation, can be immediately put to work to drive greater production gains. I'd also say PTAL has considerably more geo-political risk.
The deal works out pretty well for TRIN holders over time, but the best deal of all is for new investors to TXP at the moment, providing of course Casc and Coho meet guidance. AIMHO GLA
TXP is issuing 25% more shares. That's the number to go with. If you pay 25% in VAT you'd never argue that you're getting 80 cents worth of goods on the dollar. You're paying 25% extra.
If TRIN had 0 million in the bank, we would not pay 1.5 TXP share per Trin share. You could argue that the 10 million in the bank actually costs 15 million.
Guess I have to repeat this many times: If (!!!) TXP needed cash, they could dilute by selling shares to the market instead of swapping shares with TRIN. TRIN, on the other hand, has (AFAIK) failed big to raise capital - wonder why?
Re. #PTAL: There's TRUE synergy in that acquisition. Not only are they producing 900 BOPD at a modern facility that can handle 5.5K BOPD, and has wells booked, but ALSO they're able to blend the heavy oil from Bretana with lighter oil, which reduces their overall costs (/increase sales price pr barrel) AND open up for increased lucrative delivery to Iquitos. Furthermore, it's close to Block 107 with 600 million barrels as best estimate... I wouldn't be surprised if the net profit effect over the next 10 years is ++ 100mm on a 5 mm investment. So... is Trin also going to 20x the investment in 10 years?
I'm not arguing that TRIN isn't a bad asset or acquisition per se, but the timing is awfull and the dilution not needed so the price is too high and any scaling is way into the future. And the "synergy" is likely management BS - it's certainly not expected, based on generel studies and definitively not on TXPs succes track record.
SS: "Why would PB an the Team do this if they didn't at least believe it was good deal for TXP". Right.... take a look at the latest 2 dilutions if you want some examples of PB not acting in LTHs best interest. "Vanity" comes to mind as the best reason why they're moving for this acquisition now. "Power hungry"? That, or as I've flagged earlier; since the timing is so utterly stupid (IMHO), maybe T&T officials asked them to fix TRIN or suffer death by bureaucrazy - or at least not get any approvals on anything. With the huge board in mind, they're getting bored and making random suggestions, since they have the spare time to make big, big, big plans for a company with (still) a very small balance sheet?
I can't give you a logical reason. I can only wonder.
I was hoping to see some shareholder return end of 2025. How do you think that prediction looks now? When is the wall of cash coming, that will flow over the TXP costs and hit the shareholders with delight?
The cash is incidental. It's trebling the oil production and the revenue/profit that comes with that.
Well I've returning here with caution ,i was invested here heavy.
Very much appreciated to have a extremely balanced view form both sides of the Coin.
I do believe we've taken a hit for now , but have a high hopes at thiis SP
Sturm, you've completely lost me. As far as I see it TRIN is worth 25% of whatever TXP's mcap happens to be at the time of the deal closing. Or 20% of the new enlarged company mcap. We're currently worth $100m, so TRIN's value can be worked from this point if you're buying at today's share price. And when you work this through the absolute value differences aren't that great between PTAL and TRIN. I agree the PTAL deal is more attractive (I own 500k shares there btw). But I'm not sitting here thinking TRIN is bad, or even an average deal for TXP (having said that my 350k shares average here is 33p). And TXP will realise a few $m in annual costs savings / synergies when this deal closes. This is significant when your value is $100m and you can drill cheap wells. Eyes open, PTAL has greater delivery risk. They can have all barrels in the world in the ground, but if you cannot get them to market there's no value. And there's significant geo-political plus environmental risk.
You are correct in saying that TXP needs the cash. This is of course why they have gone the simplest route, which is to do an all-share offer. This makes sense given they're a producer that can relatively easily scale production. So better to take $10m in the bank and the extra cash being generated by the deal to pump into their known gas and oil reserves. Providing they can get over executional risk with Casc (and the estimated resource is proven up), then you'll have your wall of cash hitting end of 2025 and beyond.
This is a bet on Casc being as good as they think it happens to be, and them being able to extract the gas without f@cking up wells etc. So far I believe they've had 3 hits and 1 miss. But the wells are cheap, and the returns are good. So overall it's a good bet here, and they will have the cash to expand in 2025.
I'd also say that TXP has more PI eyes on it, which can make it jump hard on good news or 'potential'. The last 2 years has seen the sp trade between 33p to £1. The trend is down but there's no way it drops any further when this deal closes. The sp has also jumped +50% 3 times in less than 4 weeks over the past 24 months. In other words, if they execute their plans then it's hard to not to expect the sp will jump 50% again before year-end. AIMHO GLA
I too have shares in PTAL, and it is hosing out cash but it is having to spend a lot on major civils to stop the river washing a way the site! It also is coming to the end of what it can drill on the block. It will continue to hose out money for a number of years as it turns into a factory to process fluids as it copes with increasing water cuts.
The cash flow is compelling but there are clear political risks as well.
There is potential for further blocks to be explored but that will cost and there are no guarantees.
At this price TXP is looking more compelling and I have bought for the first time in several years.
CEG looks a much more interesting multibagger play than PTAL.
Tobin, you need to revisit #PTALs investor presentation. AFTER dividend AND buybacks, they'll generate 1 billion. USD the next 10 years. The work/CAPEX on the riverside is a drop in the water...
Hi Sturm, which is why I still hold Petrotal but its valuation is $52million and 10years is a long time.
If they can wash and repeat in other blocks then it looks much more attractive but they haven’t proved up their concept like TXP. Neither has CEG but the up side for CEG if they are right is much greater than Petrotal can ever see.
That said Petrotal have shown they can work successfully in Peru and they could be an even bigger player there than they already are.
Valuation petrotal$520million, but what’s a zero between friends.