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The Company is pleased to inform shareholders that payments received during
August 2018 for gas sales generated from the Mnazi Bay Concession in Tanzania
totalled $3.4 million net to Wentworth. Payments were received from both
Tanzania Petroleum Development Corporation ("TPDC") and Tanzania Electric Supply
Company Limited ("Tanesco") for one month's gas sales to TPDC and two months'
gas sales to Tanesco.
The Company is also pleased to report that gross production volumes during
August 2018 from the Mnazi Bay gas field averaged 87.9 MMscf/d.
No surprises here, no doubt that the results for the second half of the year will be the best ever. Cash build up and liabilities reduction will however continue to disappoint. Production needs to go grow further. Let’s hope Dangote will lift I it to 100 MMscf/d!
Cash build will be better in H2 compared to H1 due to a few things 1) No one-time SG&A cost related to the London move, 2) The last payment for June fell into July, 3) Operating leverage is kicking in as the opex is almost fixed while avg gas sale for H1 should be better if they meet their outlook statement from the H1 report, 4) Less interest cost, helping on the margin.
They wont pay down debt to rapidly as they already have the debt repaymet schedule in place. But the cash position should build quickly.
Crudetrader, I fully agree, and you can even add point 5: monthly gas sales are increasing steadily due to higher demand. In fact, I expect that the sum of all payments will be around 24 million in the second half of this year. (Compare that to the 13 million in the first 6 months..) The trouble is, I just expected more in terms of reducing total liabilities.
I agree mick.
The other thing is the overhang coming from the Oslo delisting. Most holders there can move the shares to CREST, but if you are a retail holder in Norway you may just sell out and not bother to get shares listed in an other country. I think the stock will remain around the current level until the delisting in Oslo is completed in October. However in Q4 there are all chances of significant pick-up in the share price as all the starts seem aligned for Wentworth for once.
Crudetrader,
The relocation to the U.K. and delisting in Olso is taking far too long in my view.
I also have little understanding for the concerns of the Norwegian shareholders, personally I couldn’t care less where exactly a share is traded, and if their broker doesn’t trade on LSE, then it’s perhaps a great moment to move to a better one. The whole job, incl. organising the moving of shares to the new broker may take only half an hour or so, so what are we talking about. Also, I don’t buy this argument that OSE “protects” the shareholders much better... Oh sure.... By the way: are we not in breach of the OSE rules already anyway? (I.e. no quarterly reports?) What did OSE say?
Unfortunately due to all these delays, my expectations for WRL are low for 2018. I think it will get interesting only at the end of Q1 2019, so perhaps Q4 is not a bad moment to get in.
There's at least 60-65 mill norwegian based shareholders, so IF the delist is agreed upon, I sure hope they'll stay. I really feel for those Norwegians who's been sitting on their shares for a long long time, and now that Mnazi finally delivers they are been squeezed out at near AllTimeLow share price, do to this delist mis-mangement. That's really unfortunate timing from mangement/board, and as we speak it's creating sort of a bridge between UK institutional+bob and retail Norwegians, which by all means dosen't seems fit as the G&A savings from delist only covers 100kusd + some related legal corporate cost.
Mangement/board/bob should have lead the way long time ago, and reduced G&A/board cost substantially, why should bob eat up 300kusd/year whilst his fellow investors receive next to nothing, I highly doubt his executive position is as time consuming as the salary is indicating. I'm also a bit furious about geoff and lance sign off bonus/"Management restructuring costs", didn't they leave by own choice?.
There certainly seems to be quite a few low hanging fruits, in terms of G&A savings, the delist from OSE at such a big gab between NPV and todays share price is not one of them, especially not with this mismatch between historical high production output from Mnazi compared again with a historical low share price, that to my mind sure seems foolish.
On a positive note, Eskil seems like the right guy for the future, and at least we've got a pretty good horse down the road it seems, although our jockeys has been all over the places at some occasions, Buffett usually encourage betting on the horse rather than the jockey “When management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.”
They need to forget about M&A activities and a third leg "which kinda look more like a second leg for now", and this BS "offset of jurisdictional risk", as long as our free cash flow don't match up with the CPR NetPresent valuation, which they'll gladly show off at any and all occasions. We all knew at the time we choosed to invest in WRL that there were a bit more risk associated with doing business in TZ, and that we do not need to offset, especially in a probable case wheres it's gonna lower our NPV pr. share. For heaven's sake it's not that difficult to be a non-operating partner selling gas for 3.1 usd/mmbtu with associated cost of 0.43 usd/mmbtu.
Mick, you should remember that if it wasn't for the norwegian and Artumas, Mnazi hadn't been anywhere close where it is today. All Scandinavian brokers to my knowledge allow trades on LSE, however as we're on a non-regulated AIM next to nobody allows trading on that platform trust me I've tried, and by norwegian law, they are not allowed to hold non-regulated shares in this tax advantage account, and just in general the spread seems out of control, next to nothing volume, to my mind AIM hasn't brought any good to WRL, the capital raised could just as easily been brought through OSE.
Seems as though, mick2020, is struggeling to find the right words.
:-) Indeed I needed several attempts... (some LSE IT issue I think!)
mick2020,
The minority shareholder are better protected in Oslo listed companies compared to UK listed companies. Its easier for a UK listed company to delist and to sq. out minorities in a take-over situation. When you compare the securities laws in the two countries they are pretty different.
It has crossed my mind a few times that doing the Oslo delisting will depress the share price and the larger holders gets "easier" laws to deal with, if they wanted to take the company private now when things are moving in the right direction.
The Oslo line has been considerbly more liquid compared to the UK one, which makes the Oslo delisting a little bit odd, but at the same time only 15% is held in Norway.
In any case it feels like the BOD dosent tell the whole story behind the Oslo delisting.
In my view, its questionable if Wentworth should remain in its current form. As:
1. The company is valued to 40% of NAV while they are currently realizing the NAV with signficant production and cash generation.
2. WRL isnt operating Manzi Bay, so why do there need to be WRL HQ / Corp costing the shareholder $4-5m per year?
3. Any acquisition for cash or shares would be value destruction compared to buying back the own stock.
Crudetrader,
When this delisting plan was announced, I contacted Eskil and asked him directly about any possible plans to take the company private. His answer was very clear: “we have no intention of taking the company private”. While this is obviously not a waterproof guarantee, I actually do not doubt this, especially after seeing the half year results. The key issue: this company is still very much cash constraint, and will remain so for a quite while still! It is in the interest of the company to keep a listing. Note that if WRL want to invest in either Mozambique or Tanzania, they can only do so by borrowing against a rate of around 9%. Very expensive therefore. While the cash situation is obviously improving, with total outstanding debt + other payables currently at 24.2 million, it will take a couple more years before they can truly rule out that they will ever want to place any shares again. Certainly not in the next two years at least I would say. But in addition to the cash issue: WRL will need the backing of many large shareholders before they can take the company private. As most of these will be sitting on (large) losses, why on earth would they support this, especially now the company starts to earn money? I truly don’t believe that. And finally, going private is usually good for its shareholders, in so far that they usually get a significant premium on the market price.
While I agree with you that WRL should reduce costs and consider closing its office in Tanzania (and maybe even Mozambique…. I am personally not at all convinced about Tembo), I think the company is actually gearing up for something different: more like a complete sell…. nicely concentrated in the UK, with in March amazing results for the half year, significant growth prospects at least in Tanzania…. I expect the company to reach a share price of 40-50p on its own sometime early next year, and then sell out at a 40% premium…. Bob wants to retire, and so does Mick2020 actually! 😊
mick,
I dont think the company is cash constrained anymore (if the payments keeps coming in).
The net debt has been reduced to $11m and will come quickly down to zero with the current production and payments.
What I fear is that Eskil worked as Sterling CEO for a while with the aim to acquire new E&P assets, which never materialized (probably because of the ownership situation of Sterling). So I think its fair to assume that he has a short list of assets in Africa which he is interested in. I dont think its always wrong to buy assets, but the last acquisition of E&P asset I have seen on AIM has been at NPV-10 valuation of 2P reserves / resources, and these transactions would be dilute for WRL shareholders.
I agree with you that Tembo dosent look to good. Complex geology and with plenty of issue in the local area. I have asked Eskil and Katherine and they have said that they will only move forward with that asset if they get farm-in, I hope they keep that promise.
In any case the share wont turn until after Oslo delisting as their is a steady sale flow on the Oslo line everyday.
CT,
On 30 June, we had 4 mln cash and 24.2 mln liabilities. (Ok, you can take of 900k for the decommissioning provision, but that still leaves 23.3 mln liabilities) Sure we have even greater receivables outstanding , but so far TPDC is not showing any inclination to catch-up on the monthly invoices unfortunately (Tanesco is, but that is small stuff).
Again, while I expect these numbers to improve quickly in the coming months, I really can’t see Eskil buying into any new ventures until we have at least say 20 mln in cash. Now I wish it was different but I can’t see that happening before end 2019.
I think for the foreseeable future the focus of WRL will be purely on reducing costs and increasing flow from Mnazi Bay (also beyond 100 MMscf/d once the Madimba inlet pressure has been reduced), unless they find a partner for Tembo.
mick,
I wouldnt include the trade payables in the debt figure. For what its worth Eskil said that they he expect that the TPDC receivables of $8.7m to be repaid by end of 2018. I have also talked to Maurel et Prom and they are on the same view regarding those receivables.
CT, I am worried about the trade payables (not falling quickly enough) and I’m also worried about the TPDC receivables (payments will drop with approx. 40% when they end) But to make it clearer why I’m so extremely disappointed with the H1 results: Despite total received payments of 13 million in H1, WRL only managed to increase cash with 0.29 mln and reduce liabilities with 2.25 mln. In other words, we spend 10.5 mln of the 13 mln on overheads and “investments”.... A truly awful performance!! Sorry to say, but I can’t make it any better.
Mick, the TPDC trade receivables (which is receivables for delivered gas) will not fall as long as production is rising and we still carry TPDC receivables (which of course only comes due a long with production). Those payments of approx. 40% will frist stop when both position is accounted for, and thus we can expected TPDC receivables for another 18-19 month from July2018 at production around 90 mmscf/d. I too was very disappointed about the minor cash build.
Thanks Mikkel, I now remember indeed that I had read somewhere that the “additional ” TPDC payments will continue, as long as the trade receivables are still outstanding. However, has this been explicitly confirmed by WRL recently? It would of course imply that Maurel will need to wait on their outstanding TPDC receivables until all trade receivables for WRL have been cleared.... Hmmm... it would certainly be good news. Would like to see it. But given that TPDC is 4-5 months behind in payments, we won’t find out before May anyway I guess.