The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
A take over is what we need, and those tangible assets are now worth significantly more than the written down book value - guaranteed. BUT with two players owing over 50% of the shares someone would have to drive a wedge between them - then we might get some real action.
Hi Folks
My 10c worth.... I feel that oil service companies, and most oil companies are a good bet in the medium (2 - 3 years) time frame - so the current SP of PFC, WG, SLB, HAL and others offers a potential buying opportunity. Why?
World oil use per day, every day, day after day after day is currently just shy of 100 million barrels per day (McKinsey) and oil fields decline at a rate of between 3 and 6 % per year, year after year. There are currently anchors on global oil demand; China covid lock downs, the high price , fears of recession - so they 100m/day could easily grown if conditions were right. Then there is gas - it's very obvious that there is not enough gas in the right places at the moment.
There has been a significant lack of investment in oil and gas exploration in recent years, this started long before the lock downs - but that did not help. Oil companies have a dilemma - they are constantly hearing the message that fossil fuels have had their day, governments and lots and lots and lots of us are telling them that there is no future in exploring for more oil and gas - so they have reduced this activity. They also know that their reserves are depleting and that to 're-stock' they need to spend more on exploration than they have been doing in the past few years.
Right now oil companies are making money hand over fist, but they have yet to fully open the purse strings and start significant extra exploration. They are looking for quick improvements and things with a shorter payback, no one is going to sanction a multi billion$ big oil field development that will have a life time of 30+ years - those days have gone. So right now service companies are in a bit of limbo, there is work but not enough yet where they can have the upper hand in pricing - but those days will come.
There are only so many exploration experts and a finite amount of equipment, once they are all busy the pricing power of the service companies will significantly increase and they will not hesitate to take advantage - after all oil companies have stuck it to service companies big time for years - I know, I used to work for SLB.
Oh and as a side note. There is going be an EVEN bigger need for gas in the future than there currently is, it's a relatively clean fuel (cleaner than coal, oil, biomass). And, we can remove the carbon and pump it back under ground using CCS, which will liberate hydrogen as a replacement for gas-heating. SRM (Stream reformation) and CCS are all in their infancy today - but it's one of the few serious ways to make a low carbon future.
And as if that was not enough, many of the service companies have a foot in the future too, PFC - CCS/Wind, SLB geo-thermal, etc....
Will the SP go down from here - maybe, it's a wired market right now, but in a couple of years it's got to be a winner.
As I said, my 10c worth.
I see the SP is now above the 206p offer price - why?
The additional 3 or 4 p premium is not covered by the dividend that will be paid in September. Is someone building a stake to make a rival bid - they would really have to make a substantial offer after RPS already greed to the current deal.
????
Or, someone else could be interested in the assets........ That's were the real excitement would come - but I'm not going to hold my breath.
But, I have been in the oil business for over 40 years and seen a fair few acquisitions and consolidations, sometimes the only way to grow quickly is to buy the assets of another company - along with the company . However, given the lopsided distribution of shares in this company it's not a very likely scenario, but if someone did build a stake and look to drive a wedge between the two principle players - then we would all be 'laughing all the way to the bank'.
Even without the above scenario I still think there is plenty of upside, but Amtech is right - until the issue of the possible dilution is resolved there is a level of risk that keeps a lid on the price.
Hi Folks,
One thing that might get this stock to have real boosters is the increasing valve and desirability of the assets.
The cost of building new rigs has gone through the roof with all the increases in energy/materials/labour costs, and it takes time to build a new rig. The GMS fleet is relatively young and although there was a hefty write down last year the true valve of the assets in todays open market is almost certainly higher (perhaps significantly higher) than the current value on the books.
Just a thought ......
As a loooong term investor in GMS one thing that cheers me is the tightening of supply with regards to vessels. From my experience, which even goes back as far as 1986 which was a truly awful year in O&G, they difference between adequately supplied and under supplied is often only a few vessels.
When times are tough like they have been for the last few years the 'sales guys' always try to get the best deals they can but the clients normally hold all the cards, and it's hard to turn down a multi-year contract even if the rates are poor - because a working vessel that more or less covers it's costs is better than stacking. Hence we see some of the recent announcements that options with NOC's have been extended at only slightly improved date rates.
Once the slack disappears from the market, and it WILL, the suppliers start to hold all the cards. Things that the supplier was stuck with paying like; fuel, crew change, standby, etc can be passed on to the customer. So, it's only a matter of time before the improved day rates and other charges reach the bottom line.
Mcatee - I think we are less rocket ship and more tortoise but we all know who wins that race in the end, but I'd be delighted to be proved wrong and if it goes to 18p in the not too distant future I for one would be laughing all the way to the bank. Keep the faith people.
Anyone know when (or IF) the H1 numbers will be published? Do we assume that the delay is due to 'creative accounting' trying to make them look as good as possible?? This (IMHO) is the main reason the SP drifts south - this lack of certainty/clarity - no one likes bad news but no news is sometimes worse.
Just added my support to Rodders Jones excellent attempt to get rid of our pathetic CEO, clueless FD and non acting Chairman. They ALL need to be replaced by people who have the best interests of the company and it's shareholders - ie us, at heart.
https://www.sanderson-out.org/
What I think will happen in the not too distant future is that SF will make a bid for all of the outstanding shares. They are now past the point where they were required to pay 22p or 11p in the new post shafting world, so they can and almost certainly will bid a much lower price. All those institutional investors who got in at 3p would probably be happy with a quick 100% profit and sell at 6p. My guess is that we will see an offer price between 5p and 6p and that the BoD will rubber stamp it and SF get all of the goodies for very little - in the olden days this was called piracy.
It means that we are getting screwed, some lucky bugger got wind of this yesterday and dumped over 2 million shares at 6p just after the market opened - no wonder.
It's a 50% dilution - your shares will now be worth (with luck) 50% less than they were yesterday. Barstards.
Well we finally have an AGM to look forward to, on the very last day of June. I assume that the last act of the AGM will be a magic trick - where $25m will be pulled out of a hat!!!!
The fact that we are now less that 20 working days away from the deadline for raising the money via a rights issue and there is NO word of how this will be done is ringing some very LOUD alarm bells. Anyone care to guess what is going to happen because I have no idea anymore.
Looks like the spread on this stock keeps getting worse, 20.8% this morning, no wonder there is no trading going on......is this all part of a sinister plan? Does our current BoD have a hand in the MM pricing??? Or, am I just being paranoid??
Like almost everyone else I was pleased to see the RNS yesterday, finally some clarity and real good news, almost all the bad news out of the way - with the possible exception of the finer points of the $25m raise, and the SP reacted very positively - for the first half of the day, but then tanked.
So, what am I missing? Anyone any thoughts on why the SP tanked and appears to have tanked again this morning ? I also looks like HL has gone 'tits-up' this morning and I cant get any real time valuations on anything.
I too think the latest RNS has a good vibe to it.
I've pulled out the relevant wording from the last three RNS on the extension, see below. Today's announcement sounds like they are almost there and it's just a few minor details that need to be ironed out (IMHO).
Mar 1st - Discussions with the banks remain positive and the Company is confident that an agreement, favourable to both GMS and its lenders, can be reached in the near term.
Feb 1st - Discussions remain positive, yet not conclusive, and the Company continues to believe that there is a reasonable chance to reach an agreement in the course of the coming weeks.
Dec 31st - The Company is pleased to report that discussions have been positive, yet not conclusive and the Company anticipates that there is a reasonable chance to reach an agreement in the course of the coming weeks.
Now, let's see if it has a positive effect on the SP :)