The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Larger investors can't invest in a company that has news pending so the Kenya news is big for the Tullow story. It tells everyone what is happening to that asset over the next year now. We are now starting to get a clearer picture of Tullow's future.
People are saying that Uganda is priced in which is nonsense, the same rule applies to this, the larger investors won't invest until this has been completed.
The kenya news out today is concrete info the investors have been waiting for.
They have had offers for the Kenya asset but feel confident that they don't have to accept a poor offer and can progress it as a valued ongoing asset.
What Kenya news confirms for me is that Tullow was desperately needing a leader and now Rahul has stepped in they seem to have a clear path they are following now. The decision they have taking on Kenya could and should have been taking 10 months ago but they just tried to sell it blindly!
It's early doors but I think Tullow has been lucky getting Rahul on board.
The market seemed to like hearing a bit of solid news for a change.
It went up instantly as Bloomberg broke the headline. Tullow needs to start bringing more news out rather than all of us second-guessing what's going on within the company!
Watching Bloomberg tv and this headling came up on the screen. The price jump at the same time it was reported strangely?
https://www.bloombergquint.com/markets/tullow-reviewing-kenya-operations-after-suspended-stake-sale
JMAX
Yes, I think the weekend frenzy over in Uganda might have taken Tullow by surprise as well?
The deal will definitely get done now, the question is when?
I think you could be right about the movement in the share price,.
JMAX
That was my thinking over the weekend, they used it to get what they wanted.
I would like to think both parties would just like to speed the whole thing up now.
But what do I know, I expected the market to see the news as a big positive and cut them a bit of slack!!
I find it hard to understand how they can be organising stage 2 with Total SA. and then straight away stage 3 with Tanzania gov, but not have stage 1 complete with Tullow?
Tullow should be using this to get this completed right now!
If the news that came out over the weekend had come out a month ago, this would have gone up 20%!
The lack of PR from the company has driven this share to this level. This could have easily been kept at level all be it a low level with just a bit of forward-thinking management.
I just hope they are banging on the door of the Ugandan Gov to finalise their part of the deal???
Tanzania has now signed an agreement - Are they all forgetting Tullow still owns a third of this project until the deal is completed. Surely they have to release Tullow and confirm their part of the deal is completed!!!
Uganda, Tanzania Sign Agreement for Construction of Crude Oil Pipeline
By Reuters, Wire Service Content Sept. 13, 2020, at 7:15 a.m.
More
U.S. News & World Report
Uganda, Tanzania Sign Agreement for Construction of Crude Oil Pipeline
More
NAIROBI (REUTERS) - Tanzania and Uganda signed an agreement on Sunday paving the way for the construction of a crude oil pipeline running from Ugandan oilfields to the Tanzanian port of Tanga, a Tanzanian government spokesman said.
Uganda discovered oil reserves in 2006 and needs the planned 1,445-km (900-mile) East African Crude Oil Pipeline to be in place to start commercial production. The pipeline is estimated to cost $3.5 billion, according to the two governments.
Hassan Abassi, Tanzania government spokesman, said on Twitter that 80% of the pipeline will run through Tanzania.
Tanzania will earn 7.5 trillion shillings ($3.24 billion) and create more than 18,000 jobs over the next 25 years, or more, that the project is in place, Abassi said after the signing ceremony attended by Tanzania's President John Magufuli and Ugandan President Yoweri Museveni in Chato, northwestern Tanzania.
Uganda has not given a date for when construction of the pipeline will begin but said last year that once construction begins, it would take 2-1/2 to three years to complete.
The agreement on the pipeline construction comes days after French oil company Total said it had reached an agreement with Uganda protecting its rights and obligations in the pipeline's construction and operation - known as the host government agreement.
Total is the major shareholder in Uganda's oilfields after agreeing in April to buy Tullow Oil's entire stake in the jointly held onshore fields in Uganda for $575 million.
Tullow said last week it was confident of finalising the sale in the fourth quarter of this year.
The other partner in the 230,000 barrel-per-day project is China's CNOOC <0883.HK>.
Museveni flies to Tanzania to rush to start the pipeline project.
Can't believe Tullow has not demanded deal approval when Total and the Ugandan government are pushing ahead with the next stages when the first stage of approving the sale hasn't be agreed ???
The Ugandan president has even flown to Chato today to progress things in Tanzania as well.
https://chimpreports.com/museveni-flies-to-chato-as-uganda-tanzania-rush-to-start-work-on-oil-pipeline-project/
Simplifying and breaking down the future RBL.
Assuming that the Uganda deal goes through, I see over the next 18 months there will be a shortfall of around $400 million and they have to convince the banks that they have the ability to raise it, and they'll have the year to do it.
Let's say the price of oil doesn't give Tullow any help and stays around $45 for the year, here are the options open to Tullow.
1. Sell/Farm down assets over 2021 worth $400 mil.
2. Pay 2021 debt commitment and part of 2020 debt and refinance the rest.
3. Refinance all of the debt with the $500 million as a first payment.
4. If all that fails come to say summer 2021 then they can raise the $400 million through investor capital, which instantly would solve the problem.
I may be looking at this too simply but as long as Uganda comes through I can't see how one of the above won't happen and who knows they may even make some money from oil next year to help!!!
Very encouraging.
https://af.reuters.com/article/uganda-oil-idAFL8N2G8501