Member Info for Fernan10

This is a move by the british government to help tackle climate change. They decided to stop supporting "overseas" oil and as projects with export finance. Your differentiation between "projects in foreign countries" and "projects in british overseas territories" doesn´t make any sense in my oppinion.

Regards

Fernando

"The government said the new policy would come into effect “as soon as possible” and would mean no further state support for oil, natural gas or coal projects overseas, including via development aid, export finance and trade promotion."

https://www.reuters.com/article/us-climate-change-britain/in-boost-to-climate-action-britain-to-stop-backing-overseas-oil-and-gas-projects-idUSKBN28L2VQ

Britain would be the first major economy to commit to ending public finance for overseas fossil fuel projects.
“This policy shift sets a new gold standard for what serious climate action looks like,” said Louise Burrows, policy adviser with consultancy E3G. “Britain now has a mandate to mobilise other countries to follow suit.”

The UK Export Finance agency has offered guarantees worth billions of dollars to help British oil and gas companies expand in countries such as Brazil, Iraq, Argentina and Russia, Burrows said.
The government said the new policy would come into effect “as soon as possible” and would mean no further state support for oil, natural gas or coal projects overseas, including via development aid, export finance and trade promotion.

https://www.reuters.com/article/us-climate-change-britain/in-boost-to-climate-action-britain-to-stop-backing-overseas-oil-and-gas-projects-idUSKBN28L2VQ
Britain would be the first major economy to commit to ending public finance for overseas fossil fuel projects.

“This policy shift sets a new gold standard for what serious climate action looks like,” said Louise Burrows, policy adviser with consultancy E3G. “Britain now has a mandate to mobilise other countries to follow suit.”

The UK Export Finance agency has offered guarantees worth billions of dollars to help British oil and gas companies expand in countries such as Brazil, Iraq, Argentina and Russia, Burrows said.
The government said the new policy would come into effect “as soon as possible” and would mean no further state support for oil, natural gas or coal projects overseas, including via development aid, export finance and trade promotion.

For example, let´s suppose that PMO´s UK subsidiary in charge of Solan has a US$ 1 billion accumulated tax loss.
PMO could merge that subsidiary with a third party that forecast to pay income tax in the next few years.
At a 30% corporate tax rate, this merge will save US$ 300 million of income tax payments for the third party.
PMO could easily ask for a 50-70% percentage of that saving, in addition to the present value of Solan current production.

Regards

When I talk about "selling tax losses" I´m referring to finding a legal structure by which those losses could be "used" by a third party that currently has an income tax paying oil & gas project.

As I said before, US$ 4,1 billion tax losses has the potential to save around US$ 1,2 billion tax payments at a 30% corporate tax rate.

I don´t think the value of this "asset" is being maximized for the full benefit of PMO shareholders in the current deal.

Regards

Fernan

As I said before, US$ 4,1 billion tax losses can produce a potential tax saving of US$ 1,2 billion, at a 30% corporate tax rate. "Selling" those tax losses for a 50% value will generate more than what PMO were required to raise to buy BP assets and pay creditors under the previous plan. I don´t think the merger with Chrysaor is the best way to take advantage of this situation for the best interest of PMO shareholders.

Regards

Fernan

PMO has US$ 4,1 billion of accumulated tax losses. At a 30% corporate income tax rate, it represents future tax savings of US$ 1,2 billion.

Another proposed structure to take advantage of accumulated tax losses:

1. Merge PMO´s UK subsidiaries that are entitled to the losses with third parties entities (Chrysaor or others) that are expected to pay income taxes in the near future.

2. Share the benefit of using PMO´s tax losses 50-50% with these third parties.

3. PMO will be entitled to receive its 50% share of the reduced income tax in cash, as soon as the payment of the tax is avoided due to the use of these tax losses.

4. the cash flow associated with this structure will be directly assigned to PMO lenders.

This scheme will provide PMO lenders with an additional US$ 600 million cash flow in the next few years. This structure, combined with a potential sale of Zama, will substantially reduce debt without dilluting shareholders.

Comments?

Regards

Fernan

I made a quick calculation of the value that PMO shareholders will receive on the deal. The share price is the cost that you have to pay to get that value.

Regards

Fernan

Down:
you will find the number of PMO´s shares outstanding here:

https://www.lse.co.uk/share-fundamentals.asp?shareprice=PMO&share=Premier-Oil

Regards

Fernando

Here is my take

Chrysaor´s EBITDAX for 1H 2020: US$ mio 920 (page 17 of today´s press release)
PMO´s EBITDAX for 1H 2020: US$ mio 352
Combined EBITDAX for 1H 2020: US$ mio 1.272
Annualized combined EBITDAX: US$ mio 2.544

Enterprise value: 5 X EBITDAX

Combined Enterprise value: US$ mio 12.720
Combined net debt: US$ mio 3.200 (see today´s press release)
Combined market cap: US$ mio 9.520
PMO´s shareholders participation in combined equity: 5.45%
Value of Combined equity atributed to PMO´s shareholders: US$ mio 519
PMO´s shares outstanding: 926 millon

Value per share: US$ 0.56 (43p)

Comments?

Regards

Fernan

I view the current situation as follows:

Share price goes down > more shares to issue > more dillution > more shareholders panic and sell > share price goes down > more shares to issue > more dillution > more shareholders panic and sell > share price goes down......etc

When TD was named CEO, there were around 500 million shares outstanding.
The share count increased to 900 million during the last debt restructuring process.
Now they have to issue around 1.600 million new shares (£400 million / 25p).
An 80% dillution to shareholders during his tenure.

Regards

Fernan

PTAL produced 9.686 bopd in Q1 2020 (see page 7 of MD&A report).
On April 20th horizontal well 6H came online, with an initial production of 4.500 bopd.
On April 30th, the field was shut down.
Then, during Q2, considering only the days when the field was producing (month of April), if there were no production decline rate, the field would have produced aprox. 9.600 for 10 days (from April 1 to April 10) and 14.100 for 20 days (from April 11 to April 30).
So, average production in Q2 (without the effect of the decline rate) would have been 12.600
On July 27 management informed:
"Taking into account the field was shut-in since early May 2020, average Q2 2020 production for the period the oil field was producing represented approximately 11,500 bopd."
This calculates to a 9% monthly decline rate.
It doesnt make any sense to me

any comments?

Regards

Fernan

Regarding projected future oil prices for this year and next, Barclays recently raised its forecasts for Brent and WTI by $5-$6 a barrel for 2020 and by $16 a barrel for 2021. It now sees Brent prices averaging $37 a barrel and WTI at $33 this year. For 2021, the bank expects Brent to average $53 a barrel while WTI averages $50.

Source:

https://www.reuters.com/article/us-global-oil/oil-prices-jump-as-demand-shows-signs-of-picking-up-idUSKBN22R06K

Good afternoon sirs. I don´t think that the issue of making an adjustment to the selling oil price 12 months after delivery will have a substantial impact on PTAL´s results.

This is my calculation of what could be the final outcome of that adjustment, for oil to be produced up to the end of the present year.

Oil sold up to March 31, 2020:
PTAL sold 1,8 mio bls, that at March 31, 2020, have an oil pricing adjustment contingent liability of US$ 42 mio, with Brent at US$ 28/b.
PTAL will sell this barrels beginning end of Q3, as per the news release.
Assuming an average Brent of US$ 35 at the time of selling, this will reduce the contingent liability by US$ 12,6 mio

Oil to be produced from April 1, 2020.
Assuming the pipeline reopens by June 1, and PTAL produces an average of 13.000 bopd in June-Dec, PTAL will have the following amount of oil produced in 2020, to be sold at its final destination (port of Bayobar) in 2021:
April production: 10.000 bopd
June-Dec production: 13.000 bopd
Total April-Dec production to be finally sold in 2021: 3.030.000 barrels
Assuming an annual increase in Brent of US$ 10/b (on average) in 2021, this will have a positive oil pricing adjustment of US$ 30 mio

In summary, we will have:

Contingent liability at March 31, 2020 (1,8 mio barrels, Brent= 28): - US$ 42 mio
Adjustment in final selling price for oil produced up to March 31, 2020: + US$ mio 12
Oil pricing future adjustment for oil produced in April-Dec/2020 (to be sold in 2021): + US$ 30 mio

= Net result from oil pricing adjusment, for oil produced up to Dec 31, 2020: 0

Comments?

Regards

Fernan

https://oilprice.com/Energy/Energy-General/The-Major-Problem-With-Shutting-Down-Oil-Wells.html

Any comments?

I´m going to send an email to the CEO, to ask him about any potential damage to the reservoir, future production perfomance and/or reserves, as a consecuence of the shut down of all the producing wells.

Regards

Fernan

Continuing with my previous post, the announcement of the proposed acquisition and extension of debt facilities reads as follows:
"These amendments, including the extension of the facilities, are conditional on the Schemes becoming effective, the net proceeds from the equity raise having been received, the Andrew Acquisition or the Tolmount Acquisition having completed and satisfaction of customary documentary conditions. Accordingly, the extension and the other amendments will become effective when the last of the foregoing conditions is satisfied"

Regards

Fernan

Hi EC.
I read you were advocating for PMO to agree the extension of debt facilities with debtholders and then to put all the three proposed acquisitions on hold.
I think this is not possible.
Here is what is stated in the FAQs section of the company website:

Q: Does the Company have to complete all three asset acquisitions to be able to extend the maturities of its credit facilities from May 2021 to November 2023?

A: The acquisitions are three separate transactions and the Company has to acquire one of either BP’s interest in the Andrew Area or an additional 25 per cent interest in Tolmount for its credit facilities to be extended.

Regards

Fernan

Thanks for the info Bluedefender.
Excellent news.
Regards

Fernan