Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
I'm as bullish as the next person on this stock but £ implies a mcap of £1bn which given where we are now is wholly unrealistic imo. Still a lot of work to be done and a good tail wind required.
ouch.....
The recent anomaly of discounted prices paid to Arg producers versus international oil prices has eroded. PPC reported an average Arg prices of $65 for PF and $56 for PG. Stuck out like a sore thumb when Brent was over $85. I presume that prices paid in Arg have remained the same since PPC released H1 numbers. Wonder what will happen if world prices go lower.
Calamity Coveney does it again
Never liked the guy at the top. He ought to now do the decent thing and stand down.
We did sell assets in Louisiana to a company controlled by PL back in Jan 2018. I didn't like it at the time and have never liked related party transactions. Now I am very confused as I thought the sell was Alpha Imperial was doing us a favour in taking assets we wanted out of in a region we had moved focus from.
"The only two things I can see holding the sp back is the Argentine macro situation and the fact we only receive $68 pb at best ( PG only $56 ) when oil is now nearly $20 pb more"
A Parky - yours is the best point I have seen on here for a while. I have eluded to this as well. The Arg macro psoition may have no material cash impact as per last RNS but it manifests itself by removing all political appetite for increasing oil prices in line with international markets.
Updating my original post (copied below). Now calculating the uplift in mcap of £16.5m or 22% since pre EV/PF deal. Clearly the company is now unrecognisable by comparison.
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When looking at where the price is now, it is helpful to look back to pre PF/EV. I bought in Summer 2017 prior to the PF/EV deal. I was buying into a company with production in Arg (potential to increase on a work over program), non core production in US along with possible upside from Paraguay and acreage in Argentina. In my opinion it was also under financed, loss making and not generating free cash. It was also only getting $55 pb for its oil. Being generous, group production was at best 1000 - 1100 bopd.
The PF/EV deal was announced on 21 Sep 2017. The day before the shares closed at 7.2p giving a market cap of £74m. Today at a price of 9.15p and allowing for the issue of new shares to fund the deal the market cap is £98m so an increase in value of £24m or 32%
But look what has changed since before the PV/EV deal:- group production towards the top end of 2500 - 3000 bopd (up something like 125 to 150% )with potential for it to move beyond following further workover and drills, They are now getting $68 for their oil, they are cash generative with a stronger balance sheet. Paraguay is still there, acreage in Salta is still there.
You can draw one of two conclusions either they were massively overpriced in Sep 2017 or they are great value today.
As I said before based on available information my personal target is 14p.
This is of course just in my humble opinion
A question for posters:- who agrees with Peel Hunt and thinks a $10m drill in Paraguay financed 100% by PPC is a risk too far and who thinks the opportunity cannot be missed?
If you haven't listened to the conf call yet you should. Very insightful and encouraging. Warren seems like a gem in command of brief. PL's assessment of over reaction in Arg is priceless. A lot of comment in their on Paraguay which has had a back seat over past year. Peel Hunt levelled a very appropriate question on the wisdom of a $10m 'punt' on unfinished business in Paraguay. Doesn't look like the Arg oil price will track international prices in near future.
Great detail and can't help but feel re assured.
https://vimeo.com/292105824
Apologies for no Spanish speakers - you can always google translate
https://www.energia.gov.ar/contenidos/archivos/Reorganizacion/informacion_sectores/direccion_exploracion/jornada_sobre_transportepdf/presentaciones_empresas/empresas_transportistas_integradas/chevron_san_jorge.pdf
A deal with Capex on Loma Negra and La Yesera? The blocks are outlined on slide 11 today which I though was interesting considering Las Bases and Puesto Prado. I understand Chevron sold their stake in both Loma Negra and Yesera last year to capex. Obviously deals to be done in Arg
Obviously a hot topic at the moment for PPC as well as the millions of Argentineans. What does it mean? For PPc I think 3 things
1. Change of government. Would be a disaster for PPC if Arg re trenched back to previous administration or similar. Reaility is there is no one else emerging other than Macri IMHO. I see this as unlikely in the coming elections - not too far away
2. Exchange controls - would be a hammer blow to PPC and all other international companies. Can't see Macri doing this
3. Liberalised energy prices. Was going in the right direction but I don't see a growing political view to increase energy price in Arg so may not see a catch up to market as fast as previously anticipated.
$29m would be a good result. House broker forecasts $64.5m for FY Dec 18 which I presume is loaded to second half. My model has got it just under $29m but think I have been a little cautious. I think we will be at $30m which would be astounding
In House Broker FinnCap's update today they mention Paraguay as well:- "Also in Paraguay, where President intends to return to drilling in 2019, it expects positive news soon regarding its application to extend the Pirity licence to September 2020."
Not sure where that has come from
why the long line of buys today I wonder.
bit.ly/2wP595f
So much in here to ponder
Thanks Stockable. your paragraph (copied below) is very interesting and ideally would benefit from a lot more detail. It is very key so the detail need to be correct. What peso balances are they holding I wonder. If they are getting paid in peso they need that into hard currency ASAP.
Is this an accurate account of the payment process they have in place?
"Very importantly, the depreciation of the Argentine Peso has almost no impact on President's cash generation. To put it in a nutshell, the company receives the Peso equivalent of the US Dollar price on the day of payment, not on the day of invoice. The currency fluctuation in the intervening period is irrelevant. Sure, if it was in a period of hyper-inflation with prices doubling in hours, it would be an issue. But it's not. It simply requires good treasury management and that is what they have put in place."
It is interest rates that are at 60%
given the history of PPC I suspect that the PL loan was at some point critical to the business - holders should be grateful that the finance was provided. That is not the case now and at 10.5% it is a high cost of capital eg they have just re paid part of the cheaper Arg bank debt. With strong cash generation BoD should give consideration to allocating capital for part repayment. Obviously there is an opportunity cost to that and other uses may generate a return greater than 10.5% but it needs to be on the table. I wouldn't begrudge part repayment although given the related party element it is sensitive. One thing it re emphasises is that PL more than anyone else wants this to come good and is doing his upmost to make that happen. He is clearly a very wealthy man and all credit to him but with 30% of the stock and $13.5m debt there is an element of being balls deep in PPC. That fact should allow other holders an easier sleep although on occasions I am sure it has stopped PL from enjoying the same.