The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
I can understand why they would want to hedge some of their gas production at current prices during the winter months. But if you just pay a little attention the the macro picture, you don't need your 20-20 hindsight glasses to see that the oil hedges over the last year was a bad idea. Countries are opening up, there is limited supply and global oil inventories are shrinking. It's time to supercharge their drilling and production at their oil heavy properties. There is no reason that they can't replicate Headwater's success over the next couple of year send the market cap to its potential. But that would require them to actually to start now. They could drill both simonette and north sea without partners. Secure the debt and start drilling. What's happening in Ukraine is extremely sad but it will make sure the oil price stay elevated for a long time.
They need to explain to shareholders what they're planning to do with the cash. At todays O&G prices they will end the year with more than £60 million, they easily double the dividend if they don't find other uses of the cash. Makes no sense to let the cash build up while inflation could reach 10%. They should use it as it comes in and they should absolutely not let their cash position grow to £60 million, as there will be no companies to buy when this bull market turns. So there is no need to sit on excessive amounts of cash considering their (failed?) hedging strategy.
First they said that £12 million in dividends will be paid in 2022, which could be interpreted as the 2H 2021 and 1H 2022 cash flow, but now they're only paying out cash flow from the 2022 production. Hopefully they will be able to clear up the confusion during the proactive presentation.
There is 0% interest in I3 in Canada, even though it's the cheapest O&G company by far. Less than 300,000 in daily volume on a 1,2 billion float. It will take decades to continue to churn through the shares. There is no guarantee that the 2022 capital program and the 10% dividend will send the share price any higher. A bigger dividend, share-buyback, moving forward with the north sea assets or a larger debt funded acquisition at similar terms as the recent ones could all boost the share price. They should beging to run the company as owners and not managers.
With their expected cash position at end of the year, the risk/reward ratio to drill is extremely favourable, if Serenity is as promising as they have communicated. I hope they have given their counterparty a deadline to sign the final papers, and if they won't reach an agreement just go at it alone this year. I hope we have an update by the end of the month.
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Eric Nuttall knows what's going on. I wonder if he would have invested in I3 energy even if the liquidy was there. He prefers to invest in companies that maximum share buy backs and dividends, I3 would probably not even pay a dividend unless they were forced to.
AECO gas is still over $4 and WCS is over $60. They're printing money and the 2H dividend will be a great one. My only worry is that Serenity seems to be the only thing that will close the valuation gap. When oil moves up, other stocks move up but I3 stays stagnant, but when oil moves lower, I3 is moving even lower. Oil cycles are short and my main worry is that the share price will stay stagnant the whole cycle. I hope that by the time that oil turns south, I3 will trade more alligned with peers, giving investors an opportunity to exit at a more fair price.
What Graham said regarding the Serenity funding was also a relief. If the level of commitment aren't satisfactory they will keep(and fund) a larger piece and go after it next year. Of course the share price will react more aggressively either way based on success/failure. Wouldn't mind that personally, people just have to take that into account and reduce/increase their position accordingly.
They're free to spend their money how they want. Any questions related to lack of ownership is a personal matter and not everyone is comfortable to talk about it, even though todays questions was nicely worded. Graham was quite honest about it, and the truth is that nobody really knows about their personal financial status. People just have to decide by themself if the small insider ownership is a reason not to invest. Both of them seems focused on creating shareholder value and I am a happy shareholder. The only thing that's needed here is patience.
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Once they prove they can turn the high NOI forecasts into FCF the rerate will come. At these spot prices dividend yield should be closer to 10%, once the company confirms that, I3 energy will rerate to be more fairly valued. It doesn't matter how many shares are outstanding, capital will continue to flow into the company until the dividend is under 5%. Come back in mid 2022 and see if the share count really matters. The company is not going to rerate based on promises, but based on performance.
DOPW the markets punish impatient people like you all the time, ask yourself if you have any chance of beating the market by buying individual stocks knowing very well that data from the past 100 years confirm that investing is a long term game. You have put up a lot of capital for someone who is young(i hope), and new to investing. You have found yourself a decent company. But I already know that your price target is based on your entry level or a psychological number like 20 or 30p, and not the value of the company. At this share price, dividend yield will continue to grow, and so will their cash position. This becomes a less riskier play everyday. If you could not look or care for the share price for the next 3 years, and only look at the oil price and oil market you would come much better out than you will now. You might be in an education and dont have more money to invest, but if you're working and receive a montly paycheck, you would be grateful for these prices. Looking forward to your next post complaing about the share price, cheers.
DOPW you bought the company less than 1 month ago and are already starting to get impatient. In the stock market, market capitalization and intrinsic value can stay disconnected for a long time, especially in oil companies. You might have to lean back and continue to reap value from dividends for a while to come. I for one welcome this lower share price, risk will go down as they grow and confidence in it will go up, all this while the dividend yield increases, giving long term investors time to add more shares. Using your mentality that share price should always be alliged with the true value you would have ended up buying 200% higher than when you bought your shares last month, as not much has changed since that date. Sit back, relax, and watch as the story unfold itself over the next 3 years as they execute.
Personally I would say that his salary is much more justified now with their recent achievements. But he received £700k when I3 didn't own any of the canadian assets, only the UK assets which were about the bankrupt the company. His personal loss would have been £0 if the company went under, that's one of the problems with investing companies with very little insider ownership and no founder mentality. The big question now is what will his salary be going forward? Well over a million I reckon.
Let's assume that the company is worth 4x noi before and after the transaction. I will use the fully diluted share count.
Expected NOI before acquisition=C$54,000,000*4=C$216,000,000/840,000,000=C$0,26SP
Expected NOI after acquisition =C$94,000,000*4=C$376,000,000/1,216,700,000=C$0,31SP
As everyone can see, the acqusition should be accretive on a per share basis if you're a long term shareholder. This is ignoring all the reactivations and new drill targets, and the stronger position they are in now with regards to farming in, out or growing their assets organically
They should find an interviewer that has done more due diligence than reading the three last headlines. Yeah yeah, absolutely. There is so much opportunity for follow up questions if you have done 5 min of due diligence, but this guy is on another planet when they are talking. Engagement please!
I've read it all, as far as I'm concerned this is new grant with new targets under the same options plan? If not please enlighten me. Anyway, never been a huge fan of the low insider ownership as well as the endless dilution, but as the doc says, data is data and math is math. Market value will still be the same, but the share price will be smaller.
First they do a financing and crash the share price from recent high, then they issue 50 million options????? Not even that, but look at the performance targets, increase production to 20,000 by July 2022, 2500 boepd in european production and add 50 million barrels in 2P reserves. Are you kidding me? Just vest 100% of the options already, these targets isn't even the slightest challenge. I just wish that this company was founder by people with more than 20% ownership, would have been a much better investment. Still bullish on the long term even though I wouldn't call this a retail friendly company.
Like I said, I enjoy his doc jones and his research. EMO have done great and I understand the catalysts coming up, but because my inability to research such companies I decided to skip that one, and everytime valid points comes up he pulls up the basher or blah blah card.
In my opinion I3 doesn't have many negatives, but a few things have already been brought up. One is their salaries, Majid pulled £600.000 something, before they invested in the canadian assets and I3 energy was a much smaller company. Without the canadian assets I3 would have run off a cliff, and what did the management do about it, cut salaries? no they increased them. Proves that they will put their own interest infront of all shareholders, but this is not so serious while oil price is high. Another is their history of overpromising and under-delivering, which seems like they are starting to fix as Majid said he won't announce and FID on serenity like they did last time. Others is their bullishness on pipelines from U.S to Canada, which there is no guarantee for, especially with Biden as president, this could become a problem down the road. Last one in my opinion is that they are not hesitant to comment on their shareprice being undervaled compared to peers, but are they putting their money where their mouth is? Regardless of all this I still think I3 is a very good buy at these oil prices