Member Info for JenniferE

It should just be a rubber stamp, the merged group have no other interests in the area so there should be no antitrust issues, the only concern is the government using this as leverage on Zama. I'm still working on the basis there won't be an issue but I'll be very pleased when we receive clearance!

Mexico anti trust consent is one of the listed conditions of the merger and the Mexican government has been making life difficult for foreign owned oil companies, there was an article about this on oilprice.com.

This should just be a rubber stamp so hopefully Mexico does the decent thing and doesn't try to use this to force us to sell to Pemex on the cheap!

Hi Stevo12,
There are 3.334bn creditor shares being issues to senior creditors. There is reportedly $2.7bn of gross debt of which about $49m is super senior. 3334m/(2700m-49m) = 1.256 shares per $ or 1.7 shares per £ of debt. All these numbers are estimates as they haven't published exact figures.

I think only Harbour has a one year lock in and all the other shareholders of Chrysoar have six month lock ins so we could be eligible for ftse100 inclusion in September but I'm no expert on these things so I don't really know!

It would be nice if the creditors took the cash option but I can't see many taking US14c instead 1.25 shares per $1 of debt!

My valuation is for the merged group and assumes all creditors take the share option. There would be 18.5 billion shares in issue. $8bn/18.5bn = $0.43 which is approx 32p.

Hi Rookie,
Assuming 220kbopd and 50/50 split oil and gas then with oil at $55 and gas at 41p per therm I make gross turnover at $3.48bn.
Deduct production costs of $1.12bn, interest of $0.16bn, hq costs of $50m and capital expenditure of $1.1bn leaves free cash flow at a touch over $1bn. This money can be used to pay down debt, buy more assets or pay dividends. In my opinion this should give the company a minimum value of $8bn which is about 32p per share.

Haha, well I wasn't aware Tibetan or mali anti trust agreement were part of the merger conditions but I'll assume you know what you are talking about

It's very disappointing there is no news of the Mexican Anti Trust Approval, the Mexican government is currently making things very difficult for foreign owned oil companies so I've always considered this the important one.

People need patience, nothing much is likely to happen here until the deal completes, tomorrows vote is a tiny step on route.

It's pretty much a certainty that the deal will be passed on Tuesday, by far the biggest risk is from creditors. They have 75% signed up but not all the largest creditors, it only takes one to challenge the deal at the court meeting to cause problems and we all know what ARCM did. I don't think anyone will challenge the deal but since some have refused to sign up the risk is there!

The original BP deal was plain stupid, the economics were based on oil at $65 rising to $70 after 3 years and then increasing with inflation. Even when the deal was being negotiated oil was under pressure due to the rise of US shale production . This is why I was reluctant to condemn ARCM even though they scuppered the refinancing deal and left us in this mess, in the end, truth be told, they were right!

We're saved, the mole has been whacked, back below 21p!

Was that a snap, crackle or pop? Will someone please whack the mole before it escapes!

There is only a lock in for creditors if they hold 2.7% of more of the shares after completion. To reach this level they would need $364.5m of debt. Considering the large number of creditors I doubt anyone is over that figure and even if they were they could get round the lock in by taking part in cash instead of shares.

Stevo12, I agree with most of what you say apart from the shortage of shares. I see quite the opposite with banks and bondholders receiving 3.3 billion shares they won't want to hold and I doubt any will be subject to a lock in. I see a lot of volatility in the early days and possibly opportunity to buy more at a cheap price.

ARCM may be short of 6.19% now which is 57.3 million shares. They have $350m of pmo debt for which on the deal completing they will receive 437.5 million shares. So it may be better thinking of ARCM as being long 380.2 million shares rather than short! I tend to think it's the knowledge of all these creditor shares coming onto the market after deal completing that is holding back the share price now.

We could qualify for the FT100 in the June or September update if our capitalisation puts us in the top 90. Currently that would be £5.25bn or 28.3p per share.

People should remember the $4.1bn tax loss is worth $4.1bn*19% (tax rate) = $779m (£577m). Also this amount needs to be discounted over the number of years it's used.

Alfamale,
We won't be in the FT100 on day one but it could happen later in the year depending on share price.
The upper quartile of ft250 wasn't a forecast, it was simply stating a fact based on the current share price. They stated at the beginning of the webcast that they were unable to give forward guidance.

I'm not sure why you are criticising posters for comparing with Lundin/Aker BP since metrics of the company are compares with Lundin/Aker BP in the webcast! One thing you do need to remember in the comparison though is that the tax rate in the Norwegian sector is 78%, 22% corporation tax and 56% petroleum revenue tax. The UK has no petroleum revenue tax and corporation tax is 19% plus we have $4.1 billion of tax losses so probably no UK tax to pay for 3 -4 years!

Hi Rookie,
I think the prospectus was very long winded and didn't really add much, it contained a lot of historic data which we already knew about and dwelled a lot on the risks of the deal not completing. I think this risk is very low but it will be putting off a lot of potential investors and so holding back the share price. I also note that creditors will receive 3.332 billion shares, 3.6 times the current issue and I would expect most of these to want to dump as soon as possible, bondholders and banks generally hate holding ordinary shares. The 3 month lockup for bondholders only applies in they hold over 2.7% of the equity, this comes out as $405m in bonds, as far as I'm aware ever ARCM only had $350m of bonds so I'm not sure this lockup applies to anyone. Anyway the upshot of this is that a lot of shares will come onto the market is the early days after completion so there is no incentive for large buyers to more in early.

There was very little new information in the prospectus but the lower production figures and the reduced 2P (although expected) were marginally disappointing.

I did find the webcast quite upbeat and positive. The suggestion that UK production could be held at the current level for the foreseeable future was a big positive for me although the capital expenditure of $800m was a touch higher than I expected. The management seem very competent and have a clear vision for wealth creation, this counts for a lot in my book.

Altogether the value of the group depends very much on the oil price and UK gas prices but if looks to me that the merged group will easily have $1 billion free cash flow after capital expenditure and interest payments. This money can be used to reduce debt, asset purchases or dividends. They refused to make a dividend forecast in the webcast but assuming oil stays above $50 then I'd expect about 20% of free cashflow being paid as a dividend, on $1bn of free cash flow that would be a dividend of 0.8p. I expect a lot of price volatility after the merger but then to settle in the 30 -40p range.

Ok my misunderstanding, you were saying the prospectus as a whole isn't clear not that it doesn't warn of the consequences of a no vote!