Adam Davidson, CEO of Trident Royalties, discusses offtake milestones and catalysts to boost FY24. Watch the video here.
The Russian asset brings no upside potential. The gas price is still $55-60/mcm, as we speak
Great to be fertilizers producer in Russia these days. Or to be a producer of whatever it is, which can eventually be exported, and which requires a lot of gas to produce
Hey, re JKX’s Russian asset, it’s long overdue, they should have done it years ago
The plan is to get out of Russia, as there is a real risk the asset is expropriated one way or another
The asset value is $30-40 mn. And it will not be easy to sell
Nothing about Ukraine, I reckon
Good to be in both JKX and ENW. For the record, I hold both for now
I covered key issues ENW if facing in my previous post. Now would like to highlight some brighter areas, which may support the share price going forward
1) Gas prices: 1H - $249/mcm, 3Q so far - $431/mcm, i.e. 73% higher
2) Production: slightly higher production in 3Q as in 1H (+4%)
3) Revenue - 65-70% increase, which translates to $33-35 mn revenue in 3Q alone
4) Additional production from well SV-59 should give a decent boost to revenue and profitability from 4Q forward even if it's only 500-600 boepd initially. Anything above that would be a pleasant surprise
5) Effective subsoil tax rate decreases as "old" production is replaced by production from new wells. Gas tax rate is only 6% for new deep wells
Hey, Straycat
I would at least wait for new well results. 650-700 boepd will give a decent boost to 4Q revenue and profitability
Gas prices increase every day. There is a chance the stock will get noticed
40-45p should be the price for this stock in the current environment, in my view
1) Whatever this company earns, it spends all of it on capex
2) Capex does not result in a material increase in production, it is value destructive
3) Capex is likely one of the ways to get cash out of the company by the shareholder. Hence, no need for dividend
4) Sales do not increase proportionally to the gas prices. All gas is sold via Smart Energy. Probably, another source to get money outside of the company. Even less need for the divi
5) No income on cash. Should be at least $3-4 mn per annum on $60 mn cash balance. One more way to earn money, possibly. Zero chance for divi, alas
6) Said it many times, cash will decrease in 2021 and, likely, going forward. Those who try to calculate by which date cash will equal to mcap are idiots. Minus $6 mn for 8 months 2021, at a time of record gas prices and increasing production. Wow
That all said, I am still holding for now. Everything has its price and gas prices help a lot here. Have nothing to do with the company, though
Yes, it may well be that Novinskiy earns money either on drilling or on re-selling ENW’s gas. If this is the case, he may not need any dividends
Also, dividends may not be tax efficient for him
He owns UGV directly, this is an asset which is appr. 2/3 the size of ENW. Bigger risk here is that he sells it to ENW at an inflated price and, as a result, gets all cash ENW has. Plus, ENW may need to borrow something for that to happen
That said, the market can initially react positively on this, not understanding the real intention
Not sure I understand what you mean here
They are unable to properly deploy their existing cash, why borrow?
What they’ve spent recently on drilling seems to be value destructive, at least at ENW level
The controlling shareholder is not willing to share company’s cash with poor minorities. Obvious by now
Any debt will be expensive, I reckon around 12% per annum. JKX had 9% convertible bond but that was in a different, pre-2014 world
Also, you should not forget that the SC well they have recently spudded at their new asset is riskier and even more expensive that what they drill at the SV field
Furthermore, even if they are successful with their SC-4 well, once the well is drilled and tested, they will need to shut it down for another 1-2 years until they build a pipeline and a gas plant at the field. So $15 mn or more will be spent this year, revenue will start in 2022 or 2023
Hey. oldholder, $1oo mn revenue and $35 mn net profit are easily achievable in 2021, no doubt
But then there are two wells ($25-30 mn), 3D seismic ($3-5 mn) and plant upgrade (cost unknown)
So free cash flow will be zero or negative, most likely. Cash will decrease or stay around the current $60 mn level
And then the question is what will be initial flow rates from these wells and how quickly they will deteriorate
Hey, OfficerFigby, spot on. Two latest wells drilled by ENW have been a disaster indeed. Mentioned it a few times here
The worst part is that each did cost US$12-15 mn. Will never pay back in any gas price environment
That said, those are sunk costs, irrelevant now. The wells still added somewhat to the overall production, which is 5 kboepd and which is pure gold these days
Apologies for the previous post
Gazprom is expected to pay a dividend in 2021, which would imply a 12-13% yield on the current share price
ENW and JKX should pay a dividend as well. Never been a better moment. Will they? Still not sure.
Regarding gas supplies, you need to understand a few things
Until recently, Gazprom supplied a bulk of its gas to Europe under long-term contracts with a gas price formula, which was linked to a basket of oil products. Normally, with a six month time lag
That guaranteed stability of gas prices for all - both for Gazprom and for consumers
When gas prices dropped, most European customers insisted they would buy gas from Gazprom at spot prices. Contracts were amended. For some time that benefited Gazprom's clients, as spot prices were on a lower side
All changed in 2021, once there is a shortage of gas in Europe, not least because of a substantial demand increase in Asia
Currently, 60-70% of Gazprom's exports to Europe are sold at spot prices. Given supply constraints, it dawned on Gazprom very quickly that all they need to do is to decrease supplies by 10-20% and that will result in 100-200% increase in gas prices. Very shrewd of them, in my view
That's exactly what they have done to boost Gazprom's bottom line. As a result, this will be a record year for Gazprom. Have a look at its share price. I wish we had a similar pattern for our small cap Ukrainian gas peers
There are no constraints on gas production in Russia. Gazprom, Novatek, Rosneft and few other companies can all increase gas production immediately, if needed
Hey, OfficerFigby
I am in, both in ENW and JKX. Approximately 50/50 currently, given most recent increase in JKX
Both stocks are at ridiculously low levels, given where gas prices are. ENW should trade at 60p, as a bare minimum
We should get 6 months financials any time soon, hopefully, this week. Then, there's SV well announcement this month. Expect some boost in the share price, as a result