SQZ just needs to hedge more gas now at thse incredible prices. hedge another 55% of the production (in addition to the 20%) for the next 3 months now. This is a no brainer...
If they do so, the SP will surpass 300p the moment that is announced. This is an opportunity of a lifetime...
Very good news. a step closer to GENL not being fully dependent on KRG's duplicity (they pretended to be different from the sunnis and shias in the other parts of Iraq, only to show their true colours after ISIS had been defeated).
Hi Slift,
Thank you for the additional info and views on Enenyra.
I assume the failed wells will be of no use even with some kind of work over.
Given that CAPEX has to deployed where the return is highest (always a good principle, but even more so when the path to repay sizeable chunks of debt does not leave much room for error in 2022/23) it seems that a safe strategy is to leave it aside for now, or even to start temporary shutting down some of the Enenyra wells, as you suggested. But with Tullo'w WI in TEN being now 54.8% the urge to drill TEN will be there.
Oiluser:
see slide 16
https://www.tullowoil.com/application/files/8216/3169/2335/Tullow_Oil_-_2021_Half_Year_Results.pdf
plenty of oil in the different subfields of Ntomme, although not Ntomme East and Far West not developed yet.
ATB
Hello Slift,
Don't you find the current decline rates in TEN a bit alarming? 30% decrease of oil prouction b/w May and November is quite a lot. And if we look at January to November is c. 35%.
Assuming the oil rserves are still there, the icrease in gas prodution will reduce the feasible recovery rate. I have not seen any info from Tullow that addresses Enyenra's issues. I guess they can always switch to other areas of TEN to bump up production, but that would take time.
ATB
dickupham,
You are spot on the need to hedge (at least the downside) IMO.
And, yes there are companies out there that have difficulty in doing their hedging to their benefit. The best example I know is ENQ. They mess up every single time: they hedge when the price of oil is already low, but now when it is high... In 2020 it was a very close call of whether the company would just fold as result of them not hedging their 2020 production at the end of 2019 . They were then forced to cease production in fields with high OPEX, because the price they were getting was lower than the OPEX.... (and they just botched it again having not hedged anything when POO was at $85/bbl...)
Fortunately, SQZ is financially very well. But hedging the downside of the gas prices across 2022 (and even some 2023 production) for a large fraction of their production now would be the wise thing to do, IMO.
ATB
Hello Slift,
Thank you for sharing the info and your thoughts. Also for replying to previous message.
Still have to check when the first $100M bond re-payment is due. In principle it should be at the start of the 2nd year from the data of issue of the bond. I know I should just the terms of the bond...
Happy holidays and ATB
EU benchmark TTF nat gas settlement: €142.7 per MWh (that's ~$270 per barrel of oil equivalent).
Had Tolmount started production the SP would be a lot higher.
20,000boepd x $270/bbl = $5.4M revenue per day...
Rehauer,
IG and others might offer CDFs.
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The people posting revenue numbers and OpCF figures need to take into account that taxes will be paid on profits... So need to work out accounting profit (depreciation taken into account), etc.. to get to estimates on monthly FCF.
ATB
What justifies the downgrades? Just Tolmount's issues or projections for price of oil in 2022? Shale is going to keep on increasing production. Permian will hit an all time high soon. Capitas discline has always been a fantasy, IMO. It is about capital availability. W/ Secretary of energy telling companies to drill more to deliver energy security they will. Americans tend to listen to "patriotic" rallying, even if that results in worse financial figures...
BERENBERG CUTS HARBOUR ENERGY TO 'HOLD' (BUY) - PRICE TARGET 350 (425) PENCE
RBC CUTS HARBOUR ENERGY TO 'SECTOR PERFORM' (OUTPERFORM) - PRICE TARGET 480 (650) PENCE
Here it is:
https://www.edp24.co.uk/news/business/gas-pockets-opened-up-in-southern-north-sea-8565060
300p coming soon?
Considering these factors, Group profit before tax and adjusting items for the Period is anticipated to be in the range of £2.0m - £2.5m (FY21: £3.7m). Global supply chain challenges are expected to remain during at least the second half of the Group's financial year and there is increased consumer uncertainty as a result of the emergence of the Omicron coronavirus variant. Supported by a strong stock position and wholesale orderbook, actions that have been taken to improve productivity at the DC, and the ongoing strong customer demand for the Group's products, the Board is confident that the Group will achieve continued strong revenue growth in H2 and an improved profit performance. Nevertheless, full year profit before tax and adjusting items is now expected to be below current market expectations and in the region of £9m to £12m notwithstanding any further significant covid restrictions.
I do not necessarily agree with it, but I am posting the link to it here:
https://www.cityam.com/shell-exit-cambo-north-sea-oil-slipping-away/
I wonder what implications for other operators will Shell's decision have... Clearly, green movement campaigners will now feel they can successfully put a stop to other projects in the future... and that is not good news to anyone who believes that fossil fuels will still be needed during a transition of at least another 3 decades...
ATB
it is trading on an "adjusted CF" yield of 8.25%....
Hello Slift,
Excellent post as always. Thank you.
What do you make of HBR's SP drop in the aftermath of their CMD? I ask because I am thinking of similarities with Tullow. When a FID that is suposed to take place does not (ZAMA), or a project that is supposed to start producing (Tolmount) is delayed for the n-th time, Mr. Market seems to be very unforgiving.
I have no idea of Mr. Market's expected timeline for Kenya, but lately he has become very impatient.
Is not Tullow supposed to repay $100M of its this year issued bonds next year?
ATB
Mr. Market has marked Linda's CMD's strategy with a big fat F.
I believe she will have to re-adjust her strategy and deliver on different fronts before there is a major re-rate of the SP (>500p). Needless to say that among HBR, Tullow and ENQ, HBR is the one in better shape at the moment, IMO.
i) Tolmount: Projects that drag on forever acnhor a company's SP until they come to fruition. Unfortunately, Linda announced another delay. If production comen online in March then the high-prices season for gas may be over by then. And 3 months delay at 20Kboepd, is 1.8Mboe, which at unhedged prices at the moment would mean additional revenue of more than $250M in Q1 2022. This gas will still be produced but perhaps sold at $60 boe, which is less than 40% of current prices. Anyway, thse back of the envelope calculations are only illustrative. The bottom line is that she needs to get Tolmount to start producing gas. The downgrade of the reserves is also not good news.
ii) Dividend: Some poster compared HBR with RDSA and/or BP in terms of dividend yield. I think that was a very smart comparison. Linda cannot expect that HBR shareholders get a lower dividend yield than if they were RDSA/BP shareholders. She should have left the 2nd instalment of the dividend to be paid next year as "will be at least X", rather than stating the exact figure now.
iii) CAPEX and ABX will be quite high in the foreseable future. The priority should be to reduce debt faster (and earlier than 2025), but stop when it gets to $900M taking into account the needs of large investments. That is very much manageable for a company like HBR (and is less than the psychological barrier of $1B!), and would allow higher dividends.
iv) Mexico: Quite important to get to FID at ZAMA (25% WI).
v) Hedging: A different strategy is needed. 3-way collars with two puts or 2-way collars with a call being sold at a very high price (so costless 2-way collars never a good idea, especially when the volatility of the oil price pushes the sold call and bought put closer together).
In summary, while there is value in HBR, oil companies need to undertand they are the new tobacco companies, and so investors want dividend yields of >6% to own the shares.
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Oil,
HBR is better run than PMO. The latter always sailed to close to the wind with TonyD at the helm. But when the wind stopped blowing disaster struck. Tony D wanted to operate everywhere (U.K., Mexico, Falklands, Norway, Indonesia, Vietnam, you name it...). Linda seems to be more reasonable, having exited from several locations and licences.