Posted by Deeko on LSE26 May 2020 15:57
First - ‘HOPIUM’ is an absolute ridiculous statement, it sounds stupid. Can you stop trying to peddle this phrase.
Second, I’ll provide ‘my’ logical reasons;
-Uganda offloaded for $575 million with contingent payments dependant on oil price, no idea what the contingent payment will be but should be sizable if the caveat is oil price above $65.
-Kenya has practically agreed over $1 billion in recoverable capex spent (50% Tullow) that can be transferred to new owners, little sweetener for the deal if $500 million is depreciated over say 4 years of production. An extra $125 million per year to the new owner for 4 years makes me think any deal on Kenya would be upwards of $800 million to Tullow (IMO).
-In Ghana, Jubilee is no longer constrained on gas and a second injection pump is in, currently the production guidance is at the upper end already. At TEN, still some work to do but I believe they have an additional producer coming online (probably 5-8 mbd looking at the total wells in the field and gross offtake) so this will add some real production due to Tullows interest here.
-Debt agreed with $700 million headroom
-We’ve already taken a hit on production writedowns this year.
-Non-operated assets are at the upper end of production guidance currently
-Every barrel above production guidance is delivered at the full price of a barrel since, operating costs are based on the lower production guidance value. If we come in above production guidance then profits grow at $36 (current price) for every additional barrel
-New CEO, not sure what impact he will have but I guess we will find out
-Reduced workforce by 1/3, offices shut etc i.e. costs reduced
-any cost for Uganda (including offices/staff/capex/licences) now recoverable to Tullow from Total
-Net debt is high but not unmanageable IMO needs work though
-TEN has capacity for an additional 30 mbopd, admittadly Tullow need to stop sicking holes in Guyana and start putting more in the Ten field.
-My projection, Tullow will end the year above production guidance
In terms of oil price;
-over the last month, US oil storage has declined by approx. 20 million barrels
-throughout the whole of Feb/March/April oil inventories rose by 95 million barrels in the U/S i.e. nowhere near what was expected
-Russia already looking to extend production cuts
-Production cuts between 10 and 20 million barrels, each month these are removing 300-600 million barrels off the market.
-Nowhere in Europe was oil storage an issue as widely published.
-U/S shale down by 1.5 million barrels in three weeks, 28 billion debt pile between the top shale producers and bankruptcies already starting. Can’t imagine any bank will want to continue losing money with shale plays. Only the majors have deep enough pockets to make money her IMO
end of year oil price $60
Tullow end of year: 50p (approx. $700 million Mcap)
happy to hear your counter-argument as to why Tullow isn't a takeover play or why oil won't go
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