Blencowe Resources: Aspiring to become one of the largest graphite producers in the world. Watch the video here.
This caught my eye:
"post-hedging oil and UK gas prices of $83/bbl and 49 pence/therm"
Given 2024 average gas hedges are 67p - swap and collars combined - with the lowest average at 54p - swaps, and Q1 HH gas pricing at c.70p/therm, how can the realised gas price be as low as 49p/therm?
I see two possibilities.
1) The Q1 hedging was much lower than the 2024 average - it would have to be very low. Or,
2) It's a typo and should read as $49/boe, ot 49p/therm - which comes close by my sums.
Have I missed something?
Another point on my strategy.
Having been through the mill with several market crashes, my hope is that the dividend income streams will be impacted to a lesser degree and duration than the capital values. I also have insurance in the form of cash.
I've heard the case for holding growth funds and selling to release income as required. I manage four pension funds for family members, with three in drawdown. They are all invested in funds and investment trusts, because I took a decision not to invest their pensions into individual shares. I can handle a 50% hit to equity, but prefer the protection of a 3rd party investment professional to explaining such a market fallout to a family member.
But it leaves me with the problem of deciding when and how much of the growth funds I need to sell down to cover monthly income requirements. Much easier if the natural dividend income exceeds income requirements but their funds don't allow me the luxury. The following link describes a strategy that might be of interest to others with the problem.
aaii.com/journal/article/10681-optimizing-retirement-withdrawals-using-the-level3-strategy?printerfriendly=true#
Meconopsis, I think the thread deserves a new title.
Well, that was a shocker – Berkshire’s holdings. Sadly, I think many private investors have a similar profile to their holdings, but probably not with Apple at the top. Going by the boards of some stocks I follow for amusement; the headliners would be stocks 99 out of 100 investors have never heard of. In Buffett's defense, while Apple might not have the near term growth expectations of Nvidia, for example, I think Apple is likely to be around 20 years from now - another Coca Cola - I wouldn't be so sure of Nvidia.
As I’ve transitioned from a position with employment income and investment income into retirement, diversification has been on my mind. A conventional route in retirement would be an allocation to bonds and annuities. Not for me but appropriate for many investors.
Frequently, over the decades of my investment career I’ve looked at bonds. I love numbers and have played out various scenarios with ladder structures around bond interest and duration to pay a reliable income stream, but ultimately rejected them on the basis equities prevail over the longer term.
Last year, a family member with a very low investment risk threshold asked me for advice. (Many years ago, I completed 3 FCA certificates, so I know the importance of client assessment.) Knowing he doesn’t have any dependents, or close family, I suggested he consider annuities. He chose not to, but the exercise prompted me to look at LGEN. I saw a company paying close to 10% dividend yield with an expectation the dividend would grow at 5% over the following 2 years. I noticed that many other UK companies had also entered the high yield sphere. Previously, I’d been more focused on growth plays. While I maintain that a good growth stock will likely produce a higher total return than LGEN paying 10% growing at above inflation, I chose to move a large part of my portfolio into the high yield sphere.
While I’m still tweaking my strategy, my thinking is that the dividend payers cover more than my income requirements, which allows me to invest the excess back into my preferred growth stocks and a bit back into the high dividend sphere to enhance the inflation proofing of my dividend income. (I think that explains it)
I also see this as a good point to be in UK stocks. Whether it’s Brexit, Covid government policy or whatever, I feel the stagnation in share pricing may be coming towards the end and as interest rates drop – I think towards 3% - the high yield sphere will be more attractive. The dividend yield on LGEN might fall towards 6% but we’d see a corresponding appreciation in the capital returns.
* When I invested in LGEN last year my portfolio application (Microsoft Money) threw up an investment I made in LGEN in July 2008, at 51p. Highlights the chaos of the period and the case for not over trading - I sold the holding a few months later, probably trading into something going the other way.
Hi strictly, thanks for your reply.
I’m pleased to hear about your recovery from a dire experience through the 2008 financial crisis. Single company investment certainly heightens the risk through such a period. I’ve been through four crises in the market, 1987, tech 2000, financial 2008 and Covid 2020. In each I lost c.50% of my equity. The lessons for me were don’t panic (or panic early), and don’t overtrade – others will have their own strategies. For my part, I was on a 6-month sabbatical during the summer of 2008, surfing and working games reserves in Africa. In October I was in a lodge in Zimbabwe, when the English owner told me about the financial crisis – the first I’d heard of it. Later that month I returned to market chaos which only turned the following March – remember Haines bottom?
I recall your focus in the housing sector was on tangible book value. Given Bellway’s focus on organic growth I could imagine Bellway featured in your recovery plays, but my focus is on the macro, as was my question yesterday - what’s different this time round for the house builders. While I understand your decision to rotate to a different sector, I’m left wondering why you think the traditional builders will return to their previous growth rates, albeit starting 3-years out.
I’ve posted my macro view to the Vistry board, in which I attempted to make the case that it will be different this time for the traditional builders, hence my preference for Vistry’s partnership model. I post my ideas in the hope of receiving a response along the lines, you’re wrong and this is why!
Yesterday, the FT posted an article on housebuilding. The key stat is that the number of completions would fall from an average 210,000 over the past 5 years to 160,000 over the coming year (to March each year).
It prompted me to write a post, again expanding on my current views on the sector macro. I didn’t post – didn’t see the point - but I came to this LGEN board and saw your post, which piqued my interest in your reasoning.
While researching my post on the FT article I came across the interest rate chart in the link below. It graphically illustrates the following wind the house builders had post 2008, and the headwinds they face today. When the latest peak in the house price to earnings ratio was 7.0 (2020), the BOE interest rate was 0.1%. It seems a forlorn wish to expect that ratio to be achieved again while interest rates remain much higher. The current forecast is for a reduction to 4% by the end of 2015.
https://www.bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate
* For balance I'll post later my thoughts on LGEN. I don't think I've posted here before.
The RNS wording doesn’t align with the March production numbers. It seems to confuse the Stanley project with total project numbers.
“Mosman …. provides an update on its Stanley project in the US (34.85% to 38.5% WI) where the recent gross production has increased 84% to circa 221 boepd (30 day average flow rate in April). This is a material improvement from the recently notified March quarter gross average flow rate of 120 boepd.”
In the March production update, issued 10th April, gross Stanley production was 5,583 boe, which is 61 boepd gross - 22 boepd net to Mosman.
The March gross for all projects was 10,745 boe, which is 118 boepd – I guess this is the 120 boepd referenced in today’s RNS.
Also in the April 10th update, “Stanley-3 was successfully recompleted and produced strong gas flows, allowing gas sales and this well is now producing oil and gas.”
It is that ‘material improvement’ from Stanley-3 which is being reported today. For the sums, let’s apply that to the March production numbers. 221 boepd x 91 days = 20,111 boe. Apply the increase to Stanley, which is an assumption, 20,111 minus 10,745 = 9,366 boe, or 37 boepd net increase on Stanley’s March reported 22 boepd.
Stanley project, net 59 boepd run rate through April. In the March quarter 76% of production (boe) was oil (bo). The note on Stanley-3 suggests a higher contribution from gas in April.
In the past, the initial flow rates after a work over have declined rapidly. The production numbers for the June quarter , including May and June will be more representative of the Stanley-3 contribution.
Though it is the revenue and profit $$s, rather than boe, that matter most, and they wouldn’t be revealed until the final accounts released around Nov.
*Good to see a 7am release, giving people a chance to review the text ahead of opening. I hope someone can confirm my interpretation - in case I've make a complete fubar.
Strictly, interesting to see your switch in sectors. I've a position here in LGEN, which I entered for the reasons you've described - a high dividend yield, likely to be inflation proofed in the foreseeable term - but the capital markets presentation next month will be key. I have a diversified portfolio, with LGEN my position in the sector. I prefer to weigh sectors rather than companies within sectors. But I understand your strategy and the success you've had within the house building sector.
Good luck weighing the relative merits of LGEN, MNG and PHNW. I look forward to your analysis.
But the reason I'm posting is the ask, why the switch now, when you stayed with the house builders through the financial crisis of 2008, what's different this time?
Tornado, thanks for the heads up on the data.
I've mentioned before that Ithaca's reported numbers have been higher than the NSTA data. No idea why but applying previous corrections get me to 59,950 boepd for Q1.
SQZ reported that Erskine came back online mid/late April.
To close on my previous post.
I’ve made the point, here or on another board, that the Ithaca chairman seems confident that the final fiscal outcome under Labour will be supportive – he referred to it as the Norway model (or some such wording). It is my working assumption that the EPL with be increased to 38%, the additional allowance will be removed but full capex allowance (x1) will be maintained against EPL.
Linnn, thanks for posting the detail of Moody’s assessment. I wasn’t able to access your original link.
It’s good to see that Moody’s didn’t flag any concerns with the merger. Interesting metrics on debt, which I interpreted as a $1.5bn future debt capacity, against 100K boepd production, as supported by the rating.
In light of my previous comment on the proposed $500m dividends in 2024 and 2025 I was pleased to see this by Moody’s:
“Stated commitment to its conservative financial policies that prioritise balance sheet strength over shareholder remuneration. Ithaca's ambition to distribute up to $500 million to shareholders in each of 2024 and 2025 represents a material step up from the $400 million amount declared over 2023 results. That said, Moody's views the company's ambition as commensurate with the stated capital allocation framework, supported by the cashflow-generative nature of Eni's assets and the robust commodity price environment.”
I was surprised that Moody’s didn’t refer to the possibility of a change to the UK fiscal regime under Labour.
Stu, you say. “it seems like Delek feel they currently own too large a proportion of Ithaca,”
I’ve wondered about the reasons for this merger. My understanding is that ahead of the IPO, Delek expected a good dividend return from Ithaca to provide cash to the rest of their operations. The 10% free float following IPO was the minimum allowed under LSE rules, so I think it’s reasonable to assume they have faith in the Ithaca’s long-term prospects. The increase in the EPL to 35% just after the IPO reduced their return expectations, which were that after the initial 3-stage dividend payment they were anticipating a c.$430m annual (gross) dividend from Ithaca. This is in accordance with the CFFO (15%-30%) payout metric.
Post the increase in the EPL and resultant impacts on capital plans and production, estimates on this board for the gross dividend payment this financial year have been below $200m at 30% CFFO. There is also the uncertainty of the fiscal regime under a future Labour government. We don’t know who approached who, but I’d guess Delek see the merger with ENI as a hedge against the worst possible fiscal outcome, which I see as an increase in the EPL to 38% and the removal of all allowances associated with the EPL. If that were to occur the ENI assets provide a higher level of cash return because of the much lower level of supporting Capex, but of course this falls away c.50% by 2030. On the other hand, Ithaca is entering a growth phase which largely kicks off 2-3 years from now as the polymer enhancements to Captain kicks in and Rosebank production starts up.
The merger provides cash to pay a higher dividend while also covering the Capex demands on Ithaca’s assets. Hence, the provision to pay up to $500m (gross) in 2024 and 2025. Incidentally, Ithaca has substantial UK corporate tax credits to cover the merged business for the next few years. Of course, with EPL still to be paid.
It was interesting to see how Ithaca presented this dividend allocation in the recent presentation. It seemed to me they went to some length to emphasise the 30% CFFO metric still applied, and the top up will be a special dividend from the surplus pot labelled ‘evolve’. Perfectly valid, but interesting to note the strength of the point.
As I said in my previous post, pro forma the new $500m payment equates to $308m under the ‘old money’. This is shy of $430m but substantially better than below $200m. I guess from Delek’s view 2027 cash flows will be even more supportive of a $500m+ dividend – which is also my basis for holding Ithaca.
If the new labour fiscal regime is supportive of capital investment in the North Sea, Ithaca has a healthy pipeline of projects, which are detailed with anticipated capital costs in Delek’s latest results.
If anyone disagrees with any part of my assessment, please comment.
Reader61, if you're looking for advice on trading BHP today, I can't offer any.
But if you are looking for an entry point to a long-term holding in BHP then these bid situation opportunities don't come up very often. I like to invest in companies that offer me an interest in their activities. BHP is the largest miner in the world and at the forefront of the application of technology as the world transitions towards clean energy. This stuff fascinates me and BHP covers it well in their 'insights' publications. Want to know about the practicalities of the transition, then read what BHP has to say. These are the guys at the coal face, not the idealists sitting at a keyboard.
I've held a stake in BHP for decades and I trade - both sides - as the opportunity arises. If you wish to build a holding then take a small stake today - large enough to minimise trading costs - and pound average over time. In 10 years time, whether you average in at £21 or £23 will be an irrelevance.
Incidentally, you could make a similar case for RIO or other large miners. Take a look at their portfolios and direction of travel, and pick one that appeals to your interests.
Montesa, I believe you’ve read too much into the transaction.
On 17th April notice was released that 339m Ithaca shares had been moved to a custody account to cover the issue of bonds to Delek. Essentially, these shares are collateral for bond debt taken on by Delek, which is nothing to do with Ithaca.
These are the key lines:
“Transfer to a new custody account under a Pledge Agreement in relation to a series of Israeli Bonds issued by Delek Group on 14.4.2024.”
“No change in the beneficial owner of the shares.”
Yesterday’s news is the release of 200m Ithaca shares from the custody account (an unwind), presumably surplus to the collateral requirement.
The news impacting Ithaca’s share price is this item from the merger agreement with ENI:
“….. in order to ensure that the number of ordinary shares in public hands remains at or above 10 per cent., Delek has undertaken to use reasonable endeavours to sell down such number of ordinary shares representing approximately 3 per cent. of the enlarged issued share capital of the Company (the "Delek Sell Down"), prior to Completion.”
3% might not sound much but it is 30m shares into the current free float of 100m shares. As the note says, “use reasonable endeavours”, the wording itself highlights the challenge. Over the next 3-6 months (Q3 completion) Delek need to sell an average of 250K – 450K share per day into a market with typically 500K to 1,000K daily volumes. There were higher volumes around the release of the ENI news, but those higher volumes have now faded.
In a way this is the reverse of a large buyback, except Delek are taking the pain, with ENI accepting their contribution via a call option. To be clear, Delek’s actions are not dilution. Assuming the merger closes in Q3, 635m consideration shares will be issued to ENI.
Although Ithaca is considered ‘independent’, Delek, as the current 90% owner of Ithaca and with two non-execs on the board, will have significant influence over the deal.
I suspect they would have pushed for the provisional agreement to pay up to $500m dividends in 2024 and 2025, ahead of the 30% CFFO metric – I believe that unless there is a problem in Ithaca’s performance or a collapse in oil/gas prices, we will see those $500m dividends.
Pro-rata that is 61.5% x $500m = $308m payable to the holders of the current 1.01bn shares, or $0.3 (24p) per share. A 48p dividend return over the next two year on a current price of 114p is the sweetener to taking those Delek shares coming into the market.
Tigar, I’m vaguely aware of two restrictions on buybacks. Sek referred to one relating to SP increase over a period (5 days?), I remember this was called out on HBR when their program was interrupted, and I recall a rule which requires an independent purchase at a higher price ahead of the buyout order, but I've no idea how it operates in practice. (Looking at the chart it’s possible the first rule kicked in yesterday)
I can't imagine a trader is staring at the screen, with finger over a buy button, waiting for the right conditions to occur - I'd guess an algo is at play, following the rules, with limits set.
Or perhaps algos are the modern-day equivalent of an 80's super model and don't get out of their box for less than $15m.
Or the trader has just had their ar*e kicked for forgetting to plug the algo in yesterday.
Whichever, I think we can agree that buybacks will weigh to the upside. From the limited number of buybacks I've observed they do tend to start off slow and increase volumes later. As an engineer I can imagine an algo being tuned to the market to maintain orderly transactions and given its head over time.
Bottom line interest here will/should fade in this activity.
Botham, thanks for the link. I had seen it before, one of dozens I’ve seen over the years, with AC, JB and supportive analysts.
I’ve been following the detail for many years, as I said, I find it engrossing and can understand the attraction of a speculative investment. But I’ve also become familiar with the deflections that are introduced in these interviews, which can easily mislead a listener who isn’t already familiar with the story.
AC mentions the two drills on EP145 which were not tested for Helium because they were not drilled to sufficient depth – the implication is that if they had been drilled deeper, they would have encountered Helium. But listen closely – AC does not say these wells will be re-entered. Hence my post directed to you. Read the RNS – statements must be true and accurate.
Why would they re-enter? When these wells were drilled decades ago the prospect was oil. What are the chances that these well locations are the optimum Helium hotspot based on current and to be acquired seismic? Answer, zero.
Which is why I also find Georgina Energy’s plan to re-enter wells on Hussan and Mt Winter-1 as a cheap option, but likely, an unsuccessful outcome.
I don’t think I’ve posted here since late 2022, but I’ve previously posted on the misleading claims based on high concentrations of Helium. I’ve referenced academic papers that reported high initial concentrations on wells referenced by AC, but the flow rates dropped off to negligible with weeks, i.e. not commercial. Given the current high price of Helium, a few years back Central Petroleum conducted a study of commercial Helium extraction in the basin. I’ve read the report, but don’t remember the reason the project never went ahead. More recently an Asia Helium company agreed a JV with Central Petroleum and a free carry on a drill for Helium, but they never came up with the funding. Last I heard CP were claiming for their costs in the JV.
Lots of activity above ground, but little happening below ground.
Botham, given your declared positions in both Mosman and Georgina Energy I’d expect you to add some clarity in your posts, but I think you’re confusing Greenvale terms on EP145 with the Georgina Energy’s plan for EPA155.
Geogina Energy’s primary target is an existing well on EP513 Hussan in the Officier Basin. Last I heard the Mt Winter-1 well on Mosman’s EP155 licence is their secondary target, 18 months later. I don't know if that has changed.
The EPA155 agreement:
“The Farminee will also undertake technical work in accordance with the permit work programme, and thereby earn a 70% working interest and become operator of the permit. Mosman will retain a 30% working interest in the permit. At the time of drilling of a well, the Farminee may elect to carry Mosman through the cost of the well and in that case would earn a further 15% working interest, in this scenario Mosman would retain a 15% working interest in the permit.”
“In addition to the forward work programme obligations set out above, Mosman will receive an immediate contribution of A$15,000 from the Farminee in consideration for past costs and a further A$15,000 following completion of the required seismic re-processing work.”
Returning to EP145. The latest news with Greenvale Energy on EP145 includes these comments:
“Mosman has identified a drilling target at 1500m and estimates the cost of drilling that well to be in the order of AUD5m. However, the final location and well design is subject to seismic results, joint venture discussions and NT government approval. Costs of the well over AUD5.5 million and any other costs will be shared Greenvale 75% and Mosman 25%.”
“The cost of drilling a well depends on many factors including the depth of a well and cost of drilling rigs at the time of drilling.”
Mosman has a pattern of issuing market impacting news during market hours. Other companies issue an RNS at 7am giving investors time to digest the news. No doubt Mosman’s intention is to generate some excitement in the stock. Given the very low liquidity in the stock and predominance of poorly informed investors attracted to any spike in the SP, excitement is easy to generate, and this board will reflect the excitement and disappointment of any moves.
Once the dust has settled, there’s a fresh supply of typically novice investors in Mosman’s stock who are then faced with coming to terms with their position. This is reflected in posting. Those of us who have followed Mosman for several years can help by being clear and accurate in our postings.
* I’ve been following the Mosman story since Feb 2016, when an associate asked me for advice on his large investment in Mosman running at a loss. At 0.8p I advised him to take the loss and sell. I lost touch with him but believe he held, in which case he’s another 97.5% down at 0.02p.
My interest is following an engrossing story, from a safe distance.
Solomonkane, in answer to d)
I've no doubt the M&A team at BHP will have run the rule over all possible candidates. They'll understand the regulatory and local risk involved in the assets and the likely price of a successful bid. AAL has well publicised problems outside of the core copper and iron assets of interest to BHP, and I'd guess BHP sees those issues around AAL as providing an opportunity. Once in play there are a number of possible outcomes. I doubt BHP ever expected their initial bid to be successful, but rather it is part of a larger strategy.
I'm a long term holder in BHP (decades), trading when the opportunity presents but always maintaining a stake. I don't like the short term impacts on the BHP SP of these bid approaches but it is part of the game.
The FT has an excellent article on the merits of buy or build - worth a look if you can get access (subscription)- titled, The ‘build or buy’ copper maths that could guide BHP’s bid for Anglo.
Buybacks.
There are rules that govern the conditions of trading - in simple language, rules to prevent market abuse.
These rules are restrictive on the buyback pricing, which are subject to the trading of independent participants in the market. Given the size of the buyback over the short first phase period, and the relatively low trading volumes in Enquest stock there will be days when it will be difficult be purchase an appreciable level of stock. It's likely that bots will be making these purchases in accordance with the rules and they'll be opposing bots programmed to profit on the other side.
I don't know if yesterday's small buyback was a result of the restrictions/illiquidity in the stock or not. Time will tell.
No doubt BHP has examined the various outcomes from their opening bid. The structure of the offer makes it clear that there are many elements of the AAL business of no interest to BHP.
AAL management were already examining a restructure, this bid accelerates the process and may fracture the business into more bitesize pieces, allowing BHP to make a more targeted bid for the pieces it wants - it will not want diamonds, platinum or a piece of Yorkshire.
This BHP management team is a very different group to those who originated the bid for RIO. They claim to be more disciplined than the old firm - the last 6 years has shown they are, I hope it continues.