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You can only imagine the number of "interested parties" jostling like kids in a sweet shop for a cut of the profits. CEO certainly has a task on his hands. There must risk, based on the language, that the license is taken back under the pretence that TLW can't get the funding and the Kenyan Government tries to go it alone.
The whole sector is unfashionable. Many of the big funds follow Environmental, social and Governance (ESG) guidelines. This means fossil fuels, tobacco and arms are off the table for investment, as they'd get slaughtered on social media. It's magical thinking. It shows that you can't have everything, you either make money or you are green and ethical with much lower returns. You can't be both. Reality will bite. Sunak has just put back the EV plan to 2035, because it's total fantasy. Making manufacturers sell EV cars is pointless if you don't have comprehensive infrastructure to support them. Lego have just given up trying to make bricks that don't require new plastic (ie, oil) The reality is that the world will continue to need oil for decades to come, but the politicians have decreed that it shall be gone by 2050. The SNP witter on that the revenue from North Sea oil can be replaced by carbon capture. It's deluded. Reality will always win out. In addition, it's not 2010, there's no cheap money (QE) gushing into the system and finally "the market" clearly doesn't expect any big news soon, either on Kenya or the tax dispute, hence the static price.
Completely agree Bluemoon. This board has been drowning in drivel for months. Dhir has been clear what his plan is, the timetable and hasn't deviated from it. Sentiment is poor, but that can be said for a number of mid range oilers, ENQ and HAR at down 40-50%. The LSE is out of favour internationally, and big institutional investors are wary of the optics of investing in O&G. Until the Fed reduce rates, which is probably 12 months away, at least, the mid market sh*ts itself every time there is rumour of a rate rise. Debt has always hung on oilers, EBITDA is a better guide. Shell's EBITDA has averaged at 2 between 2018 and today. Currently it's 1. TLW is a chancer's share, so any objectivity has long been thrown out of the window.
We are hardly falling against the market. PMO/Harbour was down 0.40 at the close and the majority of mid range oilers were treading water. If volume is low the price of any share will drift. Funds take advantage of that low volume to exit positions, but that isn't manipulation. The SP is back to pre-pandemic levels, so going forward higher POO, better hedging next year and a good drill campaign will move the SP upwards. Failure of those factors will see it fall. Obvious stuff really.
If you look at paragraphed 7 that sets out the respective positions. It appears that they have reduced their holdings on the 13th April from 3.62% - 2.88%, now whether that is related to a short closing who knows with the Vampire Squid? There were a series of these RNS' running up to the confirmation of the redetermination in February and again just before the SP peaked on the 15th March. GS raised their holding at that point from 2.93 to 3.30 just with perfect timing for the retrace. So one would assume there was shorts opening at that stage and a reversal today.
All the majority of oil companies have followed exactly the same pattern of a strong rise from the start of Feb until March 15th. BP has followed the same pattern as TLW. The market has gone sideways and TLW will always have an amplified drop on low volumes.
I don't dispute that one scenario is that TLW may be sold, but in terms of recent price action it is mirroring the market. Almost all mid range oilers followed a strong rally from the start of Feb until the middle of March, when the rally broke, and has retraced. At the start of Feb TLW was at .24p, so it is still well up. Personally I think the market got ahead of itself and the current SP is more realistic. If the pandemic recedes over the summer then POO will rise and you could see it at $75. If that is so there is no reason why TLW can't return to 60p - 80p. The elephant in the room is refinance. This is either going to be excellent or a disaster for PI's, PMO was a salutary lesson. TLW has chosen to become a producer rather than an explorer. This is realistic. Oil is in managed decline and the new decade will probably be the last hurrah. The world will always need oil, but much less over the next 100 years than has been used over the last 100. To that end exploration, particularly of inaccessible or inhospitable locations will become much less attractive. Better to get in and get as much cash now from core assets than waste money on licenses or assets that are becoming problematic. Keep it simple.
Be very careful. 88E is an ultimate casino share. They have been exploration drilling in Alaska for years and still not come up with commercial oil. It could do a GKP and go from pennies to much more, but you've probably got better odds winning the lottery. This time last year they drilled, it was all hype and positive, only for the SP to bomb when it turned out to be a duster. It dropped 75% in value in a couple of days. They might strike this time, but be prepared to lose a substantial amount of your money if it turns out to be non-commercial. It's not investing, its gambling.
To put this in context, this is raised in todays circular, Section 2 "Risks relating to the transaction not proceeding", as a potential consequence if the sale of EG is not approved by shareholders.
I think OPEC will be cautious, but remember the Russians f*ucked it right up at the OPEC meeting this time last year by walking away. They wanted to flood the market and crush shale. Trouble was they chose to do it just before a once in a century pandemic and had to reverse their decision by Easter. Each country has a different tolerance to lower prices. The Russians don't care, because as one of their oil ministers once said they are used to hardship. I suspect they will agree a production increase, but one that will keep the POO between $60 - $75. OPEC is like a pit of vipers, nobody trusts anybody. The SP will soften this week until the results of the OPEC meeting; those on the sidelines will take their cue from that. If positive it bodes well for the rest of March, as there is a stream of news from TLW from the 10th.
No, the debt hasn't been sorted, yet. The RBL appears to be resolved, but other warrants are yet to be sorted in Q2. In 2019 group production was 86,000 bpd. Next year it'll be 55,000 bpd. That, aside from debt is the big reason why the price is at these levels. That being said Rahl's plan is to raise production back to 80,000 to 100,000 from 2022 onwards. If debt is sorted, production is raised and POO remains stable at $60-$70 then this could well rerate to £1.50+ over the next couple of years.
Any price action will take place in the months that follow the RBL RNS. The SP will not spike on the day. Currently there is material uncertainty and until that is lifted the SP will be depressed for a number of reasons, investor apathy, shorting etc. If that is removed then TLW becomes investable to a much wider audience. Any rise will be over the next 12 months. You need to look at wider investing patterns. Oil and UK stocks are completely out of fashion, this isn't 2009 -2012. The market is full of companies that are over and under valued. The P/E on ASOS and Ocado is insanely high, but TLW is extremely low. The unknown is any drilling this year, as that may bring the chancers to the table, which produces spikes. The next decade is going to be the last super cycle for oil. To my mind it is common sense that there is going to be a supply issue as some stage. The world cannot transition to green over night and will need oil. There has been underinvestment. For at least the next four years we know that Biden will limit output and restrict fracking. SA and Russia have achieved their aim of killing shale, so they will look to tighten the market rather than flood it and crash prices. Biden is cautious on Iran, so I don't see a near term risk of a thaw in relations. Rahl is taking an objective approach that oil will decline after 2030, so rather than find more, they need to focus on maximum return in the short/medium term.
There's a real disconnect between the POO and the value of all Oil Co's. TLW has tracked the market since the vaccine announcements of November 2020. I think many are cautious and don't believe the price will hold (once bitten, twice shy). Personally with Bidden in fracking is on the way out and OPEC will what to drive the price up to $65-$70. The big issue here is uncertainty about finance, but once that is resolved it will bring buyers back. In three to four years you could have a company with production of 100,000 bpd and a lot of free cash with oil at $65 -$70.
Because they are professionals and everybody on her is amateur. The shorts will be tied to the debt. Bond holders use shorts to hedge their own position, so if TLW went bust they would cover their bond loss with the short gain. Genuine short squeezes are very rare events. The short position will only reduce after the RBL and debt negotiations are concluded and it will be done so in a controlled way. Any substantial rise in the SP will only come after the company is placed on a firmer financial footing, POO has minimal effect atm. If it went to $100, I suspect TLW would go no higher than 40p. The result of the negotiations is key here.