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The SP overheated yesterday 1.20 was far too high a jump and there has been the inevitable correction today as the market determines a new level. ARCM aren't stupid. They want their cake, to eat it, take all the birthday presents, whilst selling the children into slavery. They are nihilistic in approach. They want PMO to sell assets and raise money via a rights issue to pay debt back. In doing so PMO would be much weaker, but by then they'd have their cash/debt back and the SP would be much lower than 70p ensuring they collect on the short as well. Having destroyed the company they'd move on. TD wants to create value in the future. This deal is not unlike the Eon deal in that it will pay for itself and be cash positive in a short space of time. If there is free cash flow of $1 billion by 2021 then the debt is going to disappear much quicker. Coupled with the proceeds from Zama PMO becomes investment grade. At this point climate change or not there will be plenty who will want a piece of this revenue stream via dividends. It is a risk. If the deal goes through then there will be a short squeeze at ARCM get out, but if they buy up the rest of the secondary debt it could go wrong for any ordinary holders. I can't remember the name of the aggressive hedge fund that blocked everything, albeit on a smaller scale, when the major refinance went through the first time. PMO is vulnerable to this, but on the flip side this is why it presents opportunity for profit.
There's a really interesting book on shale "Saudi America" by Bethany McLean (Columbia University Press). She puts forward the argument that shale is a product of the financial crash. In simple terms shale requires huge amounts of capital investment just to stand still, because you constantly have to move rigs, find new sites to drill and all of the associated chemicals, sand etc that is required in the fracking process. Without the insanely low interest rates that we have had since the crash shale companies and the process would never have got off the ground, because higher interest rates would have strangled the industry at birth. The greatest risk to shale has nothing to do with the oil market, but everything to do with the continued flow of cheap credit. If that ever dries up it would kill the industry instantly.
GS are buying for a client or engaged in an agreement with one (in the same way that Hargreaves Lansdown are showing as 6% ownership, but it isn't them it's the cumulative holdings of all PI's). GS are not buying shares they're loaning them. If you read the notification RNS' the financial instrument is always listed as a CFD (Contract for Difference). The link explains what these are https://www.investopedia.com/terms/c/contractfordifferences.asp. There was a good discussion about this earlier this year. It is possible that these purchases in PMO are being used as a counterweight to somebody who is also long/short on oil itself. I have no doubt that some are short, because PMO is still exposed due to debt to a downturn in price. There was considerable talk earlier in the year about equity raising to purchase Chevon assets in the NS. This sale process has gone quiet, but some in the know may be willing to take the bet. Likewise with Sealion, if they don't get funding its value will drastically reduce. The other topic that has gone quiet is the sale by MOL of their share of Catcher. If PMO decided to purchase they would probably need to go for a rights issue. Ultimately traders like PMO because of the large price fluctuation. Until GS decide that they've achieved their objectives the price will remain depressed. Stating the obvious this will move in a big way at some stage. The question is which way? Place your bets!
PMO, had the audacity to try and break 75p again? Back down you go.....
GS aren't swing trading they are trading to ensure the SP remains in the range of 68-72p. The million dollar question is why? Is it a simple hedge against other trades or is it in anticipation of a low ball takeover? It can't be a pure short at these levels as all news points to the POO remaining at these levels or moving higher towards $70 in the spring.
Why has it fallen?...Back in the summer the narrative was $100 oil is coming. Trump reimposed sanctions and the Saudi's opened the taps at his request to balance the market. The price rose accordingly in expectation of sanctions. What we now know is that Trump shafted the Saudi's and his real agenda was cause oversupply in the market to achieve a lower oil price and increase US shale market share. As with all that Trump does it is chaotic and for short term gain. Trump loves to create the image with his voter base that he has the Midas touch and he has been able to do that with oil...."Hey voter base I told those pesky towel heads to lower the price...and they did. I'm fighting America's corner!". The problem with his approach is the nobody will trust his word going forward. The Iranian exemptions last until March. At that point Trump encounters difficulty with his short term view, because either he extends them and looks weak towards Iran or imposes them and causes a potential spike in the POO. The recent OPEC cuts have not kicked in yet, but coupled with the Saudi's termination of exports to the US this will cause a tightening of the market in January. Trump asked for higher imports from Saudi in the Summer and as a consequence the EIA figures have shown large builds in recent months, but this is smoke and mirrors, because it is not a build due to downturn it was a deliberate ploy to influence the figures to create the view there is a glut. There is a short term glut, but nowhere near the levels of 2014. Once this is cleared and the new cuts kick in POO will rise, not to $84, but back to $70 which is what the Saudi budget is based upon. It's grim, but this is a different situation to 2014.
Trump thrives on disruption. He's in the same mould as Putin. If you look at his record most is just smoke and mirrors. The presentation is deliberately provocative and brash, because it creates the impression to his core voter base that he is doing something for them. The hard reality is that this disruption will ultimately be against his voters interest, but he'll be gone by that point. In any event he'll just ignore bad news. It's sadly ironic how he was quick to claim credit for the stock market rise earlier this year, but is now silent. I don't think this is a deliberate strategy. I think he is sadly just moronic. As Buffet once stated "Understand what you're investing in because one day a monkey could end up running the show". I'm switching off today. I think the MM's will drag this right down on fear, then there will be a mediocre cut and an EIA draw cancelling each other out, which will lead to a limp recovery tomorrow for a low base.
I took from the opening message that OPEC want the same average price in 2019 as we had in 2018, so they're looking at a cut that ensures a price around $70. Stating the obvious whether they can achieve that is an other issue and if they don't this will be a bloodbath. The difficulty is that Trump is unpredictable. Whilst the waiver runs out in March nobody will trust that he won't extend to to give a "tax-cut" to his precious voter base. He may over play his hand, because like the boy who cried wolf eventually he will have to turn the screws on Iran or he'll look weak. By this point OPEC may have learnt to ignore him and this could cause a spike next year. As to PMO I think they've hedged at $70 because this is a good estimation of where the market will be next year. $84 was euphoric. That being the case as long as OPEC cuts to keep the market stable then the SP will stabilise and it'll be a slow road back to £1.
It's not praise, it's an assessment of his decisions over the last couple of years. I agree Solan is a total clusterf*ck that is unlikely to ever be solved. It is likely to limp on producing 5k and can rightly be considered a disaster, however the company is moving in the right direction. TD's presentational skills are akin to inviting a Dementor to a child's birthday party, but decisions he and the BoD have made have kept the company afloat in very challenging times. The SP is down, because oil is down. The drop is amplified because of the debt. The reverse is true that any % rise will exceed those seen in TLW or others. I'm not impressed by this price, but I try to take a balanced view as to why we are here.
The BoD haven't lost it. TD may have the personality of a wooden board, but the EON deal was the right decision. Catcher was brought on stream smoothly and is now the jewel in the Crown. Tolmount will also come on line. People miss the up to 40% of revenue will come from gas in due course. Once Zama is appraised I suspect TD will off load that ASAP. Some may say the physical operating conditions are much bettet than Sealion, but that totally misses the point that the political conditions in Mexico are fraught with danger, the tax regime is very unattractive and the President unpredictable. If he can pull that off that would transform the company with a hefty amount coming off the debt. TD clear has a strategy of focusing on the North Sea and Sealion. The FI has a very attractive tax regime, so whilst the area is physically challenging, once producing it has great profit potential. PMO always suffers more than most mid range oilers because of the debt, but this has been a sector wide collapse. The next issue will be OPEC. I cannot see how they could not cut. Most members require higher prices. KSA wanted between $65 and $75. Everybody is now waiting to see what happens, so the SP will not have any direction until after that meeting. It is a binary bet. Cut and Oil will be back to $75, no cut and it'll be a bloodbath. As far as PMO goes if it is a bloodbath will the BoD have lost it by locking in 30% production at an average of $70 next year? No, again a sensible move. The wider market is being played like a fiddle at the moment. It's unpleasant if holding from higher prices, but this SP could well be a steal if events full into place.
I agree it's an ugly world out there. Whether the US sanctioned it, I don't know. Certainly MBS and the highest levels of the Saudi Government would have known, but it was such a botched job! If you wanted to kill him, just dress it up as a street robbery or burglary gone wrong, don't get him around to the embassy and do it in broad daylight. The US is pumping at its highest levels ever now, so if the reason is market share any cuts to output will cement them. The Saudi's have been properly done over by Trump....as indeed have I and any body holding since the start of October!
In hindsight it's so transparent....without the murder of Khashoggi Trump had nothing to barging with. It's effectively a black swan event. He's been tweeting all year about lower oil prices without effect, but the events of Istanbul changed all that. It's perhaps no surprise that PMO hit the year high on the day Khashoggi died and has fallen ever since.
What I still can't work out is Trump's game plan. He clearly wants lower prices, but is this to gain favour amongst his voter base or is it an attempt to gain market share for US oil? Lower prices do not assist US oil or shale.
It's obvious now that he has told the Saudi's that the price of his support is to keep the taps on, but how will this play out amongst other OPEC members and Russia? They were led to believe that oil output needed to rise to compensate for Iranian sanctions and Trump has blindsided them.
In short they'll never trust him again, but how will the Saudi's convince them to keep the taps on if the technical data screams cut? PMO is at the mercy of real politic now, but whilst people moan about the astonishing drop in price it does present a greater opportunity on the upside. If OPCE do make meaningful cuts in December the upswing will be swift.
I think that that once Zama is appraised TD will look to off load the asset to reduce debt, so PMO does have some control over additional debt repayments. They will then look to concentrate on Sealion going forward.
Agreed ROS and Smut. I've been here since January 2016 just prior to suspension. There's nothing to say at the moment. There is always one provocateur on every message board who incessantly broadcasts doom. Last time I posted I suggested people switch off and return in a few months and the price doubled. That'll do for me. Last year this was 66p and the doom merchants were suggesting it would never exceed £1. Long term demand for oil is going up, Venezuela will collapse in the medium term, there has been a severe lack of investment and Trump won't ease the pressure on Iran. Those are good enough reasons for me to stay for the foreseeable. If you missed selling out yes it is a pain to lose some paper profit, but I would estimate that by the time the December/Jan pump returns this will be out of the current soft/depressed phase back to higher levels.
It's stupid season. Buy now, switch off and wait until Christmas.
It's all theatre. The SP is back to where it was around the 17th May. Pump and dump. Whilst it remains outside the 250 the SP is going to be prone to exaggerated volatility. Think of it as you would an AIM share. Sentiment is hysterical. One minute it's "Oil stocks are dwindling" the next "the taps are going to be turned on". It's over �1, just two months ago it was 65p. It was inevitable that after a sharp rise there would be a correction and bang on cue we have the scare stories of the OPEC deal falling apart. Think of it logically, when you've got your opponent on the ropes you don't walk away, you land the killer blow. Do you thin the Saudi's have come this far to see oil retrace to $50 - $60? No, they've waited four years and they'll want the maximum oil price for the IPO of Armco. Look beyond the smoke, three week visit by MBS to the USA earlier this year..coincidence? No, of course not. Iran has been pushed out of the picture and Venezuela is f*cked. The Saudi's and the American's are carving up the market. Trump may whine about the POO, but the truth is his financial backers in the industry will love it and he can point to more job creation. Smoke and mirrors. If you're a trader then yes you should have sold on the spike, but by year end the SP will be higher. Buy on the dips. The MM's are harvesting shares and savvy investors will pick them up. Demand is rising, infrastructure has not been replaced, limited investment, Venezuela and Iran pushed to one side, limitations on fracking due to lack of pipelines.....classic boom and bust...bust and boom. Four years coming, but higher prices are coming this year.
Let me clarify that 10-15p is RKH's SP, which is what you may as well look at now.
There are many commentators but the reality is that nobody has a clue about where POO is going. We are in completely uncharted waters. The Saudi's are waging an economic war, but have lost control of the situation. Non-OPEC members aren't going agree to cut production. It's like watching an old western with two men guns drawn at each other telling the other to put their weapon down. What is now clear that at some stage (and this is the million dollar question) the wheels will completely come off and the market will rise fast. That could be 2017, it could be 2020. Short term this is a race to the bottom, but I can easily see it dropping to 10-15p before a bounce to 30p. It's going to be a volatile ride.
People are p****d off because we've lost the potential upside, but that is just gambling. If Issy doesn't come in where would we be? 5p or lower and going back to the market for a poorly executed AIM share issue after which the price would drop to 3p. It is a fight for survival amongst the Oil Co's now and will be for 2016. I'd rather have cash behind us and the prospect of real rises when the POO recovers. The BoD may have gambled that Humpback would come in and produce a beauty parade of offers. It didn't and I would rather merge now than take more risks only to find nothing and be out of cash. If there really is masses of oil in the North value will out in the end irrespective of whether you hold fogl, pmo or rkh when the POO recovers.
There should be about 30 - 40 million still in the bank, because this drill is a free carry. Assuming no value is placed on the asset, then 6-8p? Very hard to tell, except that if it is not a success you can bet the SP will be torn another new a**hole. I take the view that oil cannot remain at this price for ever. There is an economic war being waged by the Saudi's. I doubt we'll ever come close to the heady heights of £1 as suggested by some previously, but Numis have a rating of 38p (18.11.15). That's a four bag (ish) from here. The landscape may well look very different in 12 months time.
There should be about 30 - 40 million still in the bank, because this drill is a free carry. Assuming no value is placed on the asset, then 6-8p? Very hard to tell, except that if it is not a success you can bet the SP will be torn another new a**hole. I take the view that oil cannot remain at this price for ever. There is an economic war being waged by the Saudi's. I doubt we'll ever come close to the heady heights of £1 as suggested by some previously, but Numis have a rating of 38p (18.11.15). That's a four bag (ish) from here. The landscape may well look very different in 12 months time.