Member Info for Megla

Slift, is saying the April 2021 amortisation has been completed, so might be on a RNS since then.

Longish, that’s the one I have with shows the next scheduled amortisation being April 2021.

Tim, FCF neutral this year which we know.

I was just guessing at the FCF for the 18 month period from the January RBL redetermination. Impossible to know without having an idea of CAPEX commitments and cash tax payments.

Slift, would you be able share the link to circular that shows the April 2021 redetermination has been completed. I’ve obviously missed it.

I’m still confused as to your logic. The company has already told us they’ll fail the January RBL liquidity test.

By excluding the RBL amortisation you’re showing it as passing, which is a mistake. The available facilities form part of the liquidity so must be included.

“Tullow has voluntarily reduced facility commitments from $2.4 billion to c.$2.2 billion, effectively accelerating the first scheduled commitment amortisation from October 2020. The reduction in debt capacity and commitments will result in a reduction of finance costs. The next scheduled amortisation of $211 million (commitment reduction, not repayment) will therefore be in April 2021. This amortisation schedule continues every six months until final maturity in 2024. The next contractual maturity in Tullow’s capital structure is the $300 million Convertible Bond in July 2021.”

This was taken from the April RBL redetermination, which states the next scheduled amortisation will be April 2021. Maybe I’ve missed something?

Slift, don’t follow your logic.

How can you omit the reductions in the RBL when they form part of the available liquidity?

Half year liquidity is $500m, which is current cash and remaining facilities on the RBL, if you remove those facilities then liquidity is reduced, hence why it must be included.

Liquidity tests are for 18months.

January’s pulled forward test covers to the end of July 2022 so includes the following:

$200m April 2021 RBL Amortisation
$300m July 2021 Convertible Bond
$200m October 2021 RBL Amortisation
$200m April 2022 RBL Amortisation
$650m April 2022 Bond

Total $1550

The September liquidity test ends in March 2022, so excludes the April debt maturities of $850m so passes.

January 2021 liquidity:

$700m - Year end liquidity assuming cash flow neutral for the year.
$500m - Uganda
$350m - FCF for the 18 month period from Jan 2021. Tullow would be forced to use the forward curve so this is generous.

Total $1550

So basically the company will run out of cash without any mitigating actions, which include a number of options. Tim points out he’s concerned about refinancing the bonds, I’m not that concerned with this option given that their subordinate to the RBL in any default scenario.

Having thought it through, I do think they’ll have to be an equity raise failing any further asset sales by the end of Jan. Although I think the bondholders will extend, I can’t see them doing that without demanding some form of protection in terms of new equity to strengthen the balance sheet.

It’s certainly going to be an interesting few months.

Good points Nickel, it’s isn’t the preferred option so is somewhat of a pointless debate at the moment.

JMAX, if it’s fully underwritten then it doesn’t matter if people don’t take up their rights. Tullow’s reserve are mostly oil and long life, the company has issues with its capital structure, once that’s resolved equity should do well.

I would hope its a rights issue if they do need to raise new equity. Obviously difficult when your share price is in the gutter, but given the value of the assets I’m sure it’d be fully underwritten if deemed necessary.

JMAX, Tullow don’t want to raise new equity, but the creditors might demand its part of any deal in extending the RBL or bond maturities. Not sure I understand the question about it being worthwhile and price ranges?

Slift, provides those mitigating actions are taking before the end of January equity should do okay. As I say, it’ll will be interesting to see how this plays out.

Slift, they still need mitigating actions in January even with sale of Uganda. The liquidity test, as it stands, would have to cover repayment of both bonds and the amortisation of $600m of the RBL.

Rights issue is on the menu, it just isn’t a preferred option. I don’t think anyone could accurately predict what happens between now and the end of January, but I do think Tullow will come out of it okay, even if shareholders have to stump up a few quid.

Slift, not a criticism, but why were you invested in a company where you base case was a debt for equity swap next year?

There is more to the pull forward of the RBL redetermination, I have my own theories but the company will always stick to the reasons laid out in the results and on the conf call so would just be speculation.

The next few months will certainly be interesting for shareholders but given the debt structure we’re not the only ones staring down the barrel of a gun.

JMAX, why a bigger downturn if the virus isn’t that deadly in your view?

You could be right, although I prefer to work off what’s in front of me now, but no harm in being optimistic.

The share price got clobbered because the company spelled out that without further action they’ll fail the RBL test next year. Obviously the company still needs to take that action so personally reckon it’ll be next year until we see any significant share price rises. Will be very happy to be wrong though.

The $500m is most definitely required, but the January RBL redetermination still falls short even with the $500m. They’ll be a time for creditors to exit short equity positions, but not necessarily before the Uganda sale proceeds are received.

A lot of the shorts will be hedges against debt positions. I wouldn’t be surprised to see a managed exit once agreements with creditors have been made.

Close to a billion a year in FCF at $65 oil.