Member Info for Megla

Better looking forward not back, FCF this year could be negative it oil prices continue to fall. If covenants are beached equity could get wiped, hopefully coronavirus is being blown out of proportion.

Where you getting the FCF figure? It’s zero at the these oil prices for the year, not $350m.

Not sure, not done the math. Horrible timing for Tullow, but a massive buying opportunity if the coronavirus does just follow a typical seasonal flu pattern.

The 22,000 @ $52.78 is next year. We have 30kpd unhedged. If oil drops and stays there, then there’s going to be a risk of breaching covenants at a time when we’re going to be desperately trying to get creditors to roll over the debt. Risky times.

Balance sheet*

A weak balance and the potential for a global pandemic is not a good combination.

So in short Tindrum, you have no idea how the company intends to pay its 2022 bond, but raising new equity to strengthen the balance the sheet is a crazy idea, gotcha.

Tony, I get their working on things in the background and hopefully they can obtain a sale of Kenya, but it shouldn’t be assumed that there’s a line of potential suitors, it might take time or it might be dependant on FID. Uganda would again be very welcomed but aside from this forum I don’t think many people share the optimism that it will be resolved soon.

Anyways, just voicing an opinion, obviously it doesn’t fit on here, but there’s reasons the equity and debt are trading as they are regardless of if investors want to entertain certain view points.

But what if that deal was at the expense of the equity?! Thinking from a bond holders perspective why would they want to extend the maturities? Tullow have no near term production coming online and decline production assets. I wouldn’t just assume people are happy to extend without a realistic plan for them to get their money back.

2022 bond becomes a current liability in 16 months, that’s when the company needs to have a plan, either an agreement to extend/replace or pay back.

So anyone suggesting the business should strengthen the balance sheet is short, gotcha.

Maybe you could tell me how the company intends to pay back the 2022 bond with production expected to decline again next year, further limiting the ability to generate fcf?

Not sure why you think strengthening an incredibly weak balance sheet is a negative post?

With vulture hedge funds buying up the distressed debt, should the company carry out a preemptive rights issue to strengthen the balance sheet?

Yes there are noises about selling Kenya, which will be confirmed in the year-end results, but how likely is a buyer within a reasonable amount of time?

With the declining share price, does this need to be done before it’s no longer an option?

I’m not aware of any way you’d be able to find out, Auson.

Lol, bonds never follow equity.

The bonds are dropping due a perceived risk that holders won’t get their money back, prices have to go down to entice buyers with an attractive enough yield to talk of that perceived risk, similar to stocks really.

We’ll know more on the 12th, but as it stands cash flows aren’t enough to meet the debt maturities so not overly surprising that there’s some weakness.