Member Info for Nobull

This would not post there for some weird reason.

They deny having a maintenance capex backlog, yet the eps growth forecast is not great (4%?), the payout ratio is low, and they also seem content with current debt levels, although net debt is forecast to drop from £105m to £60m by June 2028, so what is the growth capex doing? Nothing, it seems.

But all this is already discounted in the low forward PE, so if they did announce a shareholder-value-accretive acquisition, the share price ought to get closer to that broker target of about £1.90.

Agreed the award of so many shares is not great, but as Charlie Munger said "Show me the incentive, and I'll show you the outcome". This is a great opportunity for them to buy back Teleios' shares for cancellation to undo those massive share awards.

Another company with flat growth prospects, low payout ratio on a low forward PE, just like MCB, is FUTR, a content publishing business.

"Special Dividend on its way 🔥🔥🔥🔥🔥🔥🔥🔥🔥"

Please, no. Save it for the 26/27 tax year. And given our extraction rate is too low given the time left on the licence, it would be better to spend the dividend money on a ramped up new drilling programme. JMV.

Tman, I didn't assume any bad intentions. Just pleased to hear you think the new incremental oil production will be low cost. As I said, that ties in with what I heard about the ROI on the capex being sky high and obviously shareholder value accretive. Not disputing anything you have said, quite the contrary!

"So just imagine what one good year will do for Tullow and that doesn't even take into account increases in production, gas sales or contingent payments."

Anton, there is not time for a good year between now and the conclusion of the refinancing negotiations to get a new, postponed cram down date more favourable to us.

"Believe that is untrue since new oil Will be , due to existing Infrastructure, at very low cost of 20$pb."

Thanks for that Tman. Yes, that would tie in with what I heard about the prospective ROCE on the new wells when I queried whether it was better to cancel the capex programme and use the savings to pay down debt.

The justification for continuing with the capex programme was an absolutely off the scale ROCE figure that I almost had to pinch myself to believe - rather than repeat the figure I just referred to it as a no-brainer investment in a previous post.

"Bondholders have dictated the last 5 years and maybe this could be a new era."

Yes, Supercooper, let's hope so. Yes, our only hope in the short term is of a more competitive financing offer than JBond's, perhaps in the form of an all scrip offer from a cash rich oil company, all to postpone the equity cram down date (or to benefit from the lower financing costs of whoever takes us over) until we have sorted out the production problems on Jubilee. Fingers crossed we are near the bottom now.

"There's money out there for refinancing Junior oil producers, at lower rates. "

That may be so, but the interest rate is usually related to the riskiness of the borrower. If we were borrowing $1.2bn new debt at 15% i.e. $180m a year interest payments I think we would be finished: the material uncertainty as to going concern stuff in the H1 results and the zero FCF at $65 a barrel at current production levels.

We are in the late life space having to use expensive ERMs to get our oil out, which does not help.

At present we are heading for a cram down date set for May 2026 where a harsh decision is made as to how the Tullow assets and associated cash flows are split once and for all, for ever, between us and the debt financiers.

At present, without a refinancing, we are maybe on course to get zero. We can swing more of the spoils our way if we get more FCF (higher oil price, more production from a new well due to come on stream), on time payments for Kenya of $80m, on time Ghanaian payments for gas arrears and a 2P Reserve upgrade (courtesy of a production licence extension).

The problem is some future cash flows, which could otherwise help us, will come the wrong side of cram down date (e.g. the royalty revenues) and final Kenya payment, so these funds will go to the 2026 bond holders as a sort of bonus, not to us, in the absence of any successful refinancing (because they will be the ones owning all the company after May 2026).

JBond’s refinancing solution sounds creative in that it puts off the cram down date to a much later date e.g. to when a low coupon (10%?) convertible bond matures and when masses of value transfers from us due to the discount on conversion, and that’s only in the good scenario e.g. if we manage to keep production levels up and get a decent oil price.

The other scenario is the same as the one we are currently headed for i.e. complete wipe out except, with a successful refinancing, complete wipe out will just happen at a later date, i.e. we just get longer, to sell out at the current crappy share price.

Reluctantly, I think JBond has it right as does JMax with his zero share price growth scenario for years on end, the giving-up of all share price upside as the cost of refinancing.

P.S. there could be some shareholder value creation by buying the 2026 bonds at a discount between now and May 2026, I wonder, if we manage to collect the various payments we are anticipating. Be glad to hear from anyone what I have got wrong.

Supercooper, hi.

No, I have no experience in doing this kind of thing. I am just a learner. Ashley Kelty at Panmure Liberum has a target price of about 5p-7p (from memory), which may give an indication of what is to come, but I don't know what order he thinks things will happen in: a reserves upgrade after the refinancing deal will enrich the bond holders massively, I wonder? The share price is so low, there is no point in my selling out, and I certainly do not want to help the shorters. A WACC of 15% is what I was told. So if we can pay that sort of interest rate on our debt, we might be alright. I have not worked out if we can afford that sort of debt interest rate. I did ask about whether it was better to just scrap our drilling programme and use the money saved to pay down debt, but the answer I got was that the capex spend was a no brainer compared to not bringing on any new wells and using the saving to pay down debt. Fingers crossed we are near the bottom.

Https://www.equitydevelopment.co.uk/research/mcbride-fy-results-investor-presentation-video-18-september-2025

"Something is up….. surely?"

Hopefully, we will get the licence extension (the reason for meeting the president?) and reserves upgrade and the first two instalments of the Kenya payments before the refinancing deal is completed. We want the smallest debt for equity swap possible, and getting these other things done before any D4E will ensure the minimum amount of equity issuance, if any at all. It would be helpful to bring on another production well too beforehand. Losing a packet on this, but JBond is probably right that any money to be made in TLW will be in the 2026 bond: the bond holders have all the bargaining power; sadly, it is secured. JMV. I expect the shorts were worried by the meeting with the president. A reserves upgrade is the last thing the shorts want.

Sparks, a short and very readable book on the attractions of different business models is The Intelligent Quality Growth Investor 2025 Edition by Long Equity (an attention-grabbing nom de plume, if ever there was one). It may sharpen up what you want to hear in a presentation, and then maybe such presentations will be less of a drag – I don’t know.

The only problem with the book in recommending stocks with persistently high ROCEs (a sign of efficient capital allocation), persistently high operating margins (a sign of pricing power), persistently high FCF growth (a business model that allows growth without requiring huge capex to grow) is that shares in such companies are likely to be priced accordingly so no point in buying them. The answer maybe is to buy them at a time of crisis but that will be hard to do because the newspaper headlines will be warning about the end of the world, the problem of doing the opposite of what the herd are doing, and then there is the problem of having the cash pile just at the right time to exploit the situation to your advantage. Still the book is worth reading. Hope this helps.

Yes, you make a good point, Polishcap, about the importance of supporting the share price when it is far below fair value. It may be that they have other more lucrative uses for the FCF (acquisitions?). The dividend at least gives investors the choice themselves whether they want to buy more shares in the company. I am not a great believer in buybacks rocketing the share price: the rules around them are designed to stop the share price being disturbed too much, I wonder?

Yes, sorry I forgot that point. Our CFO said any buyback was dependent on the share price, and get this (because it really impressed me) he said buybacks were a capital allocation decision: I have argued with people who said they are not; they are. (Good to know he won't do them at any old price, as some people get bamboozled by the accounting treatment of buybacks making buybacks look like a shareholder-value neutral operation (like dividends leaving the company) when of course buybacks are not, even if the accounting treatment makes them look like they are. Sorry for the lecture: I have a bee in my bonnet about this topic. The listing rules around buybacks seem to me to be designed not to cause a false market in the shares, so buybacks are not always the magic thing to stop a share price falling if there is say an earnings downgrade, I wonder?

Polishcap, hi.

No, I could not find a link either.

Could not post this on ADVFN as sometimes I get the "contact support message if the problem persists"

My takeaways on yesterday’s presentation to private investors (not perfect, I cannot remember everything so help from others would be appreciated) are:

Operating margin matters, and our directors will make sure it is maintained (although it is complex what with changes in mix of sales causing switches, say, to lower value products, etc.) but they point out there are product engineering solutions to deal with margin preservation, and their "partners" value what McBride do. There are now quarterly review procedures on contracts to amend them (by mutual consent?) to take account of cost headwinds. Partners have differing requirements all the time: one minute it is more perfume additives, another it is packaging changes, etc. and it just happens that cost-outs are flavour of the month for now.

Debt paydown is no longer such a pressing priority, so similar falls of £26.3m to that in the period just reported on will, in the current accounting period, be a bit unlikely to be repeated: they are looking for growth investment opportunities with a payback period of 2 years or less (sounds shareholder value accretive to me). Our CFO comes from a private equity background, which to me seems important in making the right acquisitions. Buying existing businesses is maybe less risky than building a whole new factory from scratch, I wonder?

The risk of hackers disrupting our business, the way M&S has suffered, is being managed appropriately. Chris Smith outlined a strategy they are concentrating on. I could go into detail but it is maybe unwise to if the company doesn't publish yesterday's chat.

The company has not built up a maintenance capex backlog in paying down debt as quickly as it has. They said it was difficult to separate growth and maintenance capex because replacing a machine with a new one often involved a bit of both.

Liquids are expensive to transport, so the factories that make these need to be close to where their partners are. It is different with dishwasher tablets, etc.

Contract manufacturing for the branders is important: it covers the (fixed cost?) overheads.

The remaining £45m of Transformation benefits still to come will be weighted to the 2028 accounting period (£20m in that one). The rest will come in the other accounting periods before then, £5m in the current one.

The accordion facility will help finance acquisitions, I wonder?

The company is quite different from before: the new operating model seems to be responsible for a change in the previous falling sales trend and the “operating margins all over the place” problem. CS believes the business is much more stable now, and the top line is more stable now. The new operating model seems to have many advantages over the one before. JMV. Open to correction on anything, if I have got it wrong.

Sorry if this has been posted before, but it really caught my eye (from an article in the Telegraph)

Wind farm failure

Wind farms are being built, with public subsidies, that have to be paid not to produce electricity when it is very windy because the outdated grid cannot cope with the surges in power they produce.

Mr Miliband also insists on importing wood from Canada to be burned in a “biomass” power station in Yorkshire, which has resulted in the felling of 300 million trees. Even though the plant is Britain’s biggest single producer of carbon dioxide, Mr Miliband classes it as carbon neutral because he says trees can be planted to replace the ones that are felled.

In total, 11p in every £1 of household energy bills goes on green subsidies to pay for Mr Miliband’s schemes, which also include a £22 billion spend on carbon capture and storage, which critics say is unproven technology in the UK and will make almost no difference to global CO2 emissions.

Industrial energy bills in the UK are four times more expensive than in the US, as well as being higher than in many other competitor countries, which is driving investment away.

Pleased to hear from the presentation that our CFO understands you have to do buybacks below fair value to add shareholder value, unlike one poster here who takes the accounting treatment of buybacks as a value-neutral operation (like dividends leaving the company), which it is, but of course which is unlikely to be a correct representation of what is actually happening to shareholder value. Too subtle a point for some to understand.

No, I had the volume turned up to 100% on the presentation and 100% on the laptop, and it was still quite hard to hear it, but I did manage to understand it all, although could have done with subtitles when the fluent Norwegian analyst was asking his questions, the guy from Stiefel?

"PE ratio of 5.5x seems like bargain basement."

Yes, it is. Margin compression worries seem overdone. MarketScreener shows the eps forecasts have been trimmed a bit (1p off the 2025 and 2027 forecasts, and I cannot see if the 2026 forecast has been trimmed: the graph showing the change to the 2027 forecast obscures any possible change to the 2026 forecast. On my source of Factset Research consensus forecasts (from a different web site, the forecasts have remained unchanged or have not yet been updated.

Have you missed anything? You have not discussed whether the Board's record of making low risk shareholder value accretive small infill type acquisitions (either for new product or for new geography). I do not know the company well enough to know its record on that, and I have never discussed what WACC they use to decide on whether a possible acquisition would be shareholder value accretive or not, something I should ask about at the next AGM.

I think it is right that one analyst has reduced their turnover forecast slightly in response to the trading update, while keeping eps the same.

The only other things I can think of are the unpredictable unknowns - will WW3 start in the Middle East and cause the Suez canal to be closed and energy costs to go through the roof, destroying MCB's margins? No idea on that.

Stockopedia gives us a speculative risk rating. That needs to change soon to the lower one of "adventurous". I think your post has changed sentiment here! ATB.

"but if MCB can compound earnings at 18%" should read "but if I can compound my wealth at 18% p.a."