Member Info for Nobull

"In any case, can anyone explain the current buyback strategy?"

Straycat, no, I give up then. I admit I did not, and still have not read the RNS on the latest buyback program. I remain baffled too.

Putup, if shares bought back are always value-neutral distributions, as you assert, why does our CEO care about the price paid?

Maybe you would be cured of your buyback disorder if the equity method of accounting were used for buybacks i.e. the bought back shares were left on the sources of finance side of the balance sheet and a corresponding asset representing the share of profits (the same accounting treatment used for associate companies) belonging to the bought back shares were put on the asset side of the balance sheet, an alternative method of accounting for buybacks that Terry Smith is calling for, probably so that people like you are not bamboozled into thinking buybacks are always value-neutral distributions and that the price paid does not matter; it does matter. Our CEO understands it is important not to pay £1.20 for £1 coins. Why don't you?

"The price is too high."

For someone who claimed for years on end that buybacks were merely always value-neutral distributions against all reasoned argument, it is pleasing to see you have changed your mind.

List of countries that are exempt from Stamp Duty. Bermuda is on the list.

https://www.gov.uk/hmrc-internal-manuals/stamp-taxes-shares-manual/stsm042260

"Can someone help me understand why GKP share purchases don't attract stamp duty?"

Because we are incorporated in Bermuda. We are a foreign company, not domiciled in the UK even if our 'shares' (depositary interests actually?) are traded on the LSE. I have to declare my dividends as "foreign dividends" on my tax returns. That may only be part of the reason - the rest might be to do with bilateral investment treaties - I don't know.

"Bot simply doesn’t get GKP’s motives.

Unfortunately neither do I."

The simplest explanation, as has been said by others, is that GKP are in a close period (because of the negotiations). It would be different if GKP had maybe signed off a buyback program relinquishing all control to their broker so that once started, GKP could not stop it.

The purpose of the Stock Exchange listing rules (now the FCA rules) on this is to stop companies using privileged information to fleece selling shareholders to the advantage of remaining shareholders (sometimes to the advantage of the directors themselves), I wonder? The rules limit the prices and volumes so that that the buyback program cannot be used to create a false market in the shares, I wonder? JMV.

J.Bond, many thanks. Well done on the bonds. Hopefully, soon the company will stop exclusively working for the bond holders and start doing some serious value accretion for the ords, but I guess that is driven by the oil price outlook, production volume outlook, "availability of finance at a reasonable price" risk and, in the short term, the Ghana arbitration outcome . The ords certainly have multibagger potential from these levels (my family is in at approx 35p and 27p. Really pleased to understand the bond pricing better here, thanks to your help, although bond investing is not my thing, but without a proper understanding of the bonds here, I do not see how it is possible to have a properly informed understanding of the ords, which is what I do want. ATB.

Thanks J.Bond. That makes sense. I forgot that about 72 days of the coupon payment has not been 'earned' by the purchaser, and seeing as the purchaser is receiving the full $3.5 coupon, he has to pay the seller for the, say, 72 days of accrued interest, which worsens the redemption yield to the figure you give from Bloomberg. Thanks.

Antonvb, I will keep my thoughts to myself then. ATB.

Yes, Supercooper, the key is can they refinance the 2026 notes cheaper? No, I do not expect them to be able to pay off the 2026 notes out of free cash flow.

I guess if you could buy bonds like the 2025 notes are priced, and repeat this trick every 110 days i.e. more than 3 times a year, you would get 31%.

Yes, you are getting about $8.5 income in 110 days' time (the coupon of $3.5 and a 5$ capital gain). Business Insider shows a "yield" of 24.6% (which does not seem to correspond either to the flat yield or to the redemption yield) on the 2025 Notes. (Scroll down to "More bonds of Tullow Oil PLC" to see the details on the 7% 2025 loan notes.

https://markets.businessinsider.com/bonds/tullow_oil_plcdl-notes_202121-26_regs-bond-2026-usg91237ab60?miRedirects=1

I discounted the $103.5 by 1.31 to the power of 0.301369863 years (i.e. 110 days), and I get Friday's closing price. i.e. the redemption yield appears to be 31%, which seems far too high.

On the going concern statement

"At 30 June 2024, the Group had $0.7 billion liquidity headroom consisting of c.$0.2 billion free cash and $0.5 billion available under the revolving credit facility, maturing in December 2024."

I agree they will be able to redeem the 2025 notes and pay off $100m of the principal on the 2026 notes next May, but the worry is the $1.2bn or whatever that is outstanding on the 2026 notes. It is the next going concern statement that the market is concerned about, I wonder?

Antonvb, that may be so, but the company has net current liabilities in the last interim balance sheet, which I think is StanleyPro's point (expressed as revenue not covering current liabilities).

I admit I am shocked by my redemption yield calcs, so maybe there is an error in them. I assumed the closing bond prices on Friday were clean ones. In the case of the 2025 notes, the calculation is very simple with only 110 days to redemption and the last coupon payment.

StanleyPro, I make the redemption yields on the 7% 2025 Notes and the 10.25% 2026 Notes, 31% and 22.27% respectively, which sort of backs up your narrative about the difficulty of coming up with the nearly $600m to meet the cost of redeeming the 2025 notes on 1/3/2025 and the mandatory down payment of $100m on 2026 Notes on 15th May 2025. I am long in the ords, so not great :(

In that light, it is difficult to understand why the German non-exec keeps buying the ords! I live in hope.

But buying at intrinsic does indeed make... = but buying at intrinsic value does indeed make...

would allow directors too much latitude flatter the accounts = would allow directors too much latitude to flatter the accounts.

as a consequence of your misconception that buybacks always value-neutral distributions = as a consequence of your misconception that buybacks are always value-neutral distributions

“The company is merely returning excess capital to shareholder … [Long-term shareholders] increase their ownership at the buyback price. Management aren't making a judgment on valuation. “

Wrong. A share has an intrinsic value. Buying below or above that price respectively adds shareholder value or destroys it (a fact you are in denial of), but buying at intrinsic does indeed make the buyback a value-neutral distribution (as you claim); the problem is you claim ALL buybacks are value-neutral distributions (the accounting treatment of them confusingly does indeed make them look like they are, necessarily perhaps because any other treatment would allow directors too much latitude flatter the accounts).

Another fact you are in denial about (as a consequence of your misconception that buybacks always value-neutral distributions) is they are a CAPITAL ALLOCATION DECISION.

In the case of MP Evans, there is a choice between planting new oil palms or purchasing oil palms by buying back shares for cancellation: one is a better course of action than the other depending on which adds the most shareholder value. The same sort of decision-making ought to be being undertaken by our BoD re increasing output of oil per share, a capital allocation decision.

Here is Terry Smith on the subject:

“The problem is when a company repurchases shares they disappear from the balance sheet and this can be used to distort measures of company performance.

Simply by executing a share buyback rather than paying out dividends, companies can inflate earnings per share and are almost universally seen to have created value for shareholders when they clearly have not.

Capital allocation decisions are amongst the most important decisions which management of companies make on behalf of shareholders. Yet share buybacks are not sufficiently understood by company investors and commentators, and maybe even by company management.

One of the most important facts that is continually overlooked is share buybacks only create value if the shares repurchasd are trading below intrinsic value and there is no better use for the cash which would generate a higher return.”

Buybacks are discussed in this article “Is a Share Buyback Right for your Company” from the Harvard Business Review: the Merck buybacks were a failure – they destroyed shareholder value.

https://hbr.org/2001/04/is-a-share-buyback-right-for-your-company

This is my last post on the subject. Putup, you are unfit to advise any company on buybacks until you change your view.

"Expect the company to be more picky as to when it buys back stock this time around."

So you can now see that it matters what price shares are bought back at, and you will promise NEVER EVER again to peddle that nonsense that buybacks are always value-neutral distributions even though the way of accounting for them (to the uninformed readers of accounts) makes them look like they always are.

Yes, lovely RNS, but a pay date one day after the budget? Crikey, Rachel Reeves is bound to put up dividend tax rate. I saw a flight out to Tirana for £12 (arriving there at 2 a.m.) so I could go there, and if the Budget is sh*t, stay there and not come back. Most concerned about exit taxes on unrealised gains.

Yes, will be wonderful if there is regime change. I lived and worked in Iran for a year (July 78 to July 79). I still have a Persian language newspaper with the historic headline "Shah raft" (Shah gone) and a lot of the gruesome ones with all the executions in. The oil price will be volatile in the meantime, I wonder? The brutality of the regime means I am not confident there will be regime change, but then again these regimes are stable until they are not.

According to MarketScreener, the company will cease to have negative equity at year-end 2024, and will trade on Price to Book of over 300x, which falls sharply by year-end 2025, assuming oil price of about $80 a barrel (unfortunately, now about $73?), i.e. the debt financiers have a chance of getting repaid in full in a liquidation at year-end 2024, if the balance sheet asset values resemble reality, which they probably do not, but this might be part of the reason why our junk bonds are trading close to par value; more pertinent reasons might be expectations of a fall in the risk-free rate of interest, I wonder?

"Yes totally agree, APIKUR a good idea but apart from very boring and drawn out utube videos the colonel's contribution has been non existent in terms of progress with contracts and pipeline re-opening IMO."

I do not think they are boring, and he is dealing with difficult people (the CGI). He may have helped get American politicians to bring some pressure to bear. What is wrong with that? A lot of things are outside his control. If he were useless, he would have been replaced ages ago, surely?