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Yawn. Wake me up at Christmas when we are in the middle of worst gas supply crisis in living memory and IOG flow rates have doubled.
We all know SP is disconnected from reality. Unless you are already fully invested here then just accept it for the gift that it is. I will be shocked if we do not have cash equal to or greater than current MCAP by Jan/Feb 23.
I estimate we already have approx £25M - £28M from June and July.
Personally I would like to see board make formal offer to LOG administrators at earliest opportunity to buy back all shares and force them into a decision. Better to try and buy them back now while they are cheap and market is undervaluing the company.
That would see an immediate re rate to 51p and a nice increase for existing shareholders of 36%.
IOG could easily have the cash for this before year end depending on their plans.
At current share price they could buy back all of LOG shares at 2.5 months current revenue.
They could repay €100M bond with just over 4 months revenue.
These periods shrink to single month or less using winter price and flow predictions. IOG will be completely transformed as a company by end of year but market doesn’t seem to be interested.
I had a go at estimating July revenues.
Using day ahead prices during month (fluctuated from 1.66 to 3.65)
Using 50mmscf per day for low end and 60mmscf per day for high end estimate.
Total rev £39.6M - £47.5M
IOG share is £15.8M to £19M (after royalty)
IOG royalty to cal energy is £3.9M - £4.7M which indicates royalty ending in 18-22 months but will be much faster then that given winter pricing and Southwark flows.
Amazed this is not higher than 1st gas share price. But happy to hold and wait.
Futures price for December is showing at £5. I have never modelled anywhere near that price but who can rule it out with expected shortages in winter?
If we have Southwark online at that point IOG would make approx £75M net in a single month assuming production doubles! That is almost half the market cap in a single month.
The potential for IOG to be debt free and paying dividends could arrive much sooner than anticipated imo.
Day ahead price yesterday was 300p. In July!
IOG has licence to print money.
Whatever way you slice it the share ownership structure has presented a massive gift to savvy buyers
Also. Importantly. They will nearly clear the 91M cap on royalty in just over a year. Cash flow with the full 50% would be £360M.
Price will only rise into winter. Nothing can stop it. At current flow rate and spot price I now have IOG at £286M per cash flow per year.
What is the mkt cap again?
U.K. NBP at 282.8p today! In mid summer.
25 Mmscf per day (IOG share is 50%)
257050 Therms
2.5 Per therm
£642,625 Per day 50% share
£514,100 Per day Less royalty of 20% of IOG share
£15,647,918.75 Per month net IOG
£187,775,025 Per year net IOG
This is what I see currently using current flow rate and NBP price.
Of course flow rates and prices will move a lot but I would expect prices to be higher in winter and (hopefully) flow rates as well.
2023 is anyones guess but I don’t expect tightness in gas and energy mkts will subside overnight. Unless there is mother of all demand destruction recesssions (who knows).
Either way IOG will earn some decent cash this year, start paying down debt and be well positioned to take on further projects. I am happy holding and I can wait for the value to out. In this market few places are safe for your money but I feel IOG is a decent bet regardless of how the future unfolds.
IOG is raking in approx £480k a day net to IOG at current flow rates and NBP price. This is going to be a cash cow. Intraday does not concern me here. Value will out eventually.
Imagine the daily cash inflow with Southwark running and Russia shutting off European gas over winter. The mind boggles.
I think one factor playing into weak share price could be that we are selling gas at day ahead rate.
This has dropped as low as 40p in May. Currently back at 112p right now. Nothing to worry about in longer term but explains maybe some short term weakness in SP?
Drop is caused by massive amount of LNG being offloaded in U.K. for re-export to Europe but interconnect capacity is limited and U.K. demand is low leading to U.K. day ahead price much lower than in EU.
Meanwhile gas price is up 28% today.
I expect first dividend will not be until next year at earliest. Although company stated below in their corporate presentation
“Will establish a sustainable and progressive dividend policy in combination with share
buybacks once cashflow is available”
Good news all round.
BOOM
Gas at £2.80 a therm now and up 30% today but market seems like it will not ascribe any of this value to IOG until it is producing. Given previous delays I guess this is understandable but should produce big lift in SP when gas is flowing.
It will come good in time. Gas back over £2 a therm now. Need gas to start flowing for the re-rate. I can wait.
Can we simply repay the convertible loan notes or is it up to LOG if we can repay or they take fee in extra stock?
Obviously better for us to repay rather than 60M new shares issued.