Member Info for QuintusCurtius

Agreed they got this away with minimal discount to last close especially considering yesterday was a significant up day. Excluding yesterday’s up move the price was close to being inline with the recent closes. All in all suggests deep institutional appetite

All in my opinion only and please do your own research

LuckCounts, the 2021 and Q1 2022 hedges will have dropped off as they will have expired. Since they have not added any new hedges post July 2021 the amount hedged will have decreased.

Hedging will actually have decreased since July 2021 as swaps roll off and are not replaced

All in my opinion only and please do your own research

What we are seeing is the exit stage right of many of the short term ‘tourists’ who were expecting a huge div, a special div etc which drove up the share price over the last few weeks. Would not be surprised to see the SP close much of the gap lower once saner and cooler heads consider these results

All in my opinion only and please do your own research

Thank you - missed that. YTD cash build impressive

My initial read … very solid set of results. Most had overly high expectations so stock will probably sell off.

Div is inline with what I was expecting and liked that they are seeking the flexibility to buyback shares if they become cheap again.

Have not seen anything on cash balances for YTD22 but may have missed it.

All in my opinion only and please do your own research.

Agreed on the special div NewKOTB. I can't see that happening either. With the number of swaps we have and with NBP at approx. 200p/therm we need the liquidity. I am really hoping the BoD let the swaps run off (or close them out a la Kistos) as the deep out of the money hedging they are doing in this environment is pointless ... well the hedges do help to solve our cash 'problem' by burning it ; )

The dividend is an interesting topic. My guess is that it falls into the range of 8.5p to 12.5p. Frankly I would be surprised if it was below 10p given that would put the dividend yield below 2.4% which for a pure play gas producer operating in this environment with an articulated policy of emphasising shareholder returns is way too low. My concern is that if the div is improperly handled our BoD would lose credibility with the market. SQZ has received increasing attention over the last few months so now is the time make use of it. They also need to articulate a formal policy for distributions (25-40% of FCF or whatever) and put it on paper. Institutions will want to see this.

All in my opinion only and please do your own research

This is the likely explanation Sasa given the big jump in the share price over the last few months. (Good) Managers will regularly rebalance to ensure that the weightings remain relatively consistent.

I also hope that our management will provide guidance on a move to the main market as well as the hedging ... When we are generating this much cash in an inflationary environment we do not need the hedges.

Good w/e all

I would not worry too much about the short-term fluctuations in the share price of small and mid caps. With SQZ, it’s likely that an institution is having to top cut their position to remain within their position limits after the run up of the last few weeks or just normal profit taking so the impact of an institution doing so is magnified due to the relatively lower average daily trading volume.

If anything the short term fundamentals have improved with the Russians requiring payment for O&G in ‘rubble’ (rubles) which the continentals have said is a non-starter. The specter of reduced gas flows will keep NBP and TTF prices elevated for the foreseeable future.

All in my opinion only and please do your own research

Itsriskythat,

Cash settled swaps are the main instrument that SQZ has used to 'hedge' their downside risks. They have hedged only 20% of the total oil and gas production. With more than £300 mln in cash (£100 mln end of 2021, £115 mln pre-paid with swap counterparties and at least £100 mln in additional cash for Jan and Feb production the Rhum shutdown would need to last for years and NBP would have to remain over 500 p/th the entire time for their cash balances to be eroded to the point that they have a liquidity problem. This is not a perfect storm but rather a tempest in a teacup.

To me SQZ is looking more attractive than ever. The conflict in Ukraine has put a floor under gas prices and there is now finally more awareness about the importance of our energy security. Likelihood of a windfall tax has decreased dramatically. It is slightly annoying about the timing of the Rhum shutdown the Ukraine conflict is showing no signs of cooling off and if anything could heat up more in the coming days/weeks.

Good w/e all.

All in my opinion only and please do your own research

This is the guy we need as our next CEO. MF and ACW have done a great job to get us this far but in order make the jump to the next level and to do a deal that is competitive we need AA.

"Hasn't done a deal for awhile has he" delivered with a straight face by someone who has done two £100 mln+ deals in less than 12 months. Brilliant. Very legitimate criticism which echoes the same feedback posted by many on this board. AA wouldn't lay about with £200 mln cash.

All in my opinion only and please do your own research

What is the benefit to the Iranians of selling an asset only to have the proceeds go into escrow as their share of the Rhum revenues currently do? OFAC would never approve the release of the funds

NewKOTB,

Your figure of GBP 51m for H2 unrealised losses is remarkably close to my GBP 50 mln. There will also be some additional realised losses which I estimate to be cir. GBP 10 mln.

Glad to know I have not missed anything ... as has been discussed on this board previously, management need to be much better at communication in general and specifically around their hedging strategy.

All in my opinion only and please do your own research

Great post, Dick.

I was very surprised by Looney's comment that BP was a 'cash machine' with energy prices at these levels. He is inviting a response by politicians ...

We took a non-cash provision of GBP 30.3 mln in 1H 2021 for unrealised mark-to-mark losses on our swaps, a further GBP 5.7 mln in realised losses on swaps plus GBP 10 mln of margin calls. I would expect these figures to blow out significantly to at least GBP 50 mln for the unrealised mark-to-market losses plus at least GBP 10 mln for realised losses in H2 (a smart counterparty would margin call at least at a level they expect future short-term realised losses to end up at). I think these figures will surprise some people even in the light of the unprecedented revenues we will be generating.

As per our H1 2021 results our H2 2021 and 2022 hedges looked like this:

H2 2021: 192,500 @ 39p plus an additional 12,500 @ 94p added in H1 for 205,000 therms in total.
H1 2022: 300,000 @45p
H2 2022: 225,000 @42p
Plus an additional 50,000 @66p for 2022 added in H1 2021.

Perhaps I have missed something but I do not recollect management articulating clearly what the hedging strategy is? Cover expected Capex? What I find strange is that the strikes on the swaps have not moved up proportionally as the price of gas has increased which leads me to believe that they are only trying to hedge the increasingly slender tail risk of a return of severely depressed gas prices which I think is incredibly remote at this juncture.

It is interesting to note that several majors have already signalled to the market that there will be a significant negative P&L impact on their Q3 earnings as a consequence of gas hedges that have gone the wrong way (see Shell's RNS from Friday).

All in my opinion only and please do your own research.

Looks like the opposition is forcing the gov't to clearly state how they plan to address rising energy costs.

Not surprising that a matter of hours after Rachel Reeves sound bite supporting a windfall tax which was picked up by various media outlets that the FT publishes an editorial that examines various solutions to spiking energy prices ... they do not even mention a windfall profitability tax. Their preferred solution is targeted help to lower income households in the form of an increase in the universal credit benefit. Less optimal, though preferred to other solutions, would be an expansion of the 'Warm Homes Discount'.

I would expect that a windfall tax is front and centre this week

Al in my opinion only and please do your own research

Stahel is a specialist in O&G (amongst other things). He's very methodical and thorough in his research. He runs his own money and third party money. What isn't clear is whether this is PA or for his clients but regardless its great to have him onboard.

Happy New Year all and thanks for all the great input in 2021.

All in my opinion only and please do your own research.

NewKOTB,

I thought a windfall tax was more likely but thinking it through, I do not think so now …
Other producers (Harbour, etc) are much more hedged and thus will not profit as much from the price increases so it is conceivable that a windfall tax would severely impair their profitability if not make them loss making. The thing is that HMRC’s tax receipts will go up naturally by virtue of the higher revenues being generated in this environment so they already have a windfall tax in place via the existing corporate tax rates.

All in my opinion only and please do your own research.

My guess is that we will see that one of the institutional investors is trimming (or continuing to trim … AXA?) their holding.

I’ve been topping up at 195, 196 earlier this week and again today at 190.

All in my opinion only and please do your own research.

Couldn't agree more, flexmw. Shameful really that the total shareholding of the CFO of the company is a small portion of his annual salary and bonus. I saw the RNS and thought perhaps we might have some news on Columbus ... instead it was Andy Bell and his 631 shares.