Member Info for QuintusCurtius

When you do a stock screen on Bloomie for companies with high free cash flow yields and low debt SQZ does not stand out because of the way in which they account for the future cash flows under the terms of the BKR agreement. As per the 2019 annual results conference call, SQZ's definition of liabilities includes future payments made to counterparties under the BKR profit sharing agreement. I would not consider this a 'liability' in the classical sense as these are payments that are contingent on future cash flows i.e. no revenues, no payment. This means that SQZ is getting missed by many asset managers who rely on Bloomie stock screens to form their 'short-lists' for in-depth analysis.

Long-time lurker, first-time poster.

I will preface my remarks by saying that I really like this company and been holding a large position in it for 2+ yrs. They have superb management that are truly shareholder friendly and they are great at what they do. That is tough to find. I have some thoughts on the acquisition/take-over debate that has occurring over the last few weeks.

1. Ongoing need to renew OFAC license - This will put off many institutional investors who see how much the company relies on the revenues from the Rhum field and do not want the global geopolitical risk albeit mitigated by SQZ's, by all accounts, careful implementation of the various OFAC conditions and professional handling of the renewal process. This means that that a deal to buy producing assets provides the important (and vital) benefit of diversification. However one of the challenges that the company faces is that the type of deal that they are seeking that will move the dial will likely require bank financing as their cash pile, while large, is not enough to finance the size of transaction they need on its own. The centrality of Rhum revenues for SQZ and their contingency on OFAC renewals will put many many Credit Officers at financial institutions especially as bank balance sheets are already tightened due to potential fallout from COVID-19. In light of these challenges the share price does not seem like a screaming buy. The OFAC license renewal is also the big difference between RRE and SQZ. The brilliant deal would be to buy out the IOC however I can't see the US approving that transaction.

2. Premier Oil - They need the free cash flow to reduce their debt and there are a lot of potential synergies with their existing fields (Shearwater) however I don't think they have the headroom to acquire SQZ after walking away from Tolmount recently. I would be interested in hearing anyone's thoughts on this.

I hope I am wrong but I think utimately SQZ gets taken out but not over the short term as they need to diversify away from Rhum and in the meantime earn a higher % of the BKR revenues going forward. Happy to sit and wait while getting paid at least 3p per share per year.