Member Info for RagstoRich

We can agree to disagree. The NAV here is $200mm at most in the markets view. Other than Egypt there is nothing of value bar some kickers on the Senegal sale and North Sea sales. Therefore any takeover would basically be paying £1.5bn for £1bn cash which makes utterly no sense.

I don’t think it does work. Cairn will not have £1.4bn? They will touch £1bn once the India money is received…..

It makes absolutely no sense for a hostile takeover right now. There is not a huge upside here (but there is 20-30p upside). Any hostile takeover would have to pay a premium for a company which is basically just cash. If Cairn had some assets that a larger company was interested in maybe but I don’t think they do.

What does make sense is Cairn using the money to back into someone - putting their money to use that way. But a hostile takeover? They hardly ever happen in energy stocks and it would make no sense right now.

Forgive me BaysilHope, but I dont follow (your post pasted below this):

HBR buy CNE for £1.5bn by diluting their stock and paying £500m cash? They would then get the india money (~£780m)......? + CNE's other assets which are pretty worthless. Why would they do that?
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

I think your missing using equity to buy CNE's cash. As I said - take HBR 925m shares £3.50 - Buy CNE for £3/ share costs £1.5bn - they could issue 450m shares only a 35% dilution for ££1bn cash - no brainer - with the SP stuck under £1.90 it's a winner, HBR have a free run at leveraging up. IMO DYOR - always said CNE could not defend a bid - hence the pay-out. Such an acquisition would push HBR into FTSE 100 - so on many accounts its a win win and gearing ratio would fall through the floor and have more control over their hedging.. HBR should be bringing Tolmount on line in Dec 21 25kboped GAS - perfect timing, their shares will go thru £4, making the Acquirer more attractive - facilitating a TO IMO DYOR.

I also dont buy into the TO hype.

1. It would have the be at a price acceptable to the shareholders (as someone previously said £ for £ on the cash + something significantly attractive for all other assets).

2. If you wanted to do it so that you could increase your leverage - you'd have to leverage up to buy Cairn in the 1st place? its not like Cairn has a bunch of assets you could borrow more money against..... So I fail to see the upside there either.

A merger.... that's different. But that would mean cancelling the divi and instead using the cash to back into somebody (basically taking a chunk of another company with assets in return for shares).

I don’t think so… it’s been posted a few times below. Cash in the bank will be £900m odd post India payment. Of course there is still a question on the timing, but other than that the only other value is contingent payments. In terms of the assets the market doesn’t rate Egypt. And Cairn has nothing else producing, exploration has 0 value, Mexico also has zero value right now until someone figures out how to cash it in (it has awful terms and so even then it’s likely to make hardly any cash). What else would you put down as missing from the value? I would love to be wrong but I can’t see the £2.50-£3 spike people are talking about.

I disagree, I think there is a real headwind building against O&G in the North Sea, look at Labours stance on Cambo. What if they get in government next? Exploration wise we are talking 10 years + for licences such as EOB to get anything on stream (in event of a discovery). The risk reward doesn't add up for me.

Completely agree that the divi may not be fully priced in the to SP, but this is a personal target (with no risk) from my recent buy in at £1.25. The equity will work harder else where one I reach that target rather than waiting months for the divi to come.

I'm not 100% sure the payout will push the shareprice to $2.60, so dropped my exit point slightly to be based purely on cash value (removes the guessing game on what the market will value the assets at). I have other companies where I'd like to move the money to ASAP.

Exactly. That is why I see some of the reason behind the Egypt move. I think the North Sea is risky for exploration. Look at Cambo, even if Cairn found a 500 million bbl field in the North Sea it could be near worthless until it started pumping oil (which may be never). I dont see why Cairn are in the EOB, it will take about 5 years to drill a well there and then another 5+ to develop, by which time where will government policy be!!

I think moving into the Middle East, Africa etc offers (ironically) more long term stability than most of Europe for the industry now.

My answer for all the below added together would be circa $200MM. I dont see any value in exploration nor does the market. Just my own opinion, but I dont believe £2billion is reasonable. We are long past the old days when the market values exploration assets (like Greenland) at crazy amounts.

I think this is a great buy at these prices but I will be bailing out ~£2.3/40 ish

I understand that, but £4?

I believe a merger is likely, it would be an ideal way to grow the value here, and for the would-be counterpart company. As stated previously on here, I think the majority of the india cash will be shed off as a dividend as soon as it lands though.

Actually I'll change that to no assets worth buying

If someone offered £4 then more fool them!!!

Why would someone offer £2billion for a company that would have £1.2bn in cash (post India assuming ~$1bn)+ Egypt???

I think CNE are in a unique position to re-invent themselves, they have little in the way of CAPEX obligations, and a massive + cash balance. I dont see them as a take over target because they have hardly any assets worth buying.

£2.40 based nearly only on cash is what I calculate.

Reading this on the move so apologies if I get the wrong end of the stick. But the $1.7bn includes dividends from Cairns ~5% ownership of Vedanta which were all seized.

Also, everyone be careful what you wish for. Yes Cairn would almost definitely get the full $1.7bn if they played hard ball, but probably not for many many years. So $1bn this year? Or $1.7bn in 5+ years? I know what I’d rather have!

The CNE rise is probably more to do with the $1billion + payout from the Indian gov for Cairn which looks like it is coming soon.....

Dark Knight - Indias defence is that tax matters are not something that should be decided in int arb, therefore I assume they would continue down that line if Cairn didnt take the offer without tax and costs.

IMO ~$1bn, take it and run, saying no will just delay things into potential years of haggling and see no value reach the shareprice for years.

Agreed, I'm not here for the oil (CNE doesnt have any major oil asset now anyway) - just purely on cash this should be heading over £2! I dont give a hoot about the POO!

~£500m in the bank, about £300m of India already priced in. Say $1billion (~£700m) expected in total from India (my guess).

£500 + 700 = £1.2bn mcap on cash alone (maybe £100m of equity asset value)

= £1.3bn mcap = £2.60 a share

Thats what I'm going on for a target

I completely agree, although this is one of the biggest cash cows out there. But, right now the share doesn't have any real defined direction; will GKP jump into a $$$ development to increase production capacity? Will GKP sit at 55kbopd and undertake a chunky share buy back program? Will GKP sit on this pile of cash for a while to see if a development of the field to its full capacity is feasible?

Lots of oil, lots of cash. Just need to decide on a strategy going forward, right now the company is in a bit of limbo.

MJ - if your using HL I think you need to log onto the browser version, I couldn't figure out how to move the divi into capital on the app, but fairly straightforward on the browser (I was amazed I remembered my password).