Gordon Stein, CFO of CleanTech Lithium, explains why CTL acquired the 23 Laguna Verde licenses. Watch the video here.
. . . into the đď¸ you go for being a massive
đ đ
Oh and donât bother responding to me directly Snapper10. Youâre in the đď¸
Snapper10 is not providing a balanced view.
It is just all the downside risk perspective.
When the asset sales land and guarantees for EPC work are obtained PFC will recover - a la Rolls-Royce.
This is a liquidity squeeze no doubt and the actions of the short hedge funds have highlighted that too.
However a lot of Snapper10s analysis ignores the fact that the likes of ADNOC would not want to see PFC fail.
ME bank funding will be an option being explored. It will not adhere to conventional Euro/US approaches. Expect something entirely different.
All IMO.
If you donât believe that the short position hedge funds havenât nobbled the Fitch analysts then youâre living in cloud cuckoo land . . .
Read them bottom to top đ
Strong order backlog lifts Petrofac's mid-term outlook
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This lack of confidence is reflected in the stock price, which was languishing at ÂŁ0.183 ($0.225) at publication time, down from ÂŁ5.28 in early 2019 and an all-time peak of ÂŁ16.72 in 2012.
In parallel, its market capitalisation plunged to around ÂŁ100 million this week from about ÂŁ1.5 billion in 2019 after peaking at ÂŁ5.6 billion in 2012.
In August, Petrofac's future looked rosier when it said free cash flow was set to be âbroadly neutral" for 2023 due to cash advances on new EPC contracts and capital being released from legacy contracts.
However, this prediction did not materialise, which triggered Petrofac's early December statement on liquidity problems.
As one financial source said: âYou need liquidity to run your business. You need to pay people and supplies. You have certain obligations to your debt providers. You need to make sure youâre paying coupons on their bonds, paying interest on their debt.â
Petrofac declined to comment on either assets sales or the cash amount needing to be raised.(Copyright)
Sources said the key sentence in Petrofacâs 4 December statement was: âBanking and surety market appetite for the provision of these guarantees in support of the contracts won by Petrofac has reduced, resulting in delaysâ.
Jefferies analyst Mark Wilson told Upstream that Petrofacâs disclosure about these guarantees âis a very significant situationâ and explained why.
âPetrofacâs forward revenues and cashflow come from the execution of new contracts or awards. But without the provision of performance bonds to effectively backstop or rubber stamp a contractorâs performance, that new work may be unable to move forward.â
Also significant for the broader EPC market, said Wilson, is that McDermott's recent performance bond problem appears to confirm Petrofacâs overall âreduced market appetiteâ comment.
Nevertheless, he said Jefferies believes âthe more important criteria for the banksâ is each contractorâs âbalance sheet strength, execution track record and type of (performance) guarantee requiredâ.
Petrofac wins field development work offshore Trinidad
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So, if Petrofac generates cash from asset sales, its financial health improves along with its ability to secure these bonds.
Alternatively, suggested one source, clients could make concessions, although this âis not not something theyâre talking about todayâ.
A source with direct knowledge of Petrofac lamented its current situation, saying its cash flow issues mean banks will not issue letters of credit, so it cannot pay to subcontractors, contrasting this with the potential of it $5.5 billion backlog won this year.
âThe company is in good shape with a sound business backlog ⌠the best ever seen in the last four years. However, the capital market is less convinced and has little confidence in the company.â
A contact familiar with Petrofacâs strategy said âit will be obvious to speculate aroundâ PM304 because this is the last upstream asset on the companyâs books, having sold everything else in recent years.
Another source agreed, saying PM304 is âthe keyâ non-core asset, while stressing the sales price achieved will be influenced by any debt attached to it and the expiry date of the licence.
Adnoc awards landmark CO2 recovery project to European contracting giant
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The other asset to be sold is a 10% stake in the JSD 6000 pipelay vessel, which is due for delivery from a Chinese yard in the second quarter of 2024.
In its 2022 annual report, Petrofac valued its JSD 6000 holding at about $56 million, although one veteran marine contracting source said he is ânot sure anyoneâ would pay this amount.
Shanghai Zhenhua Heavy Industries is believed to hold a 90% stake in the vessel and has also been marketing it for sale, according to market watchers.
Once delivered, Saipem has chartered the vessel for five years, but could retain it for an extra 24 months.
One well-informed source with direct knowledge of Petrofacâs options said the company may also consider offloading its O&M business in the North Sea.
âHigh-quality backlogâ: Petrofac predicts turnaround after first-half loss
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This huge Aberdeen-based entity employs 3000 people and controls one-third of the market.
A company watcher said that while O&M could be an âobvious businessâ to sell, âI would consider it to be quite central to the company.â
A source close to Petrofac agreed and also downplayed this scenario.
Also counting against Petrofac quitting the O&M sector is that a sale could attract the attention of the UKâs Competition & Markets Authority, which a few years ago forced Wood to sell (to Worley) the O&M business that came with its acquisition of Amec Foster Wheeler.
âSo, if it was for sale, who would buy it?â asked this market observer.
When Petrofac revealed the extent of its financial problems to the market early this month, it focused on many issues, leaving perhaps the most important one â performance bonds â to the end.
Cash-strapped Petrofac aims to sell its upstream and pipelay vessel assets as part of a critical drive to raise some $450 million to shore up its ailing balance sheet, according to multiple market sources.
Upstream was also told the company may even consider selling its huge UK North Sea operations and maintenance (O&M) business, although it is still considered a core part of Petrofacâs business.
Funds generated from any completed sales would help the financially distressed player secure performance bonds or guarantees that are a fundamental, but little known, requirement for any contractor involved in the engineering, procurement and construction game.
Petrofac considers asset sales, seeks to strengthen balance sheet and short-term liquidity
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âOne of the biggest issues theyâve got is getting guarantees in place,â said one source close to the London-listed company.
After a company like Petrofac wins an EPC order, it must always secure a bond or guarantee from a financial provider, otherwise it cannot start the contract and receive milestone payments from the client as work progresses.
However, if the contractor fails to meet its contractual commitments, its client can then place a call on the bond.
Market sources said these financial instruments were not an issue until this year, when Saudi Aramco pulled contracts placed with McDermott International because the US company â with its own financial problems â could not secure performance bonds.
âItâs extremely rare these [bonds] ever get called in, but clients still want them,â said a financial source, adding that perhaps they are in the spotlight now because of high interest rates.
âThe cost of money has gone up and any bank with a few billion dollars of exposure to any sector always looks at that exposure and decides whether theyâre happy with it.â
Petrofacâs problem is acute because, despite securing billions of dollars of backlog recently, these contracts will be worthless if it cannot secure performance bonds.
It was on 4 December that Petrofac reported its cashflow crunch, highlighting that selling non-core assets would boost liquidity.
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Upstream was told the contractor may have to raise about $450 million if they are to pay off $250 million of debt due to mature in October 2024 and plug a $200 million hole caused by working capital continuing to be tied up in legacy contracts.
Market sources said two major assets are definitely up for grabs.
One is Petrofacâs 35.3% operating stake in a production sharing contract (PM 304) offshore Malaysia that hosts the producing Cendor oilfield, an asset that the company âhas been marketing for some time,â one knowledgeable insider said.
A contact familiar with Petrofacâs strategy said âit will be obvious to speculate aroundâ PM304 because this is the last upstream asset on the companyâs books, having s
. . . expect all the crazies to come and comment now . . .
Apparently all PFC do is drill well hopes and side tracks? Kaiser00
And PFC being compared to Yell đđ¤Łđđ¤Ł
This is going to be hilarious over the next few days as the pile on continues . . .
Iâm in as a LTH. Per previous message it is a binary play now IMO.
Just going to watch and laugh at the people in desperate need of their afternoon meds struggle to put across an articulate argument before their carers wrestle their keyboards away from them . . .
FFS
What a fustercluck
. . . in a sea of green filtered nonsense from the đď¸ binned mindless chaff producers . . . Bliss âşď¸
. . .I went to uni with Aidan de Brunner . . . same course . . . knocked about with him in the same social groups for a while . . . top guy, super bright, didnât stay in contact after uni though . . . Hopefully he does well for PFC
. . . thatâs going to drop Napalm on those short hedge fund managersâ weekends . . .
đ¤Łđđ¤Łđ
. . . judging by all the green âAdjust your filtersâ messages being posted onto the board . . .
Somebody hasnât been handing out the meds this afternoon đđ¤Łđđ¤Ł
Binned đď¸ for adding zero value to the conversation. Every point is rebuttable, quite frankly I canât be 4rsed.
Thanks for about 2 pages of fresh air buddy. Insightful . . . Not
. . . Keyboard warriors getting frantic calls from their masters in the short position hedge funds to turn up the heat . . . theyâre losing control of the narrative . . . funny as feck to watch đđ¤Łđđ¤Ł
. . . or if you donât want to do that, then donât engage in conversation with him.
As Mark Twain once said, âNever argue with an idiot. They will drag you down to their level and beat you with experience.â.
If youâre already resorting to abuse - then youâve lost the argument pal . . . You should report to the FCA if you even have a suspicion of insider trading . . . I have.
. . . thanks mate, no offence if I just ignore your well researched, salient advice and perhaps rely on my more in depth research as opposed to â. . . the shorts are in the know . . .â.
If the shorts are in the know, then they are trading on inside information and that, mate, is illegal. Is that what youâre saying?