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Terrific investment opportunity this one for medium term growth in profits, revenue and share price. The re-organisation of the entity should give much more visibility to UK and European investors and will also drive share price as institutional backers increase. Class act.
This is a buy to average down on weakness for those who have been in longer or hold for those who entered lower. No point in selling unless you are trading oil and political sentiment. This is being held in a narrow zone now until the risk around completion goes and there is greater clarity on captain cooks's plans. Those who believe it will move towards 30p are probably right and thus it should outperform most oil stocks over the period to April.
I found the RNS only mildly encouraging. Production is falling and there is nothing coming on stream to replace it. It must be a nice life sat watching PMO and Enq produce oil for you and the lawyers chase money off the Indian government. But right now there are distressed oil co's with too much debt to maximise the assets they have and this must be an opportunity for Cairn to make some acquisitions with strong IRR's. At least the RNS does mention they might consider emerging from their hibernation to do this, let's hope they haven't missed the boat.
Agree with Pokerchips that this is in the hands of the shorters whilst everyone is running scared. You only have to say SFO and down goes any company's share price but really its yesterdays news, and even though Petrofac has had an awful 2020, and will produce poor 21 numbers, the point is it has capacity to deliver projects that can't be simply rustled up, and the SP will return to being a reflection of the longer term soon. Note DNO/ Genel announcement on 8 new wells at Tawke - as the oil price recovers companies will dust off the delayed and deferred projects that just keep them where they are production wise let alone grow. The Petrofac SP recovery which had begun has simply been put off for a little while. Those who don't mind holding for a few months will look back and see. slow as the most sensational buying opportunity.
Cash and equity. ENQ valued at £250m - could be bought with cash, see Sussex engineer comment, and Tullow valued at £460m a bit more sizeable but with Cairn Market cap at £1.2bn it could be paid with cash and equity, combined with debt refinancing, remember Cairn has no debt and the prospect of a large cash payout further down the line
The market was applying some value in the claim before the award announcement and some more after the announcement hence the SP rise. The risk element is still there as to whether India pays up or not. I would guess that about one third the value of the award is in the share price as people are still sceptical as to whether they pay so there is still some upside here. I'd prefer to see cairn management being a bit more active, make a bid for Enquest or Tullow, where a combined business would have sound finances, a bit more production and the firepower to develop the opportunities that aren't being acted on at ENQ or TLW due to balance sheet constraints
PMO is gradually heading towards a duller Aker BP life as Harbour Energy (just check how it tracks the oil price), so soon the bumpy PMO ride will be over but not quite yet. From its 18-22p recent trading range its likely to bump up after the vote, my guess is 21-26p trading range and then if the road shows go well prior to relisting as Harbour then dependent on oil price probably 25-32p, after that there will still be a little fun left as it becomes clear what the forward strategy is and whether Harbour buy up more of those 'rusty assets' or whether they grow the PMO international assets. So maybe 40p possible this year or early next with a fair wind but after that if you want fun and tears buy some different shares. UJO, ECO, ENQ
I think the purpose of the special dividend with share consolidation is to make Cairn a better long term proposition to hold by increasing Cairn's EPS. In theory the share price should stay neutral when the shares consolidate, but in time may benefit disproportionately from the EPS boost. There may also be tax advantages for Cairn this way but would need a tax expert to explain these and if they exist. For shareholders there will be a tax liability but I wonder if the share consolidation makes the special dividend effectively a return of capital and thus covered in smaller shareholders CGT allowance rather than income. If you have a lot of shares then its probably worth getting advice on this given the low threshold in UK for tax on dividend income, especially for higher earners.
Does anyone know if PMO shares will be suspended prior to re-admission as Harbour Energy, and if so over what period? It's not clear from either the prospectus or the summary of main events?
One argument made by several posters for holding shares now is that institutions will have to buy them when its re-admitted and effectively in the FTSE, (though I suspect many will pick them up as bond holders sell their holdings), meaning those who wait and see could miss out if there is a suspension period and they open/readmit at a much higher price.
End of the year, so special div payout Q1 I guess
https://www.africaoilandpower.com/2020/11/27/woodside-to-begin-drilling-campaign-in-senegals-sangomar-in-2021/
Jefferies in a note after the Trading Update valued PMO 5% stake at $200-250m which has it firmly in the 15-20p range. Its a shame the creditors pulled the rug on TD's BP plan and imposed a rights issue (which they knew was never going to fly). At least it had the attraction of LTH's having a chance to average down in a managed way. Many folk felt there was not a need for a rights issue just creditor support needed for a perfectly decent plan to buy the BP assets which could have seen the share price back to £1.50 and more once the oil price recovered. As it is the Chrysaor deal means the vast majority of LTH's will never get to see a profit because the deal was done at the very bottom of the market. Its a shame that the creditors couldn't see a way to back a decent plan but seems like a number were pretty unpleasant people, and a shame they were not able to back an honest British business. To get to a 30-40p share price needs a big hike in the oil price.
I'm sure this has been covered further back on this Board but I've not followed ENQ for long but would really like a view on the debt situation. ENQ looks like it has c 10 years of 2P and 10 years of 2C at current production. Problem seems to be that at oil prices below c $55 it can't keep the debt mountain at bay or free up enough cash to convert the 2C quicker so on the face of it is (regardless of how well run) in a bit of a bind. At low oil prices it seems to risk going the way of PMO and fizzling out probably into Private Equity hands with big dilution or nothing for shareholders. At higher prices it can potentially chuck of £400m of cash pa and it lives to thrive with a big uptick for shareholders. Does that seem fair?
It's surprising how little ambition Cairn seems to have. Perhaps they are waiting for the Senegal money and the India arbitration (yawn) but surely now would be the time to pick up some assets with some production and exploration potential and PMO would have been perfect plus the BP assets with lots of development and exploration potential. OK production not as big as Chrysaor PMO but well north of 120 k with Tolmount on board, and PMO debt could have been reduced by more than the amount the creditors wanted to in a rights issue.
If not PMO or BP lets hope they have some deals in the offing, as its not really clear what the company wants to be.
The bad news was good because we discovered what the problem was and why it was being pushed down so hard and shorted down to 11p. The operational update revealed major issues with Catcher which were going on during and after the negotiations, hence the significant production downgrade. On top of this you can read between the lines that there have been issues getting Solan P3 operational. The bad news was good because we got to hear what has happened and that the issues are now fixed, hence the price bounce when it got leaked yesterday. Clearly the pro's, creditors and those in the know knew about these issues. Once fixed the risk is removed and the SP is now moving back to the 20-30p range which is probably fair value for 5% post merger. It probably won't move towards the middle of that range until the prospectus is out, so would expect it to settle into 16-22p for a while, dependent on how oil price moves.
Today's rise is baffling given no actual news, which suggests there is some news we don't know about. For LTH's SP is only back to where it was just before the merger announcement .
Its not true the deal is done as Chrysaor or PMO could back out (for a fee) or shareholders might vote it down or there might be issues with re-admission of the shares (remember its effectively an IPO). Possibly some risk premium has been removed today with the rise in oil price and shorts exiting but it's a big rise for one day on no news. PMO do have a habit of announcing more than just trading news in trading updates.
This is the total number of PMO shares. There will be be 19-20 times that number post merger with Chrysaor in order that everyone gets their allocation according to the terms off this poor deal unless of course there is a scrip. The prospectus will however, when it comes, indicate a value on the combined entity hence all the arguments on this forum as to what that might be.
The existing creditors deadline is 3rd Nov but can be extended. From the merger RNS available on PMO website:
Existing Creditors’ approval
Premier is seeking consent from Existing Creditors for the Transaction and, in order to support implementation of the Transaction, an extension of the existing maturity date of its debt facilities from May 2021 to 31 March 2022 by means of Court-approved restructuring plans. Existing Creditors (other than Premier’s retail bondholders) are being asked to enter into a support letter pursuant to which, among other things, they commit to approve the restructuring plans and agree to waive the Premier Group’s financial covenants. The support letter will remain in force until the Transaction completes, subject to certain limited termination rights.
As at the date of this announcement, over 43 per cent by value of the Existing Creditors have entered into the support letter. The support letter will terminate if the requisite thresholds of Existing Creditors, being in broad terms 75 per cent of the Existing Creditors, have not entered into it by 3 November 2020 (or such later date as may be agreed). Pending these thresholds being achieved, sufficient Existing Creditors have provided forbearances in respect of any defaults that may be argued to arise under Premier’s debt facilities by virtue of steps taken in connection with the Transaction.
Does anyone know what has happened to the Solan production? The August results presentation said additional 10k per day from September. You would have thought that by mid October they would be obliged to let the market know if this production is coming on stream or not or if the Solan bogeyman has intervened.
Its rather like an IPO but with the PMO share price as the proxy for the valuation of the combined entity i.e. c $3bn. I suspect most here think that's too low but its probably a reflection of risk and market appetite for effectively a mid cap oil IPO when sentiment is shot to pieces. I'd expect the share price to follow market sentiment and the oil price and behave a bit like a mid cap oil co until 1. the bondholders vote which may move the shares price up a little or 2. if another party turns up.
Otherwise suspect the share price is range bound at say 13-16p.
I suspect Chrysaor and co are hoping that by the time the transaction completes the oil price will have improved and sentiment is better ensuring a successful takeover/IPO of sorts after which a valuation toward that of Lundin/Aker BP might be achievable. A lot will depend on the prospectus and sentiment over the next few months.
This looks a fabulous deal for Harbour and a good one for the creditors and a very poor deal for PMO shareholders at the very bottom of the market, a market in an oil price crash mentality.
It's probably worth holding onto the shares in case someone else comes looking. There are other companies with strong balance sheets, Cairn, Woodside, Apache etc who could also swallow up PMO and would find the price very attractive. The sheer complexity of the proposed deal and its timescale gives plenty of opportunity for others to make a move - let's hope they do or lets hope that a shareholder action group comes together and demands that PMO shareholders get more of the pie. After all they need shareholder approval. In any kind of half normal market PMO is undoubtedly worth much more than they are getting here.