Member Info for romaron

This morning I did a quick calculation. The market closed at c.40p so I just added the RI and got an average of 34p. It means sod all but it's a calculation we all made. Unless you'd sold the night before you'd have been lucky to hit the early bids but you have the strange situation that holders who don't want to sell have to otherwise they cannot take up the RI (you can sell the rights or the company will for those who hold but don't take up) The direction is almost always down and algobots are tuned to profit from human frailties. I worried that 34 wouldn't hold and there was something I wasn't aware of. I checked the price and couldn't resist (60,000 @ .334903 9.13.03). Gord knows why because I'm drowning in them anyway! I took a punt on the presentation and was happy with what I heard.
This RI is not to stop a company going down the tubes. It is to fund GROWTH and if the analysts are sold on this expect a big re-rating. You get the usual traders who like wasps can smell jam from a mile away but they'll be gone in a few days.
My point is that if you hold your nerve then the price you are still in at is 40pish. OK, there is a nervous world out there and poo has been known to collapse but it'll be interesting to see the price movements for the rest of this month.
*The retail bond purchase today was the equivalent of almost 7 mio shares. Now I'm not saying they're connected but I'm gonna take a wild guess and suggest that the the bond buyer was aware of the RNS on the RI.

BTW, Of course they're connected!

The stock market is nervous but you can never pick the right time for a rights issue. For my portfolio I was worried about World Trade and Brexit before looking at specific stocks. The only answer was to sell the lot, buy tinned food and reinforce the roof. Well, I'm not gonna do that or spend all my time watching stock prices; I spent enough times staring at screens (27 years) worrying about 'positions'. I'm a bit early for reflection really but the invasion of traders and puerile comments from the regular sources today makes me want to post.
One bit of good news is that the cloud over payments has been removed. A RI was a surprise but is also a cheaper way to reward long term investors and raise finance. I expect the management to fulfill their promises (well not exactly promises-let's say expectations). AB has again put his money where his mouth is and it'll be interesting to see what other larger shareholders do. I was worried that the company would go into defensive mode but AB has a longer term strategy which I am happy to back. Some even called him a crook but I'll settle for 'visionary'.
The comments about hedging I haven't looked into because as long as a prudent amount of oil is sold you cannot complain that it has gone up in the meantime. I consider that housekeeping but if they are trading aggressively then I would be worried. I haven't listened again but from memory AB said that the rig or rigs they use can be used more efficiently because they do both-decommissioning and drilling which Enquest can utilise better than most. He wants to grow the company and I am open-minded about the Oz loan. He wanted to expand and grow so with debts due he either sold assets cheaply ((Kraken 20%, forgo Magnus 75%) or went to lenders who knowing the company's position may have tried to 'gouge' them. That's the phrase Jim Ratcliffe of Ineos used when his paper was only worth 10c on the dollar.
Incidentally the Retail Bond moved a tad higher today.
BP are happy to deal with us and they are a company particularly sensitive to criticism (e.g. SVT and TUPE) and as I've said before is win win for them. They get rid of a field/plant that doesn't fit with their scale/business plan. If oil continues to rise we all win. If it collapses then BP were right to treat it as a liability and they are of a size that can take almost any hit. There are vendor loans as well to Enquest which means the BP Finance people would have had to sign off on them.
I'm pretty happy now that future growth of Enquest is assured but still wondering whether sell everything and buy tin hats might have been the better option in a world of Trump, Putin and Brexit! Still, if the world is going to hell in a handcart oil tend to rocket.
AB had a choice. Rein in ambitions or take advantage of the current market. I'm glad he went for growth.

Be Lucky

...was much shorter than previous presentations imo. AB and team behaved exactly as they have at other presentations in not quoting figures on production. This isn't unusual and prudent executives at the better oil companies do the same at presentations. Of course the analysts there attempt to extract figures and in reply they usually get "in line with expectations". Producing oil is not always straight forward and you're on a hiding to nothing if you miss a figure. Quoting best production aspirations is best left to the David Lenigas end of the market (Gatwick Gusher).

Bits I noted:
They are 2 years into Magnus (including due diligence). They know the field extremely well.
Several offers for 25% of Kraken.
The NPV10 on Magnus is heavily reliant on the CPR (July 1 2018). [I don't know which company carried it out but expect it to be top notch.]
August production of Kraken 36,000 bopd.
NO CHANGE to Kraken production target.
They are left with a rich opportunity set.
Future large repayments after October are April 19 £175m and Oct 19 £100m

This against a backdrop of a softer market overall (FTSE 250 down 140 points 0.70 %)

Patience is required. The US seem to be better at it than the UK. They are prepared to forgo immediate gratification. People suggest that the financing is 'creative'. So what, it doesn't mean it's bad? In oil as in most businesses it always comes down to money so best you understand it. The skills that Enquest possess in end of life fields is impressive. I detected a slight readjustment in strategy with 3 main fields (Kraken, Magnus & Seligi) and the remaining NS fields becoming associated with decommissioning as well (both are close in time scale). Maybe a split down the road. One company exploring and running new fields whilst the other part pays the rent. There is a market for decomm and end of life NS fields and I can't immediately think of a competitor. AB said something about rig utilisation on decomm and new wells. Bit above me but interesting.

Don't know about you Auson but I want AB to become a billionaire through his largest asset!

Hi olderman - at first glance we could all have done without it! That was a missed trade but bear in mind that AB couldn't do it and also has to stump up more for the RI. The real bet is in my mind "what is AB's strategy?" We can see it's growth but with the coffers not filling up at anticipated speed does he let 25% of Kraken go for a song and relinquish the option on Magnus? The market would have taken a dim view on that decision imo. The company will look a lot different in 6 months. Bigger and more profitable.

The presentation will shed more light I hope. I bought some more today at 33.50.

Well I am. I'm no poorer this morning than I was last night. If I sell this morning I will be poorer. For holders the calculation is what they hold and the RI. I used 40p and the 3/7 @ 21p and come out at today's price of 34p. On paper we are showing a loss and holding the stock until you gain the benefit of the RI feels worse than it is. I'm hoping some of the experts ask the right questions at the presentation. Taking a very wide swipe at the purchase of 75% of Magnus we have bought reserves at a very low price. The devil will be in the detail and I'm hoping some discussion can take place here once the presentation is over.

is what market's like. One of my worries was that the company would nurse its wounds and not look for future growth. AB wants a larger company in my opinion and that is why I'm backing him. In the US they back Unicorn companies that bleed cash and show no profit. Investing is picking the right people/company and patience. I'm not criticising a man who has more at risk than the majority of CEO's.

I'm expecting that the October debt payment will be made on time and in full. My reasoning is that failure would be a significant event and we would have heard before now if there was any risk of a missed payment. Discussions will revolve around the next operation update in November when I expect the results will be a lot better than tomorrow's. Once debt is repaid it is obviously becomes lower and ratios improve whilst interest payments go down. All rather boring and predictable but that's what business is most of the time. We're through the worst and I see nothing to get over excited about unlike some other makebates - I hesitate to call them 'investors'.

As long as the price of oil doesn't crater we are sitting pretty.

squif 8.47 - "Any News or has AB slipped some advice to his hedge fund buddies?" Have you evidence or is this a typical unsubstantiated conspiracy trope. There is no news so following your infantile outburst AB is guilty of malfeasance.

Perhaps oil coming off its recent highs and the FTSE 250 off its recent highs has something to do with it. Even Brexit may have an effect without worrying about Trump and Iran Having said that there could be a conspiracy because other oil stocks are off too.

If you think that of the CEO and are really invested here I'd get out quick.

Slight downgrade today and this comment:
"We believe Inmarsat has given up on wholesaling its fourth GX satellite (I5-F4) to the Chinese government. The satellite had been located at 117 East (over China) for several months while it conducted 'testing' with Inmarsat previously saying "the situation is highly commercially sensitive". However, with Inmarsat having been approached by a US buyer, satellite tracking now indicates it has moved to 11 East (over Europe/Africa). Management said on the 2Q call that there was a possible alternative use for the satellite, which we believe is most likely to be aviation/government. If this is the case it may lead to long term value creation, but we think the market is very unlikely to give the company credit (unless there is a substantial new contract announcement) given its track record to date in aviation. By comparison, we had estimated the value of a Chinese wholesale deal would have been an incremental c. £1 per share. If we assume the market had factored in a 30% probability of it being used in China, the downside risk is c.30p / 5%."

It is a Ka band satellite. Could it eat Avanti's lunch?

This was from 15 May 2018 Cairn release:
" UK-India Bilateral Investment Treaty scheduled for August in The Hague with an outcome expected in Q4 2018."

That would suggest 1st October at the very earliest.

would be a good explanation of the Enquest performance since the restructuring. After initial exuberance the share fell back and only an improving oil price has helped any upward movement. But isn't this what we should have expected?

Problems with the FPSO are not unique and when you've been in ICU a certain amount of time convalescence is normally prescribed. The stock market looks forward and the next figures will hopefully say we've finished the recovery and can start growth again. Paying off debts is hardest when they are large and your first salary goes mainly on the mortgage. That's where we are today but I really expect the eighth wonder of the world to kick in from here. As Einstein said "“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn't … pays it.”

I'm not expecting fireworks on Friday but don't be surprised if the price rises. Analysts look to the next production/financial update.

UK households have seen their outgoings surpass their income for the first time in nearly 30 years, our data have shown.

On average, each UK household spent or invested around £900 more than they received in income in 2017; amounting to almost £25 billion (or about one-fifth of the annual NHS budget in England).

Households’ outgoings last outstripped their income for a whole year in 1988, although the shortfall was much smaller at just £0.3 billion.

Even in the run-up to the financial crisis of 2008 and 2009 – when 100% (and more) mortgages were offered to home buyers without a deposit – the country did not reach a point where the average household was a net borrower.
----------------------------

I'm more concerned about loans getting repaid. Throw in Brexit and we've got a potential tsunami heading our way. I hope our captain and crew know what they're doing?

I am not sure if the public can sit in at the Hague hearings but imagine they can. You certainly can in civil cases heard in London. Using London as an example the decision is not announced at the end of the trial and there is often contradictory assumptions from both parties on the perceived outcome. This was a trial that was no doubt extremely complicated (and expensive). The one and only trial I attended was 5 days finishing 12 March 2014 with a decision on the 27 March 2014.
Then there is this from the July update;
"Following the hearing the Arbitral Tribunal will issue a binding and internationally-enforceable award. The drafting and issuance of such an award typically takes several months. In this case, taking into account the delays already suffered by Cairn, the Tribunal has stated that it will endeavour to issue its award as expeditiously as possible."

So I would say a minimum of 3 weeks up to 'several' months. It's not quite a piece of string but my wet finger in the air is November at the earliest.

Thanks for that cassius - I must remember to look at the website more often because I did say on here that I was a tad disappointed that the CEO hadn't commented on the Comsat MDA RNS. He had on the website:

Kyle Whitehill, CEO of Avanti observed: “Our partnership with COMSAT is disruptive in the most positive way. It takes us into new markets, with our highly capable satellite fleet paired to a global leader in Satcom innovation. We are delighted to create shareholder value through new opportunity. Avanti advances on”.

From today's RNS: "As previously reported, Morses Club took on a significantly higher number of territory builds in FY 2018 as a result of a unique market opportunity which arose at that time. These new agents and managers have been successfully integrated into the business. Territory builds are now operating at a more normalised level in the period."

I think we know what this "unique" opportunity was.

Followed by this from Fitch: In a note on Friday, Fitch Ratings said the payday lending business model that grew rapidly in Britain after the global financial crisis "appears to be no longer viable". It expects lenders focused on high-cost, unsecured lending to adapt their business models towards cheaper loans aimed at safer borrowers.

It does seem that those agents who jumped ship may be guilty of poor timing. That old saying about the grass being greener was never more true. The whole sector faces a challenging time and I would expect the cost of funds to go higher as a reflection of perceived risk. We have Avanti which is basically self supporting whilst judging from the PFG Retail Bond we are considered fairly stable. On Newsnight (from memory) the number of subprime lenders had gone from 400 to 150. Many would close and open up the next day under another name. This appears to have stopped and the winnowing out continues. It's early days but the new board seems to be better suited with the right experience for the challenges ahead. I expect we'll be in the doldrums for some time until the picture becomes clearer.

Listened to their webcast (I am not invested). Pretty neutral and short. Only one question in QA. An important point was made is that they are not under any investigation by the FCA despite some rumours. A pretty simple product and not that much more expensive than main stream borrowing. They used main stream >35% Then Amigo a tad under 50% and non-standard 100%. They have the lion's share of this guarantee segment (c.88%) and are for the moment unchallenged. I must say the name 'Amigo' is pure genius.

The threat to Amigo doesn't appear to be the regulator just the arrival of competition. Not sure what I think about them and won't be investing.

I'd forgotten about glo. Tomorrow Amigo have their results so something to read. The next figures from PFG aren't until end October. I've wondered why Gillespie was called back. He hasn't exactly covered himself in glory the last few years but I assume he's seen as a safe pair of hands with many contacts. Do you think he's a stop-gap?

Door step lending is becoming more of a misnomer everyday and even cash is becoming outdated. Plenty of media attention at the moment and we were mentioned on BBC 2 Newsnight last night. It wasn't an attack but a brief mention of Vanquis being owned by PFG by Stella Creasy. She pointed out that the FCA haven't kept up with developments and there is room for excessive charging on Credit Cards. There is an acceptance that those with poor credit ratings need access to finance and I think the area is still vastly profitable and we are one of the companies with the scale and ability to adapt to these changes.

HIS - that is why I mentioned the absence of any comment from Kyle Whitehill on the RNS. In some ways it's similar to announcing that you've put your house on the market with an Estate Agent. Lets hope it isn't a sole agency.

I wonder if there will be any ripple effect on Avanti from Theresa May's African visit or her comments on the Galileo programme?

*for clarity - the drop in the retail bond was expected as it is similar to a stock when it goes ex-dividend. The 95>91.75 is roughly the 6 monthly effect of 7% divided by 2. If nothing else changed then a gradual increase back to 95 until the next coupon payment. However, since then the stock has leapt by c.18% and the bond stayed down. It suggests to me that the deal has been sell the bond, buy stock. It is a form of arbitrage and has commonalities with buying oil and warehousing in a tanker when situations dictate. Taking advantage of leads and lags. I expect the retail bond to eventually go to par and above. It may take a few years though.