Member Info for seakingalpha

Bailiff....if you care to view the price of Tullow bonds trading near highs for the year, you do not have to be a genius to form an opinion. Rather than tell you what mine is , I would suggest that the negotiations to reschedule debt maturities are drawing to a conclusion . The art of investing is to look through the noise and look at the probability of different outcomes and invest according to your risk mandate. Notes like Cannacord’s, point out obvious balance sheet risks but fails to point out how a few sensible moves could resolve those issues. The direction of travel , if the bonds and RBL are successfully redetermine is obvious.

Does anyone want to comment on Carmichael’s 2023 production number which appears to assume that almost $600m of capex is expensed largely on an infill drilling programme over two years, results in no virtually increase in production ! Whilst i acknowledge, mature fields have a natural depletion rate this is too conservative ? Each development well in Jubilee should add 8kbpd gross and each injector almost a similar uplift to field performance. This was all highlighted in their last Company presentation. He also uses 12% debt financing for 2023 ....well with the bond refinancing we will be able to determine the accuracy of this charge. Many analysts these days have a habit of producing risk adjusted models that always seem to stay within certain levels of a share price. We can all play that game but it will not help investors spot the multi baggers or the disasters lurking out there. Decommissioning costs peak over the next 2 years and then the free cash flow profile of this company combined with very high IRRs will be very attractive albeit in a world fixated with making batteries for electric cars which require refining almost a house full of raw materials ...just to make one battery. The latter environment is choking off oil industry capex..which may result in very oil prices post 2025.

OK Happy...lets see what happens to the tax case shall we ? But you have probably noted it is quite an historic demand. By the way , i take it from your answer that you believe all the partners to the licence have paid their due amounts claimed ? Perhaps you could show me proof of that and show the disclosures associated with it. I think Ghana has been very progressive and professional in its approach to oil and gas companies otherwise i would not have invested in Tullow. However, as the furore over gas allocations and certain government expenditures have caused some well documented controversies . If you want me to elaborate with examples , I will provide the links with my next post. Even the taxman in the UK has been known to get greedy on occasions . The point i am making is I believe such issues are resolved by international tax tribunals ...otherwise the E&P sector would be defenceless from all sorts of claims. If you can show me where Ghana has successfully won a case at an international tax tribunal for “branch profits tax” levied against an PSC agreement for oil exploration I will retract immediately . Otherwise , you are entitled to your opinion and I to mine. Whilst your at it, do you believe this is the first time the tax authorities have tried this ? Give me a laugh ! I afforded you the courtesy of a response because I will always retract or apologise when I feel I have misunderstood something . I am just a private investor. People should never rely on my opinion when making an investment decision . I for one , do not knowingly mislead or misrepresent. I certainly have every respect for the lovely people of Ghana so do not make this a personal slight ...it is just business . The Ghanaian Government finances are stretched. They have just successfully issued a zero coupon bond but they are under great pressure to fund public services ( in common with all governments around the world).

Well let me elaborate a little further. Tax claims under the auspices of “branch profits tax” are a regular occurrence for oil and gas companies. The board of Tullow have decided to disclose them but other companies receiving such ludicrous demands choose not to bother . I will let the discerning readers of this website guess who has not bothered to make disclosures of such spurious demands. The original PSCs did have different treatments but then they unitised the two fields where standard terms apply. Apologies for my verbosity. Also Tullow book reserves based against the P90 reserves whereas the US E&P I understand use more of a P50 a approach .

I must clarify /retract an observation I have just made. I now understand that the PSC terms do not now vary between any of the partners..none of whom have recognised this tax demand as legitimate. I think i will get me coat ....

I have read the article. He has not taken on board positives changes to the GOR resulting from the work programme...or the fact that gas compression facilities have been considerably expanded over the last 18 months. He ignores 2P reserves ....how Tullow categorises 1P &2P is a debate for another time...but to ignore 2P is just plain wrong. The depletion in Ten is from a lack of historical drilling and the reserve upgrade was also a function of recoverability rather than just additional reserves added. The author might have observed that reserve replacement from enhanced recoverability has been achieved pretty much continuously on Jubilee over many years...it does not need additional reserves to be discovered just more of the existing in place to be recovered.
MOST IMPORTANTLY. I understand that Tullow enjoys different fiscal PSC terms to Kosmos . To pass judgment on the viability of the Ghanaian tax claim is above the authors pay grade. This would need to go to International Arbitration ...where i am led to believe there is no case to answer. I note he omits to discuss the contingent assets which have also been disclosed. Some might argue that the Cretaceous prospects in Guyana are exceptional...which i am confident will attract a farm out partner by the end of the year (which would allow a sensible monitisation of the asset).
The reserves booked by Tullow have to reflect the length left on the petroleum licence. With such conservative accounting standards, few have allowed for the consequences of not assuming more wells are drilled in these circumstances (leaving reserves not produced in the ground) At $65 per barrel oil , Tullow should recover almost all new well expenses for “cost oil “ within 3-4 months .....therefore the decision to drill more wells , with there subsequent impact on OPEX charges and unit cost amortisation of the FPSO lease, is profound. If any of the teenage scribblers ever worked out what a second rig would do to cash flows , they would probably be all over this stock. I am afraid it is a case of a little knowledge is a very dangerous thing...especially in the hands of a shorter...who motives are plain for all to see.

Try reworking the numbers after deploying a 2nd rig ...and you will understand the share price. Remember at $65 oil the Capital Markets day presentation suggested a 130% IRR on well inventory for Jubilee and a little lower for Ten. Investment is sometimes the art of anticipating the likely/possible rather than waiting for it to happen. The risk averse may wait for the debt to be restructured and the cash headroom to become officially available for a second rig to be chartered. Imagine how the unit cost of depreciation will change when two rigs are available rather than one. At the moment field recoverability has to be limited to the life of the licence.

If i am honest , i have to admit , i just bought more...but i did sell 70% of my holding at higher prices because they were technically overbought. If the oil price goes down $10 is does not bother me. The company is adequately hedged in short term. The key is the bond refinancing which i see no reason not to go ahead smoothly. GLA

You do realise that at $65 oil we can invest the money in Jubilee well stock with an IRR of 130% ? All we have to do is the tie ins on new producers from 2P reserves. From a risk perspective the EG assets do not qualify for inclusion in the RBL so this all makes sense. The returns at a higher oil price are exceptional ..Tullow just needs to refinance to gain control.

@Jubileey Do you think the banks would allow us to use the RBL for Uganda ? Did you include our contribution to the pipeline which would have been required to participate in Uganda ? If so our contribution rises to over $3 per barrel ? Do you realise that first production will probably not be for another 3 years and we have no spare cash ? Do you have any idea what value Tullow can generate from the Ugandan proceeds . Assuming oil at $65 per barrel we have projects yielding IRRs of 130% at Jubilee. Having been royalty shafted for 10 years ? in our dealings with the Ugandan Government I for one, am so pleased we are out of Uganda. To be fair to you, the headline price per barrel achieved is very low by historical yardsticks but you assume that Tullow had other assets to sell at a time that the industry was in survival mode. You will no doubt be pleased to know that Kenya should work at current oil prices so lets see how we do there .

You must be joking...Nothing wrong with Les ...its Dorothy and Jeremy which i would vote out. At least we have a competent new CEO... Seriously you have to look at partner disclosures to see the ridiculous assumptions built in to current production forecasts. Try asking IR what downtime assumptions and new well contribution are allowed for in 2022 ? Ask how we fall from 88k gross per day in the last reported quarter (Kosmos) to the new numbers. Then ask what the exit run rate will be in the last quarter of 2022. The non execs are in my view not accurately reflecting the most likely numbers after spending $140m on Ghana . I think it is is poor form which might prejudice our negotiations with the bond holders. Personally i think the bonds will have their maturity date pushed out and the RBL redetermination will be all wrapped up within the next few weeks.