Member Info for seakingalpha

I have been telling you the shares are going higher …so i am glad you have changed your mind . The shares will be over 55p post resolution of the spurious branch profits tax claim and the bond refinancing. You will not have to wait until Easter before that.

May i also point out that in the latest news the macro position has just dramatically improved with Ghana’s euro debt now reduced by $4.7bn as debt holders have just agreed to an average 37% haircut. By returning from the precipice of a sovereign default scenario the prospects for Tullow debt refinancing should improve and the prospects of receiving more timely payments for gas sales maybe also !

Your post of 9:57 today was highlighting the potential liability with an exclamation mark as though it concerns you ..so it is a perfectly reasonable question to ask if you believe the claim will be successful. So what’s your opinion ? Your are not normally shy.. :)

So, just for the record JMAX do you think the branch profits tax claim will succeed ? Because i certainly don’t think so ..the Ghanaians dropped the same claim for a South African telco and Kosmos when they pushed back.

As for trying to frighten people over an FPSO lease commitment which reverts to a short term with annual breaks ? contract after 10 years is really beyond the pale.

Ghana elections are scheduled for early December…watch this space. The incumbents don’t look competent to me !

Troughsnout .

Forgive me if i misquote, but from memory didn’t Brevarthan previously claim production would be much lower this year. My understanding from Kosmos is that water injection is at record levels but they need to slightly upgrade the gen sets on the FPSO. Kosmos reiterated guidance of 90k+ production at Jubilee for almost the next decade…but accept some decline in advance of further drilling next year after the seismic programme has delineated better well locations. Jubilee is a large mature field and there was only 1 out of 18 wells which disappointed. It initially flowed at very high levels but was not connected to main reservoir as initially envisaged…slightly different to how this report presents it…but i hate to think the author of this report would exaggerate when he has a self declared short position , heh). I note Kosmos have just refinanced with no problem with Jubilee accounting for a big chunk of their cash flow. The report mentions the lease liabilities on the Ten FPSO ..which has already been accounted for to the Ten year break…no mention is made of the dramatic fall in the FPSO charge for subsequent years of almost $50m per annum because it does not suit the narrative . The “problem” with the Ten field is that management have prioritised Jubilee based on the quality of defined prospects and lack of seismic…there are considerable reserves…albeit some requiring uses for condensates. lastly the Ghanaians have had a history of irregular payments on the field …but the bills have always been paid.

As for the spurious branch profits tax claim..good luck with that…never known a properly drawn up stabilisation clause to ever allow that sort of hustle by a host government …hopefully Tullow we be awarded some pretty decent costs as well !

Nonsense, the tax tribunal and refinancing are both events expected in coming months. Your posts are meaningless if they are not backed up with logic. Let me speak plainly, when you value a company you look at the enterprise value. Trying to tell people there are buying and selling levels in the ordinary shares ,representing no more than a 10% differential of the total enterprise value is proof that you have not got a clue. From my perspective the limitation on the share price performance with current cash flow yields is the restrictive covenants on the bonds . These restrictions mean historically there has been little surplus for share buybacks. I do acknowledge there have been modest production shortfalls but production can easily be replaced by small bolt on acquisitions with all the surplus cash .

Thank you for your efforts JMAX. Just doubled my Tullow holdings. As soon as the bond is refinanced i think the Company will be able to start buybacks and then watch the price move. For unloved sectors buybacks are an extremely straightforward way of boosting EPS.

JMAX This is about the first time i have ever witnessed a junk bond go up to almost parity whilst the equity falls. The simple fact is the Company has had to prioritise debt reduction and capex for the last four years. The share price has also been tossed around by the ineptitude of certain governments to pay their bills or perform their basic duties to their citizens. In Ghana , they are importing gas at punitive rates when there is a source 30kms offshore. Total incompetence .The market cap of the Company is now spare change to the principal shareholder. In my opinion, Rahul has been running the company like a private equity operation with disregard to shareholders which is why the equity has been so under appreciated. Incredible value here, but I understand people being fed up.

Very encouraging Anton. This should definitely improve the chances of this moving forward very quickly .

@JMAX it’s called a dispute resolution procedure…all laid out in the PSC to stop host Governments confiscating assets at their whim. Looking forward to the verdict…if you’re still around. Ghana might get lucky on a few minor claims (not branch profits tax) but they will be ruled on at a later hearing. The damage their hair brained action may be having on inward investment and supranational funding is lamentable..but many countries have the arrogance to believe that international contracts under a different jurisdiction can be ignored as soon as a discovery is made. Duh, ..IMO Plain wrong .

@JMAX Please show me just one example of where a dispute over branch profits tax has been upheld in favour of a host government suing an international oil company with a petroleum sharing contract where there is a stabilisation clause.

Perhaps you would also care to comment on why the other spurious branch profits tax cases were dropped against Tullow Oil in the past before arbitration,or why a similar claim has been dropped against Kosmos this time ?…as well as a South African Company, where, in my opinion , the Government of the Country objected to this crude attempt at a shakedown.

You may have also seen the opposition in Ghana suggesting they will have a “tax amnesty “ for many of these unfounded claims by the ruling party. The Government of Ghana is only just waking up to the folly of intimidating those that seek to invest in their country. The scandal over high transfer gas pricing in local fields has cast a cloud over the current administration . That being said change is now occurring and Tullow now appears to receiving a warmer welcome.

I am afraid it is one of those companies you relist in the USA and you get three times the existing market cap. The product is approved in Europe and the USA ! Give it a year to gain traction…they have to train people to use it first !

Tullow has been slavishly paying down debt to ensure the RBL can be extended (like Kosmos has just done) or replaced on sensible terms. We are fast approaching the time when production deals could be financed which would have IRRs that could have a meaningful impact on cash flows . When we no longer have to shrink our balance sheet we should enjoy equivalent rating to our peer group. I know its like watching paint dry , but private equity would love to own this puppy on one times cash flow with their cost of capital ! Patience could be very rewarding.

@SharingGuy That is logical but we have had a GPG ? Offline for 2 weeks and the gas plant we distribute to has a planned maintence shutdown in Q2. Kosmos reported gross Jubilee production of 95kbpd gross for March and April and 110% voidage replacement.

I note that Tullow said in their last statement that production should be range bound between 90k-110k gross in Jubilee for almost the next decade. Kosmos has also commented in previous webcasts that redundancy is built in to allow wells to go offline and production forecast could still be met. It may well be that the additional wells just brought on stream have needed to be brought on slowly to balance the water flood reservoir engineering. Voidage replacement needed to be accelerated as the field became sub optimally pressurised when two of the pumps broke down last year.

The end of 1H represents the peak cash outflow on the balance sheet as the capex is substantially less in Ghana now drilling has finished for probably 18 months in Jubilee. I think Tullow will gradually allow production to rise as part of a controlled reservoir management system incorporating the new offtake from Jub South East. I would not be surprised if the 1H production number averages 97-8k gross and picks up to around 105k in the 2H of the year. It is important now to run the field at full capacity and endanger water cut etc.

JMAX,the Ten write off was accounting treatment for the FPSO on the assumption that no production would occur and the lease would be surrendered at the first opportunity provided by the early termination clause. In reality, that is most unlikely to happen. If Tullow sign a new FDP the provision will be written back and further significant reserves recognised. . Furthermore the FPSO operating cost comes down very substantially after the first 10 years …by over $50m per annum from memory ? Throw your mud…it actually draws attention to how conservative the carrying values are . Rahul , has to do better at explaining the detail to the average shareholder to stop you little games .

So the amazing performance of the bonds does not impress you ? Or the Glencore facilty? Or the news that Jubillee is back over 100bpd gross…or that BAML changed to a buy tack ? Or that debt repayment is well ahead of schedule? Or that the oil price at this level would be fabulous for royalties from Uganda ? Or that we should shortly benefit from two submitted FDPs awaiting final sign off from host governments in Ghana or Kenya worth collectively multiples? on the current share price. Perhaps you can point me to some other stock on 1 times cash flow to market cap….? No , didn’t think so. Rahul may have the charisma of tax inspector but value is being created. I can understand the frustrations of those that would have preferred to pursue the valuable exploration acreage in Namibia , Guyana, etc….but the market was risk off and insisting on a resolution to the debt situation. Not being in control of our finances has already cost us $600m of mark to market hedging loses since the last bond refi ….no point getting burnt again.

My only real criticism of Rahul is that he does not want to put his reputation on the line by talking about situations beyond his control , like political decisions affecting approvals. By adopting this policy and having to write down assets like the Ten field in the intermediate period…he is short changing the returns of shareholders on anything other than a long term view. IMO of course !

@Flavius. Your confused . Chocolate prices are skyrocketing ..old cocoa bean. Brent is now the same price as it was about 10 years ago. Taxes on oil may have well risen though ? This narrative about oil prices causing inflation when in real terms over long timelines they have not, is typical nonsense . Gas prices on the other hand that have caused a crisis in certain continents are very much on the way down now. Our dear woke friends meanwhile have hindered oil and gas exploration which will now cause spikes going forward from supply imbalance. What is more interesting is that technology have driven break even points down on even expensive shale projects. Tullow has a cash operating cost per barrel of under $10 in Ghana. The oil hedges were forced on them by the bond syndicates. Hedging in fact saved the Company when prices had previously collapsed but we have taken a $600m hit this time round. Perhaps the Ghanaian government would like a share of these too ?

@Tambo210 Let me remind you that Tullow has been one of the biggest investors in Kenya . No one is disputing that host Governments have the ultimate say, but as Kenya have already entered into a binding contract they will have to pay compensation to exit which would be rather stupid. There is a PSC in place, enforceable under international law, (as the Ghanaian Government are about to find out with a highly questionable branch profits tax claim now they are in international arbitration)…On the other hand Ruto could emerge as a winner with an additional revenues and jobs for the Kenyan people. Seems a non brainer to me…unless you know something different ? Why on earth would a Government trying to attract oil exploration , international aid and development finance want to screw up its relationships with Western Governments by refusing to honour an agreement which Kenyan will generate billions from . Very short sighted may I say !

@JMAX This project is very likely to be sanctioned in my opinion. The economy badly needs the revenue …but the smell of corruption and manipulation is self evident in Kenyan politics

https://www.theguardian.com/global-development/2023/aug/29/money-down-the-drain-scandal-of-kenyas-failed-dams-reveals-a-country-drowning-in-debt

If Lokichar is developed on a smaller scale as a trucking operation it will be massively cash generative for all parties. The Kenyans may well be stalling making a decision on their back in rights because that will trigger a requirement to make cost contribution. I would not be surprised if they were holding back hoping a new partner would take some or all of that obligation off them . If you read the link , this has been their modus operandi on previous capital projects. The Kenya project is worth an awful lot of money at current oil prices…few more months should do it !

Hi antonvb . If you want some concrete costings of the 2000bpd proof of concept EOPS programme you will find them in this report. Obviously when the volumes increase there are many ways of making this more efficient….with a heated pipeline, refinery or any number of combinations linked to the LAPSSET Corridor Development . Personally , a 120kbpd pipeline with a tariff of around US8-9 per barrel would the most efficient option , but for such a capital project we will probably need to appraise a few more of the fields .

https://www.tullowoil.com/application/files/1015/8490/6130/1654017-722_a-2-esia-non-technical-summary.pdf