The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Tullow reported current Jubilee gross production at 107k BOPD in September analysts call. Why are we having this inane discussion ..none of you listened i suppose ? Now you’re working yourself into a froth? May I suggest you look at slide 6 of the last investor presentation…they could defer $150-200m of capex and still maintain current levels of production . SO who gets the dunces cap today ? Step forward ! Hope it’s not me ! :) Also hope all the poor P.I. ‘s reading this board have not sold expecting bad news next week.
@Scrodingerscat.
“Rahul did say Jubilee would be poducing 100K plus and it's currently not”
I believe it currently is. Let’s see what the Kosmos conference call says. The Jubilee water injectors to help optimise production started post the quarter end date..the objective is to achieve stabilised production which can be extended several years..whether we are delayed one or two months getting there is really immaterial to NPV . The scheduled shut down of Ten has cost us a few thousand barrels in this quarter .
@POWER A few small delays in hitting production guidance..but the suggestion that forward guidance for Jubilee will be upgraded for next year and the years ahead. I know which i prefer. You should never invest looking in the rear view mirror .
@antonvb
The nameplate capacity on the Jubilee FPSO is 120kbopd. If you read page 11 of the 2012 earnings transcript (link below) you will see the operational constraints. With current oil prices , funding rates, individual well productivity and the limitation on the licence period, I would certainly hope Rahul reaches it shortly.
https://www.tullowoil.com/application/files/3015/7960/2227/2012-tullow-full-year-results-webcast-transcript.pdf
I sincerely doubt that Exxon would show interest in Ghana licences without them seriously wanting to dominate the region. I suspect Tullow must have an amazing opportunity to divest …watch this space.
@TrebleTreble. I think you will find that this does not affect Tullow . The background to the dispute is covered by this article.
https://www.trtafrika.com/africa/nationwide-power-outage-hits-ghana-15570174
Tullow of course supplies gas at sub market rates so is unlikely to messed around….other operators charge almost as much as three times per standard cubic feet. If Tullow was in anyway affected it would promptly make a public RNS to that affect.
@Anton let’s be honest. Rahul had the opportunity to lock in production at $90 per barrel for 12 months. If he was that concerned about the debt …that’s IMO is what he should have done. When you are trading on one times projected cash , you have to throw shareholders a bone. Repayment of debt is the priority …no point paying dividends, but a buyback to take out a few obvious loose holders (like the bonds ) would have worked wonders for everyone. I cannot believe the share price…but what concerns me now is a clown in America who insists on running such a high budget deficit that the worlds bond and debt markets are in disarray . Until the Fed acknowledges the risk of a depression, the cost of debt repayments will cripple economies bloated with debt . I suspect the macho central bank response is currently leading to a severe recession. When the Fed changes tack we will all breathe a big sigh of relief.. but it is getting seriously dangerous to invest in the absence of market liquidity. It is only the macro that worries me now…Tullow has never been more attractive .
@Supercooper Do you honestly think international arbitration works that way ? that is why PSC contracts are adjudicated elsewhere. All the issues at stake will have been dealt with in previous judgments that have been handed down…they don't make it up as they go along you know !
As soon as Tullow can put a fraction of its internally generated cash flow to buybacks ..the shares will recover . Rahul talks now about “jam today” …those looking in the rear view mirror could miss out handsomely. Renegotiating the outstanding bond maturities might well transform this Company.
@Flavius
On one and a half times cash flow, with the ability to sell forward production , interest rate movements and ESG are affecting sentiment to an unprecedented degree. As the balance sheet recovers off debt restructuring , the opportunity to buyback will trump all else. The same applies to many other oil production companies with strong cashflow ..just like it did to tobacco companies forty years ago….in my opinion of course !
If oil prices stay high and Tullow sell production forward for 16 months ..the refi will be a walk in the park. Any extension of maturity will wipe out the shorters. If the Company starts to expand its operations on 60% ROI projects instead of paying down debt , the shares should be very well. DYOR.
@Tambo
hTTps://www.tullowoil.com/media/case-studies/successful-end-early-oil-pilot-scheme-eops/
Tullow have many ways of monetising the field that people forget about. The optimal way is of course by pipeline ..but there are various permutations…just with a refinery, just with a pipeline , with both …even trucking large volumes . The reserves are waiting in the ground to be lifted. The only real technical challenge is the need for heated pipelines for a waxy crude …but this has been overcome in subsea developments so should not be a real problem for onshore logistics.
hTTps ://www.sciencedirect.com/science/article/abs/pii/S0377025717300903
I can understand why people might be cynical about progress in Kenya. The Government sent all the wrong signals out a few years ago by trying to increase the level of taxes once a commercial discovery was made. The multinationals baulked at such behaviour as they had so many alternative high value projects to pursue elsewhere . Kenya shot itself in the foot and have had to backtrack to get some sovereign governments interested. I believe the project is very robust at $70..per barrel . Let’s see how this involved …it a high stakes game of chess…and by holding 100% of the licence (before Government back in rights) Tullow can make timely decisions .
@Gingy The market is being played by the shorters. They are getting into your head…or maybe you are one of them trying to get into mine :) Let me remind you , that just a few months ago , Mark Wilson of Jeffries was questioning if they could even raise gross production at Jubilee to 100k gross per day. Currently, production is at 107k …with further wells planned . Let’s remember other nuggets …the $75m free cash flow in the July/Aug excluded the latest well which came on stream in September. Furthermore, some of the existing wells are being constrained by having no outlet for associated gas …a problem which will likely be resolved by the expanded gas contract which should more than double off takes in the future . In fact Rahul indicated that based on graded well inventory we may be able to keep gross production in Jubilee to over 100k for several years. Meanwhile costs are falling and the oil price is surging . Sounds like as total disaster to me !
Total are interested in operating fields ..not being a junior partner . I do not believe their relationship with the Kenyans was helped by favouring the Ugandan pipeline proposal either . Originally they had high hopes of exploration in the Lamu basin which was not exactly a great success. Big is not a guarantee of commercial execution …BP currently has its own headache with the Tortue field development . In my experience , large companies are often a nightmare in terms of cost recovery and laborious and inflexible authorised financial expenditure budgets although I wouldn’t mind employing some of Exxons tech being used in Guyana :)
I might also point out
@Tambo. You appear a little confused , that might have been your argument before they awarded the licenses ..not afterwards. Meanwhile it has been the likes of Total who have disappointed the Government by not maintaining an equity participation not Tullow . Normally , it is the multinational who appoint Country Managers from the expat community and shun local content in favour of their suppliers. Tullow try to view all “stakeholders” as worthy of participation and benefit from the value creation . Strange concepts for the large inflexible multinationals . Just sayin !
Completely agree…one month late with commencement of Jubilee South East accounts for the tiny shortfall …but the balance sheet debt will come down fast from now on. Very well orchestrated bear raid. They have picked the wrong company IMO. The valuation is not a “bear trap” . Excess cash flow after capex has been used to pay down debt..after the next debt renegotiation we should allocate some to growth project with high IRR. Then watch the share price.
Hi Tambo, Doc you see the Chinese tourists visiting Turkana in the last week…or the tweets from the Chairman of the NOC of Kenya . Strange times . The reserves have been increased and the pipeline size upgraded …apart from the requirement of waxy crude to be heated which might add $4-6 per barrel to transit economics I am struggling to see why this is not an attractive project at current prices. Why explore when you have onshore assets close to FID ?
2026 maturity bond price is marginally up but share price is down …what a load of contrived BS from the bears ! They need to held accountable in coming months …many innocent investors will have been forced out on this raid. Company IMO is in great shape …free cash flow multiple is one of lowest on market
People are seriously daft.;..oil futures allow you to sell forward and lock in profits if you want to …I am sure the company will lock in the appropriate caps and collars in due course to justify a significant rerating . As capex is much lower going forward the Company will lower its forward gross debt facility saving material amounts . The harvesting is just starting . $75m of cash generated in the latest 2 months and the last well only came on stream in the last week. Current production is at 107k …this is heading north in my opinion after the usual IR results fiasco. Rahul is doing at great job but his presentations sucked. It all comes out in the Q&A. There should be substantial saving on the FPSO as the market is severely depressed compared to the shortage of available FPSO’s when the original lease was negotiated. Also, subtle reference to other operators potentially using the infrastructure …might be the Pecan development? Or Ivory Coast on a longer term basis ? Outstandingly cheap share . Added to my holding today as I note one prominent CFD provided doubled their margin requirement and combined with stop losses exacerbated the situation . Post any positive agreement in relation to an extension of debt maturities , the sales shiould be north of 80p in my opinion.
Sorry, see slide 5 of the link for forecast Jubilee production .
Not sure if we are looking at the same Company. Thanks to “Bootycall” on another site for the link
Production is obviously moving materially ahead. The link up for Jubilee South East was delayed by just over a month and the building up in production necessitated lower the main field output for a few months . This has been explained in the Kosmos investor call. As usual people need time to disgust . This is a Company about to generate virtually its whole market cap in free cash flow in the next year…and some posters are trying to describe progress as a “problem that needs to be resolved”. The last well came on stream at 17k bopd !
hTTps://investors.kosmosenergy.com/static-files/7b9c3940-a273-4ed6-90b8-601feaf5f583
Look at the forecasted $200m of free cash flow in the second half. This is not a seasonal business and average production will be higher next year. The business is on 1-2 times free cash flow for goodness sake ! The Company can sell forward its production and lock in massive cash resources now prices have improved. One of the cheapest value stocks in the market in my opinion . Only annoying thing is the Kenyan Government faffing around …but I suspect that may be a bit of a negotiating stance ?