Proposed Directors of Tirupati Graphite explain why they have requisitioned an GM. Watch the video here.
There would have been no BOD members present at the meeting. It was already mentioned on the circular RNS;
"...and Directors will not be available to meet with Shareholders, before or after the General Meeting."
It's just general sector level drops it seems which is visible across many E&Ps - although sadly CNEs sp didn't go up as much with oil price recently to begin with. Impatient traders might be selling out as there's no strong upward trend. Like I said a few days ago - until CNE confirms either receipt of the refund or a new acquisition, the sp might just go up and down with the market. Doesn't seem much volume either?
The law says CNE needs to withdraw all enforcement actions which will include handing back of the Indian governments confiscated Paris properties as well. Wouldn't be a surprise if unwinding these actions takes a bit of time along with the 45-60 days timeline post notification of the withdrawal by CNE. Cne should at least update the market though that the claim has been accepted by the gov in principle etc.
Has anyone contacted or heard back from the IR yet?
Interesting that over 15mn votes were against the sale although just 5% of total voted.
If you look at the decommissioning provisions and lease liability of the assets sold, that's close to $400mn of liabilities offloaded. So isn't as bad.
Of course it's pretty silly price action for the longs - CNEs sp didn't go up when the oil price rallied $10/bbl the past few weeks alongside most of the oil stocks that went up. But CNEs sp is going down with the rest of the E&Ps and oil price in tandem or more.
The GM vote results should be out today - a surprise turning down of the sale might boost the sp considerably imo although that's a remote possibility.
CNE should at least unveil another acquisition soon hopefully...
It's not an AGM, it's just a general meeting. And an update has already been provided on 11th October as part of the North Sea assets sale circular. Nothing more would be mentioned in the meeting imo as legalities can be a bit slow especially with Diwali holiday on 4th November and most official/ locals on holidays until Diwali imo.
Think this below excerpt from the circular summarizes as the process for refund is ongoing ;
"On 7 September 2021, Cairn announced in the 2021 Half Yearly Results that it is considering entering into statutory undertakings with the Government of India in respect of new legislation, which would enable the refund of retrospective taxes collected from Cairn in India by way of the asset seizure referred to above totalling INR 79 billion (currently US$1.06 billion). The principal condition under the new legislation is the withdrawal of Cairn’s rights under the arbitration award referred to above, as well as the termination, withdrawal and/or discontinuance of various enforcement measures taken by Cairn in multiple jurisdictions."
https://www.cairnenergy.com/media/2980/north-sea-circular.pdf
Agreed, the few weeks comment was too optimistic to say the least. It has wrongly given the impression of fast resolution but as we've seen in the Indian governments defined rules, what fast possibly means is in the range of 15-60 days or more depending on how fast CNE withdraws cases and submits the forms and if that's acceptable to the gov. But It's been just under a month since the rules been published on 1st October.
And even though the gov is not paying interest - the arbitration award is still accruing interest towards CNE until CNE says it's settled fully and foregoes the award after receipt imo. Current award value imo is c.$1.8bn and counting...
@eni has made three more discoveries in the Western Desert
"The company drilled the Jasmine W-1X and MWD-21 wells on the Meleiha lease, and the SWM-4X well on the South West Meleiha exploration concession.
The Jasmine W-1X found 113 feet of net pay in the Jurassic sandstones. It flowed at 2,000 barrels per day and 7 million cubic feet per day of associated gas.
The Jasmine MWD-21 found 51 feet of pay in the Cretaceous sandstones. Eni has already tied this into production, with a rate of 2,500 bpd.
The SWM-4X well found 36 feet of net pay in Cretaceous sandstones. The company reported an initial flow rate of 1,800 bpd and 0.3 mmcf per day of gas. This well is 35 km south of the Meleiha facility, Eni said.
These three discoveries have resources of 50 million barrels of oil equivalent, Eni said. They provide more than 6,000 boepd to Eni’s gross production, it said.
Agiba arise
There is scope for more appraisal and production wells. Eni is planning these in order to sustain production at Agiba. This is Eni’s joint venture with Egyptian General Petroleum Corp. (EGPC).
Eni’s IEOC holds a 76% stake in the contractor participating interest of Meleiha, while Lukoil has the remaining 24%. IEOC holds the entirety of the participating interest in South West Meleiha.
In December 2020, Eni reported its equity production in Egypt was 320,000 boepd. It has risen to 360,000 boepd.
The Italian company struck a deal to merge the Meleiha and Meleiha Deep concessions in June this year. The licence runs until 2036, with the option to extend this to 2041.
It has continued discovering new resources in the area. In 2020, Eni reported success at the SWM-A-6X, on South West Meleiha. The well began producing at 5,000 bpd, while the concession was producing 12,000 bpd.
The company then announced another discovery in Meleiha at the end of the year, which produced at 5,500 bpd. It followed this with two appraisals, bringing new production to 10,000 bpd..."
https://www.energyvoice.com/oilandgas/africa/ep-africa/359754/eni-success-western-desert/
It's just the CEO /CFOs ill timed comment regarding receipt of funds within few weeks, that has set up expectation of upcoming news. Although in the half year results release they have mentioned the expectation is of a "near term resolution". So don't think there would be any news at next week's GM as no directors would be present, and it seems more of a formality vote meeting. Don't think even IR is getting back with responses to emails.
The law that was at the root of the arbitration has been removed - rest all seems semantics as long as both parties want it settled - legal paperwork might be going a bit slow especially when CNE has to withdraw or stay proceedings in all jurisdictions.
Does feel that way. Would have preferred if CNE kept the pressure on until full cash repatriation but I think CNEs management mostly follow the big IIs advice and agreeing to settlement is a pragmatic choice. I guess Blackrock and Franklin Templeton want this issue resolved so they can get back to investing in the country... But the CEO and CFO did make a fool out of themselves by trumpetting the "within a few weeks" receipt of payment announcement based on some gov officials word on timeline guidance.
Meanwhile CNEs arbitration award enforcement actions have set a precedent that devas seem to have copied. They are going after similar assets following CNEs footsteps.
https://m.economictimes.com/news/company/corporate-trends/devas-multimedia-eyeing-foreign-assets-of-indian-govt-to-enforce-1-3-bn-arbitral-award/amp_articleshow/87125719.cms
If anyone wants to read the final rules for themselves, have a go at it on this link ;
https://incometaxindia.gov.in/news/notification_no_118_2021.pdf
Rules being onerous might be an understatement imo after reading it.
mrc- the below is mentioned in the Half year results announcement. It states that, the cases need to end so as "to be eligible for the refund". The enforcement cases anyways don't serve any purpose if the issue underlying the award is resolved I.e. Retrospective tax demand withdrawn and the amount is to be refunded.
"In accepting the terms of the new legislation in India, Cairn would be required to withdraw its international arbitration award claim, interest and costs and to end all legal enforcement actions in order to be eligible for the refund."
Agree. Although to be fair, CNEs management and shareholders especially the ones who've held through the past 7 years of uncertainty, would prefer today a certainty of the refund amount even if there is a few weeks delay. And CNE never gave much detail during the arbitration process on timelines or since the award so wouldn't expect CNE would do any differently now in terms of rules, timelines etc. until the receipt of funds and final closure of the issue imo.
The dislocation of the cash as a percentage of market cap is definitely attracting market participants attention ;
"The market capitalization of the stock doesn't reflect the cash that they will have on the balance sheet, Majcher said.
"They are going to distribute through dividends and share repurchases a very large portion of their market cap," Majcher said. "We think that's an interesting company, low risk opportunity to invest in energy."
https://markets.businessinsider.com/news/stocks/energy-stock-picks-bull-case-outperforming-value-investor-stan-majcher-2021-10
34a - If you read the North sea sale circular they have reiterated the latest status of the continuing group which is basically the same expectation of near term settlement. CNE have also mentioned specifically that CNEs going to have to withdraw and terminate the cases before settlement can be done which explicitly wasn't mentioned at the half year results.
It makes sense to let CNE drop all cases first else it would be a tricky situation for the gov if they decide to pay back CNE the settlement amount first but CNE doesn't drop the cases in a timely manner. With the rules they have put all the actions in a sequence i.e. Give an undertaking, drop all the cases and the award claim and get payment within specified days. Because CNE has all the leverage, the cases can just be reopened if settlement doesn't happen according to the above rules/sequence. The $1.8bn arbitration award will still be in favor of CNE(and interest still accruing) if the $1bn refund doesn't happen according to the new law /rules in time. The enforcement of the arbitration award on Air India despite its sale would resume if CNE chooses to go after the full award.
"On 7 September 2021, Cairn announced in the 2021 Half Yearly Results that it is considering entering into statutory undertakings with the Government of India in respect of new legislation, which would enable the refund of retrospective taxes collected from Cairn in India by way of the asset seizure referred to above totalling INR 79 billion (currently US$1.06 billion). The principal condition under the new legislation is the withdrawal of Cairn’s rights under the arbitration award referred to above, as well as the termination, withdrawal and/or discontinuance of various enforcement measures taken by Cairn in multiple jurisdictions."
If you read the issues that the two fields and the FPSOs have, it might give a bit of insight into why the management think the assets are not as high return. They are going into decline and would need capex and North sea capex can be $100mn-$200mn + for the two assets.
The assets are well worth keeping at current oil prices for the cash flow over the next few years but after that offloading them would be an issue. Also in the circular the assets are classed as held for sale at a value of over $700mn and the liabilities for sale are close to $400mn that means the asset value on CNEs book is of around $300mn for these two assets.
Next step is to see what sort of acquisition can CNE pull off with the cash. Yesterdays Kosmos deal of buying Ghana asset stake from Occidental should give a rough blueprint on the financial metrics. Although would be surprised if CNEs management can pull off a similarly attractive deal. So there do seem to be deals but might not be as attractive as Egypts deal terms given the rise in oil prices imo.
There are some old articles which show the range in which revision of gas prices happen in Egypt. Would assume as gas prices go up E&Ps would be asking for revisions to gas prices else they might not invest more in gas production causing domestic production to drop. Case in point - CNE will be ramping up investment in the EGY assets in '22 but towards boosting oil production rather than gas production.
Gas price revision example from 2016 news article ;
"Shell, Apache Agree on Higher Gas Price
The Dutch company Shell and the American Apache have agreed with the Ministry of Petroleum on the price of the gas in the limestone layers at Apollonia field in the Western Desert. The new agreement decided on $4.6 per 1m thermal units instead of $2.9, Daily News Egypt reported. The gas proven reserves in the limestone layers in Apollonia field are estimated at approximately 700bcf.
After 19 days of work, Apache completed the drilling of the two horizontal wells in Apollonia field, with a estimated cost of $3m and each, according to a prominent source at the Ministry of Petroleum cited by the newspaper.
https://egyptoil-gas.com/news/shell-apache-agreed-with-petroleum-ministry-higher-gas-price/
"The government has notified a fresh set of rules to facilitate settlement of the retrospective tax dispute with British telecom giant Vodafone Plc"
https://www.thehindu.com/business/Industry/centre-notifies-rules-to-settle-vodafone-retro-tax-case/article36999551.ece/amp/
You might need to listen to one of the recent webcasts where the CEO answers this question which was posed by an analyst(I think it was the SNE disposal call). The CEO said that currently CNE is not at a scale to consider a regular dividend but of course if the scale is reached then CNE will have the optionality to consider a regular form of return.
And at the latest call the management stressed about building and scaling up the production and cash flow base. Of course CNE wouldn't just generate cash flow for exploration alone but also would have the option of returning capital if cash flow is sizable. Can't think of another reason why CNE would want to build production scale if not for more exploration and dividends/returns? And if you read the latest transcript the CEO clearly says the following ;
"So, with final resolution of the Indian tax issue in sight, we're excited to move forward with a renewed portfolio, balance sheet strength, near-term value growth opportunities, and the potential for acquisitions of scale all against a backdrop of ongoing returns."
He also hints that the contingent payments from North sea assets sale might give CNE opportunity for further capital return after the India divi/returns. So it might be possible that $700mn be bumped upto $800mn? Especially with another c.$80mn coming CNEs way from north sea assets sale oil price exposure?
"We intend to continue with this differentiated strategy of creating, adding, and ultimately realising value for shareholders through a combination of share buybacks and further potential returns with contingent payments from recent asset sales providing the potential for near-term capital allocation decisions"
Remember that CNEs management and analysts consider CNEs sp to be trading at a significant discount to the core NAV. As current sp is covered by cash mostly, market would struggle to price CNE correctly if there is no visibility towards the CNE story or unless CNE paints a better picture of life after the India return? Until then we might just drifts up and down day to day with the market especially until the receipt of funds RNS is confirmed.
https://www.cairnenergy.com/media/2966/hy21_cne_transcript_210907-final.pdf
That can only be answered based on what sort of acquisition CNE can redeploy that sale capital towards. If CNE manages to get hold of an asset or portfolio with similar production to C+K - 15-20kbopd+ oil production but highly cash flow generative in a low risk jurisdiction then it would definitely be good news for equity, especially if it can get CNE to start regular dividends.
Leveraging up CNEs year end $300mn cash (pre GOI refunds/rebates) with some $500-600mn RBL /acquisition debt should get CNE another asset which can generate at least $300mn cash flow per year. Together with EGY you would have CNE generating c.$500mn cash flow per year or at least $200mn free cash flow that could be directed towards dividends and more exploration? $100mn dividend per year could be massive on a per share basis if post divi share consolidation and buyback drives share count a lot lower.
CNEs story is all about what's next and not what CNE is currently. Since the acquisitions are yet to come, market is not pricing any of the above possibilities.
It's hard if not impossible to time any receipt of funds RNS. It is already past the few weeks timescale the management guided on the results call on 7th September. Could a receipt RNS land any day? There is a possibility that whoever guided CNEs management regarding "next few weeks" timeline could have meant post the final rules notification date, rather than draft rules date which was a month ago? Also possible that the local festival period that's ongoing might affect the timelines a bit? Who knows?
Both fields are declining and would need infill drilling to be done which means much higher capex. And capex would be massive in comparison to EGY WD drills. In WD an exploration or development well costs $2-3mn while in the north sea we are looking at a bill of at least $25-30mn per well.
But if we can retain the oil price upside without any capex then it's a good deal. Would have preferred we retained north sea assets but the total price does look like over $600mn for the two assets plus a new 10% interest bond to Waldorf for $30mn.
If CNE can use the cash proceeds from these two assets for acquisition of another low cost asset or portfolio in a low risk jurisdiction with decent oil price exposure then all the better. It's all about growing and reliable FCF generation from the assets. North sea assets obviously are not reliable in low oil price environment especially below $60/bbl.