Member Info for Slift

Hi adoubleuk,

I don't agree with your statement: "Well 6 quite self-evidently does not require ESP assistance right now."

Firstly, ESPs help control the water cut and is best controlled (or minimised the increase in water cut %) when installed and commissioned early on.
I'm glad that they installed ESP on well 6 now rather than later when watercut rises significantly.

"Or at least, not as a method of improving production and decreasing 'interference', to optimize flowrates."
I'd like to believe that this "testing to optimise" ended with the resignation of RT.
As CaptainSwag says, the new board is trying to make the company look "shiny" rather than prove concepts, or that's what I also believe.
Also, if you noticed in the last RNS, the company has clearly said that they will provide a "stabilised water production rate". I don't believe that they can provide this if theyre still trying to improve production or optimise flowrates.

ALL IMO.

Hi Neversellshell,

Tullow's strategy is very limited. I think it's better to explain using this chart:
https://gyazo.com/bb62ad4e11091dea3dd57d13c1a22b2d?token=39a2031f98287b48c33b752ae1b69f29

Grey, red and blue are debt repayments. In 2022, there's now an additional repayment of $161m in blue (As at 31st May).

I think Tullow will only go after the assets if they believe that they can justify it going forwards. (e.g. proving that the payback period for the assets is less than 2 years, which isn't really likely..) Obviously the forward price of oil has a big impact on this.

Below all assuming 75k bopd average and $35/barrel:

Revenue: $958m

OPEX @ $12/barrel: $329m
CAPEX (after $15m uganda capex saving): $285m
Decommissioning: $65m
G+A cost: $85m
Finance costs: Est $172-210m (based on 7.5% on net debt)
Total costs: $936-974m

Which is practically breakeven with revenue for cashflow at $35/barrel.
But I haven't dismissed YoungEngineer's comments. I'm happy to learn.

Posted this a while back, repost:

So Tullow has increased RBL borrowings in Q1 through widrawing from facility.

So as at 31st May 2020:
Cash in bank = (YE2019 + FCF Q1 - unforeseen costs), <$364m

Net debt at end of Q2 2020 (After FCF from Q1 and Q2): Approx. $2811m
The above is assuming that Tullow has spent the $148m it has withdrew.

Net debt following Uganda sale and estimated FCF (based on 1 or 2) for Q3:
1: (breakeven is $35 including for hedges)
Net debt: $2205m

2: (breakeven of $35 only applies to non-hedged)
Net debt: $2297m

"Why is it that companies like Occidential sell good assets like Jubilee and Ten which we make a lot of money from ?"

To answer this question:
Occidental is selling not only Ghana, but also Mozambique, South Africa and Algeria.
Seems like Occidental wanted exit from Africa, but also needed to raise cash? These assets were part of Occidental's acquisition of Anadarko.

Hi Neversellshell22,

The full stake of Occidental's Ghana assets on sale was estimated to be valued at $2.5b (before covid19).
There is no way that TLW can fund for the entirety, but there is an opportunity for TLW to obtain part of it to increase their stake (if that opportunity arises).
Currently TLW is barely getting through the difficult times regarding cashflow and debt. I mean, debt isn't really that bad, but combined with looming capital payments and credit ratings at CCC+, it's a struggle.

As at 31st May 2020, Borrowings are at $3255m. Net cash is unknown (this is one the current risks to this company, we won't know cash in bank until Trading Update/Interim Results). But if there wasn't huge unknown spendings, i'd imagine TLW to have around $300-400m+ cash in bank.
With the sale of Uganda (once approved and completed), TLW will have an extra $486m in cash. This brings net debt down to $2.3-2.4b (assuming that Borrowings hasn't increased since May 31st).

TLW's lenders have two tests (gearing covenant test and liquidity forecast test):
This level of net debt is more than enough to pass the RBL gearing covenant test 12 month ending December 2020.
The liquidity forecast test is the one where Tullow was likely to trip up before the Uganda sale. At these liquidity tests (September 2020 and March 2021), Tullow is required to show their lenders that they have enough cash for all financial commitments for 18 months.

Given that the convertible bond of $300m is due in July 2021 (within 18months) as well as normal financial commitments (OPEX + CAPEX etc.), it makes the liquidity test difficult. As at September, with approx $780-880m cash in the bank following Uganda sale, TLW can easily pass this liquidity test.
TLW does have undrawn facilities with the lending facility, but withdrawing this increases net debt, and only causes TLW more problems down the line (due to $650m senior note in 2022 and $210m bi-annual reduction of undrawn facility).

Unless TLW can raise cash in the way of share issue, it's difficult to obtain a part of these assets on sale. Or at least until September 2020 (if they have spare cash lying around following liquidity forecast test).

Hi CaptainSwag,

Just curious, where is this from?:
"slift - @ 18000 bod - A Brent price of $26 per barrel
covers the Company’s operating costs as well as its general and
administrative expenses and the coupon cost of the Convertible
Bond"

The $37m is before the cost saving from the rig is applied. With the early termination of the rig, the EBITDA is $45m.

Hi Antharry,

"What do you need to see in a company to make an investment?"
The shareholders vote was the one! I've got cash ready to make an investment. I'm just waiting for a good entry point at the moment (probably sometime next week). A lot going on with the markets right now, with earnings, vaccines and stimulus - so just being a little cautious.

I believe there's a lot to look forward to with Tullow, and I certainly don't want to miss it!
This recovery won't just be back to normal operations - Guyana, Suriname and Namibia are all to look forward to!

I also don't think the oil and gas sector has had a proper recovery yet in comparison to other sectors. Sure oil prices have recovered slightly, but I don't think investor confidence in this sector has recovered to that extent yet (e.g. pension funds and instituitional investors are staying away from high risk stocks). Markets are cyclical, but for oil and gas the time with come (usually sooner rather than later as the economy recover).

I think everyone invested here for the long term will benefit from both (assuming Tullow progresses forward as they have been this year so far). I also wouldn't be surprised if Rahul Dahir buys shares in the company to add to his holding.

GL to everyone here.

PlantedBHA,

lol okay, it was $55/barrel mate.

Rather than living on hopium, why not try and understand the risks and what it means for the company?
Seems like most people here just want all the positive facts with all the negatives hidden.

"Sounds dramatic considering you have no knowledge of this ?"
Sounds like you have no knowledge of this.
Go on PlantedBHA, let's see if you know something about the company other than the revenue equation.
Do you know the price of oil assumed by the company when they evaluated resources and assets?

Net earnings are likely to be negative after you take into consideration interest (c.$15m), tax, depreciation and amortisation.

In terms of balance sheet, HUR will take a big hit on impairments due to oil price and the material downgrade of 2C contingent resources on assets.

Hi fandg2,

The 5% is kept in inventory, and sold at a later date.In the calculation, 95% of all oil produced is sold, and 5% is kept in inventory at the end of the year to be sold in 2021.
You only generate revenue on the oil you sell, and when kept in inventory, it's just oil, not $.

Slift.

Yes you're right.
The initial cost of the rig would be accounted for in OPEX.

The early termination of the rig would decrease OPEX cost by circa $7-8m (at 50/50 with Spirit).

"so in my opinion it has been over represented in the SP"
In my opinion too. I wouldn't invest otherwise.
The fundamentals are strong, and as the uncertainties are taken care off by the board, confidence and investors will return to this company.

The following calculations are based on assumptions and should be taken with caution.

To the end of June, estimated Revenue at $99m.
Going forwards, assuming 15k bopd, $43 Brent and 90% uptime for the rest of the year:
Revenue Jul to Dec: $107m

Production (including inventory): $206m
Total Revenue for the year (assuming 95% sold): $196m

OPEX: $112m
CAPEX (install+commissioning of ESPs, well shut ins etc and assuming limited CAPEX H2 2020): Est. $25m
Staff costs and G+A: Est. $12m
OTHER costs (including hedge) at Est. $2/barrel: circa. $10m

EBITDA: $37m
EP/S: 1.47p

P/E Ratio: 3.9

Slift.

CaptainSwag,

Yes, I think we can all agree that HUR is undervalued (or at this stage). But the risks affects sentiments.
Some can argue that production for the rest of the year will be 0 (due to no production guidance given and the uncertainty regarding the EPS and assets). Obviously that's like a worst case scenario, but that's the risks associated with the company and it is reflected in the SP and Market Cap.

Slift.

CaptainSwag,

That figure was a very conservative estimate assuming that CAPEX will be spent in H2 following some kind of a disaster.

I will repost later with a more detailed calculation (once i'm done "working from home" lol) and provide an estimated P/E.

Slift.

CaptainSwag,

The P/E ratio for HUR on HL is based on 2019 earnings. I don't think that's applicable atm IMO.

Hi Romeike,

Yes, the Ntomme-9 has been delayed until August, but the production from Ghana to date has been in line.

That c70k bpd forecast was made following a disastrous year last year. Since then, following improvement projects, the production from Ghana has been good.
We will likely get an updated production guidance for 2021 later in the year.

Thanks Tony,
Yes, hopefully just minor issues that delayed programme.

The Stena Forth is likely to stay in Guyana/Suriname area for the drills later this year and 2021.
So whilst potential drill locations are likely to be identified in Ghana, it probably won't be drilled in 2021. Unless ofcourse they contract another drillship on a short term basis.