Member Info for Slift

No worries Sharethejoy!

I expect to be back in here with a holding before the trading update. Just a little cautious with some of the 2Q financial estimates and figures to come out. Will wait and see how the markets react.

GLA.

Confidence in this share is slowly coming back.
The management has so far done exactly what had said they would.

- A new CEO has been assigned.
- $1b portfolio management is coming along nicely with the Uganda sale. I'd imagine the share price to rise a little after shareholder vote as this would give more confidence for the sale being completed on time.
- All other operations goals (albeit some have been delayed, but still on track).

The next step that will bring more confidence into this company is the production guidance. This will be announced at the half year results/trading update. The following are key information to look out for:
- Production to date in line with guidance or above is positive and will again be in line with what management had set out to do (70-80k bopd production for the year)
- Estimated production should be around 75-78k bopd.
- Cash in bank and other financial information
- Progress of Ntomme-9 well (solidifies production guidance for the rest of the year)
- Information regarding further asset sales
- Forward strategy from CEO
- All other updates will be relevant, but may not have much of an impact on share price

ALL IMO.

With every market soaring, this should be good for Elementis.

Chinese markets have been taking off. Elementis has a huge market for it's products in china as well as operations. Should see a good upside here if the rise is sustained for this week.

IMO, the main reason for the recent decline or undervaluation (in comparison to other shares) over the past month has been due to China/US tensions as well as Elementis getting kicked out of FTSE250.
Wouldn't surprise me if we're back in FTSE250 by the end of this month (if not earlier), following results.

Good job if you got in at low 60s.

GLA.

Hi Cragrock,

Good points.

"We have licenses not a million miles away from sealion."
The licenses in Argentina are pretty far from sea lion which is located north of Falkland Islands.
But the licenses Tullow have in Argentina COULD be great. These licences in the Malvina's basin are adjacent to major operators. Exxon, Total, Equinor and Qatar Petroleum to name a few.
We won't know the potential for these licenses until someone drills here first. I don't think Tullow will be the first to drill here, but an oil find by the major operators will definitely give Tullow a boost.

Here's a map I just annotated with the licenses:
https://gyazo.com/277c4f469e643fc6d74f2dbf84e80e84

GLA. ALL IMO.

I'll skip on the accounting course thank you.

"It will be more useful than patronizing on risks on this in this chat."
I was simply answering your question and providing my opinions lol

"Canarywharfy
Posts: 323
Price: 30.99
No Opinion
SliftToday 12:18
Why do you think Tullow can't hold Uganda for 2021?
We have more than $700 millions in undrawn facilities."

Not an accountant. I'm a chemical engineer, and the oil and gas industry interests me (as well as the corporate world).

"with time on your hands"
I think a lot of people have time on their hands at the moment...

Free cashflow doesn't matter if Tullow fails liquidity test and RBL facility demand their $3255m in full (Company would file for bankruptcy).

Suggest you read this from Moody's: https://www.moodys.com/research/Moodys-downgrades-Tullows-CFR-to-B3-places-ratings-on-review--PR_420645

" WHAT COULD CHANGE THE RATING DOWN
Conversely, the ratings could be downgraded should the liquidity position of the group deteriorate post RBL redetermination and/or in the absence of any disposals. The rating would also come under pressure should the group generate sustained negative FCF resulting in Moody's-adjusted total debt to EBITDA failing to fall back below 5.0x for an extended period of time."

ALL IMO.

"Why do you think Tullow can't hold Uganda for 2021?"
Answered this before..

$300m bond repayment in 2021.
$650m senior notes due in 2022.

Tullow will reduce RBL facility commitments by $420m in 2021, leaving $280m in undrawn facilities.
How do you pay $300m bond in 2021 and $650m senior note in 2022 with $280m in undrawn facilities?

I'll answer that one for you, debt restructuring.
Which brings me onto the next question, how do you restructure debt with CCC+/Caa2 credit ratings? Not to mention that the risk of failing RBL liquidity test will further DOWNGRADE this credit rating.

But i'll let you answer that one..

Hi Canary,

I was once invested here.
A quick research to add to a discussion on a discussion board isn't try hard or being big-headed.. or i don't think it is.

Here, you can do your own research:
Page 110 for value of Ghana assets as at 31st December: https://www.tullowoil.com/application/files/6515/8636/0100/2019_Annual_Report_and_Accounts.pdf

Page 3 regarding Anadarko's sale: https://www.oxy.com/investors/Reports/Documents/2019-Form-10K.pdf

Anadarko's share of TEN and Jubilee according to the article was valued at $2.5b, when the oil price was ~$60-65/barrel.
Also according to that article, the total value of Ghana, Mozambique, Algeria and South Africa was $8.8b.
The sale of Mozambique assets was completed in Sept 2019 for $4.2b.
That leaves Ghana, Algeria and South Africa assets valued at $4.6b.

Ten - 17% (Tullow 47.8%)
Jubilee - 24.8% (Tullow 35.48%)

TEN is a lot less valuable now due to the reduction in the 2P reserves last year.
Tullow's 2019 annual report values the Ghana assets at $4.1b, at a time when oil price was ~$65/barrel. This valuation also takes into account the reduction in the reserves in TEN fields.

Currently at $43 Brent price, I'd say that Tullow's Ghana assets are valued at $3.5-3.7b after depreciation and impairments. But the price companies will be prepared to pay in the current market conditions is probably less than $3b, or a 15% discount.

ALL IMO.

Hi Betrayed,

You kept saying that the CEO needs to be LION.

If you follow shorters, wouldn't that make you a sheep?
Be a LION. DYOR.

Tonadotony,

"The non- Ghana production value has asset value of around $260M.
The Ten and Jubilee field if sold tomorrow are $3.6B minus the tax considerations. Lets say $2.7B net.
Other plant assets etc may well take the value overall to $3B. 1.9B debt remaining after farms down Guyana and Suriname and selling Kenya blocks etcetera. Company say is worth $1B after decommissioning bills worth 70 cents a share or around 56p."
The asset values are more in line with $60-65/barrel. After impairments due to oil price, all assets would have been downgraded. Farm downs and selling Kenya (and Uganda) in today's market further devalues the asset profile..
Impairments affects assets, but doesn't affect liabilities as much. Hence the negative net assets for YE 2020.

"I do feel fair value for Tullow at this time is 37-43p range but the market is not always reflecting where a company actually is."
I think we may well see 37-43p range following H1 results if in line or better than expected.

Regarding coronavirus, sooner or later investors will dismiss increase in cases and will probably focus on death rates. If death rate rises in line with increase in cases, then I wouldn't be hopeful of a recovery short term.

Hi Longish,

Following your comment, thought i'd calculate the valuation via discounted cashflow.
Discount rate: 12.1% (Calculated with 5.8% 2020 UK market risk premium, levered beta of 2 (assuming Tullow is a stable company) and current 20 year bond yield of 0.571)

Cashflows and discounted cash flow for 5 years (figures are finger in the air based on oil price/production as I cba to calculate each one :P):
2020 FCF: 200m 2020 DCF: 176m
2021 FCF: 250m 2021 DCF: 220m assuming oil price $45-50/barrel and production 80k
2022 FCF: 300m 2022 DCF: 264m assuming oil price $50-55/barrel and production 80-85k
2023 FCF: 250m 2023 DCF: 220m
2024 FCF: 250m 2024 DCF: 220m
NPV for 5 years: $1276m

Terminal value: $780m (using 2024 FCF over 10 years)

Total Equity: $2056m
Per issued share (using 1410m outsanding): £1.17

Hi Longish,

Out of curiousity, how did you come to the value of $1.7b?

Regarding valuation on "income" and assets:
- Profit/Loss for year 2020 is likely to be negative
- Net assets for year 2020 is likely to be negative

I don't think that the company can be valued on net assets as will be negative for YE2020.

"Uganda sale is disaster, you haven't got a stake stop pushing for the sale.
Please people vote against the sale it won't be lonf until we recieve a better offer.
Don't let Total tread on you!"

Vote what you want, but if Uganda fails, i'd imagine the following is needed for survival for 12+ months:
- Oil over $65/barrel
- Production over 85k
- No writeoffs this year

Even then, in 12 months time, very unlikely to get debt restructured and Tullow will consider bankruptcy.

Also, the 400m FCF you stated is assuming that EVERY barrel is sold (also assuming that as I previously posted that hedges are to included in the $35 breakeven). Tullow tends to only sell 85-90% of the production and keeps the rest in inventory. And as a result:
Method 1 FCF: +$300-350m
Method 2 FCF: +$90-95m

Canary, I don't think you understand Tullow's financial position currently if you think that Tullow will survive without Uganda sale...
Little room (and very unhealthy) for debt renegotiation at this current moment, even with extremely low market interest rates.

ALL IMO.

Hi Chrismc67,

Hedge = Insurance against oil price. Heding oil sales works both ways. In 2020, for 60% of Tullow's production (45k barrels/day), Tullow is guaranteed $57/barrel for 60% of all their production, no matter the oil price.
For example:
If oil price is $40, Tullow will receive $57 for 60% of their production, and $40 for the remaining 40%.
Likewise, if oil price is $80, Tullow will receive $57 for 60% of their production, and $80 for the remaining 40%.

What you quoted was following end of year results (March). Since then, Tullow has lowered their free cashflow breakeven to $35/barrel for the rest of the year (April --> Dec).

Also Tullow is in a much stronger position than in March as Tullow is looking to raise cash through sale of their assets.
I think under current circumstances (with Uganda asset sale), Tullow would have enough liquidity to operate for 12-14 months. Following which depends on whether Tullow can restructure debt (Likely to be restructured in 2021 if company finances or operations do not deteriorate from now until then.)

A while back, YoungEngineer mentioned that the cashflow breakeven of $35 was for non-hedged sales. E.g. the 40% of the non-hedged production needs to be sold at an average of $35 for breakeven.

Tullow hasn't provided much information on how they came to $35 breakeven. We won't know which is right until Tullow provides cashflows to date (interim results).

So, I've done both calculations.
We know that Q1 FCF hasn't changed (breakeven of $45, and we have realised oil figures provided by Tullow in Q1 trading update).
FCF Q1 = +$70-75m

I have already calculated FCF (taking into account that hedged + non hedged combined realised oil price is above $35):
Q2 = Approx +$75-80m
Q3 (assuming $45/barrel spot price) = Approx +$120m
Q4 (assuming $45/barrel spot price) = Approx +$120m

This method provides a FCF for 2020: Approx. +$350-400m taking into account unforeseen costs.

Now if we consider what YoungEngineer said in terms of cashflow breakeven and non-hedged sales:
Q2 (negative due to average spot price being below $35) = -$21.8m
Q3 (assuming $45/barrel spot price) = +$27.3m
Q4 (assuming $45/barrel spot pricce) = +$27.3m

This method provides a FCF for 2020: Approx. +$105-110m

Both provide positive free cash flows but that's not to say that there are no risks to investing here.
There are risks that are required to be managed (some of which cannot be managed by Tullow) short term:
- No decrease/loss in production
- Debt
- Cash raising through portfolio management
- Brent Crude price
- COVID19 impacts on operations and supply chains
- Delays in projects (e.g. Ntomme-9 well)
- Forward strategy

GLA.

Just a few reasons why I still think the company at the current share price is valuable:
- New site being constructed in India (to be completed in H2 2020) that will improve margins and profit
- HUGE profits every year, enough to pay dividends (dividends suspended for 2020 to save $33m cash)
- Shareholder returns will likely return 2021 (dividends)
- Company is reducing debt with ease, likely to be 1.5x Net Debt/EBITDA by end of year.
- Capex of $45m in 2020
- Likely to be 17+% operating profit margin with 90+% cash conversion for this year
- Addition returns to shareholders when Net Debt/EBITDA under 1x (2022)
- Additional $15m in savings by 2022 through new plant in India and optimisation

There is uncertainty with COVID19 and almost all operations by Elementis (especially the Chromium, Personal care, coatings market in the USA).
Elementis lost 15% revenue in April (hardest hit month for COVID19) and the current price reflects this. However China and elsewhere in the world has recovered considerably since April.

Even at a 15% revenue hit, the company will make a profit and service taxes, interests, debt whilst also improving their operations.
The $33m savings from dividend is a hit to shareholders, but is a surplus to Elementis for operations (most likely used to reduce debt)

Trading update on 28th July 2020. I have increased my holding here and looking to hold for the forseeable future.
Guidance and interim dividend information will be provided at this update.
I do not see the interim dividend being suspended for Sept 2020, but let's see what happens following the results!

ALL IMO.

Not at all!

Good luck with your investment at Easyjet. Pretty sure that more pressure on airlines than oil right now!

Got this down on my watchlist as one for the longterm.
I am currently not holding, but MAY seek to build a holding.

There's still plenty of time for this company, hopefully give good returns in the next 3-5 years to current holders.

GLA.