Member Info for Slift

"Does he just pick up the existing strategy and run with it or does he recalibrate where he thinks he gets bigger wins?"
I'd say initially to pick up existing strategy regards to increase in production, cutting costs and raising the $1b for portfolio management.
I'd imagine he'd change the exploration strategy from 2021 onwards.

Don't expect the CEO to start and make results immediately..
- Trading update end of July
- Possible farm down of assets end of July/August

"You really are naive, their shareholders won't care at all if we got scamed, it will be our loss and it will be their gain and they won't owe us"

Business relationships are important. In this case, I suppose Tullow has been taken advantage of in the way that their balance sheet requires work. But at the same time CNOOC didn't pre-empt the rights. Total were still willing to do the deal which is kind of beneficial for Tullow's survival. Total are also trying to save cash and have liquidity (like many other oil companies) during this period with covid19.

Total is likely to be in favour of Tullow (as a business partner rather than shareholders) to work together again for future opportunities at a business and professional level.

All IMO.

I suppose one benefit of selling it to Total for $575m is that Total and Tullow are more likely to work together again (and there may come a time when Tullow gets a good deal?).

I mean they both have stakes in Guyana explorations, and will probably be partners for future exploration/development opportunities.

ALL IMO.

Canary,
Yes, I sold out before the circular, to try and trade and just haven't bought back in. I will probably buy back in when I feel like it's the right time in line with the market conditions.

Android,
Yup! The worst case scenario isn't even possible unless Tullow loses over 56% production (or 16% production with oil hitting $0)..
The base case isn't possible unless oil hits $2/barrel..
I don't even know why Dorothy would include such cases without the inclusion of the hedges...

The savings does affect future cashflows and will put Tullow in a better position for 2021 onwards.

The net assets for 2020 is likely to come negative following this years decline in oil price (and hence the increase in impairments).
Though this doesn't really matter too much as it will be offset by rise in oil price in the future. Whilst this will probably "look bad" on the balance sheet and accounts, it's not something to be worried about IMO.

Increase in gross borrowings at 31st May is mentioned in the Shareholders' circular for the sale of Uganda on page 22 and onwards: https://www.tullowoil.com/application/files/6715/9247/0563/Circular_Final.pdf

Hi Longish,

The "fair value" I posted was what i'm willing to pay when it's neither overpriced or underpriced (at 5th June)

"Why you slightly less positive (but still positive)"
Less positive due to the circular and current market conditions i suppose.

Regarding net assets:
Uganda in 2019 was valued at $992m, but sold for $562m
Net change in assets = -$430m
This isn't really the issue, as I believe this transaction helps Tullow raise cash to meet financial commitments and capital payments on debt that is looming round the corner. Survival is key this year for Tullow and anything to provide this will value the company more in the current market.

What concerns me is the increase in borrowings from 3072m (as at 31st December 2019) to 3255m (as at 31st May 2020). Net increase of $183m.
We don't know current cash at hand..

Net assets at end of December 2019: $984m
Less net asset change from Uganda and less increased borrowings:
Net assets (not taking into account cash in bank) is $83m.
Net assets (including $288m cash in bank at 31st December 2019) is $371m
These don't include FCF from Q1 and Q2.

Thanks Dent!

"I look forward to you reinvesting in TLW as there is something reassuring about you being invested here"
I still have high hopes for Tullow, I will most likely reinvest here sometime in the future, when I believe it is at good value with the market conditions :)

"kudos to you for your in-depth knowledge of the company"
Everything is available from Tullow's regulatory news releases. Anyone can do some research and do some calculations Dent!
I mainly look through Annual accounts, quarterly updates, and any other significant updates provided (presentations, circular) for the information.

Good luck to you here Dent, as i'm sure you don't have to worry regarding this company at this stage! Following completion of Uganda sale by September and the completion of Ntomme-9 well in August, Tullow can technically wait for better market conditions in (probably in Q4 or Q1 21) before selling/farming down other assets, IMO.

"You talk to lenders in search of finance for new projects or for finding a decent offer for our Ugandan assets.
That's the job of the CEO."
And who's going to give you decent finance deals if you have CCC+/Caa/B3 credit ratings?
Not many, and definitely not at good interest rates. Similar to a mortgage.
The Uganda sale will improve Tullow's credit rating and put Tullow in a much better position to restructure next year, or 2022.

CEO starts in July, RBL facility Liquidity Test in September and RBL facility Gearing Covenant Test in December. I don't think many CEO can find a decent offer within this timeframe under current market conditions AND GET IT COMPLETED...

"Selling Uganda provides CAPEX savings of $1121m over 6-7 years, and over $700m over 3 years.
That's at best an estimate and we would cuadruple production. And it would be more like $2100m ($700 would be for a 10% stake, we hold a 33% stake)"
No, it's $700m over 3 years of FID for the entirety (Tullow's 33% stake), and $1121m CAPEX over 7 years. At max production, Tullow will receive approx 60k bopd or less. Not quite quadrupling production, but will provide significant revenue for the years to come. It really is a shame that the sale broke down in 2019.

"We owed 5 billion in debt not so long ago, we stand now at 2.9 to 3.2 billions (possibly less than 2.9, net debt = total debt - cash in the bank) we still have around 700 millions more in undrawn facilities!"
Yeah. Borrowings are at 3255m. Cash in the bank unknown. "undrawn facilities" were $700m WITH CASH ($288M) at end of March...
Do you want to explain the $183m rise in total borrowings from $3072m from last year?

No idea where you're getting 650 mmboe for Uganda.. It's 476 mmboe 2C reserves.
Selling Uganda provides CAPEX savings of $1121m over 6-7 years, and over $700m over 3 years.

"TEN &Jubilee is around 280 mmbo and Gabon ?"
At least state that you're "guessing" these figures..
TEN & Jubilee reserves at 194 mmboe 2P and 331 mmboe 2C.

"We owed 5 billion in debt not so long ago"
Maturity for these debt wasn't due "not so long ago" but it is now. How do you restructure debts with CCC+/Caaa/B3 ratings (Vulnerable to defaulting).

Very misleading. Makes me wonder if you even know the company you've invested in Canary...

Hi Canary,

Ofcourse it doesn't represent the fundamentals or the ability to pay back the debt.
Note: you implied the comparison in your original post. I was just making the point that the comparison shouldn't be made between Repsol and Tullow..

Also, I think I can have opinions as a non-holder too :)

Hi Canary,

The problem isn't reserves. Tullow has great assets and reserves.
If you're using Repsol as a comparison.. here's a comparison you might like:
Repsol Market Cap: 12.3b
Repsol Debt: 10.9b
Debt to Market Cap ratio: 0.89

Tullow Market Cap: 440m
Tullow Debt: 3255m
Debt to Market Cap Ratio: 7.40

Selling Uganda and using all proceeds for debt reduction, brings debt to market cap down to 6.29. Still nowhere near Repsol's ratio. (Or in otherwords, Tullow shouldn't be compared to Repsol.)

ALL IMO.

Repost:
"Slift
Posted in: TLW
Posts: 454
Price: 30.39
No Opinion
Fair Value05 Jun 2020 18:22

Current Market Cap of $428m and share price of circa. 30p.
I'd say that's fair value for Tullow in the current conditions.

Would need oil to break way above $45/barrel or a positive RNS update for rise to 35p+. But it's more likely for oil to retrace once gap filled than it is for it to continue moving upwards.

ALL IMO. GLA."

Tullow will require a much higher Brent price or positive RNS to see 40p again IMO. If you read the circular, as at 31st May, the company is in a worse position than following RBL annoucement and Uganda sale.

31.75p to 40p doesn't seem like a big move in terms of share price.. but that's an increase of 26%. Whilst Tullow did move up and down at low prices, it's less certain to expect this at higher share prices.

A 26% increase in share price is £116m in market cap/value. How do you justify this without any positive news regarding the company, Brent price or the general market? I'll let you answer that.

I do however see further upside in this company in terms of value if:
- Another positive RNS (farm down/sale)
- Increase in Brent price past $45
- Increase in production
- General market sentiment

I'm not invested here.

....
Crude Oil Inventories +1.442m vs +0.299m forecasted...
"oil data very strong"

Keep misleading yourself and the whole board I guess..

MaverickD,

I have never seen anyone ramp as much as you.
I understand that you're invested (probably heavily) here.. but every single day whenever I visit this board, all I can see is your stupid ramping with no evidence to back up any of your comments. Everything you've said hasn't come true (yet).

Your comments on this board are misleading for new investors.
Give it a rest.

Exploration in Guyana is highly unlikely for 1+ years.
Tullow themselves have stated that their priority is spending CAPEX on Ghana to improve production.

Tullow may drill Comoros drill next year. And ofcourse, Tullow have the Suriname drill planned for Q4.

I am not invested in this share.. but thought i'd share this from the circular (see what i did there?!)

- 27.5% shareholders already voted FOR the Uganda sale (50.0001% majority required to pass)
- Sale value is $486.8m with circa. $73m after FID, following Uganda capital gains tax. (contingent payments after First oil will be subject to 30% tax)
- A further $15m CAPEX saving following Uganda sale
- Rise in impairment for 2020 in respect to non-current assets due to low oil prices
- Ntomme-9 field to be delayed until August (2 month delay) - no effect to CAPEX or production guidance
- $52/barrel realised oil price until end of May and as a result of hedges, $111m received from hedges until end of May.
- Rahul joins 1st July - Currently holds 1,346,000 shares.
- $3255m borrowings as at 31st May 2020 (RBL facility at $1505m)
- RBL Gearing Covenant Test and Liquidity Forecast Tests both still a risk to the company defaulting
- Further $25m G&A savings can be achieved from 2021 onwards
- Jackson Wabyona claim to Uganda high court on taxes still awaiting trial.

GLA.

Cesna,

Good to know that you've read the circular!

The $25m as they say in the circular is likely to be from G&A costs. Tullow previously stated that they are looking to target $200m savings from G&A over 3 years.

YoungEngineer,

I understand where you're coming from. I had a hunch this might have been the case until I read this from one of the updates:
"With the benefit of the Group's hedging policy and production remaining on track within the Group's 70-80 kbopd guidance range, this results in a free cash flow breakeven oil price of c.$35/bbl for the rest of the year."
Note: "with the benefit of the hedging policy"

$35 true breakeven further makes more sense when you also take into consideration the cost cuts from last year:
- $490m CAPEX 2019 vs $285m CAPEX 2020
- $112m Administration costs 2019 vs $85m G&A costs
- $75m decommissionin 2019 vs $65m decomissioning 2020
- Other savings (e.g. early termination of Maersk Venturer etc.)

These cost savings offsets more than the $3 difference in the suggested breakeven figures.

Hi Cesna,

Yes, there was a mention of a further $15m CAPEX savings following exit from Uganda.

Breakeven then becomes circa. $34.5/barrel. Doesn't seem much, but adds up over 75k/day production from uganda exit --> end of year.

Last year, cashflow breakeven was circa. $51/barrel.