Member Info for Slift

Hi YoungEngineer,

Yes, Cashflow breakeven is $35/barrel.
Anything above that is FCF.

Q1 breakeven was $45/barrel. Realised oil price of $56/barrel and production of 75.8k.
Thus, FCF for Q1 at $76m.

Q2-Q4 breakeven at $35/barrel. Realised oil price can be estimated with Brent prices and hedges.
Q2 (rough estimate $46/barrel incl hedges) FCF = $80m
Q3 (rough estimate assuming $45/barrel Brent) FCF = $120m
Q4 (rough estimate assuming $45 barrel Brent) FCF = $120m

Willing to learn if i'm doing something wrong.

Agreed YoungEngineer.
And circa. $1.8b debt due over the next 24 months... unless Tullow refinances this.
Takeover was more likely when the company didn't have a CEO and market cap was $120m than it is now.

The $50m FCF was predicted at year end and provided in March following Coronavirus impact. A lot of savings have been made and FCF is likely to be close to $350-400m now with the hedges in place and forward looking oil price.

ALL IMO.

I'm interested in knowing what Buffett "got completely wrong"....

You don't become a billionaire investor getting things completely wrong..

Hi canary,

"It will be short on 270$ millions but we have around 700 million more from the undrawn RBL facilities."
It was $700m total liquidity including cash and undrawn facilities at the start of the 2nd quarter.

I think you and anyone as a shareholder would want the company to survive. Like I said, difficulties for the company until 2022 and if Tullow does survive past 2022, they will be in a MUCH STRONGER position. I wouldn't be surprised if oil prices were 70+$/barrel in 2022.

But right now, survival from defaulting is key.

All IMO.

Canary,

"If you think the Ugandan sale is good then why aren't you holding the stock?"
I sold out before the recent rise, and have not bought back in. That's all. In fact, I'm mostly liquid right now, with a couple small investments.

I have a question for you.

For the scenario below, we are assuming that Uganda is NOT SOLD. Let's just say that Tullow's cash at bank $288m cash from 31st December 2019 was fully used for CAPEX (CAPEX for 2020 was $300m). Also let's just forget about OPEX and other unforeseen costs that Tullow have experiened during this period.

Q1 FCF = +$76m
Q2 FCF (estimated) = Approx $80m
Q3 FCF (estimated at $45/barrel) = Approx $120m

So in total by end of September 2020, Tullow would have approx $276m cash.
Tullow is required to pass the 18 month Liquidity Forecast Test in September 2020.

At this point, with $276m cash and $Xm available undrawn facilities, do you think that Tullow will pass the Liquidity Forecast Test on their financial commitments for 18 months, considering that they have a $300m bond repayment in July 2021 and the amortisation commitment reduction of $211m in April 2021?

It's too late to renegotiate the sale and complete it before September 2020.

End of page 21 through till 24 is applicable to you Canarywharfy.
"Consequences of the Transaction failing to complete"
https://www.tullowoil.com/application/files/6715/9247/0563/Circular_Final.pdf

I'm pretty sure derisking is also in the majority of the shareholders' interests.

Very risky to not sell.

You are probably right that we "could" still make it without selling. But it's a HUGE risk come September 2020, and I don't think that the board will take that risk when there's this option of selling Uganda to lower that risk.

Hi canarywharfy,
Not currently a stockholder. But I will most likely will trade here again.

That question has a triple negative.. I don't even know what you mean..
But as it reads in the circular, the Ugandan assets should be sold if the board is to stick to their current projections and their current priority of net debt reduction.

Yup, I'm still following this stock.

The net debt, adjusted ebitdax and gearing is provided for 31st December 2019.

They haven't provided cash holdings, net debt or gearing at the end of May.
But increased borrowings is not a good sign IF Tullow doesn't have at least $400+m cash (or equivalents) in bank.

The Covenant test is at year end (31st December 2020) and Tullow is required to show that as at 31st December 2020 their Gearing is below 3.5 (Tullow needs to satisfy RBL facility in April following the 2020 annual report).

Tullow shouldn't have a problem passing this test if Uganda sale is completed.
As noted in the circular, the impairment costs will rise this year due to reduced oil prices. The adjusted EBITDAX takes into account this and will prove beneficial for the covenant test. The gearing is likely to be much smaller than the 3.5 required following these adjustments.

GLA. All IMO.

Just a few more notes from the Circular and also some of my OWN OPINIONS. I am in NO WAY ramping or deramping, and just thought i'd share this.

27.5% of the shareholders have already agreed to vote FOR the Uganda transaction. Tullow requires 22.5% to further vote for the transaction to be successful. This is more than likely to happen as it is in ALMOST all shareholders interest to vote FOR this transaction.. (especially after reading the circular).

The circular also has some worst case scenarios projected.. and it really doesn't sound too good. But obviously these are WORST case scenarios should the sale transaction of Uganda fall apart. The worst case scenarios include defaulting in December 2020 should Tullow:
1. Fail the 18 month RBL Liquidity Forecast Test from October 2020 --> March 2022. The liquidity forecast for March 2021 is completed in September 2020 and is expected to have a shortfall of $40m in the worst case. Or in other words.. Tullow requires completion of Uganda Sale by September 2020 at the latest.
2. Fail the RBL Gearing Covenant Test for a 12 month period (ending 31st Dec). The gearing (Net debt to EBITDA) required is a minimum of 3.5x.

I HIGHLY DOUBT that Tullow will fail these tests should the transaction pass as the worst case and the base case scenario takes into consideration realised oil prices of $25/barrel and $35/barrel, respectively. We all know that with Tullow's hedges, the realised oil price will be above $34.2/barrel even if oil price hits $0/barrel. The worst case is only possible if Tullow loses more than 60% of current production.

Those who have been following my posts will know that I try and calculate and forecast based on what's given. I must admit that I have been wrong in some areas, especially the Borrowings. I initially thought that Tullow's borrowings will be around 2860m following the early amortisation repayment with RBL redetermination in April 2020.

However..
Borrowings at 31st December 2019 (from annual report): 3072m
Borrowings at 31st May 2020 (from circular): 3255m

In my honest opinion, I was under the impression that Tullow would overcome this period with EASE... However the above borrowing figure is quite concerning. This borrowing figure affects credit re-ratings, covenant ratios and also shows that there is a lot more for Tullow to achieve in a short period of time (That $1b from portfolio management is necessary).
That's not to say that Tullow will default (see above about hedges), but Tullow is likely to have difficulties until 2022.

I have previously estimated EBITDA for 2020 to be around $550m.
To pass the RBL covenant test in December 2020, Tullow requires (EBITDA + Cash in bank + $488m from Uganda) to equal $930m. That's assuming borrowings stay at $3255m.

Also, the above is in no way investment advice but I will recommend everyone to read the circular, very useful information.
Link: https://www.tullowoil.com/application/files/6715/9247/0563/Circula

Realised oil price for April and June = Approx $46/barrel including hedge receipts.

Tullow has sold each barrel in this period at an average of $29.5/barrel (excluding hedge). NOT BAD considering Brent oil spent 1/3 of this period below $30/barrel.

As for hedge receipts, Tullow have had approx $84m from hedges for April and May.

LOTS OF GOOD INFORMATION IN THE CIRCULAR. EVERYONE HERE SHOULD GO READ.

P.S. Ntomme-09 well delayed till August. However, it is noted that production forecasts aren't affected. Production for Q2 likely to stay around 75-78k.

DYOR.

Hmm..

It's very risky not to sell the assets. Tullow MIGHT just be able to survive without the sale, but it would mean no growth opportunities for 2021 or 2022.

This sale is required to be completed by H2 2020 or H1 2021 at the latest.

$211m ammortisation debt required in March 2021.
$300m bond capital repayment is in July 2021.

I'd imagine these are what Tullow will use the proceeds from the sale for.

If oil price rises to $60+/barrel, Tullow can get away without selling assets by using FCF to reduce debt. But it would mean no growth opportunities (Small CAPEX spend) for 2021/2022. This is the decision Tullow had made I suppose, for the longevity of the company.

Year 2022 will become A HUGE issue if Tullow keep these assets (even with 60$/barrel).

ALL IMO.

Hi toon,

Today's RNS was more "information". Nothing new about it, we were told before that the Uganda sale requires the following:
- CNOOC pre-empting of rights (CNOOC has elected not to pre-empt the rights. No effect on sale.)
- Shareholder approval
- Uganda Gov/URA tax agreemen/approval
- Approval from Uganda's minister of Energy

The shareholder circular was provided today which have valuable information about the company. Every shareholder should read this. Other than that, the RNS was just for information.

Here's the link to the Circular:
https://www.tullowoil.com/application/files/6715/9247/0563/Circular_Final.pdf

Yes e-Jay.
Shareholder approval is part of the approval process for the sale.
This sale is more than likely to be approved by majority of the shareholders.

ALL IMO.

In what way does offloading assets to Total in Uganda benefit Samuel's panafrican vision?

Filter me if you like, but I like to keep a non-biased view thanks, even if i'm holding or not.
I'm 100% not FOR or AGAINST this company.

Just my opinions.

Imagine if Shareholders vote against it lol.

I think Samuel will vote against this sale. That's 13%.

ALL IMO.

Also, Q2 is April --> June.

Even if oil prices rise, it wouldn't make much of a difference to Q2 results anymore as 12 days left in this quarter.

All IMO.

OPEC cuts were 23%.

Non-operated portfolio (if affected by these cuts) will likely be 18k bopd (5k cut) at worst case scenario.

Still be in positive free cashflow, but isn't ideal..

All IMO.