Cobus Loots, CEO of Pan African Resources, on delivering sector-leading returns for shareholders. Watch the video here.
Give a man a fish and you feed him for a day. Give a man a fishing rod and teach him how to fish and you feed him for life.
Apply a windfall tax to an oil company and you can give the consumer some short term relief from an energy crisis. Leave the oil company to invest your ts cashflows in future energy solutions and provide a business environment for this investment and you solve an energy crisis for a lifetime.
To transport gas you either need a pipeline or a gas to liquids facility. Neither are cheap and neither are constructed quickly. Nigeria do have a LNG export facility and do export to Europe via this run by NLNG ltd. Not sure what capacity it is running so I guess it’s possible we could connect to this facility but this would not happen quickly…
Asking the bbc to keep you abreast of the Nat gas market is like asking the pope for recommendations on a jazz mag :0
Use this
https://www.theice.com/products/910/UK-Natural-Gas-Futures/data?marketId=5253319
And bear in mind….there is very very little physical delivery of gas traded at spot. It’s for future delivery. And gas ALWAYS is lower in summer as we use less. But look what happens to the future price for September 2022.
Now calm down, take a breath and relax.
You have to ignore the screen spot rate as pretty much nothing trades there for physical delivery
The current curve is as per below (p per therm)
June 22 174p
July 22 delivery 194p
Aug 22 delivery 212p
Sep 22 delivery 223.5p
Oct 22 delivery 235p
Q4 22 delivery 244p
Q1 23 delivery 248p
….even the summer 24 co tea this 140p!!!!!!
So the futures market is telling us gas prices are staying high for a long time and we should not sh it the bed cos the spot is lower.
Let’s put some numbers on this all
Shares outstanding 70.6m
Current share price 1.51
Mkt cap = 106.46
So essentially trading at around the level of cash we hold. So what is the mkt saying? It’s basically pricing in that we lose all or most of that cash via unfavourable dhsc ruling or just via cash burn from operations with no incremental increase in business performance from capex or investing the cash.
If we look forward to that 5 year target. 100m revs and say 25% ebitda margin would give 25m ebitda and I would think a valuation of 10-15x EV / EBITDA. So that is an enterprise value of 250-375m.
If we assume that we do have no or minimal cash at this time the mkt cap will equal the enterprise value. As such with 70.6m shares it would equate to a share price of 3.50 to 5.30.
If we did not burn cash and the company was able to defend successfully against the new dhsc claim then the EV would go up by 100m (the current cash pile) which would give implied share price range of 5.0-6.75.
On a bull case where we win against the dhsc and get out 40 odd million back and add this to current 100m ish cash the share price/ valuation range changes to 5.50 to 7.30 per share. Albeit in 4-5 years.
So what can we say?
Is this ever getting back yo 10+? No. Not sure if n this 5 year horizon.
Is the downside of an unfavourable dhsc case priced in? Largely.
Are there any near term catalyst to send sp higher? Not really. Only dhsc and we have no clue there.
Would obviously be a rattle lower if we had to pay dhsc claim money back but it looks like much of it is priced in as the current market cap = the cash balance and thus the enterprise value is ZERO. That is saying the IP, patents, are frastructure, know how, sales and distribution etc is worthless to the mkt. this is just a cash shell. Why? Cos of dhsc!!!
Basically the fate of the sp is still dependant on this issue and it’s hard to price as we dont know what the exact issue is or a time frame for resolution.
It’s a hard investment to hold given that. And I think the worry that you sell and then next week dhsc is solved is what keeps people here. As you would kick yourselves on a resolution as it would easily double if not treble in a click of fingers if even just a case of we won’t claim for the 40m and you don’t claim for a refund was agreed.
I’m debating what to do with my holding personally. Will wait for the call and then make a decision as there are no near term catalysts here pry from dhsc. And that is a black box.
Bushmanbob suggested they were pressurising the pipeline last week. To get to that point commissioning and testing activities of the HGS and its link to CSL at easington would have needed to be signed off by U.K. heath and safety exec. You then get a pre start up safety review before you start backgassing. The start up sequence for backgassing and a final test of equipment and safety systems prob takes about a week. So for sure, if Bob is correct (sounds like he may have some connection at CSL?) then next week we should see first commercial gas received into easington (assuming no issues or delays).
If you can’t use a pipeline you need a gas-to-liquids facility. This basically super cools the gas input to a liquid form at something like minus 160 degrees. The are big. Very big. They are expensive. Very expensive. And you don’t build those at sea. I’m not even sure it would be possible to build one at sea?! Look at the pearl facility at ras laffan which cost nearly $20 billion.
But either way, just look where the fields are. Northern North Sea not far from the Shetland’s. Closest landing point would be Norway and they have a truly **** load of oil and gas already. Who would take it and where would they take it to? The production is not big enough for anyone to spend the billions on billions it would cost to bypass the frigg and forties pipelines and route it somewhere else.
Conclusion. Not gonna happen. Ever.
You have a tv? Turn it on. Or get a paper. Then let me know if you think high oil and gas prices are staying for a long time. A very long time. This is just the start. Europe are still sorting out non Russian supplies.
Get long energy stocks. Literally of them. And they will be higher in 6-12-18 months. You name it. We can’t magic that non Russian supply.
Honestly you need to see the wood for the trees. Down 3% when it is this high is totally irrelevant u less you are day trading oil per tick.
Most oil companies have opex per bbl of between $12-16 and cash flow break evens at around $30. So whether oil is 116 or 120 a bbl is totally irrelevant if you are making that much bottom line free cashflow per bbl.
Oil selling off? Yeh cos there is not a single national government currently looking to buy and build as much non Russian oil and gas as possible.
Oil and gas are staying high. Very high. For a very long time.
Hi
Apologies if my crude analysis is wrong but where is $5m from? Is the below correct?
Jhi will own 34% of eco post deal. Eco mkt cap is £100m. So that’s £34m. Then wte own 7% of jhi so our share is £2.4m. We then also have 1.5m eco shares at 40p so that’s 600k value. Add together and it’s £3m which is about $3.9m.