Member Info for Soder

The usual muppets firing out complete nonsense here so let’s get the facts:

Leverage: this is not a levered company. Net debt is 2.7bn. It has been throwing off free ash and reducing net debt by 100m a month. That may slow in second half as some capex expenditures are backloaded due n 2021. Either way, net debt is likely to be closer to 2bn that 2.5bn at year end. I With the current oil and gas price deck, even with our hedges in place, (pre any dividends and m&a) the net debt in 1 years time is lively to be sub 1bn. That would s the street feeling too. Last note by peel hunt a few days ago is predicting 1.1bn FCF next year and net debt sub 1bn. Given expectations for ebitda in the 2.2-2.6bn that gives us leverage of ~ 1x this year and 0.5x next. Let’s put the we have too much debt argument to bed shall we?! We are less levered that pretty much any competitor.

Even with the hedges we are under values. With those hedges we are trading at sub 4x ev ebitda. The historical average for this sector are 6-8x. But it’s not just hbr…all large cap oil stocks are. They are not en vogue.

Ok ok ok. There is a term called net leverage which is a simple calculation. Net debt divided by ebitda. I will set you a task to find out what those 2 numbers are currently and what you think they will be at year end. A smart guy like you should be able to calculate a rough free cashflow and ebitda number. Just back of the envelope given what guidance you have from the company re production, hedges, capex and of course the oil price. You spend so much time moaning about this stock and “the market” that you must know all about valuation? Or do you prefer to moan rather than get smart? Maybe it’s uninformed, financially illiterate investors like you that is the problem with “the market”?

Either way. Go find those numbers and tell me what the leverage is. Then come back and and I will ram them down your throat for you stupid initial post.

Over levered!!!??? Pmo yes. Hbr???

….because name me a company on any stock market anywhere where the valuation given to it via the market matches the fundamental value. I’m wait.

Price is what you pay. Value is what you get.

My kids broke up on Friday until September :0

Blades man this is an oil company. It’s the simplest of businesses. Volume x price. Price set by mkt and volume is going to be a steady eddy. We are not wildcatting so wo t fluctuate and even if we had some big funds it would not impact the production too much as next year with tolmount we should be 220-230 boe a day. Unfortunately this is a business run for cash now.

That’s a very selective analysis you are presenting. Yes it’s throwing off cash. Yes it’s under valued. But….

So is the whol oil and gas space, particularly the larger caps where the institutional investor bid has vanished. Like truly VANISHED. Aviva, fidelity, Invesco, Henderson etc etc literally cannot buy oil stocks in n a lot of their funds anymore due to esg and the militant actions of some minority investors they have.

Pre lockdown oil was mid 60s ish. Bp share price 50% higher. Shel share price 50 percent higher. Section trading at an avaerahe ev ebitda multiple of 8x. It’s now trading it sub 4x ebitda. Why is that? It’s because of what I said above. Smaller cap situations have fared better as you have retail herd investors that can drag share prices along eg tullow and enquest. But you, me and Dupree simply do not have the firepower to drag $5bn mkt cap harbour out the doldrums. For that it’s needs institutional firepower. Will we get that? Unlikely. Esg is now the buzz. Oil companies are global pariahs and investing in non green energy makes you an ******* according to the hypocritical liberals with their green pipe dreams. So how do we get the share price up? Simple. We stop clamouring for a quite frankly useless dividend and we let harbour management use their free cash firepower to start a huge back back program next year. That is the ONLY way to get this is. The mkt sees the oil price. The market sees the huge free cashflows. The market sees we will make a billion of free cash next year. But the market shrugs. As it’s has had is arms, legs and balls cut off by a load of tree huggers that think the future lies in windmills and sunshine.

Cool.

Anyone in any other oilers? I have SAVE who are in process of buying some assets in Chad from Exxon so is suspended but that should meaningfully relate. Generating so much cash from gas assets and you get Niger upside for free. Eco Atlantic I started building 2 weeks ago. They just announced a deal to get some more Guyana exposure on the canje block alongside Exxon and total with the drill ship and hit target depth over next couple of weeks. That won’t make it break that share but they will announce targets and drill plan on orinduik in august to drill in 2022. That should bring the share back into play and would think could move up significantly.

Any other tips?

Plebleens. Agree totally. Some very cheap assets around with huge IRRs present some fantastic opportunities to make hbr a true oil behemoth. Bp and shel etc are being ****ed over by a minority of investors who are forcingthem waste cash on windmills. We can fill that void.

The news yesterday was that they may increase output by 0.4-0.5m bbl a day every month from august to year end. That headline is perhaps negative but prices held as the output increase likely includes Iranian oil returning.

I’m def not an expert but everything I read is that maybe the market won’t be as tight as originally expected in q3 but on current trajectory with the world opening up and travel resuming etc that q4 and 2022 in particular could see the market under supplied and a meaningful jump in oil prices. I would be pretty confident that we go through 80bbl on the spot market.

Shal1000 they have never said the size of the divi as that would be a dividend announcement. Thus we have no declaration or ex date.

But, they have said they expect to pay a dividend in the near term. That will mean an announcement with full year earnings in my view. Companies don’t just announcement a divi out the blue. Comes as part of results which will be next year.

But I genuinely hope they don’t. It makes no sense to pay a divi at this valuation. It’s a waste of money.

If funds want dividend they buy bp, shel Vodafone. The lack of a dividend is not what is stopping the institutional bid. ESG and the fact most fund managers are being told by investors to stop buying oil companies is stopping the institutional bid across the sector.

If we want to replace that bid and get the sp up we have to do a buy back and not a divi. Let’s put some numbers on it.

Say they have $300m at year end to either do a divi or buy back. $300m is approx £215m. With 925.5m shares outstanding (post consolidation) that’s 23p a share or a dividend yield of about 5.8 percent at current share price. Nice. But….

Use that 215m quid for a buy back and I guarantee you the share price will be more than 5.8 per cent higher. Guaranteed!!!

Our average daily volume since start of June is 1.177m shares. At 4 quid a share that’s £4.7m value every day. If we used that 215m of cash to buy back shares that’s 45 days of volume at current sp. if that gets announced this share price is turbo higher in a click of the fingers. And they can do it every year with free cash.

In the short term you also use it to take out the creditor shares. It really is win win.

No company should get rid of debt as it offers a tax shield given you pay tax after deducting the cash interest cost. The most efficient cap structure is actually 100 percent debt but obv that won’t happened.

Either way, management have stated a desire to be 1.5x area for leverage (net debt divided by ebitda) and as you can see we are currently under that target leverage. This free cash at year end WILL be used for something. I just hope it’s not a divi.

Good video. Thanks.

I’m pretty bulled up in this name. Lots of catalysts over the next 4-6 months.

Don’t pay one!!!

When your business is generating 100m of free cashflow a month and trading at sub 4x ev ebitda you should not pay a dividend. You should use the money to put in places a share buy back!! That will make shareholders much more money than a ****y 3-4 percent yield from a divi.

In hbr case a buyback would be even more suited as it will help to take out the creditor share overhang. Remember at close of the merger creditors held 18 percent of the total outstanding shares. A $400-500m buy back program would be 8-10 per cent of the mkt cap and would send the share price up meaningfully. They do this and you make much more than getting a ****ty dividend given the valuation is so so so low.

Buy back buy back buy back buy back. Or do m&a and buy some more assets from the majors who are puking them for two fist fulls of **** all at the moment.

Why all eyes on covid? Mkt has moved in from that and not a **** given now. Demand is there.

The biggest risk to the mkt at the moment is that flatiron and blow up in the rates market if the fed changes course. Money can’t be free forever and at some point the central banks will have to taper and raise rates. When the mkt things that is gonna happen all asset classes will puke.

A quick and dirty valuation of hbr… all numbers are dollars

Mkt cap. Approx $5bn
Net debt $2.7bn as reported and decreasing by 100m a month.

Gives and enterprise value (EV) of $7.7bn
Pro forma ebitda on an absolute worst case is going to be $2bn this year and more likely 2.2-2.3. Next year with higher oil price and a full year of tolmont it’s will prob get towards 3bn but let’s take 2bn as a worst case.

That’s an ev ebitda multiple of 3.85x. This sector historically trades at 8-8x. So basically it’s half price by historical valuation standards. Can it stay that way forever?! No.

The market quite simply does not know how to value larger cap oil stocks anymore. HBR is just one example of this but it’s the whole sector given esg and ‘build back better’ green *******s. The institutional bid has pretty much vanished in the sector as their funds are now actually prevented from buying oil stocks given investor demands on ESG.

Just look at names like BP and Shel. Pre lockdown their share prices were 45-50% higher and oil was in 60s then. The fundamental performance and cashflow generation of these companies is super positive and actually the outlook is better than pre lockdown. But, valuations are down by half. We are the new tobacco. The global market pariah that hypocritical institutional investors won’t touch but happily drive their cars and buy plastics, chemicals etc etc. You can’t make ethylene from a windmill. You can’t fly a jet on sunshine.

Long and short of it is the supply-demand side of the oil market has not been this positive for many years. Brent will bust through 80 this year even with opec and Iran putting more supply in to the market. I am a big believer in mean reversion and given the amount of free cashflow these companies will be making at the moment the share prices will eventually have to move north as companies will have to do dividends, buybacks, m&a etc. What else can they do with the cashflow?! Nothing. So patience patience and over next 12 months this sector will have to see significant gains as you can’t have hugely free cashflow generative companies trading at 3x ebitda.

Seeing you say you “got in” and “sold” but then announce you just took exposure via a spread bet is exactly why we needed the consolidation. Hopefully there are less punters in this after.

Does orinduik value not increase SSE for eco of this block funds oil. Think you need to consider bigger picture.

Even without this transaction eco should have been trading higher as the option value is pretty punchy for year.