Member Info for Soder

If I reduce opex bbl to $12 then you get ebitda of

$3bn at $65 oil and 44p therm gas
$3.4bn at $68 oil and 50p therm gas

That gives sp target up to 74p and still with conservative assumptions on oil at 68.

So, based on following assumptions for 2022...

Gbp usd fx 1.38
Daily production 235k bbl per day
Average realised oil px $65 bbl
Average realised gas px 44p a therm = $35 boe
Oil/gas production split 50/50
Opex per bbl $15
Fixed costs $182m per year (excludes any synergies)
Cash build up in biz in 2021 (post dividend)reduces net debt to $3bn

= ebitda of approx $2.8bn

Implied share price at following valuation multiples (ev ebitda)
5.5x: 48p. 46% current upside
6.0x: 54p. 62% current upside
6.5x: 59p. 79% current upside

However, if I use oil at $68 and gas at 50p a therm you get ebitda of $3.1bn. Which gives implied share price at 5.5x/6x/6.6x of 55p/62p/68p so upside from today’s 33p of 68%/86%/105%

Conclusion: keep buying

https://www.theice.com/products/910/UK-Natural-Gas-Futures/data?marketId=5101973&span=2

Winter 21 and Q1 2022 gas prices are above 50p a therm so hopefully they are getting some hedges on still.

Does anyone have a view or have the company communicated what 2022 daily production could be?

I will re run my model at a few difference gas and oil prices tomorrow and importantly a higher valuation multiple for 2022. Given the cashflows this sector is making I would assume the entire oil and gas space has to mean revert and can’t stay at 5x ev ebitda. We look cheap at just under 6x so will run out at 6.5x.

Given the move in long end US rates I would also expect the dollar to strengthen as inflation feeds in which will benefit our gbp stock price.

Will report back tomorrow.

Bluelight it’s scary you think living your life and making your own decisions is considered a liberty.

Blades man I know. I think max 40p all things being equal but I have no clue what happens to oil in second half. This has been a violent move.

My trade was buy at 20 sell at 30. I think it has legs more now as oil moved so much. But 60p no way.

A share price is simply the valuation of the biz divided by the number of shares outstanding.

The valuation is the present value of future discounted cash flows of the company.

Oil complies are the easiest companies in the world to analyse. You have been given all the data you need. We know daily production so we can work our annual. We know how much they have hedged and at what price. We know what spot prices are. We know what their opex per barrel is. We know what the fixed costs of each biz is. Using all this we can model an ebitda number.

You can then model cash flows as we know capex, tax (there is none), cash interest (they told us net debt will be 3.2bn at close so assume 5% on that), working capital change will be minimal.

But a quicker back of the envelope analysts is to look a enterprise value (ev) and ev ebitda multiples in the market. I have looked at them all. The sector trades in between 5-6x at the moment.

Ebitda will be approx 2.2bn. Enterprise value is net debt plus mkt cap. So you can work out an implied mkt cap. Divide that by the number of shares post merger (they have also given us thAt) and you have a share price in usd. So use tax rate of 1.4 and you have a share price. It’s very very simple and gives so much confidence when putting in big trades. I don’t need to worry about short term sell offs cos I know what a company is worth and fundemantals always play through over time.

Porky you are so full of ****. It’s embarrassing to read. Are blackrock at activist investor that does what you are saying? Let me answer that for you, NO. They are just passive real money. They are not Elliot or Carl Icahn or third point or Pershing. Maybe you could spend more time getting smart instead of talking absolute junk on here.

Come on then pad, tell us how? What are your assumptions for oil px and production and what ebitda and FCF does that get you to justify 60p?

You don’t have a clue. Fact.

Message should say NOT buying tullow. That’s a dog. Good biz but crap balance sheet. But tullow hold the keys to Guyana for eco Atlantic. Will have finished work over the next few weeks.

I do a lot of work on trades and only do a limited number of very high conviction trades. Maybe only 5-6 a year and if there is nothing that I like I won’t do any.

At the moment I own: save, heiq, pmo, ncyt and 2 large cos in rdsa and vod. But all in decent size.

And re a 1 quid valuation, I have a valuation model I built on pmo that would put most city analysts to shame. As it’s not possible for them to magic production, I just tested what oil price they would need for my model to get to a quid share price.

Based on 210k bbl/d for 2021 and given the fact they are 50 percent oil and 50 per cent gas with 16m bbl oil hedged at 60 and 22m boe has hedged at 34 boe it would take a spot oil price of $190 for the unhedged production to get 100p share price. This is assuming a 6x ev ebitda multiple and fx rate of 1.4.

If you think that will happen I am more than happy to take the other side of that bet in what ever size you want to make it.

Hey. Not sold yet and without going into detail I can’t actually do it until after the deal closes. The sp has moved far quicker than I though off the back of oil moving far quicker.

It may be a risky trade and I am not there yet with my work but I am looking at tullow. But with a view to buying tullow as it has big problems but eco Atlantic who is a partner of theirs in Guyana. The way I see it is that tullow have a very small oil price window at the moment to refi their 21 and 22 maturities and could raise some equity and a convert to repair the balance sheet. To do that they need to sell an equity growth story to the market which they do t have at moment - cash going to repay debt not drill, decline production etc. The most obvious growth story to sell to raise equity Is drilling Guyana. Eco themselves have no production but the moment that tullow announce a drilling plan for Guyana then eco sp will double - minimum. The market not expecting much news from tullow until later in year but I think this oil move gives tullow a refi window they may use. Will see.

You are smoking crack at one pound. Let me save you the agony of blind hope by telling you that.

We will own 5 percent of the of post merger equity. One pound or even close to it is not possible. They can’t just magic production from nowhere and remember half this biz is gas so not even exposed to oil px.

Dream on dreamer.

I think tullow will be forced to do a huge equity raise to accelerate balance sheet repair. It probably comes alongside a new convertible bond to rely the 21 convert. The only way to do that will be to give equity holders a carrot and some future potential upside and that carrot has to be Guyana.

At the moment tullow is being run exclusively for the creditors and balance sheet repair. It’s a ship floating on the o ran with no engines and no rudder. Unless they start drilling something, somewhere the annual production will keep declining and the equity will be eroded at the expense of repaying creditors.

Fwiw I think a decent proportion of tullow bonds sit with distressed debt funds who could pitch debt for equity or provide new financing at an asset level rather than corporate level. Again I think this will be Guyana.

I am small in eco at moment but the moment they announce a drilling plan it will double and I don’t want to miss that. So with oil at 67, tullow throwing off more cash, and the 21 and 22 maturities approaching I think a capital raise could come very soon. This is their window. As such I am going to be adding eco quite significantly over coming week.

They have already said they expect to pay a dividend this year. It’s written down in black and white in the last presentation they did to the market.

I think we just have bog standard vanilla loan agreements. However, given the take or pay nature of the revenues which are backed by bank guarantees you should be able to securitise that revenue stream much cheaper than the current debt.

Obv it’s Nigeria and there will be a premium for that but a finance provider will have the security of the bank guarantee to fall back on so it’s a different type of credit risk for them.

Unfortunately I have no clue how you would price that risk without knowing what bank provides the guarantee but I think we were told they were investment grade (?) so it’s not like it’s ccc rated tomato bank run by uncle George for African money laundering.

The ceo is from glg so will be plugged into the alternative financing market. It’s possible you could get non bank lenders to step in and provide private credit which may even be at lower cost than banks.

Brent up at 66.5 and wti at 63.5.

Oh sweet. The Saudis also maintain the voluntary extra 1m bbl cut. Next stop Brent at 70.

No increase. Wti futures just hit highest in over a year.

There is some serious dough to be made in this sector. Even large caps like shell were 40-50 percent higher SP when oil was last this high. These business have since reduced opex bbl so will be throwing off cash at current oil prices. Dividends, buybacks, m&a.

Gaaaaaaame on.

Bloomberg says 23 April

Thorndon they are called wash trades. They are highly illegal and would see the individuals doing them locked up and fined alongside the fund management company. The separation of portfolio management from dealing in a fund management company would mean it is impossible to do these trades and the IM agreements would prevent transfers between funds.

What you are suggesting is not possible in liquid exchange trades equities in a company the size of Jupiter unfortunately.