Chris Heminway, Exec-Chair at Time To ACT, explains why now is the right time for the Group to IPO. Watch the video here.
I saw OP this morning and thought Serica was best placed to answer questions about H2 cash flow demands, rather than us trying to guess.
So I emailed to ask whether increased demand on cash was partly due to capex payments booking next years drilling program.
I expected Investor Relations might reply, but Mitch kindly replied himself. I don't think he'll mind me posting his reply in full:
"Thanks very much for your enquiry. It is a little difficult to focus on individual numbers in isolation as these are subject to a range of factors and assumptions. It is, however, the case that some types of cash payments are weighted to the second half of the year (2H).
The 2022 final dividend of approx. £54 million was paid in July and this will be followed by a 2023 interim dividend of approx. £35 million in November. Likewise current year tax instalments are weighted to 2H with the July payment already disclosed at £80 million and a further payment to be made in October before a final reckoning next January. In addition, as you have suggested, we expect to see some early spend on the 2024 drilling programme falling this side of year end. Beyond that there are the normal cash variables of production volumes and liftings, commodity prices etc and payment/receipt timings.
Once these factors are smoothed this reflects expectations of a continuing strong performance and we are encouraged that the Investors Chronicle, and the Peel Hunt analysis to which it refers, both hold Serica as a recommended buy on the basis of their analysis.
Regards
Mitch"
Banburyboy- the $95m dividend paid on 12th Jan 2022 was generated on cashflow generated during 2021. I mean come on, this is 2023, that $95m was paid out over a year ago. It's gone.
I don't know what dividend was paid in January 2023. I think we should've been told how much and told if Tailwind weren't paying a dividend. They wouldn't cancel dividend schedule just because of a takeover bid imo. It just annoys shareholders. My estimate is they paid $100m, as it was $95m last year and $110m the year before. So yes, from end of of 2021 to completion I estimate Tailwind paid two annual dividends amounting to about $200m.
IMO it's rational thinking. Occams Razor says the simplest explanation is usually the truth. So unless you have evidence that says otherwise, we should believe cash has been returned as dividends in usual way rather than some speculative theory.
I only brought up Tailwind dividend because it was suggested that rather than money being paid out as a dividend, that money had disappeared fraudulently!
Why hold the shares if you aren't bullish? It doesn't make sense. Serica haven't just bought "debt", they've merged with a company generating significant cash which doesn't need to be spent paying off debt.
It's normal IMO for a company paying dividends to have debt (Tailwind).
What isnt normal is to sit on a pile of cash (Serica).
If anyone looking for link, Tailwinds 2021 accounts published to companies house:
https://find-and-update.company-information.service.gov.uk/company/07879002/filing-history
Banburyboy, I don't think we can complain about Tailwind paying it's shareholders a dividend which it does every January.
Post 2021 balance sheet, Tailwind paid a dividend of $95m in January 2022 (page 52 of Tailwind 2021 accounts).
Anyway, between year end 2021 and completion, they would've paid two annual dividends amounting to maybe $200m.
Using equity to buy Tailwind was ok IMO because both companies were undervalued. Both struggling with negative sentiment due to being in North Sea, both in oil/gas sector. Tailwind seems to be generating a lot of cash, so think it'll eventually become clear to everyone that deal was good one.
But I'd say taking another acquisition must require taking on debt. Unfortunately, obtaining loans has been made much more difficult with all the tax uncertainties.
Mercuria's position is they have said they won't invest in long term fossil fuel projects and half of their investments will be in alternative energy by 2025. That's fine by me- I like strategy of short term projects. But Mercuria are trying to fairly aggressively move away from oil and gas.
So I think the story of the RNS here is that it's the BOD that are trying to keep Mercuria involved in Serica, rather than Mercuria pushing the BOD to stay involved.
BluDefender, the gas is included in those figures (boe). I don't know the realised price per boe for gas in 2019, but Im sure it's less for gas per boe unfortunately.
$45 is roughly where PMO make free cash. See the FAQ:
https://www.premier-oil.com/investors/FAQs
"At what oil price does Premier breakeven?
On a full year basis, Premier expects to generate positive free cash flow at oil prices above $45/boe during 2019."
Brent below that now, but they have hedged 40% production at an average of $64 for first half of 2020. And they produce a lot of gas, which is is significantly hedged for 2020.
So still generating FCF now, but they need oil prices to rise in H2. I think oil prices will rise, as market eyes capex cuts. There's little appetite for investors to refinance a new round of shale.
Https://www.investing.com/news/commodities-news/shale-drillers-are-staring-down-barrel-at-worst-oil-bust-yet-2105048
"With oil at about $30 a barrel, some shale explorers will find it impossible to pay lenders and support newly minted dividend programs adopted to entice retail investors. In addition, promises to finally generate free cash flow -- which has become something of an obsession in parts of the industry -- may be for naught."
Novak is meeting oil companies to discuss cooperation with opec tomorrow. Virus subsiding in China too.
First Squawk @FirstSquawk
RUSSIA'S ENERGY MINISTRY HAS CALLED A MEETING WITH RUSSIAN OIL COMPANIES FOR WEDNESDAY || RUSSIAN ENERGY MINISTRY TO DISCUSS FUTURE COOPERATION WITH OPEC AT WEDNESDAY'S MEETING
Bearbull, Its Novaks show so far I think. So Putin could ride to rescue maybe. Putin the hero calms global oil markets.
Or I think a commitment from SA to invest in Russia would give Russia a win.
But there's a referendum on Russian constitution on April 22nd. Amongst other things it's about extending Putins presidency further. A referendum on Putin really. He will win easily, but I don't think crashing stock market is what he wants just now.
Reuters article on Zama yesterday. UK, Eu and US diplomats discussed how to put pressure on Mexican government.
The US administration should have leverage, if UK doesn't.
"One particular dispute centers on who has the right to operate a major offshore crude discovery in a reservoir straddling areas held by state oil firm Petroleos Mexicanos (Pemex) and a U.S.-led consortium of private investors."
https://www.reuters.com/article/us-mexico-energy-diplomacy-exclusive/exclusive-u-s-canada-european-nations-meet-to-discuss-concern-over-mexico-energy-policy-idUSKBN20W0GI
Something I hadn't appreciated was how Saudis have dropped their Official Selling Price (OSP).
OSP is the price multinationals sell crude to long-term customers
Saudi cut OSP by most ever to EUROPE by a wide margin. They are offering $10 discount to Brent- it's the largest OSP cut in history.
So with Brent now trading at $33/bbl, Russian crude is now selling for $24/bbl as Saudi's OSP cut was designed to destroy Urals pricing.
https://seekingalpha.com/article/4330764-oil-saudi-price-war-scenarios
Huge pain for Russian oil companies. Rosneft's breakeven is around $50/bbl Urals. That's like double their current sale price.
Novak meets oil companies tomorrow to discuss cooperation with Opec, I fancy Rosneft could be more flexible now.
“When you look at the leverage the industry is in, at prices of around $30, it’s not profitable,” said Jonathan Barratt, chief investment officer Probis Group.
“Saudis and other Middle Eastern producers have their budgetary constraints, Russia is starved for cash and the breakeven for ... shale has to be around $50 a barrel. So the dynamics of all those put together will mean they will come to an agreement somewhere.”
Oil jumps 5% after rout on stimulus hopes & slowing virus in China ... RTRS
https://uk.reuters.com/article/uk-global-oil/oil-jumps-5-after-rout-on-stimulus-hopes-slowing-virus-in-china-idUKKBN20X02F
I think PMO have strong case for delaying in current climate. If it can be delayed 6 months, but still backdated to 1/1/19, then less cash would need to be raised.
And usually when people start talking about $20 oil, it's an indication oil prices are about to rise again. Things may very look different in a few months .
Emerald, Bloomberg have characterized it as a price war, but Saudis had no choice but to cut their prices. There are millions of barrels floating offshore China without a home. Saudis clients were not going to pay $58.50 bbl after the opec meeting. Saudis had no option.
And Russia hasnt left Opec+, so still intend to cooperate IMO.
Yes, Opec and Opec + countries all lose if they don't come to an agreement.
And shale loses money at $60, so $20 poo is unnecessary.
So a deal soon is still likely. Saudi were ready to cut on Friday, but Russia only ready to extend existing deal.
Unfortunately, Novak didn't go into meeting with remit to offer a cut. He needed agreement of Putin and oil companies like Rosneft in advance.
I think a compromise in coming soon.
Market reacted to no deal rumour from an anonymous sauce, before meeting even started.
OPEC tweeted start of meeting:
https://twitter.com/OPECSecretariat/status/1235945762309246983?s=19
The meeting started about 3 hours late due to the SA -Russia talks, I doubt you will get news before London close.
Full meeting Opec + meeting started. It looks hopeful:
Giovanni Staunovo?? @staunovo : 10 mins ago
It seems #Russia is prepared to agree on something - #Iran's Zanganeh #oott