Member Info for Somekindofnut

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

Saudi Arabia will cut without Russia if it needs to.

It's done it before. SA and its Gulf Arab allies have previously over-complied with the cuts.

Saudi Arabia, Gulf states consider additional cuts - report

https://breakingthenews.net/Article/Saudi-Arabia-Gulf-states-consider-additional-cuts-report/51437831

Interesting to note that unlike other countries, Thailand didn't close it's borders to China at Chinese new year. They had almost 3 million tourists over the Chinese New Year. But the virus hasn't gained much traction in Thailand.

https://twitter.com/HayekAndKeynes/status/1233623588156125189

This might be the warmer weather, containment or because Chinese people have a cultural different view of personal space

https://www.chinaeducationaltours.com/guide/article-privacy-and-personal-space-in-china.htm

Normally when two people are having a conversation, they leave a comfortable space between them. But Chinese people are unruffled by closeness to others, and there can be a certain amount of quite acceptable pushing and shoving in public.

Durrants said recently he doesn't expect PMO to pay tax for 10 years. !

Https://uk.reuters.com/article/brief-premier-oil-ceo-says-does-not-expe/brief-premier-oil-ceo-says-does-not-expect-to-pay-tax-in-britain-for-10-yrs-idUKL8N29C193

A main point of the BP acquisition is it accelerates use of tax credits. So tax credit affect should increase next year and beyond.

So comparing Premier to other oilies, PMO looks decent value on EBITDA, but it's post tax that it's really good value.

LONDON, Feb 27 (Reuters) - Saudi Arabia, the world’s top oil exporter, is reducing crude supplies to China in March by at least 500,000 barrels per day (bpd) due to slower refinery demand following the coronavirus outbreak, two sources with knowledge of the matter said.

Https://www.reuters.com/article/saudi-oil-china-idUSL5N2AR71J

Opec meeting should confirm substantial cuts.

FT links are tricky.

But if you google the title "Premier Oil’s battle with hedge fund set for vote showdown", google should give you a link that you can read.