Member Info for Stevo12

Lse

I fully agree that new harbour is going to be a great share for 2021 and beyond but we need to prepare for a very bumpy ride from April-June. The share price is going to be up and down like a fiddler’s elbow for 2-3 months. Need to put the shares in bottom draw for a couple of months or get your traders hat on. I am going to be doing both.

Pearls

You are 100% wrong. It has been explain 100s of times how the shorts work, what they are for and that they will most probably close in early April when debt holders hand back some of the creditor shares to close shorts. No shorts burning and only obligation is to declare shorts as for all companies under FCA requirements. Nothing to do with merger or prospectus. No requirement to close shorts ahead of 29 March as PMO continues as same legal entity in April and beyond, with a name change and more shares in issue.

Shorts will continue to rise ahead of 29 March as debt holders sell their creditor shares ahead of receiving them on 1 April. Shorts have increased by 50m over last few weeks,

Ovets

In respect of Harbour’s intentions re Zama take a look at Bloomberg article of 18 March which quotes Richard Rose on Harbour’s plans.

“They like Zama, and I fully anticipate they will look to retain it and develop it”

Harbour were very clear that they will only invest where they can build a business of size and scale. If they chose Mexico as a new development hub, it will make it a very difficult to also invest in FI. They will also be investing £1b per year to maintain NS volumes at 200k barrels.

Ovets. I have listen to webcast and presentations and like you I had assumed that there was no way they would invest in Zama. Accordingly I was surprised that Richard Rose came out a couple of weeks ago and stated that Harbour would likely be investing in Zama through the development phase. RR will be leaving PMO post merger so very surprised he would comment on Zama.

It may be that Harbour are planning to purchase some of Talos interest and take over operator-ship. Also a very positive statement released a couple of days ago from Permex CEO stating they would consider an independent operator taking over management of Zama and the Permex field in the adjoining block.

There are many other blocks offshore Mexico both proven and unproven and its geology and characteristics are very well understood. Like you I would stay well clear of Mexico given current governments leftist leanings, but oil companies operate in much more unstable regions (most of Africa, Iraq etc).

PMO also has a good business in Indionisia with direct access to growing market for oil and gas.

All I am saying is that harbour will have lots of places to spend its money and the chance of Sealion being sanctioned is low (less than 20%). However as discussed previously, it is a binary bet and I remain a LTH. We will know this year and if Harbour writes off the carrying value of investment in Sealion at the half year their intent will be clear.

Bro

They do not have to close their shorts on pmo pre merger. PMO continues post merger and all that is happening is a name change and a few billion shares being issued!

FI

The shorts have increased by 50m shares to just under 170m since Jan 21. Once the debt holders receive their 3b+ creditor shares they only have to use a small percentage of the shares they will receive to close the 170m shorts. There is no logical reason to retain the shorts given they will be holding huge numbers of shares from 1 April. Until they sell their creditor shares they are Long just like us and will not want to depress the share price to allow then to exit.

As long as oil holds above $55, the share price should move to 40p by Q3 to value Harbour closer to its quoted peer companies (Aker BP and Lundin). However we need to see first set of results first, dividend to be declared and FTSE entry confirmed. This will then drive institutional demand and tracker funds will be required to hold harbour shares. If oil stabilises a above $55 the share price should increase by 15p for each $10 rise.

In addition to the general negative sentiment around oil, PMO share price over the last few days has also been impacting by increased short selling. As discussed in many previous threads, these are not your normal shorts where hedge funds are betting on share price falling but debt holders selling their creditor shares in advance to lock in price.

All the shorts will quickly close post 1 April as shorters hand over some of their creditor shares. This sill not impact share price.

However please be ready for ongoing volatility for a couple of months as remaining 3 billion creditor shares find new homes. This will ultimately create a free float of 4b shares with other 14b+ shares subject to lock in. For those brave enough, incredible opportunity to trade the volatility as creditor shares are sold. For LTH you either need to sit tight until Q3 when price will stabilise or get out on next upswing.

matcur

It all depends on the level of institutional demand. There will be lots of match making going on now behind the scenes as Harbour tries to find long term equity funds to buy shares from the distressed debt hedge funds. There will be significant demand at end of June once we enter FTSE100/350 but I think we will see share price capped in early months as creditors sell shares into any rises. I think you will make good money on your 32p but you will need to sit tight until Q3.

Do a bit of trading in April/May to average your price down. Buy in low 20s and sell in high 20s.

Matt

I am in the 5:1 camp. My principal reason for this view is that the market is generally pretty efficient. There is general acceptance that if SL is sanctioned the share price would be at least 50p and potential heading to £1. If the odds were better than 5:1, more people would be buying which would drive up the share price until risk wnd value were balanced.

Harbour want to diversify away from North Sea and they have clear criteria. I thought this would rule out Zama but looks like they might keep. They will have lots of other opportunities offshore Mexico and also Far-East. I truly, truly hope and I am wrong but I can not see Harbour investing in a virgin basin with no infrastructure. There are many other oil opportunities across the world for a cash rich oil company.

However I can not sell mainly driven by FOMO.

Shorts are increasing significantly and will continue to rise until 31 March which will put a cap on share price. They will all then close in first week of April.

Gosia

The creditor shares are primarily held by distressed debt funds. They don’t hold equity for any length of time and will be looking to unload them off market to institutional investors (even at a discount). You are right that they will not want to trash the share price but they will want out ASAP. A number of the creditors are selling their shares already - look at the increasing shorts. We are going to get a lot of volatility and a depressed price for rest of this month as creditors keep increasing their shorts ahead of 1 April. The shorts will close in first week of April but it will take several weeks for the remaining 3billion shares to find new homes.

I have put aside a trading fund and will be buying shares in April/May on the big sale driven dips (20-22p) and selling pn the 28-30p rises. I hope to do this several times over the first couple of months.

I am confident in the long term future of this share and I believe it will be 40p by Sep21 if brent stabilises at $55-60. Add 15p for every $10 increase above this level

SmallT

Many of the holders of the creditor shares are specialist distressed debt investors. They are not equity funds and will look to realise their cash as soon as possible to enable them to invest in other distressed debt situations.

Yes. A few of the debt holders are selling their creditor shares ahead of 1 April. I sold my creditor shares in advance last week by taking out a relatively modest short. The share price will be capped over next couple of weeks by creditors selling their shares in advance of 1 April and there will then be a large volume of creditor shares sold in April/May. I hope there are lots of big institutional investors lined up to pick up the shares in off-market purchases.

LTHs need to sit tight for a couple of months.

Saint T

The reason the vast majority of the creditors took shares rather than cash is that Harbour was offering the cash equivalent of 8p per share. A number of the creditors are selling their shares ahead of 1 April by taking out further shorts (which is why the shorts are continuing to rise) and accordingly have received around 30p per share, rather than 8p offered by harbour.

None of the shorts will unwind in the normal way (by buying shares in the market) but will be closed by handing back a small percentage of the creditor shares they will receive on 1 April. Accordingly no stimulus to share price.

The big unknown is what demand will be from big institutional investors and how many of the 3 billion+ creditor shares will hit the market in April. All the ingredients in place for significant volatility in early months.

Gosias

This has no impact on current pmo shareholders or the value of new group. There are approx 17.5b new shares being issued and current pmo shareholders will have 5% of total shares in issue. The current share price of pmo is a valuation of 5% of new combined group. The analysis you are looking at only relates to how the new shares are allocated between various harbour investors.

RKH shares will be either 2p or 50p by the summer. A very binary bet. My head tells me 2p and my heart 50p. I have been in this too long and FOMO is keeping me onboard. I would rather be on board when the good ship-RKH sinks than miss the rocket to the moon.

Maybe I should just pick a horse for Cheltenham.

Pearls

Long term value and short term sentiment dint always align. Plus some of the debt holders are selling their creditor shares ahead of 1 April by increasing their shorts.

Melquart and Mirabella have been selling over 5 million shares a day over last few days which is going to be negative to share price.

Outofideas

Thankfully this is not the case, the current pmo share price and market value is effectively the market valuing 5% of new Harbour.

As an example a PMO share price of 30p is valuing the new enlarged group at £5.4b, resulting in a market cap of pmo of E270m.

Have a look at Soders post for valuation analysis. Be comforted that two combined businesses generated EBITDA of over $2.3b in 2020 during the worst dip in oil prices for several decades. We also have current listed businesses such as Aker BP to compare valuations.

If the market thought the valuation of combined group was $2b the current share price would be 10p.

Mughal

All that is happening to your premier oil shares is that the name is changing. Oh and we are issuing 17.5b new shares to harbour and PMO credItors.

Agree 50p minimum on FID.

Our fate has moved from a company who were committed to Sealion but had no money to fund it, to a company that has the money but has yet to demonstrate a commitment.