Member Info for Stevo12

Blades

Melquart are continuing to increase their shorts. They are not betting on the share price falling but locking in the price of some of the creditor shares they will receive on 1 April. A very sensible strategy for them and guarantees a very healthy gain on their loans. They are getting 61p in cash and 45p in shares for every £1 of debt (they would have purchased the debt at least a 50% discount from original banks).

There will be likely be significant price volatility in April and May as some or all of the 3b+ creditor shares look for new homes. A really interesting trading opportunity. The volatility could even pick up in March if other creditors seek to lock in their gains through increasing their shorts.

I hold both PMO shares and retail bonds and looking forward to my creditor shares arriving in late March. I will probably trade these in April and May, while keeping my LTH for next 12 months unless there are signs that oil price is at risk of falling back below $55pb. I have also applied for additional shares via the creditor offer at 8p per share - not expecting to be allocated too many but you never know.

Pearls. I think we are actually agreeing. 40p based on $55-60pb and then a further rise as and when Oil price sets to a higher level. My point was that all oil cos, including harbour, are set for a further 50% rise if oil price and future oil price expectations sets in the $65-70 range.

While lots of positive noise around oil over last few weeks we are not there yet. we need aviation to come back on stream and the world getting back to work to allow OPEC+ to return their withheld production. I am always nervous when oil prices are dependent on the fragile alliance of OPEC+ and there is a reasonable possibility that there will be divergent views over next 3-4 months which could destabilise current oil price.

To be clear I am absolutely positive on the medium term price of oil being in the $75 range but I am expecting a few bumps along the way.

Pearls. I believe once Harbour/PMO gets to 40p the valuation arbitrage to other Oil Cos will have largely been achieved. The rise above 40p will be driven by macro factors most significantly oil price and all boats will rise. I am expecting Shell, BP, Total etc to also rise by 50% in next 6-12 months. Accordingly there are many options to Play this rise but I do like Harbour, Aker BP. lundin who are pure oil plays and are not trying to reinvent themselves as renewable producers. The renewable sector is going to produce a lot of tears in the medium term with overinflated prices driven by the ESG brigade.

Debate and challenge is always good as groupthink is highly dangerous. I very much welcome any different perspectives and, as Soders notes, there are no certainties of future performance or share price . However it is a useful platform to understand the core cash flows and earnings of a business which, particularly in Oil, is the way the market values oil producers . We are not Tesla or some digital space rocket which defies fundamental for a period, but as eggs is eggs, you can’t defy gravity for ever.

What I have said (and Soders) is that the logical share valuation at about End of Q3 this year should be around 40p with Oil’s future curve at €55-60pb. However the cash flows and valuation are very sensitive to oil/gas price movements if they are sustainable and Soders is providing indicative valuations at various Oil and Gas scenarios for 2022.

The world feels very bullish on oil and the moment and equally it was quite negative only a few weeks ago. This just highlights the fickle nature of the commodity markets. However I believe we are going to see a long term sustainable rise to $75 pb by end of 2022 and a very profitable period for Oil producers though to 2030s. The lack of investment is going to come home to bite.

I am certainly betting on Oil and more generally a commodity supercycle over next 5-10 years as governments invest in infrastructure to create jobs and stimulate post Covid economies. Might be wrong - have been before and will be again.

Interesting transaction by Cairn with a minimum consideration of $460m for 33m barrels of 1P reserves, with further upside if oil is above $60 pb.

Th8s translates to approx $15 per barrel of reserves which increases to $20pb at current oil prices. Applying this valuation to Harbour would value our proven reserves at $14b or €11b after debt. On a like for like basis this translates to 42p per share for producing assets and you can add another 5- 10p for contingent reserve. Also tax benefit worth 5p per share.

Interesting times.

Soder

Production forecast to reduce from 235k bpd in 2020 to 210-220k in 2021, due to major refurb on forties pipeline which will result in a number of our fields closed for 5 weeks. Production to return to 235k bpd range in 2022. Maybe slightly higher. Operating costs per barrel to rise in fy21 to $15 pb due to lower volumes and then returning to $12 pb in 2022.

Look forward to the rework of numbers. My back of the fag packet calculation takes us to EBITDA of $3b in 2021 at $65 pb oil.

Bloo

Firstly there is no way we are going to get UKEF funding - that boat has sailed. Secondly UKEF is focussed on developing UK exports and to provide gap funding for investments that are at the higher end of the risk range for commercial bankers . Investing companies are still expected to provide equity contribution to project and UKEF is not funding for failing companies. The dividend policy of companies is not a restriction or requirement of UKEF as long as company is funding the equity element of the project, which for O&G would normally be 30-40% of project costs.

SK - you make me chuckle.

As strong a commitment as you will get from any Board as dividends are always subject to Board and Shareholder approval. They legally can not say WILL.

The core purpose of Harbour is to return cash to the mothership via dividends.

SK

Extract from prospectus below

“The Combined Group is expected to generate sufficient free cash flow to support shareholder returns including via a sustainable dividend which, subject to market conditions and Board approval, is expected to be introduced with respect to the financial year ending December 2021.”

My expectation is that they will pay a relatively small interim dividend on back of half year results (say 0.5p pe share) in October 21 and a final dividend for 2021 of 2p on approval of 2021 results in March 2022 with dividends paid in May 2022 after AGM.

If I was a betting man (which I am am or I would have walked away from PMO many years ago) Harbour will pay an interim dividend on the back of the June half year results, which will be published late July/early August. The interim dividend will be paid in November and I am guessing an interim dividend of 0.5p per share, with the final 2021 dividend declared in early March and payable in April 2022 at 2p per share.

All guesswork but I would be surprised if I am too far out. They might even announce something progressive like US shale companies who have agreed to pay variable dividends linked to oil price.

SK

The commitment to pay dividends is much stronger. The presentation by Harbour and Linda Cook was very clear that their intent was to start paying dividends in 2021. She referenced their Norwegian peers (Aker BP and Lundin) who pay a high dividend yield and that providing shareholder a dividend yield was a key objective and attraction for investors in Harbour. Linda was legally obliged to caveat that dividends are subject to Board approval and trading conditions. Prospectus documents are always relatively uncommitted re future actions. But you can bet your bottom dollar that the charm offensive going on at the moment with institutional investors will be committing to a level 0f dividends. Even shale producers are now paying dividends!

The enlarged business will be kicking off $300m per month at these oil prices which is way above their investment needs.

HEF

My projection is 40p with oil at $60 and each rise of $10pb is worth 14p per share to harbour as long as it is a sustainable rise. I am expecting oil to stabilise around $75pb once Covid is fully behind us which should translate to a share price around 60p level in the long term - say by Mid year 2022. 50p is possible by end of year if oil rally holds and following announcement of dividends, FTSE100 entry and first set of results published.

I think we need to detach old PMO share price with new Harbour share price. PMO has given away huge shareholder value to PMO creditors and Harbour shareholder. Not that they had a choice once they had backed themselves into a corner.

We need to recognise that Harbour’s business model has been to not invest in new developments that take many years before cash is received and are inherently higher risk than buying a producing field. They also do not like to be pioneers in new oil basins with no infrastructure and add to that the disputed nature of the FIs. I am not trying to be overly negative and there are a lot of positives such as the $1b that has already been spent to date and huge follow on opportunities. This could easily be 100k bpd for many years with follow ons.

There is also going to be lots of opportunities around the world for Harbour to invest.

However what can not be disputed is Mr Market is pricing Sealion sanction as being remote. Let’s hope Mr Market is proven wrong.

Harbour will have many opportunity to invest in new projects around the world. Like all other LTH, I hope and pray that Sealion is sanctioned but it is still a long odds bet which has improved from about 50:1 to 5:1 with rise in oil prices.

A sanction of Sealion will see RKH at 50p which will rise to £1+ as development proceeds to first oil. As noted this is a binary lottery ticket.

They are doing very, very well. ARCM just made another £12.5m today with the share price rise and the value of the creditor shares increased by £90m.

I see that Rockhopper have issued an RNS stating that Falkland Oil licences have been extended to November 22.

Given Falklands makes up a very significant % of Harbours 2C reserves, I would have expected an RNS from PMO.

Interestingly Premier have not issued an RNS. Clearly a lot more critical for RKH, but I would have hoped that Premier would have also seen this as a key event. Hopefully their silence is not a reflection of a lack of commitment to Sealion.

Yes. At 32p Harbour will be valued at over £5.5b and will automatically enter FTSE 100. Unfortunately as we are relisted on 1 April, Our FTSE entry will be considered as part of the June review and we will then enter FTSE on 1 October 2021. Once admission confirmed in June, the tracker funds are forced to start buying.

I should have added to my previous post that we should expect a lot of shares price volatility in April and May as creditors seek to sell their 3 billion of shares. How many of these shares are placed with institutional investors off market as opposed to being sold via MMs is anyone’s guess.

Great opportunity for traders but for long term holder best to batten down the hatches and wait for September FTSE entry.