The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
There is some confusion on the other ADVFN board. Can someone correct me if i am wrong but this is my take. The BKR liability is not a fixed financial liability such as a term loan or bonds. The liability on the balance sheet of £155m in relation to BKR as at 31 December 2019 is the discounted cash outflows that will be paid to BP in 2020 and 2021 (presumably at the end of the year, I havent read the minutiae of the deed) based on the net cash flow sharing agreement. The net cash outflow per the agreement is paid to BP and is 40% of operating cash flow that the BKR asset produces in 2020 and 2021. The shutdown or maintenance that occurred on the Bruce platform earlier this year and any other future BKR temporary shutdowns disproportionately benefits us, in a material way actually. The gas remains in the ground, BP pay for half the maintenance and its extraction is unintentionally back ended until we own 100% in 2022. I am not saying we should jump for joy if we hear news of another BKR shutdown but it is far from the end of the world. In fact its the opposite. In business i highly value integrity and I am sure management feels the same so I doubt these shutdowns are predictable in any way and a strong relationship with BP has value.
On the other board there is a web of confusion going on about mortgages and debt and EPS. Of course increased ownership of the BKR assets up to 100%, paying out of net operating cash flows in 2020 and 2021 will lead to higher EPS in 2022 when we own 100% of the damn assets. I appreciate some people are learning how to read accounts but its best not to cause confusion (to the downside)
Its probably your end sentence. Cash represents over a third of the company's market capitalisation. Clearly, what management do with this cash significantly impacts the company's intrinsic value, particularly given E&P assets are finite. I am not expecting any bonanza in the share price until the underlying value of the company changes. In fact, downward more rational than upward until this is deployed.
7% while gas prices are surging. As a long term investor I can never understand who plays around but it always seems very suspicious. The regulators should do these useless day traders or algo funds a favour and ban it. They will find something better to do with their lives
Management keeping cards close to their chest. Agree...."Serica is ideally positioned to act as a consolidator in the UKCS" in bold has positive undertones. A i have mentioned previously, management are sitting on a lot of shareholder cash. I have no problem with this if their are ample opportunities and prospects in the North Sea. I also admire the fact they openly disclose that they were not drawn into dumb deals in 2019. However, management must earn their crust over the coming months in terms of managing that capital and coming up with a deal. As a manager myself, its very very tough to deploy capital into good businesses, managed by talented and honest people at attractive prices BUT.....we cant just moan about the high priced climate. I hope they wait for the fat pitch and take a big swing.....I would much rather inaction. If that doesnt work out, they can always buy the company's underpriced stock.
POO isn’t paying the drill for many US producers. RBL’s and leverage tests due in October will force bankruptcies. Funding of those capital expenditure requirements for those mid-cap energy players to even stay in the same is simply not available. Granted we have a sizeable obligation to meet come October 2021 but so long as the oil price doesn’t pay the drill in the states, it may cause even more permanent loss of supply. Would you rather a bumpy ride to $60 Brent with the increase back-ended towards Q1 2021 or a straight line up. Former for me if it means permanent correction of some marginal barrels
Inventories also being worked off globally. We can never predict macro but there is handbrake on oil for sure. WSJ reporting horrible margins for refiners who still have ample product to sell down. Big chunks of demand from refiners still some way off i reckon. Nat Gas sinking. It will all correct within time. Just needs to be worked through.
epiphany, i think its really difficult to predict. Some of the credible scientists stuck their neck out and made hard form predictions about outbreaks and hospitalisations being inevitable across the protesters but it never happened. Here in Switzerland, restaurants and bars are packed with no masks and social distancing, full of old and young people and there are no outbreaks. I just think its impossible to predict. There are no longer facts in place to support taking the train off the tracks again. There are supporting facts for mass unemployment, economic devastation and permanent employment (those companies publicly releasing statements that they are making lay offs not furloughing). The health impact to high unemployment is also devastating.
The hospitalisation rates of these 'alleged' troublesome outbreaks seem strangely low. Of course we all need to be weary but im sorry to say, things are getting eerily political in the election run-up. The democrats best way to get into power is to force another shut down or scare the people from moving the economy forward. I hope the rest of the world does not look to the US as an example of how to deal with the virus rationally. Very abrupt strange decision from Apple to just close stores. If you look into the actual case increases, hospitalisation rates and cases divided by the increased numbers tested..... i think you will see the political football continue to be thumped back and forth
Options in the capital markets always good but ultimately as shareholders, we want debt turned into equity through pay down of the SFA and notes. Almost in a boring type fashion over the next 18 months. Then, a couple of turns to the right on the multiple from mr market.....then....i'm outta here :-)
Londoner - agree with your summary. You would think management / AB will not want to walk the tight rope in 2021 so no news is good news imo in terms of ENQ ability to either repay or refinance the SFA in October 2021. Ignoring macro disasters, looking at the FCF breakevens and steady as she goes production, the SFA is more than doable. It wouldn't be Ben Graham's margin of safety stock granted, but we are where we are.
Moody's ratings can impact how much capital insurers or institutional holders have to hold against their fixed income investments that are downgraded, which can be an issue and cause further sell offs. I wanted to purchase ENQ Retail bond a few weeks ago during the chaos but Interactive Brokers couldn't offer it to me. Very annoying indeed as it now 65 - straightforward >2x. Stock probably the same though.
You are correct with your more updated terminology. SFA is the RCF. Perhaps the lenders changed or the guarantor subsidiaries changed. No idea but looks the same. Bonds, notes, RCFs, SFA. Just money we have to repay or refinance at a set date i suppose with cash or PIK'd coupons attached to them.
Hi Romaraon. I am not sure what you are referring to when you say SFA. No need to be an expert. Just reading the prospectus. The RCF and the High Yield Notes and Retail Notes (i am referring to the latter two as bonds) are completely separate to the RCF. The notes comprise the majority of our debt i.e. $966m at year end. The $966m is split into high yield and retail but both securities have the same maturity terms i.e. quoting from the prospectus...
"The Notes are scheduled to mature on 15 April 2022. The Company has the option (at its absolute discretion) to extend, at any time, the maturity date to 15 April 2023."
The RCF is completely different and has a set amortization schedule on p25 of the revised 2016 prospectus, which states a October 2021 as the final maturity date of the RCF.
My point on refinancing was at April 2023. If you do not think we will be in a better position to refinance by then, then i would seriously reconsider an equity position in ENQ currently.
Having the option to delay c. $900m of debt to refinance by one year in a rising oil cycle is a huge advantage. The option to extend being of huge value is not up for debate. That is just a fact.
Once we are start demonstrating cash build and paying off chunks of the RCF from now until October next year, this should rocket . April 2023 for the bonds is so far off and captures the up-cycle, which is of huge benefit. Slow and frustrating but our time will come.
Do most people understand that the company has absolute discretion to shift out the maturity date for the bonds from April 2022 to April 2023. This time option given where we are in the cycle is a huge benefit. We are just under three years from that date. Refinancing at better terms is a likely scenario. We have no leverage tests or constraints up until that point. I do not think the RCF will be a problem either.
Well if you are convinced of "corporate activity" arent we all over the moon. I have been waiting for your signal on this. lolz