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NewKOTB. You are one angry human being haha. If only we could all possess your investment acumen haha. Relax dude and I am guessing you do not know the answer, which is just ok.
Based on the accounts and depending on what you absorb into the unit number and weight barrels to account for incremental acquisitions, it could be around $30 when including leasing and scheduled capex. Hopefully this can come down.
Anyone had a guess as to RRE's breakeven including leases and maintenance capex? It looks quite high being honest. I read $30 in the annual report for opex and i assume that excludes maintenance capex. Perhaps it includes depreciation. Either way as a shareholder i would like to see that come down on the oil side. I also own enquest and there free cash flow breakeven for the rest of this year including interest on debt, capex, leases is $25
Unknowable consequences but sometimes interesting to monitor. I have been looking at RBL financing arrangements with US shale where mark downs have happened formally or where leverage tests are due in H2 and reserves are to be marked down. Take Callon Petroleum for example....
"The borrowing base and elected commitment were both set at $1.7 billion, relative to a previous elected commitment of $2.0 billion. As of March 31, the drawn balance on the facility was $1.35 billion"
RBL capacity is getting squeezed which limits the capital expenditure these US shalers can pump to sustain production. However, assuming they breach RBL limits, leverage tests, covenants (whatever you want to call them), lenders have to decide whether they want to take the keys in H2 when there is zero liquidity in the market and extremely low selling prices. The Wall Street Journal has consistently reported the problems for US shale in terms of the rate of decline and amount of capex required to stave off rate decline. On that basis creditors have to also decide not only whether they want to become owners but also whether they want to continue to support capex being poured in.
My point being OPEC will be looking closely at this. They will want to see how bankruptcies play out, the rate of production declines and the attitude of lenders. OPEC likely to have learned from 2016 and will keep brent in the 35-40 range. I can not see them bailing out US marginal producers that will go into cardiac arrest very soon. I never try and predict the oil price but i am extremely bullish in 2021 and 2022. The undersupply could be absolutely massive depending on how these lending arrangements in the US play out.
Why interesting? They have changed their long term price target for Brent and WTI, thus moving the mark at which they price assets. The change in fair value going through the P&L as an impairment. They have reduced rig activity and discounted the price of assets sold to PMO given it doesn’t move the needle when compared to their market cap. Not clear on how this new information will have major implications on the North Sea oil and gas information unless you placed ‘significant’ reliance on price forecasts from BP (or anyone else for that matter).
Its a very odd price target that reeks of emotion Jan. The maturity on the RCF is not until Oct 2021. To say all E&P companies with any debt maturities coming up over the next 5 years are doomed is a very odd (polite way of saying dumb) assertion. Most of us dont make investment decisions based on analysts calls but given the limited coverage i found it very strange.
RBC first reported an impending covenant breach, which they had to immediately retract after a basic screw up. They then issue a 1p price target. Yes, i am sure top quartile investment houses are queuing up to hire RBC analysts. Maybe they should read documents first and speak later.
Will enjoy my pint this eve. Extended cuts, great jobs data, Trump (love him or hate him) lets animal spirits run wild , Europe engines starting to fire........this could explode upwards. Downside risks are decreasing. Feeling the pull............Boris, get moving for crying out loud.
Yep, i read it as they would receive $50m to offset against repayment of the project finance facility but I could be wrong. That was an 8% PIK facility so we need to shift it ASAP. Regarding net debt, quoting Einstein "Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn't, pays it"..........The effects of compound interest on our net debt are not good if we cant wipe out chunks of principal. Hence my plea that AB keeps updating us on the outstanding debt (including PIK). I am hopeful.
I am serious. Not trying to be funny. Have i got that wrong. On my screening tool its saying she owns 173,822 shares. The company's free cash flow is impressive and i like the fact they dont have suppliers to bargain with. But the incentives don't work for me. They will have to scrap for every pound of FCF and 'scrappers' tend to own the car, not rent it.
"The Committee sets shareholding guidelines for Executive Directors. The current guideline is to build and maintain, over time, a holding of shares in the Company equivalent in value to at least 250%"
Wow, they want the CEO to reach a holding of 250% of salary holding over time. Doesnt wash with me.
This is probably undervalued. I don't like debt but I could live with it. I have a rule about investing.....management have to have downside. Why does Karen Hubbard own so little of the company? 130,410 shares outright compared to £600k in compensation doesnt work for me. I cant invest. Shame but experience has taught me the power of management that eat their own cooking. The CEO hasnt impressed me with capital allocation skills either. This could have been a value investors dream of returning gobs of cash to shareholders. She doesnt own any shares thats why they seem to have sprayed retained earnings into.....new card shops. Struggle to comprehend the strategy.
I try not to disappear up my own rear end when it comes to guessing production numbers in between the company reporting. The POO is however the key factor here to state the obvious given we know FCF break even. To convey transparency, simplicity and predictability, I would like to see more regular RNS updates from management to communicate debt pay down. There is no reason why this can't happen now every few weeks even if we bit small chunks from the debt load, it will provide stability. A 5% drop today for no reason is just bonkers, not that i care, but AB should try to release more net debt updates this year.
It’s not my expectation that Enquest will default. If that is your expectation it would be rational for you to sell your equity position immediately. I don’t think £40m will make or break a company with an EV way over £1bn. It would be unconventional to try and force through a buy back. Psychologically after the worst oil crash since the 80s, a buy back is scary. it’s the equivalent of writing terrorist attack insurance in October 2001, but they were the most profitable premiums ever written. The rcf is the bigun in Oct 2021. If you believe we won’t make that that get the hell out. Very simple
*I also think share repurchase programs are nearly always done at the complete wrong time due to misunderstandings from management on basic capital allocation. They often fail to realise what is great at one price is dumb at another. Enquest equity likely to be significantly below intrinsic value after one of the biggest oil crashes in history. Now is the time to be rational imo. Not in two years when the share price reflects intrinsic value. I also happen to think many North Sea players would hugely benefit from this will retaining some funds to service the needs of the business. I can remember Jamie Dimon did a famous repurchase of JP Morgan shares in 2016 when they were in the 60s. Enormously benefited shareholders and great capital allocation from him.
Fair enough. Accept a steadily improving POO is no slam dunk however i do not think buying in 20% of the company's shares for £40m is risking the company's future but the benefits to the intrinsic value per share are significant. Just my opinion.
The intrinsic value of a business is the discounted cash flows that can be extracted from the business over its eternal life. By using retained earnings to buy a piece of the business at a price way less than what it’s worth increases the intrinsic value per share for continuing shareholders. iamnotananalyst yes, this means continuing shareholders would be entitled to a greater share of the company’s earnings. Should a dividend be announced after the buyback as a way of shareholders extracting cash, the cash stream will be greater than before the buyback executed under such conditions. The share price will reflect the change in intrinsic value over time
The company could theoretically buy in 50% with £70m at today’s prices. Yes it would move the share price and mathematically yes, shareholders would receive the double the current dividend per share. I think you misunderstand a buyback. You can’t compare a buyback that BP made years ago. It depends what price they bought back at relative to the intrinsic value of BP at that time. Your comment is like dying “can’t see how acquisitions have done for BP over the years”. Exactly the same from a shareholders point of view. Buybacks are often misunderstood so apologies for thumping my point done. It completely depends on the price you’re buying back at and what you’re getting in intrinsic value.
bandit. Thank you for your reply and i respect your opinion but I do feel your understanding of capital allocation is misguided. Managements decision to allocate capital to cancel their own shares versus deploying the capital to purchase external assets should be based on price and value. The math governing each course of action is the same. What is smart at one price is stupid at another. Its a matter of what are you getting for your money. At RRE's current share price, i think we all agree management are getting a lot (instrinsic value) for very little (£10 a share). The share price reflects intrinsic value so if company cancelled shares, the earnings per share for continuing shareholders will absolutely increase. That is simply mathematical and not up for debate. If you agree share prices and the market cap of the company reflect intrinsic value over the long term, RRE's intrinsic value will be worth less in the future if they choose to allocate £70m (for example) of the company's existing capital on an external opportunity that is worth less than £70m of RRE today.
I would add that i think management have done a superb job operationally particularly when using a yardstick of total finding cost per barrel/therm. Rational capital allocation needs to follow. Cancelling shares at these levels makes absolute sense.
Happy to hear you utterly disagree. Management should conduct a share buyback when a) the shares in question are priced significantly below intrinsic value b) the business can sustain and expand its operations with operating cash flow and c) alternative acquisition opportunities are inferior to their own business. Serica meets all three criteria hence my recommendation.
Also "our". Do grow up. You were not elected to run the message board. Its free for shareholders to voice an opinion on proposals that would benefit shareholders. Its a shareholders board. And yes you are correct i am never happy when excess cash builds up in a bank account earning nothing. Excess cash building up in a bank account and not being allocated in a way that provides maximum benefit to current shareholders is unsatisfactory to me as a current shareholder.
I will abstain from responding to "happy bunnies" and "our friend" and other personal remarks on the basis i dont think you get it.