Member Info for Tonyb33

I see a lot of oil prices being quoted on this share chat. Whether WTI or Brent. The interesting thing is Tullow's Oil is sold as at Dated Platt Brent. This is a spot Brent dated price. As we know the market is being told every week that this war is just about to end and everything will get back to normal. As such the market is in extreme backwardation ie the spot price is higher than the future price.

This can be seen in the interplay between the quoted prices for Brent and WTI. Normally WTI is lower than Brent but since the start of April its been noticeably higher why? Because the Brent price you are seeing is June future the WTI is May future. So as the Brent Price is further from spot its lower.

But what is the price that Tullow is getting for its oil well it gets Platt Dated Brent. I do not have access to this number but I can access Platt Dated Brent futures on CME group they are currently quoting April Platt Dated Brent at $133.26 this morning this is the price Tullow is receiving for its oil.

A further interesting feature is its hedging it has a triple collar. Ie two calls and a cap. The idea is selling a cap for income but two calls in case for some insane reason oil should rise above $100. As such up to $100 oil Tullow gets $90. But over $100 oil Tullow gets all of it. So with oil at $133.26 thats an extra $40m a month above the extra $180 projected for $100 oil in the last guidance.

The reality now is the next stages

1. The closure of the Bab El Mandeb closing the Red Sea

2. Iran unleashing missiles on gulf oil production and water desalination

3. Israel & USA bombing Iranian civil infrastructure

In Trumps words Iran is gong back to the stone age. Unfortunately Iran's words the western world is coming with us.

Hi @draft

Can you please give me a link to where you found your spot dated brent is it the same as Platts dated Brent as that is the index on which Tullow oil is sold

The price you are looking at is the May 26 Brent Futures quote. Tullow sells their oil on the basis of Spot Dated Platts Brent. The quoted oil prices are misleading at the moment this is because the current WTI number is the April future and the Brent price is the May future. (That's why WTI is unusually higher than Brent). The oil market is in backwardation ie the spot is higher than the future, and the further from the spot the lower the price.

To get access to the Platts Dated Brent you need to access specialist data sets I know @xxnjr has access to this data we need to ask him. What I have accessed is the CME Group Platt Dated Brent futures. This is showing the current Apr 26 Platts Dated Brent contract at $131.55. So that is more representative for the current price for Tullow Oil sales

@xjnr

One other item can you please tell me the latest Platt Dated Brent prices.

The oil curve is now showing high spot with a steeply dropping future we currently see April WTI and May Brent futures hence WTI is now higher than Brent. I would imagine that the Spot Platt Dated Brent on which Tullow oil is sold is a lot higher than the May Brent future price that we all are watching???

@xxnjr

Did the April 2nd load get away if so do we know the date of shipment and the average Platt dated Brent price used??

As always your knowledge in this area is greatly appreciated

@TDDW

I realise that US bond yields are rising but have you taken into account that the May 2026 refinancing is going to be made as at penal interest rates. The current Senior Notes are at 10.25%. The agreed refinancing is 10.25% cash 3% PIK (this kicks in when oil is sold above $65 a barrel and 1.75% PIYC (pay if you can) This tests the available cash in Tullow on a rolling basis. If Tullow has insufficient cash the interest is rolled into capital on the same terms. So the effective new terms are 15%.

My point is when oil hit $150-200 a barrel which in view of Iran's and Donald Trump's latest exchange of messages is virtually certain Tullow should be able to clear its Junior debt by 2027 and perhaps a $100m off its senior debt. At that stage Tullow should be able to refinance at more the 10% stage and not the new debt stage of 15%.

As to Mr Trump sending in ground troops that has now already been done with special forces getting into a firefight rescuing a downed airmen over the weekend. The other item to take into consideration is exactly how much damage Iran will do to the Gulf's infrastructure. Israel seems to be goading Iran by attacks on power plants and civilian infrastructure such as universities and powerplants. Iran has now crossed red lines in attacks on oil infrastructure, power and water desalinisation plants.

There is no way that this is going to end in April. That means $150-200 oil. The only question is how many months will we get because each one will generate around $80m extra a month to pay down debt.

What I am looking at is the Tullow debt. In February 2026 its senior debt $1.285 billion was priced at 69%. Last week it was valued at 93.70% this week its valued at 94.70%. This equates to a gain in value of $330.24m in the last month and $12.85m in the last 5 days. This is on a company that is capitalised at less than £190m. To all of you commentators who have been asking the question why has the share price not moved up faster with the rise in the oil price the answer is simple. The company is rapidly repairing itself. The first thing it had to do was repair its debt. Its senior debt has increased in value by $330.24m in a month. This is on a company capitalised at less than £200m.

The cashflow plan for 2026 at $65 oil was a prefinance trading cashflow of $100m trading profit plus $80m of asset sales and government debtor payments (thats $40m out of $205m actually owed). The 2026 interest is projected at $200m. So essentially the company was projected to lose money but drill 5 wells and boost cashflow into 2027. The war price of oil has meant that March will generate a surplus over plan of $18-25m. So we have enough to cover 2026 interest charges. Any surplus over $65 is now retiring junior debt yielding 17.1%. I estimate that we will retire $200-$300m of junior notes that's going to be a further $51m off the overhead in perpetuity.

The utilisation of oil surpluses oil on water loss of 40% of Russia's exports from the destruction of Ust Luga plus the demand to restock strategic oil reserves and for some countries (Australia) to actually fill the reserves they actually should have had but never got round to will mean 2027 oil prices will averages $85 a barrel some $20 a barrel over current plans. That will mean the whole junior notes will be paid off and hopefully a $100m of the senior notes. At that stage the balance sheet will be repaired and a refinancing opportunity will come available at interest rates at least 30% lower.

Meanwhile Trump is threatening to start destroying Iran's infrastructure. Did everyone see that very big bridge that Israel destroyed over the weekend. What are the chances that the Iranians start attacking oil wells and refineries.

The reality is before this war started Iran was selling oil at $40 if anyone except China was brave enough to actually buy it (it did not have a customer hence the amount of Iranian oil sitting in tankers off India). Russian oil was selling at a similar amount . Now its going for $110 a barrel if you can actually find some because its all been sold. Every day the Strait is closed Russia and Iran are making immense amounts of money. The chances of them opening the Strait in April is zero. This will force Mr Trump to send in ground troops which will result in the Strat not opening in May and a lot of destruction to Gulf oil infrastructure.

This means $150-$200 oil. At these prices even for a month or two will retire debt at $80m a month and produce a sub 1 PE ratio for the H1 r

My call we will chug along. We will get a blip end of April once the 2025 numbers are out. We will be able to see the hedging strategy for 2026, updates as to whether hedging was changed on declaration of war, and we will be able to see the net credit on the IFRS16 lease which will be released H1 2026.

The next key number is how many months this war goes on for and how it will end. My take it will not have an end but a simmering on. This will be good for both Russia and Iran because otherwise the embargoes will be put back on their oil.

The next key date will be 1st Week August 2026 when H1 numbers come out I see Tullow in the range 30-35p. @JMAX I will fuly expect you to remember this number you can crow as much as you want if it does not hit. But I am fairly confident. The IFRS16 release will be booked in H1 along with the high sales and the depreciation reversals from the higher oil field valuations. I think that number is conservative

The reality is that at $100 oil Tullow is producing $18m above plan cashflow per month. Current Brent futures have Brent above $100 to June 2026. The current plans for 2026 was to have $100m trading profit plus $80m debt recovery from Ghanaian Govt and Asset sales before financing costs. Financing costs are $200 where oil is above $65.

You have to understand Tullow's account they have 3 pools, Accounting presentation, cashflows and tax.

The accounting presentation differs from cashflow and tax in the following manner

1. IFRS16 accounting. Tullow has a $136m pa IFRS16 lease at 16.4%. IFRS16 lease accounting on struggling companies pushes up notional interest charges into the early periods of the lease. We are in Period 13 of 15 and we are early terminating the lease. The accounting impact will have been the notional expense of the lease would have ben disproportionately charged in the early periods of the lease. Early termination will release a credit to the accounts in H1 2026.

2. The depreciation charge accounting presentation is based on year on year oil field valuations based on discounted PVs of projected production oil prices and lease lengths. Because between 2004 and 2005 oil dropped from $75 to sub $65 as well as the lease length dropping by one year the oil field valuation dropped causing excessive depreciation charges. In 2026 the lease length will extend because the leases were extended from 2036 to 2040. In addition the calculation will be based on higher oil prices. In the 2025 calculation the TEN field had a negative value because it did not have a sales agreement in place for its gas. Ghana have greenlighted a new gas processing plant to go live in 2027. So with luck by YE 2026 a sales agreement will be in place for TEN field gas. The year on year increase in valuation will directly decrease the 2026 depreciation charge.

3. Tullow drill oil in Ghana but its treasury book is in London. It is a debt recovery play hence it heavily hedges downside risk. in a falling market hedging is a heavy expense. This expense is not tax deductible against Ghana oil profits. As such the hedging losses are deducted from profits but taxes are calculated on gross of edging profits which gives the impression of very high taxes on profits. However with spot at $108 rolling downside hedges can be placed at high oil prices. As this dispute ends it will result in these hedges generating profits that are tax free due to unutilised tax losses in London. Th eimpact will be that taxes fall as a percentage of profit.

4. Production and oil price distribution. The business plan for 2026 was based on flat $65 oil. However oil production will vary over the year due to 5 new production wells and one water injection well coming onstream in 2026. So due to the war we started the year on $60 oil and it has risen steadily into higher oil prices. A new well comes onstream end of March at $108 oil. Over the next few months more and more wells will come

Each time they play the game the price recovers more quickly. After Trumps nothing burger speech Brent has been rising at $1 an hour.

Now $108.22

Good Morning The Strait of Hormuz is still closed today is day 33 and we are about to start a 4 day holiday over which nothing will change apart from the markets will have 4 days with no open market to contemplate how much higher prices will go.

Meanwhile so long as the strait is closed both Iran and Russia can sell their oil openly Russia gets an extra $150m per day and can supply Iran with anything they need via the Caspian sea. Every additional day this waterway is closed is precious.

Meanwhile Trump in his important speech said nothing. Brent has now risen 7% with no concrete future plans but US troops continue to arrive in the Gulf.

Another Cargo leaves in the next day or so and Brent is $107 as I speak and its been rising $1 an hour I wonder where it will be before the market closes for Easter a four day break.

Ghana is fast tracking a new gas processing with an estimated opening date of 2027. Which means the surplus gas in the TEN field will soon get a sales agreement and that combined with the lease extension and new oil prices will mean that its field valuation will no longer be negative.

Brent futures are $100+ out until June 2026 so the H1 figures combined with the interest credit from the early termination of the IFRS16 lease combined with lower depreciation from the revalued oil fields will result in a stella set of numbers. Chances are when the H1 numbers are published in August the Strait will still be restricted.

Meanwhile the 12 month rolling hedges for April and May 2027 will be booked with a $107 a barrel spot this will be locking in higher revenue for next year, especially when a market is developed for the TEN gas which currently is being reinjected back into the oil field.

The newly drilled field should start production this month and the new numbers will start coming through as we start drilling the other 5 wells planned for 2026.

The Ghanian Cedi was one of the strongest currency stories this year, due to sales of oil and gold the currency is up 40% against the USD. The Ghanian government is seeing the benefit of its resources and will be in a position to start paying off the $205m it owes Tullow.

Finally this month after the bonus $20-25m earned on $100 + oil in March Tullow has sufficient cashflow to pay its note holders in full for 2026. Any extra money earned with oil over $65 plus any of the $205m owed by Ghana paid to Tullow will be used to retire debt currently being charged at 17.1%.

All we need to do is chug along whilst we wince every 2 weeks whilst Donald explains that the war will defiantly be over in the next two weeks and oil drops $20 again but slowly recovers again.

Hi xxnjr

Would you be so kind to explain the income recognition on oil drawdown. Tullow has two fields and owns a percentage of each of them. Now I know there are other partners who have a position and the Ghana Government and state oil company has a position. I know that the tankers draw from the floating collection platforms.

Could you please be so kind to explain how each partner takes turns how the recognise income as they draw and how they account for their revenue and pay the government percentage.

Many thanks for your patience

Whoop Whoop

Its very simple

Due to its debts Tullow was remodelled as a vehicle to recover the debtors money. The equity holders had essentially lost everything.

The debt refinancing raised the interest rates on the debt to effectively 15% on the senior notes and 17.1% on the junior notes with kickers if prices rose above $65 giving extra interest. Had oil stayed at $65 it highly unlikely that the debt holders would have been paid in full. The plan this year was cashflow before debt pay of $180m with full debt interest around $200m.

The business plan was to generate enough cashflow to keep drilling more wells in the field and to roll up the debt using PIK notes that would accumulate and generate more interest on a compound basis. As such at Feb 26 the debt was valued at 69% of parr.

The war in Iran has changed this position however its only kicked in during March and we are still in March. The improved cashflow now has the ability to not only pay interest on the debt in full this year but also to generate a profit and retire 50% of the $426m junior notes paying 17.1% interest.

The impact has also pushed up long term oil prices for next year into the $85 range which means next year we should be able to pay off all junior debt and be in a position to refinance on better terms. However it is still very early days

The Brent May future is starting to motor now just hit $118.50

@xxnjr For the next load you thought perhaps 2nd April 2026 what do they use as the price is it the spot price on the day or the average over the loading period??

@JMAX my little ray of sunshine :-)

The interesting thing is Trumps deadline is Bank Holiday Monday. The market will have to make their bets by Thursday to gamble where oil will be by the time Trump reveals his strategy Monday and the market will not open until Tuesday

What price Brent for Next Tuesday Open my Guess $125 a barrel

If POO and debt reducing why SP so low.... give it a chance oil only went over $65 in March and its still ...March.

The debt is nearly $1,7b we are making an extra $20-25m a month.

We have effectively a debt recovery plan at high interest rates attached to a company with an equity value of nearly zero. The old plan was effectively a collection for the debt holders.

With oil over $100 we can knock of the top $200m of debt in this financial year yielding 17% with oil $85 next year we can clear all of the junior debt which will enable the company to refinance the senior debt at much more reasonable prices. Expect 30-35p this year and 50p plus next.

Meanwhile we have hit 13p and whilst larger investors are jumping on the smaller investors who got in at 9p are jumping off at 13p because Trump said the war is almost over and oil prices are about to fall. Spoiler alert he has said that every week.

This is why i just cannot see the viability of the plan to use destroyers to escort oil tankers through the Strait of Hormuz. The reality will be the Iranians will simply watch from their 900 mile mountainous coastline and sent out drones against any tankers that start their engines.