Member Info for Tornadotony

Another scenario where some shares are allotted may be in the case of a merger with another company and what is being allotted has to do with bringing providing the other company shareholders with Tullow shares at an agreed ratio. For example if Kosmos Energy or Premier Oil was to merge with Tullow and the allotted shares go for the most part to the new shareholders of those previous company. At some point we may see a lot of mergers and acquisitions of companies to give greater stability and efficiency where it works extremely well to do a merger.

I wonder if our CEO could do a director's chat with someone giving hard questions and then later on a good news RNS comes out like Ntomme on line. My small investment in Pensana went up 45% this week thanks to an interview and a good RNS this morning. Some polishing of good news delivery would be really nice.

Now we need to see this move up to resistance lines.

Only made a small investment. Now up 35%. It takes guts to buy a shed load on newly listed company. However I will enjoy the ride.

Should have a blue up day response.

60p is 1.5 times book value. Tullow has traded up to 1.2 times book in the past but realistically the oil price would need to be around $60-$63 a barrel to return back to 60-64p that it was holding at Christmas.

Trading at 60% book is regarded as being a very pessimistic assessment. Considering that 50% of its asset sales are booked this year with another 7.5% to follow does seem harsh. I believe the $1B asset sales will get done and debt levels are brought under $2B.

what became wanted.

I believe it is mainly priced in. Very happy with both the RNS and a 50% cut in divi still provides a very solid yield for any new investor buying the stock in the coming weeks. I would be surprised if we got a bad reaction this morning as the company have done wanted they needed to do on a number of fronts.

233p RSI over 80%
212p Resistance 2
204p Resistance 1
188p Support 1
179p Support 2
161p 38.2% FIB retracement.

To note using moving averages or longer term data sets over 7 days are pointless as a result of the sharp breakout late in July with trial results. The chart data has limitations as we need more time to establish the strengths at support and resistance and how good the trading range is on medium term basis. The half hourly chart is a good indicator of money flow impacting on RSI as shown this afternoon from 1530. Volatility in the stock is around 3 fold of what it may have been in earlier months.

They are at 191p which is now being tested and at 178p. I was expecting an upward bounce from 191 back to around 200p or so as a number of oversold signals appear and the stochastics are zero on several time frames.

https://www.londonstockexchange.com/news-article/KOS/2nd-quarter-results/14637967

They have not changed their guidance on Ghana H2 and say Ntomme likely to improve TEN output.

Could be a case of Tullow being cautious as they are not operator for 1/3 of the output or not over promising like in 2019.

I certainly believe a 50% cut is baked into the price and a lot of other folks expectations. There is a tendency of BP to follow what shell does of late so we be left with a 3-4% yield. I actually feel the share has been kicked to pieces. It looks to me as if it might be buy the news as they have ripped the pants off this share beforehand.

The reason some of us are putting money here is that it gradually equates Covid-19 infection towards a suffering aligned with influenza virus. Governments know that societies have had enough of lockdown. Authoritarian regimes may cancel any form of democracy with brute force, but their comes a time when people really do take over in mass when they have enough of a failed strategy of virus containment. I suspect given another 4 moths that scenario may play out in various parts of the global arena.

I spoke to someone who had an offspring working as an orthopaedic surgeon in our NHS recently to hear only road traffic accidents were getting attention in theatre of which a fair proportion involve people injured on bicycles etc. No hip or knee replacements were done in 5 months. No elective surgeries were on going for a range of high risk diseases and the local health burdens and suffering as a result are just going through the roof. Despite this a lot of NHS staff get infected by patients coming into AE. Staff previously infected with Covid-19 get infected again but many show no symptoms so can go on to infect elsewhere in the hospital before its discovered they are also positive again and the hospital has a wave of staff self isolating over and over again.

Overall I think that time is in desperate short supply and waiting for a vaccine that works may be just to late. The key maybe to reduce lethal nature of the virus that allows greater acceptance of risk. It would be interesting to know if this medication was a useful defence before someone got the disease and their health pathway was less traumatic as a result in comparison to not having it.

I am only invested here as I pray to God they can deliver something to the market very soon, as we enter a world of destroyed economies to save 2% or so of the global population with years lost in the other 98%. being vastly greater.

Cluelesstim

In fairness Ntomme is part of TEN and has got its fair share in getting a well that we assume works and that will be a welcome August RNS and in fact I hope a few readers might prod IR to do this. It can be a short and sweet RNS but takes one doubt off the horizon. The situation on the rest of TEN needs a lot more sophisticated reservoir analysis on how extraction is managed with the greatest efficiency. With problems at Jubilee mainly resolved and Ntomme holding up weaker parts of the TEN field they can focus on those areas in 2021. The company has success building up behind it so far this year and hopefully similar field outcomes may happen in TEN for 2021. What we do not want is to write down resource lost through mismanagement which appears to have arisen in 2019.

Beetham
Thanks Beetham for discovering the reason why we have just $500 million liquidity. It tells me they have a high confidence on Uganda sale going through which it did on our side of the vote in July. It also shows their keen interest to save interest debt costs wherever they can. I find all of this more positive news. Tony

Cluelesstim

The current decommissioning is in North Sea. Around $35M is required to finish that job next year. The company then has to decommission 3 other fields in future years which I think was near Mauritania.

I agree with you on infilling Jubilee and more so on TEN. I wonder if advertising the Suriname drill next year it brings in a 15% farm down and its like Tullow getting a free exploration shot. The issue with Suriname is that a new find helps the company reschedule debt instruments that it has. They might of course sell it as an asset if it struck oil and pay off another chunk of debt for the Suriname blocks.

The RBL in 2029 was reduced from $2,464M to $2400M of which $900M is not debt but for operational liquidity.

At the April redetermination the RBL was reduced to $1,900M of which the operational liquidity was to be reduced by $210M with immediate effect to $700M and RBL total was $2190M. (At this point the company had reduced its Capex and decommissioning budget by $140M from what was spent in 2019 and of course is not paying out a dividend of $100M. ) It therefore has an RBL debt net shortfall to make up of $290M.

In response to a verbal presentation on 12 March from memory the CFO mentions how in repaying down the RBL it was intended for them to cover the draw down notes of $300M in 2021. So when the Uganda monies arise the RBL Debt reduces from $2,190M to $1,690M. It then goes back up to $1,990M when 2021 notes are paid. The $75M FID Uganda payment reduces it 1,915M in the meantime and the reduced decommissioning bill probably ensures they hit that target of $1900M RBL in March 2021. All the above is in line with your figures Slift and fit with 31st May circular.

As for the future the RBL would need to see the prevailing forward curve in April 2021. If the company generate $500M more sales it may be possible to pay the senior notes but taking out a similar instrument for $400M later on and pay down $250M off RBL debt and reduce $700M liquidity to $600M as they do not have Kenya development to worry about. It would leave the company on net debt of $1.9B. The RBL debt would be $950M which is the same proportion as it would be in 2019.

What is important in the next 18 months is to find more reserves and resources. The new CEO is aware of the importance of the 2021 Suriname drill.

The temporary dip in demand relates more to China drawing down on its supplies ordered in Q2 and river floodings keeping people home. USA August fuel demand is thought to be less than expected as more people may not drive outside of their state but they could drive a lot more within it. Hurricane season can impact supply and demand in August and September so I see oil as neutral for the time being.

The RBL was cut by $200M in April and must be paid first. A second payment of $300M goes to RBL and they in turn pay off the $300M debt due April-June 2021. The $75M follow up is contingent on Uganda FID and could be delayed to early 2021. he $15M returned on 2020 Capex could end up as part of a tax bill to Uganda government.

The Uganda sale gives the new CEO and his team some precious time.

As for the oil price, a big deal is made of OPEC increased production. However, Saudi Arabia made it clear it was not exporting as its domestic demand peaks August and September. Additionally some of the Russian increase was to be off set by several nations overshooting their quotas between May and end of July. August was therefore a very incremental adjustment. Despite Covid-19 setbacks consumption remains much higher than output and is still higher than April May of this year. The key is how governments learn to manage and contain setbacks and that populations act unselfishly to comply so that we can mimic the South Korean methodology of living with this problem. I should comment that recovery in California and Texas is quite good over the past week. Florida remains resistant to deal with it and Nevada after making a second recovery has again mismanaged its progress. The failures are a source of knowing how to manage it better. This approach may actually avoid national shut downs later in the year so there is a reward for working with proposed solutions. If this happens a better economic outlook is possible.

1. The first point I should make is that the timing of when production comes into revenue could be delayed into July and so might be in temporary storage so production does not quite equal revenue.

2. The forward curve price for Brent upon which the company was working on for all of 2020 was $38 a barrel for Brent and can be found in the 2019 annual report and was updated just before publication. . In the first six months the forward curve was approximate $42 a barrel. So in the second half of the year they either retained the forward curve at $38 or reduced it to $34 to give their annual curve price for the entire year.

3. If Brent was $34 average price per barrel from 1 July to 31 December the hedge income is $472M and unhedged income is $187M = $659M which is $42M less than H1 income and $71M less than what was actually earned which works out at 729M but quite possibly as said in point 1 it may not have materialised as revenue.

4. The next variable is they decide to pump less/sell less oil on days the oil price is very low. It does not affect hedge income but it reduces the unhedged income further. So lets say they pumped the minimum to hit 71,000 would mean only 20,000 of unhedged oil pumped. This would drop income by $61.8M in this scenario and second half income is 598M and at this level both the H1 FCF of $75M or so is gone and the loss in H2 becomes $56M and its only $19M above breakeven.

5. The minimum curve price Tullow can not control. However the production and how much of it is sold as revenue in 2020 certainly is. I would encourage someone in the company perhaps to write to the IR folks and see if what I wrote above is right. If I am correct then one mystery is solved.

It was a block of discovered oil so unfortunately it does not help. On my spreadsheet I gave them a combined figure of just $25M as intangible assets. I valued all other licences at zero although they have a value.