Member Info for Tornadotony

Here hoping

My last buy into the pool was at 42p to create the 63p average. The problem I have is that once 38p support was broken it has left me waiting for a proper bottom in the share price to form (Chart confirmation patterns). I also wanted confirmation from the banks that they support what Tullow are doing and we shall get that hopefully in the RBL re-determination later this month. I also waited to see the strategic report delivered today and it has left a few unanswered questions partly as they are yet to meet key stakeholders as they concentrated mainly on Africa governments. The overall fall in the stock market is also encouraging me to just wait and see how bad this all can get. I have just arrived back from Spain and I really need the whole weekend to review what is going on in the oil market. Finally there is a saying, if you are in hole think twice before you dig further and just make it a lot deeper for yourself. I need to be really sure that the oil price is not going to be kept down all through 2021. The phrase Tullow would not be a going concern reminds me of Bradford and Bingley when they went under over a decade ago. Fortunately the stock I had were given away free but became nothing after administration. I appreciate Tullow's management comment was on the assumption of no 2021 recovery in the oil price.

I have my own pool at 63p and have yet to do a big average down. Like many I am well down on Tullow but fortunately posted big gains elsewhere in 2019. I am assessing how ridiculous the oil dispute will get as lose-lose is pursued.

My assessment on China coronavirus outcome is proving broadly correct and they are carefully avoiding a second wave. South Korea population screening picked up a new cluster and its rapidly being dealt with. Unfortunately we have a European out break and I support Trump's move to stop air travel. I do foresee all of Europe following the China model and find it frustrating that population screening is not being done in Europe. I continue to believe that significant mild case numbers are not being reported and unseen and its nearly impossible to measure them all. The South Korea data is the best we have on mortality and I believe that it still over estimates the mortality rate on coronavirus. That said its worse than a typical influenza epidemic. Overall I believe not closing the Italian border earlier was an economic disaster and repeated the China spread model. It also demonstrates the stupidity of EU Commission intransigence on free movement of people. I personally feel everything should be on lock down by next week if we want to enjoy a near normal late spring and summer. The quicker they do this the better.

The hedging in January was zero for say 6,500 barrels. The company did not identify February hedging but said it was $60 a barrel for both months. I believe 18 days of hedge was used for say 78,000 barrels a day which I suspect could be a target achieved. The net price for 13,000 barrels was $60 In January and February. The company can now run on hedge for 191 days for $57.5 a barrel. This takes us to 8 September with an average sales price of say $58 a barrel. If anyone believes Brent can be kept near $30 as we approach end of Q3 does surprise me but for the sake of argument lets say its $35.75 the company is at breakeven for all its production for an entire year. If oil price recovered to $42 the profit is $59M for the year.

I produce this as some individuals are posting wrong data. You can correct down to 75,000 but they are hitting 95% up time and I have allowed for the odd slippage.

I want to read that the company has discussed it's strategy with major stock and bond holders along with those giving finance and has their strongest support and willingness to rollover finance commitments subject to identified compliance criteria.

canarywharfy
Uganda and Kenya sales at $1050m which is under tax concerns for seller.
Non Ghana oil fields 150M assumes 4yrs cash positive returns.
Hedged income to sept 2020 100m.
100m unspent from 2019 income.

Jubilee and ten field sale equals company debt and tax due to Ghana gov for sale.
1 Dollar per share minus 20 percent because of market circumstances is
around 59-61p.

Fire sale analysis is around 65p as we have demand for oil reduced and oversupply. In fact another 10 Percent haircut might need to be factored in. This is a total company buy which now makes sense to deliver to protect all stakeholders to the best degree.

Tax subject to allowed expense. Uganda is $570m before tax kicks in. Kenya allowance quite high as well. Ghana not clear as jubilee and ten fields have run for different number of years so its a rough guess.

Jmax
35 percent of jubilee and 49 percent Ten field on basis of recent sale 3.7b minus costs and tax. Alternative 2p is 2.3b$ plus 3p is 2.8b$ after all costs. Or flow barrel rate $2.3b plus $0.5b from 3p.

Jmax
Ghana government,Kenya and Uganda have tax bills to pay on sales and my valuation accounts for this.

Total 25 percent buy of jubilee was 2.4b. Tullow value 50 percent higher say equals debt. Fire sale of Uganda and Kenya assets $1050m. Non Ghana oil fields 150m. Cash not spent from income 2019 150M and income from hedge 75m.
So value near $1 a share. Allow 10 percent off for oil drop for year gives 65p a share. Low stock prices are bargain basement buys. Make the best of it. I have held back from double up as its now treble and growing. The share price is stupid low thanks to oil price so low. USA to turn off tap soon, Saudis to get it soon and cool heads dialogue agree how long low oil runs. Expect coronavirus death rate to fall and mild rate to increase. Wimbledon,ascot,footie to continue.

Jim
China did not screen it's population. I am qualified immunologist. They were huge numbers of mild cases probably not recorded and true death rate is likely tobe lower. The authorities can not speculate on what they cannot measure. Instead they show worse case and we get public anxiety.

Tullow hedge holds to late August. Suriname drill cancelled. Maintains fcf as planned until 1sept. Economies will rebound strongly and oil demand goes up 4th quarter. Mitigation protocols defend public on future coronavirus infections. Tullow sells 20 percent of Kenya blocks and sells some Guyana block to pay 2021 debt.

1.south Korea only country doing random screening. Find more positives but mortality and morbidity are lower and drop each day. 0.67 percent mortality.
2.hand washing properly and barrier controls limit 85 percent spread as seen on cruise ships.

3. Only immunologically and genetically compromised children at risk. Schools should stay open.

4.only those with clinical underlying conditions under 60 affected above normal flu.
5. 6 percent over 60s die every year who do not have coronavirus. Those who do have 8 percent. However mitigation protocols could eliminate most of this extra risk.

Overall media hype is exaggerating risks. China is recovering. Similar will follow elsewhere sided by warmer weather.

The company is hedged for 60% of annual production for this year for around $56.70. That is 45,000 barrels per day. January was above that figure with an average of $62.50 for the month on futures. We had 4/5 days or say above hedge when Jubilee was fully functional. We might have used 24 days of hedge funds. Overall target was held up to 1 March as in the FCF plan.

The coronavirus first wave in China is burning out and 2700 recoveries exceed 400 new cases of late is the trend and follows a recovery phase similar to influenza. 6 countries having coronavirus no longer have any. A second wave into the Middle East, South Korea and Europe has begun. There is a chance that good hygiene and informed public to the disease may limit the second wave. These should burn out to low numbers by April. Tullow hedge can be used in the interim. If Russia agrees to cut if Libya comes on stream or the maintain existing cuts to 30 June, the oil market should improve at a time when the hedge is only half used. We should see a significant economic pick up after this.

Romeike

Its probably not a good idea to go out and eat in a McDonalds unless you see full time cleaners wiping all the hand surface areas all the time where Coronavirus has taken hold. Tony

The pattern in China is suggesting recovery phase is fast approaching. They will be the first state to come through the disease. The issue now is whether the message of frequent hand washing and not touching your face so much gets through to the public in other countries. It has a dramatic effect in reducing spread. Japan is doing a good job in that regard.

Yes I did receive a response regarding the TEN field. I believe everything I was told was in the public domain already so have not reposted it. The answer to your question is that we only have a production figure for 2020 being specified for TEN. The focus in the short term is getting the new well up and running in Ntomme.

Dear Tony,

With regards Jubilee there were a couple reasons for production performance being significantly lower than expected in 2019, with water cut being one. So perhaps it would be useful to touch on each one briefly:
•Uptime: our forecast assumptions for uptime in 2019 was 95%, when in reality we were closer to 90%. To mitigate the risk of this in 2020 we are now forecasting 90% uptime.
•Gas offtake: we expected the Ghana National Gas Company (GNGC) to take ~100mmscf/d in 2019, but in reality it was closer to ~50mmscf/d. The result of which was that we had to re-inject more gas into the reservoir than we would have liked, increasing the gas:oil ratio (GOR). So far in 2020 gas offtake has improved to >80mmscf/d.
•Gas handling: with the GOR higher (see above) we have to be able to handle more gas at the surface. In late January 2020 we carried out planned maintenance on Jubilee to increase the gas handling capacity from 155mmscf/d to 174mmscf/d. Furthermore the government have given approval to flare for good reservoir management.
•Water cut: this was again a forecasting issue. In 2019 the water cut we experienced in one well in particular was much greater than expected, this corresponds with a decrease in oil rate. However, this is not a reserves issue, shown by the relative stability of reserves at Jubilee (YE18: 123mmboe and YE19: 121mmboe). So it does not affect our ability to capture the same amount of oil within our Production Licence period.

I was impressed to receive the above on the Jubilee field and thought some of you may wish to read it.

They forecast around 22,000 for TEN and 29,000 Jubilee for 2020.
Last year TEN was over 28,000. If they can fix Enyenra field problems, they fix Tullow when you think about it. They will need to go into 2C areas on TEN and reconfigure the entire field life after losing 30% of 2P resources and understand why and how it was lost. Extra 2P discovered in Jubilee partly compensates.

Libya supply 90% out. Iraq oilfields a number of southern fields came off line last week, one of the reasons oil went up. Iran may also have some of its production go off line for a range of reasons. Supply issues are arising in lots of the OPEC countries. Nigeria also has outages. A Russia agreed cut is icing on the cake for the oil price and would help keep a floor. USA production also easing and Canada not exploiting available assets. The demand side bounce later would see oil prices back up again.

As for Tullow, they will have probably used 3 weeks hedge at most by end of Feb and average sale prices just on $59-60 a barrel.