Global Energy Development Share Discussion Threads

[salpara111] 31/12/2014 11:09

So, will 2015 be the year that the inept management finally justify their big salaries?
With most shareholders underwater including myself good news cannot come soon enough but sadly any good news will be launched into an environment of rock bottom oil prices.
I imagine that there will be little point in them actually producing oil when it is below $60, personally I think the price will bottom out around $50-55 but I fully expect it to rally towards the end of 2015 as there is a lot of production that will go off line gradually with prices below $75.

[foghorn5] 17/12/2014 23:10

ST has been ramping this aim dreamer stock all the way down

[wilk1] 17/12/2014 22:13

There can't be much free float available if what Simon says is correct. 9 shareholders = 86% and then smaller pi's. They should earmark half a million or so for a buyback whilst the price is so low. Surely the directors must see this as a way to get the price to where it should be and it would still leave a decent warchest.

[paleje] 17/12/2014 21:22

No, OT, she just didn't mention at all, their priorities were clear debt, accelerate drilling and take advantage if poss of some near distress situations.

I think if they had some early drilling news it might alter their thinking on the cash, it would make sense but they haven't got anything going at the moment unless Catalina coughs up. That's only my thought not aired by Anna.

Fair to say though, she couldn't have mentioned a cash return to me it would have been price sensitive.

[wilk1] 17/12/2014 17:55

Jeez paleje, thanks for posting that. This price is absolute madness. Share buybacks would make sense, always a positve for the share price. Crazy valuation. Just value the P1 at $1 per barrel and it must double the current price even without including the cash. This is very under loved by the market for sure.

[on target] 17/12/2014 17:41

I also think a smallish buy-back could be on the cards as I posted a few days ago. It would certainly make a lot of sense.
Did Anna tell you there definitely would not be a buy-back or just didn't mention it?

[paleje] 17/12/2014 17:31

ST sorry not IC, anyway same outfit, Simon's take, don't disagree with his logic except he seems to infer a share buyback might be likely, well I hope he's right but that was most definitely not what Anna Williams told me:-

The dramatic slump in the oil price in the past six months has sent shock waves through the listed oil sector and with justification too. Not only does the near 50 per cent decline in the price of Brent Crude since mid-June undermine capital investment projects and decimate earnings of producers, but the damage may not be over if reports prove accurate that Opec, accounting for a third of the world supply, is willing to let the price fall to $40 a barrel. By refusing to cut output in the face of downgraded global demand forecasts, and focusing instead on maintaining market share, the 12 member countries of Opec have exacerbated price falls.

Ultimately the cause of the oil price decline is down to a softening of global growth prospects, but there is no getting away from the fact that the actions of Opec have helped undermine the economics of US shale gas producers and heaped further woe on Russia – oil accounts for two thirds of Russia’s exports and half of its federal budget revenues. Conspiracy theories aside, it's difficult to believe that Opec, and Saudi Arabia, the world's largest swing producer, are unaware of the full consequence of their action.

I am not going to even try to attempt to call an end to the current rout, but what is apparent to me is that the indiscriminate sell-off has thrown up some appealing investment opportunities even if the oil price stays below $60 a barrel for a prolonged period of time.

Indeed, it was reassuring to see Aim-traded South American oil explorer and producer Global Energy Development (GED: 45p) complete a major asset sale and one that transforms the company’s finances. The disposal of its Llanos Basin properties in South America to a subsidiary of Canadian listed oil and gas exploration company Platino Energy Corporation (PVE:CVE) completed earlier this month and at a favourable price too considering the fact the oil price has fallen a third since the deal was announced. The cash consideration of US$50m (£31.8m) represented a 35 per cent premium to the valuation analysts attributed to these assets and equates to five times their annual cash flow (pre-capital expenditure). The properties generated a pre-tax profit of $4.7m on revenues of $75m last financial year and accounted for 95 per cent of Global Energy’s total cash flow. But those figures were based on an average oil price of $90 a barrel, or 50 per cent higher than the current price.

Free ride

Moreover, having paid off its net debt and accrued interest of $8m, Global Energy now has net cash of $42m, or £26.7m at current exchange rates. To put this sum into perspective, the company has a market value of just £16m based on 36.1m shares in issue. Or put it another way, net funds now account for 74p per share, or 68 per cent more than the current share price,

This means that we are getting a free ride on the company’s development programme, albeit the slump in the oil price means that hitting pay dirt in the current environment is less likely to be fully recognised by investors who can cherry pick bargains amongst the debris of the oil sector sell-off. That said, the funding costs of the ongoing drilling programme are being met by partner Everest Hill Energy following a farm-out agreement earlier this year whereby Global Energy retains a 50 per cent interest in its Bolivar license area, located in the Middle Magdalena valley in Colombia, and has a fully carried interest on three wells. The portfolio contains 32.2m barrels (1P-proved), 55m barrels (2P-proved and probable), and 184m barrels (3P- proved, probable and possible) and importantly Everest is fronting drilling costs of $24m (£15m) which mitigates risk for investors holding Global Energy’s shares.

Investors are also getting all of Global Energy’s Bocachico properties, in Middle Magdalena, held with partner Ecopetrol, in the price for free too. These contain 11m barrels (1P-proved), and 40.4m barrels (2P-proved and probable).

Clearly, these Columbian assets have some value, but even if we ignore them completely, then Global Energy’s shares shouldn’t be trading 40 per cent below net cash on the balance sheet. It’s a crazy valuation in my view. It’s worth noting too that we can expect Global Energy in due course to make a further announcement with regards to the use of the cash proceeds from the aforementioned asset sale following the completion of the Llanos transaction. An earnings enhancing share buy-back programme would not go amiss given that 86 per cent of the company's issued share capital is controlled by the top nine shareholders, so it wouldn’t take much buying to propel the share price upwards and reward Global Energy's loyal shareholders with a much fairer valuation for their equity holdings.

Admittedly, the investment has not worked out since I initiated coverage two years ago (‘Insiders major buy signal’, 17 December 2012), and the shares are close to their 40p all-time low (‘Overdue and ripe for a bounce’, 10 September 2014). But with such substantial cash backing they are a value buy ahead of an announcement from the company on the use of the cash windfall.

[paleje] 17/12/2014 14:23

Don't forget the free rides on the drilling.

IC highlighted the undervaluation again today, cant replicate at the mo might later.

[wooster4] 17/12/2014 14:16

not going to take much to get this going - sitting at a massive discount to cash, debt free, and assets chucked in for free. load up

[wilk1] 17/12/2014 13:27

Back in for 10000, anyone expect a low ball bid for 90p ?? Cash is king at present for oilers with so many distressed sellers out there. GED could transform itself, sell off current assets and use cash to buy out some knock down North American assets instead. Thoughts anyone ??

[wooster4] 17/12/2014 12:33

loverat - he's being a tit!!

[loverat] 16/12/2014 09:52

What weird things happened in Columbia to LGB shareholders? I thought it was some made up credit note originating from Brazil that was the issue there.

[dlku] 16/12/2014 09:35

not if it is a letter of credit in banco brazil

[on target] 16/12/2014 09:34

They only got it 2 week's ago. So I would think it a fairly safe assumption its still there.

[dlku] 16/12/2014 09:31

the cash can be spent plug and abandoning wells and management bonuses. management charges by harken

dont assume it is intact

weird things happen in columbia - ask langbar shareholders

[on target] 16/12/2014 09:29

Most of the explorers have no cash!

[salpara111] 16/12/2014 09:26

Most of the explorers are trading below cash so hardly surprising situation.
I am not sure if anyone knows what oil price they need in order to actually be bothered drilling.
I still reckon that oil will bottom out in the first quarter around $50 and will then return to the $80 range by the end of the year as there is a fair bit of production that needs that sort of price level to justify continuing investment.

[on target] 16/12/2014 08:57

~75p/share net cash won't be.

[dlku] 16/12/2014 08:20

Will GED need asset write down due to oil price collapse

[paleje] 12/12/2014 10:44

By Saijel Kishan and Devin Banerjee Dec 12, 2014 5:00 AM GMT

Stephen Schwarzman, Chairman of Blackstone Group LP.
Stephen Schwarzman, the chairman of Blackstone Group LP (BX), said now is the best time in many years to invest in energy.

“There are a lot of people who borrowed a lot of money based on higher price levels and they’re going to need more capital,” Schwarzman said Dec. 11 at a conference sponsored by the New York Times’ DealBook. “There are going to be restructurings to do. There’s going to be a fallout. It’s going to be one of the best opportunities we’ve had in many, many years.”

Oil prices have tumbled since June to the lowest in five years because of slower growth in global demand combined with surging production in North America. The Organization of Petroleum Exporting Countries spurred further selling by refusing to cut output on Nov. 27. Oil futures fell as much as $1.19 to $63.05 a barrel in New York on Dec. 11, 45 percent lower than the price on June 19.

Blackstone, the world’s biggest manager of investment alternatives to stocks and bonds, with $284 billion under management, is raising a second energy fund with a limit of $4.5 billion. The New York-based firm’s first energy fund, which gathered $2.5 billion in 2012, was producing a 44 percent annualized return after fees as of Sept. 30.

Carlyle Group LP (CG), which has $6 billion to $7 billion available to deploy in energy, also sees the industry as more attractive now than it will probably be for the next five to 10 years, co-founder David Rubenstein said on Dec. 10.

“This is a great time to buy,” Rubenstein said at Goldman Sachs Group Inc.’s financial-services conference in New York. “The bottom hasn’t been hit yet. Oil prices will probably stay low for a while.”

Schwarzman, who has a net worth of $10.9 billion according to the Bloomberg Billionaires Index, said the U.S. financial system is in “good shape.” Europe is “quite discouraging” because of a lack of economic growth, he said, and Asia is “spotty, but there is still really good growth there” despite a slowdown in China.

To contact the reporters on this story: Saijel Kishan in New York at [e-mail]; Devin Banerjee in New York at [e-mail]

[salpara111] 11/12/2014 17:08

Big drop today! clearly I was a little over hasty in doubling up my stake but the investment case is still the same so I guess I will just have to wait my 3 months but no longer, these guys are drinking in the last chance saloon.
I will be annoyed if they don't do some sort of capital return, the last thing I want to happen is for them just to continue on as they have over the last 5 years feeding themselves large salaries while shareholders get nothing.

[on target] 11/12/2014 17:07

Thanks paleje, I did expect they would be looking at acquisitions.
Looking forward to the details.

[paleje] 11/12/2014 16:55

I just got a reply from the FD, I wont print it, it's not price sensitive but I didn't ask.

Anyway, they're not ready to update specifics yet, they've paid off the debt are looking to expedite growth through the drillbit (her word not mine) at Bolivar and Bocachico but also there are some possible opportunities coming onto the radar, highly leveraged situations which might not weather the current oil price rout, I think they need a bit of space to test those.

So it doesn't sound like a return of capital more like expansion. Personally I don't mind that but I'd rather think they would work towards further sales, on the back of successful drills, rather than long term production and then move on to do the same with the new opportunities they're looking at. The oil price won't stay at this level, there will be serious money made..and lost.

EDIT - I better emphasise the last paragraph is only opinion the previous one is fact.

[on target] 11/12/2014 16:22

You'd have to use an industry average I guess.

I would have thought a bit more than the -£11m the market is currently ascribing though.

[anangf] 11/12/2014 16:18

So what value to ascribe to the reserves?
Thanks