Salamander Energy Share Discussion Threads

[salpara111] 03/12/2014 09:33

Well, this has turned into a car crash of a deal!

[ed 123] 02/12/2014 11:17

Ta, tiswas. No, not seen the note, but I see they've dropped the price targets for a number of oil companies. Presumably the lowered targets are due to the fall in the oil price? They don't mention (where I've been looking) Ophir, so can't tell if the Salamander target price is 0.5719 x the Ophir price target.

[tiswas] 02/12/2014 11:11

Anyone seen a new new Numis note supposedly out with buy and 126p target?

Surely can only be based on a recovering OPHR price?

[ed 123] 02/12/2014 08:55

No problem, ohisay, easily done. :-)

Btw, I think the SONA deal will not get approval of the SONA shareholders, due to the fall in the oil price. I expect the Ophir offer to be accepted by both sets of shareholders.

I had hopes for Salamander. Their assets are very good - hence the multi-party takeover interest - but the debt, while still manageable, is a drag.

Interesting that the contact at the end of Ophir's takeover presentation is Geoff Callow of Ophir Energy plc. Afaiaa, he is an employee of Salamander!

[ohisay] 02/12/2014 02:53

Yes Thanks Ed - I had a senior moment there - that Sona deal on my numbers would have had them almost completely net debt free - which certainly would have registered with me.!

[ed 123] 01/12/2014 16:41

At 30 June 2014 Salamander had net debt of $401 million. Enterprise value at 74p = £0.74 x 260 million + £401/1.58 million = £445.

Borrowings should come down somewhat in H2, since production in H2 will be higher than in H1 (though average oil price will be lower in H2) and tax payments should be less in H2 than in H1. Also, the company reported that it was making some inroad into the debt in H2.

Despite the fall in the oil price there are some positives. For instance Salamander holds 70% interest in West Kerendan, which has 1 Tcf of gas recoverable. Presently there is a contract for supplying 20 mmcf/day. There are discussions underway aimed at increasing the supply (need additional generator plant to take the extra gas, so will be some delay). There has been talk of supplying another 50 mmcf/day. The initial contract should produce revenue net to Salamander of about $25million pa, probably starting next month. If they are successful with the additional 50mmcf/day offering, then another $62 million pa revenue comes in. Salamander has significant Indonesian tax losses, so strong cash flow until the capital costs are recouped = helps to pay down that debt and unaffected by the fall in the oil price.

[ohisay] 01/12/2014 16:06

Can somebody more up to date than me answer Tiswas question .
I'd been assuming SMDR had 400m$ debt less 150m$ cash so net debt 250$ - is this still the case pre Sona ?

[ed 123] 01/12/2014 13:15

Aren't the two dissimilar? I think I'm correct in saying that Dragon hadn't actually made an offer to buy Petroceltic - so they can walk away. That contrasts with Ophir Energy's situation, since it has made an offer to buy Salamander.

Having said that, I'm not enamoured of Ophir's all share offer. I'd much prefer a cash offer from someone else.

We should get an operational update when West Kerendan gas field comes on line. No delay has been suggested, so it should be sometime this month. Looking at that guaranteed income and that from Sinphuhorm (being long term gas contracts), these are unaffected by the fall in the oil price. Bualuang is obviously affected and is the biggest asset, but the operating cost is low and the SRB part of the tax is geared to take some excess profit from a high oil price - so there is some post-tax shelter of cashflow from Bualuang in a low oil price environment.

Interest payments cost about $32 million pa. Management had already made the move towards reducing capital expenditure before this fall in the oil price. Operating cashflow at the half year was $115 million. Salamander can continue as an independent if the Ophir offer is voted down?

[nigelpm] 01/12/2014 11:07

Price broken out of OPHR 0.572x range. Looks like market agrees cumnor.

Remember though that DGO was a cash deal - share only deal makes more sense.

[cumnor] 01/12/2014 08:58

DGO pulling out of Petroceltic not a good omen for Smdr imo. Imagine everyone reconsidering their options and wont be forgiven for overpaying. imo

[tiswas] 01/12/2014 07:35

What is the SMDR enterprise value, including the debt that OPHR are taking on to get a fair picture?

[salpara111] 28/11/2014 16:53

If I were a holder I would definitely be voting against this deal as it is giving you absolutely nothing.

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[nigelpm] 28/11/2014 12:40

Fair point tiswas. I guess I'm quite relaxed about this given how cheap OPHR is but you make some good points.

[tiswas] 28/11/2014 12:17

Hello Nigel

It is a good start to have the board and 20+% shareholders give you irrevocable undertakings in a bid is it not?

And why roll over, why not say they reserve the right to consider a higher offer should one come along. How can it be in the best interests of shareholders to commit to something such that if a 200p bid comes along, for arguements sake, you cannot take it!

I must agree, something smells here but have not got enough at stake to worry about it.

[nigelpm] 28/11/2014 10:58

tiswas - what value does an irrevocable commitment really have? Not much I'd argue if shareholders don't vote for it.

[speedsgh] 28/11/2014 10:39

tiswas - don't think you've missed anything. The SMDR BOD do not give a toss about shareholders + are only interested in feathering their own nests. I've no doubt that they have been suitably incentivised to give their irrevocable undertakings, the details of which will of course never be made available in the public domain.

[tiswas] 28/11/2014 10:16

I only have a recent punt here, a well underwater one, so I do not know the full story.

But as I said earlier what was the incentive for directors and shareholders to give an irrevocable commitment to an OPHR paper offer at a time that share prices generally in the sector were under pressure. Maybe they did not foresee OPHR paper falling another 10 or 20% or whatever it is but irrevocable and no get out for a larger cash bid being put on the table? Talk of synergies etc just does not wash when the difference could be 50% in the bid price.

Have I missed something?

[nigelpm] 28/11/2014 09:44

That's - walk away with the assets!

It doesn't make complete sense in my head that SMDR just slavishly follows OPHR less 2p given SONA and CEPSA are still lurking.

[nigelpm] 28/11/2014 09:25

CEPSA could come back with a £1 and walk away - this is quite bizarre.

[pineapple1] 28/11/2014 09:18

Have 75% given though. I,ve not received anything about how i wish to vote and i will be voting NO NO NO not that it will make a difference.

[tiswas] 28/11/2014 09:12

Directors and certain shareholders have given irrevocable commitment to the OPHR deal so not sure how they are going to get out of it now.