Namibia is pretty frontier stuff. The discoveries are about 300 kms offshore in 1,500m to 3,000m of water. Quite a lot of gas with the oil, so that has to be re-injected back into the reservoir as Namibia cannot absorb it locally. And if you have poro-perm issues as appears to be the case with Shells acreage then that doesn't help. Total Energies who are secretive, seem fairly positive and anticipate concept selection by year end for their first FPSO. Galp's (apparently) huge find tested at a rig limited 15,000 bopd. Total (apparently) may have another discovery according to the rumours (four separate sources according to Upstream). But It depends if those sources are just the government (unreliable) or subcontractors (better) who may have an idea of whats going on! |
Namibia: Chevron only found gas, not oil on the ex-TLW block. |
Anyone care to join in a little New Year fun?
Predict the TLW bid price at the close on Valentines Day....
If my adding up is correct, that's 22 trading days away.
Winner bags a ticket to Rahul Dhir's leaving party.
I'm going to kick off with 28.75p.
Edit - the 50 day EMA now looks primed for a sharp upturn. |
Well TLW have to repay $493m of 2025 notes within 47 days on 1/3/2025.
Tullow also usually pay about $300m in TAX in 1H as front loaded.
At half-year 2024 TLW had $2.0bn of gross debt.
Cash positive $273m.
Total net debt: $1,735m.
FCF was -$126m in 1H24 due to those front loaded tax payments
but will (apparently) be $150m to $200m for FY24.
meaning FCF (apparently) should be $276m to $326m for 2H24.
suggesting cash at FY24 (apparently) could be >$550m.
remaining undrawn Glencore facility $270m.
So maybe they will repay the remaining 2025 notes with
Glencore $270m + $223m cash + a tad more cash to pay the interest.
Leaving about $350m of cash + future cash flows to pay the tax + OPEX/CAPEX etc?
Reducing gross debt to ($2bn + $270m -$493m) = $1,777m on 1/3/2025
Net debt at 24FY kind of ($1,735m - say c.$300m of 2H FCF) = $1,435m
There will also be a mandatory $100m 2026 bond repayment on 15/05/2025
Check the maths as bound to contain flawed logic! |
25 & 26 bonds have rallied significantly since December lows
Stock appears undervalued now.
Short positions reducing.
Could rally strongly to 30p.... |
A nice end to the day, I wonder if news is afoot, or stake building or snug trade had been going through keeping it low, or technical trading. Guess we will find out soon enough. |
TLW seems to have de-linked itself from the soaring price of Brent and the KOS share price ....
There must be an underlying reason why we're stuck in the low 20's... |
4D Survey vessel and support vessels are now in the Jubilee Area. |
Brent doing well.
Re-rating for TLW soon surely.... |
 Nobull,
Maybe the next significant event will be the next reserves report based on the new 4D?
No sign of the 4D Jubilee Survey having started as yet. Can't imagine it will take long to shoot as the area of interest is probably between 200 to 500 sq Km? Then maybe 5 to 6 months to process? Who knows? Would imagine the refinancing of 2026's will be in limbo pending the new reserves report?
The other thing is there seems to be a lot going on with the FPSO Topsides with a shutdown possibly in 1Q? Some of this is to do with reducing flaring from extremely high levels now (40kg of CO2 equivalent per boe) with the gas being mainly re-injected into the field (I don't think there's significant capacity on shore to absorb much more gas). The w/inj will surely be upgraded and reinforced to increase capacity and reliability.
It's not clear if the recurring w/inj under performance "We fixed it" until it is not fixed! stems from reliability issues with the topsides, or is a more fundamental issue with less communication than anticipated between some w/inj wells and the producers. Not explaining the issue in detail to shareholders doesn't help.
But at the end of the day maybe it all rests on the new reservoir model and reserves report?
And possibly a slower decline rate if voidage replacement is more effective after shutdown?
Edit: thinking about it didn't 1 of the 3 w/inj pumps have a temporary outage a yr or so ago? |
xxnjr, thanks for that. Yes, my bearish view stemmed from a belief that we only had 168.4 million barrels of P2 reserves as at 30 06 24 (slide 4)
and that we were extracting it at the rate of 36m barrels per year (90k bopd), so I had no problem figuring our cash flows would end on 01 01 2029 and that this explained the 23% gross redemption yield on our bonds, a rate of interest that would produce a debt principal default even if we could pay the interest at that sort of rate on any replacement finance with a redemption date extended to 31 12 28.
Slide 6 with its P2 valuation estimate of $3bn, (say $2bn to get rid of all our debts and $1bn to cover the market cap) left me alarmed because a 10% discount rate to get that $3bn figure sounds more like fraud if we are paying 15% for the Glencore finance: you do not want to borrow at 15% and invest it only to get 10% even if the accounting rules allow you to report a statutory profit doing that.
You make an excellent point about hedging costs. These make a lot of replacement debt finance prohibitively expensive, but all our BoD probably care about is getting their salaries paid. I am not a great believer in the narrative that we are at an inflection point where we are about to start some serious equity value accretion. We are still just working for the debt holders. Anyway it is good to know we have more that 4.5 years of P2 reserves. Thanks. |
Noball,
Oil Reserves. Perhaps the easiest way to look at it, is to go to p191 of the 2023 Annual Report. At year end
Ghana Commercial Reserves were 143.9 mmbbls. 2023 Ghana production was 15.5 mmbbls.
Reserve life is kind of 143.9/15.5 = 9.28 years.
Group Commercial Reserves (includes non-op) 202.1 mmbbls. 2023 production 20.4 mmbbls. Reserve life = 202.1/20.4 =9.9yrs
If you want to delve more deeply into the various reserve subsets and a description of the assets then download this audited reserves report
On your point about the current share price being an option on higher Oil Prices going forwards, one thing to bear in mind is that any large scale >$1bn new bond issuance (if that happens) would probably come with strings attached, stipulating that say 70% of the next 2yrs, or 3yrs of production has to be hedged, with the hedges being placed within a limited time horizon from bond signing. This (i think IIRC) is what happened with the 2026 bonds. The so called 'legacy hedges' (a description that Tullow tend to use rather more loosely than is actually the case). Hedges had to be placed (or written) within a limited timeframe, at a time when oil prices were weak, meaning that the company lost out on about $500m to $600m of revenue as a result of terms within the bond contract.
A lot of the cash has been eaten up by adverse hedging effects. Then add on the interest from the bonds. Tullow has been a cash machine for other parties, not shareholders. |
https://edition.pagesuite.com/html5/reader/production/default.aspx?pubname=&pubid=ba4b284e-4ba7-4f0c-9305-3600bc3f8902 |
Ouch. I have only 20k left of this dog. Sold most at a loss at 27 p and glad to be done The geology team are an embarrassment after Dhir |
Bought in today. GLA. :) |
I would expect DT to give the Israelis encouragement to take out Fourdow (that underground enrichment place near Isfahan), the Aras heavy water plant, Parchin (the nuclear detonator experimental place) and maybe leave it at that. American involvement will only make a lot of Iranians more loyal to the regime.
The way to undermine the regime further is not to attack Iran's exports by wiping out its oil refineries, etc., but rather to undermine the rial with sanctions so that Iranian people rebel against the regime and get rid of it themselves. Yes, pushing up the oil price would help us, but it might help Russia too. |
City, my sentiments exactly. That's even without the involvement of the IAF which will induce an Iranian response. 14 days to go to find out. |
The only 90 percent dead certainty is that Iran is going to be attacked by DT. They tried to assassinate him in the USA. They will cause havoc and Iran may even attack SA in Revenge. Bad news for the ME but the oil price will move how much who knows. |
xxnjr, thank you for your helpful and factual reply in 61015, as always.
Does anybody have any views on what the likely interest rate will be on refinancing the 2026 senior secured bond will be, assuming the new finance is also secured?
I see the consensus analysts' eps forecast is as below:
31-Dec-24 21.75p PE 1.1
31-Dec-25 17.36p PE 1.4
31-Dec-26 13.39p PE 1.8
What I do not understand is how an NPV(10) valuation of our P2 reserves of $3bn is sufficient to repay both our total debt and leave anything much to cover our current market cap, the reason I think our shares are basically an out-of-the-money call option on the oil price being higher than it is now and remaining high until the end of 2028, when our P2 reserves run out, and on finding some new P2 reserves that are not already included in that valuation.
The $3bn figure seems a gross overvaluation of our P2 reserves if our new finance is going to cost more than 10%, doubtless the reason our CEO is leaving, why he cannot face us, and the reason why our company attracts shorters. Any views?
It is no good reporting (statutory or even adjusted) profits as per the analysts' forecasts above if you are borrowing at 18% and only earning a return of 10% on your capital employed, is it because then you are making economic losses whilst reporting 'profits', the problem being the accounts do not charge for the cost of equity.
I get it that the biggest part of our cost of capital is debt rather than equity. But you are supposed to discount future cash flows by your weighted average cost of capital, and ours definitely is not 10%, even if our soon-to-be-gone CEO thinks it is. Bootycall, do you have any views on this? |
Brent 76.65 |
Well said Jenny.
Intresting detail about the arbitration posted on LSE |
This is the first time I've visited this board.
Worthy of mention are the erudite exchanges between XX and Booty.
So refreshing to find a sensible BB. |
https://www.fxempire.com/forecasts/article/natural-gas-and-oil-forecast-will-cold-weather-boost-heating-fuel-demand-1487733 |
Who has the bottle to keep them open.....and get burned. |
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