Query: Isn't the tax arbitration conducted by international court not Ghana? |
 Some great points in recent posts , navel gazing and introspection. Difficult to call the turn in cash flow projections without rig confirmation for Jubilee , but let’s just give a range of $300m-$500m free cash flow post financing costs likely in 2025-6. Shares are languishing owing to the absence of production growth which has occurred primarily because the covenants on the bonds restricted use of free cash flow to primarily repaying debt. The UK listing requires ludicrous accounting treatment on reserves ,that means half the value has to be written off until the reserves are put on production. Kenya is holding out, it appears, for a larger pipeline project…does not want Tullow obtaining $2bn of cost recovery on a smaller scale trucking project.
Most players have given up on the Company, which is ridiculous.
As I have said many times previously , branch profits tax claims against a stabilisation clause is doomed to failure at arbitration in my book…the fact that the arbitration result has carried over past the election in Ghana this weekend does not surprise me. If the Government of Ghana are unsuccessful they do not want to know until afterwards i would speculate. If Tullow moves its primary listing to another exchange we might be spared a report and accounts which is becoming weighed down in corporate governance and woke trash.
Africa is full of consolidation opportunities in E&P, in my opinion , Rahul appears accident prone in failing to close virtually any of them. When I went to an AGM he bolted out of the room straight away rather than talk to his own shareholders…
What i can say is that our Finance Director is the opposite, very helpful and answers questions directly and with great honesty which i liked, so I wish him well.
Do not write off this company…it has great cash flow and a credible franchise in Africa. I think the debt restructuring has been pushed out until the outcome of the tax arbitration and will sensibly dealt with in January. I believe Tullow will be one of the best performers of 2025, which is remarkable as we may not have any high impact drilling during the year. Tullow has the reserves already, which are not recognised in the reserve report because they need to have a confirmed path to exploitation. A lot can change in a small amount of time. Good luck to all. Booty
Please do your own research and do not rely on the above when making investment decisions. |
A good summary markyp23
Well the bonds have come off quite a bit today.
2025's which have kind of been bullet proof since the $400m Glencore facility was put in place are languishing at 91.5% as opposed to 97% not so long ago.
2026's seniors secured notes are 85.3% vs recent 93% to 95% range.
Incidentally the 'RBL' was in fact a "a super senior secured revolving credit facility 'SSRCF' comprised of a US$500 million revolving credit facility and a US$100 million letter of credit facility." The recent $250m extension of that is also somewhat time constrained now. It only runs for 6 months perhaps suggesting less confidence in providing future support?
Looking ahead let's say $1.45bn of net debt end 2024. Oil prices look weaker next year vs this. Production will most likely be weaker in 2025. Any debt refinancing will probably come with cripplingly high interest rates to reflect the risk. (Just look at the Glencore facility: 15% debt to pay off 7% bonds) It's not an encouraging backdrop. The promised imminent inflexion point with a wall of cash seems to have been a bit of a mirage.
Maybe running the business on the assumption of permanent $80 to $90 oil was another misstep? |
Hard to see what comes next for tullow. Beholden to the bondholders, they have to sweat their Ghana assets because they can't afford to do anything else and they can't really afford to do it either.
It's also hard to see how they could ever pay off the bonds. They can't really expand into new areas because they can't afford the entry ticket. Jubilee is getting full field seismic next year, hardly a vote of confidence.
If they lose either of the arbitration cases, it's likely existential. Recent refinancing of the RBL was sold as "successful" but really suggests that they could only agree to getting $250m vs $500m last tine.
Kenya is toast. They may one day get a trickle of money from Uganda.
Whereas in 2020, RD came in and did 'self-help' by selling Uganda and a huge bond refinancing, there isn't really anything left to sell for the new CEO. So we're back to sweating JSE, and they've been trying that fairly unsuccessfully during RD's tenure. |
Thank you xxnjr regarding 60847 |
I won't post it here but have sent the BoD a rather long email regarding CEO share options, incentive plan and remuneration package etc. You can probably guess the gist. I've pointed out some of the flaws as I see it in the current arrangements. Hopefully not to be repeated. |
Not dancing a jig! It's kind of sad it's come to this. I do feel he got off to a bad start by demanding 9m share options to justify his appointment. These options were AIUI to 'compensate' for the loss of options from his previous employer who he was then leaving to join Tullow. But since strategy there had also unravelled and his previous company owners had decided to wind up that company one presumes those options would have been worthless?
He's proven to be good at running at tight ship with high FPSO uptime, efficient drilling etc. Probable instilled a decent, calm, stable working culture in TLW HQ. But the main thrust of Rahul's strategy to concentrate on Ghana appears to have been a bad misjudgement. Was it wise to invest $1bn gross in JSE + Jubilee in the middle of an oil price crash? Results of that investment vs projections have been very disappointing. None of his asset sales produced the envisaged contingent payments. And for the last 2 yrs we only got diversionary waffle about 'shared prosperity' and unrealistic upsides aka the plate spinning circus act.
Dunno what it means for the future. Result of the arbitration could be critical. Also depends on the reserves in Ghana. If they are still there (no massive downgrade) then maybe an incoming CEO could reposition the company in a more balanced way by acquiring mature assets in Nigeria, or Angola. Or maybe we just get absorbed by Seplat.
Let us hope Rahul doesn't sell share holders down the river to save his own skin (to monetise his share options). |
90% of all business in India is vie graft, back hands or down to nepotism and cronyism He was a disaster and totally devoid of lateral thinking |
Good riddance to the bloke, The share price should have gone up at 10p on this news! |
Well I did think xxnjr would be on here dancing s jig! |
He will unload a few shares imo |
In for an interesting day. |
Board change5 December 2024 - Tullow Oil plc (Tullow) today announces that Rahul Dhir will step down as Chief Executive Officer and resign from the Board during 2025 to pursue other business, academic and family interests. The Board has initiated a process to find his successor. Rahul will stay in his role until a date to be determined to ensure a smooth transition. Phuthuma Nhleko, Non-Executive Chairman, commented today:"I would like to thank Rahul for his hard work and dedication to Tullow. Since joining in 2020, Rahul has led a comprehensive turn-around and strategic reset of Tullow, focussed on the delivery of operational and financial performance, debt reduction and positioning the company for future growth."Rahul Dhir, Chief Executive Officer, commented today:"It's been a privilege to serve Tullow during these past four and a half years. During this period, we have achieved a step change in our operating performance, cost structure and capital discipline and delivered over $1.1 billion in free cash flow and reduced our net debt from $2.8 billion to c.$1.4 billion. I am also very proud of our team's strong culture of ownership and commitment to business delivery. With a strong pan-African platform, Tullow is well-positioned as a trusted partner and responsible operator to deliver the next phase of growth." |
At last, larger volumes and a rising share price....here's hoping! |
Your thesis is very concise. What evidence do you have that Jubilee production will drop "dramatically"? Hedges are in place to mitigate if poo stays low or goes lower. Renegotiation of debt for any O & G company won't be easy. "This" has been around for 4 years (poorly researched thesis). |
Interesting. My thesis here is that Jubilee production is gonna drop dramatically. And poo will stay low. And renegotiation of debt package won't be easy. Now this. |
Interesting article. Thanks for the link, hopefully as it says already priced in should it go against TLW. Should it be in favour then a nice tick up but will have to get in quick. |
https://www.proactiveinvestors.co.uk/companies/news/1061892/tullow-oil-for-ghana-read-godot-us-investment-bank-says-of-long-running-tax-saga-1061892.html |
Looks like court case could hit us with 70% chance of us losing |
Thanks for all your post XX much appreciated.
Comment from Springfeild CEO
Afina-1x is a vertical well, we are confident that a horizontal well or other well completion options that maximise reservoir exposure in the fields would deliver much higher production rates.
Perhaps an interesting thought for Tullows next drilling plans? |
Not like tullow to relinquish valuable acreage! LOL, time for management changes perhaps |
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