What happened ? Tullow - once considered (by some) to be the glory boys of the oil sector - down to a mere shadow of itself after its hey day in 2010 ? What happened ??
Indeed, A Good Day to Die Hard. Those MMs and their algos have an achilles heel...competing MMs and algos. Tips for human traders:  Make the MM bots fight each other to buy the same shares...  Overload them with buy limits orders..  Hold the orders at higher prices even if sp falls - it will retrace.  Cancel & restart orders again when L2 is higher than the Ask from your broker.  (i) Do small buy (instant - with countdown) deals to keep the shares liquid & check live prices. (ii) Do overwhelmingly large limit order buy deals when the live price has increased.  Hold the larger deals until L2 increases.  Repeat ad infinitum, or more realistically, to your target price.
Overshoot to the downside? Added at 40.5p, wasn’t planning on doing anything until the 12th but couldn’t resist. Surely the company will have a couple of positives to announce on results day?!?! As I wrote back on January 7th, these are the key areas I’m hoping the business are focussing on. They won’t all get resolved for results day, or even this year, but will be good to get an update on what’s been happening behind the scenes. Resolve corporate governance issues - sack anyone complicit in keeping shareholders in the dark about the production issues Resolve production issues - noticed a post about the gas flaring that should help, would be nice to see a bit more detail about this on the 12th Cut G&A to the bone - a 20% cut just isn’t going to be acceptable to holders. Tullow should be aiming for no more than $20m a year, which adds $80m a year to FCF. Sell Kenya - Apparently this is in the pipeline, again would be great to get some more information on this come the 12th. Makes sense in my eyes, especially with such poor free cash flow generation. Farmout Uganda - easier said than done of course Find oil in Guyana - surely this has to be a focus, one good find and current problems resolved Adding to the list: Sack off all frontier exploration except Guyana, no need to be splashing cash we don’t have Update on debt profile Will be back on the 12th.
Overshoot to the downside? I wonder whether Shell would be in the market for a company with a billion barrels of 2C oil reserves… B3A935EE-BD8B-4C5A-89A3-85C7088E2677.jpg750x1334 280 KB
Overshoot to the downside? Thanks for clarifying, Tony. One thing that I’m sure we agree on is that all sides will be motivated to take the project to sanction, although the length of time to get there is very much unknown. Maybe the old CEO ruffled some feathers and the Ugandan’s refused to work with him, maybe FID is closer than we think, there’s always something happening behind the scenes that’s for sure. The concern for me remains the debt (assuming the company isn’t sold), by the middle of next year the 2022 bond becomes a current liability, the liquidity headroom will be reduced due to amortisation of the RBL (assuming it doesn’t cut in the redetermination) and we’ll have no clear way of paying back the debt, equity at this point will be toast. Obviously it shouldn’t come to that, the board still have options in monetising its undeveloped resources, but you have to wonder how liquid the assets in Kenya & Uganda are, would we really be able to sell then for a reasonable value given the CAPEX requirements and the delays already incurred?! I’m holding until the details of the review have been released and will take a view after that. Tullow debt.png766x554 29.9 KB
Overshoot to the downside? Beatley You may be correct about the timeline as one thing is stated by the Uganda government and then evidence follows on later that actually shows absolutely no action being pursued at all so perhaps I am mis-reading the desired urgency on that side to fix things. To end the riddle talk, the Uganda government stops pursuing capital gains tax and the off ramp is a carbon off set tax instead. It changes the dialogue and moves income paid back to the environment to overcome negative issues of all the building work and installation of the pipework and that budget is overseen by Uganda officials with some overseas auditing authorities. In effect it is attempt by the oil companies to be more carbon neutral in what they are doing. It may facilitate more international grants/ bank support in general for Uganda providing things are spent where they should… Such a move encourages Tullow to quit completely and just sell all of the asset to TOTAL. Tony
Overshoot to the downside? You’re not going to divulge what the off ramp is?! You’re taking in riddles, Tony. Now I’m all for being positive, but an 8 week timeline to make progress is just your opinion, a private investor with no links to the on-going discussions, surely there’s has to be an element of realism and the facts are Tullow have been talking about sanctioning the project for years. At this point all work has stopped, farmout discussions have ceased and it’s a stuck asset. Business is difficult in some parts of the world and Tullow are falling victim to this. My own opinion, and that’s all it, is that the deal will eventually get done, Uganda need the tax revenues just as much as Tullow need to get the project sanctioned. I doubt Tullow are much of a concern to them, but with Total & CNOOC in partnership the country need to show its open for business to attract further investment. Now I hope you’re correct when you say a lot of the issues will be resolved in 8 weeks, but I wouldn’t be setting any timeline. I do think Uganda and Kenya are better suited in the hands of the majors, which strengthens my view that the entire company should be sold. Tullow have failed to deliver value to its shareholders and with the 2022 bond becoming current mid next year, they’ve only got 18 months to convince their creditors to start rolling over the massive debt pile in company that isn’t producing enough fcf to justify it.
Overshoot to the downside? There is an off ramp for the President of Uganda. Lets seen if he is smart enough to find it and if he applies it will CNOOC, TOTAL and Tullow agree with it. I am not going to divulge what it is. Tony
Overshoot to the downside? A lot of activity is building up in the Uganda press after the visit by TOTAl I think CEO, with the President. The Ugandan President and his tax dept have tried it on with capital gains tax. Tullow following Chevron and other oil majors have all downgraded future oil assets to $65 a barrel. So if Uganda thought their oil was so valuable as to be hit with CGT, they have got a $100M write down tax bill presented from Tullow on that asset. We await how tax authorities in Uganda now justify a higher oil price long term when the oil majors say the opposite. Another argument the Government has ran with is that any costs/loss incurred can not be deferred in future tax and that argument has to be binned as well as nobody can borrow money or issue bonds under that kind of project regime. In a nutshell Uganda has to find an off ramp in the dispute to get the project started. They have to decide soon as the Tullow review will probably prioritise another project. All opinion of course. Tony
Overshoot to the downside? Hi Tony, What do you mean when you say you’ll write about the re-opening of Uganda farm down on Monday? As it stands, I’m only aware that there are on-going discussions between the relevant parties. I am optimistic they’ll be a positive outcome, Uganda can’t afford for this to become a stuck asset, but given this has been going on for years, why do you believe they’ll be progress in the next 8 weeks?
Overshoot to the downside? Hi Beatley I will write about the re-opening of the Uganda farm down on Monday. A lot of issues are going to get resolved on that front imop in the next 8 weeks. I was happy with the 2P data on reserves and resources being confirmed. Tony
Overshoot to the downside? What did you think was positive about the update? Apart from the details about the impairments there was no new information, which is why the huge dropped surprised me somewhat. Investors can draw their own conclusions from the bonds, but a 7% bond trading in the 80’s should be a cause for concern, well it is for me anyway. What’s painfully obvious is that the debt won’t be paid back at maturity and will need to be extended. The problem with that is Tullow have lost market confidence, who wants to roll over a bond with a company that has a complete lack of transparency?! These issues are there to be solved of course, but you can’t argue with the market pricing these at multi decade lows, for noe at least.
Overshoot to the downside? [link] The bond holders liked it. I thought it was moderately positive. I have not played any positions until it hit 55p today. I sold 1/7 of my holding potentially in a losing position as the average down is just above 70p to act as a short to buy back lower if they drop the price in a volatile way once again. If that position gets stopped out in the next 30 days I would take the loss and just sell out 3p higher on what I have got left. Overall I am staying with the view that share is to return to the 85-90p region eventually.
Overshoot to the downside? What did you think to the results, Tony? In my opinion, I thought they were fairly neutral, the write-offs never look good, but they are just accounting semantics at the end of the day. I certainly wasn’t expecting the share price volatility that we got, but managed to make a few quid over the last two days so not complaining. Nothing much from the review so will be interesting to see what happens in March, most likely a traders paradise until then, so will be looking to take advantage if I can, Lots to be concerned about but I’ll take a view after the results in March as to whether I become a long-term holder or not. Whilst we’re waiting, if Total want to come in and buy the company for a reasonable price (a reasonable price being one that’s significantly about my average) then that would be great
Overshoot to the downside? Thanks for your thoughts Tony, they do echo my own in a lot of ways, obviously it’s impossible to know what’s going through the mind of the major institutional holders, but we will find out if an offer does come in. Update due on Wednesday, will be good to get a glimpse into what’s be going on behind the scenes.