"Of course TLW produces but it isn't a pure production company"
So just who are these pure production companies?
Shell, BP, Mobil, Exon,Total, ENI perhaps?
To produce oil, someone has to find it first. There is less profit to be made from buying into another company's discovery. If you can find and exploit the oil yourself then you do not have to share the profit with anyone else. That's why all the majors are explorers and producers. As are Tulow!
I never said that TLW was a pure production company. In case you have forgotten you said that TLW were not a producer, which is cobblers. End of!
Of course TLW produces but it isn't a pure production company and doesn't have a strategy of generating its profit from production. The proceeds of production are to fund exploration by paying down debt and generating cash flow. Some people wrongly persist in valuing TLW solely as a producer and ignore the exploration part. The exploration is steaming ahead, it's not all about drilling. Dyor and you'll see the prospects that are in train.
All that means is that the value won't be appreciated by the crowd until the fruits of exploration materialise and TLW starts selling acreage into that shortage of oil that will squeeze the majors after exploration has been cut across the board. That's the gap that TLW will sell into.
"Tullow Oil is a leading independent oil and gas exploration and production company."
I really do not understand your argument, Brummell.
The quote above is on the home page of Tullow's website. If Tullow describe themselves as an exploration AND production company, why are you contradicting them?
Exploration companies are those who are yet to find oil, or who have not yet started producing it, such as Chariot Oil. This is their home page description:
"Chariot Oil & Gas Limited is an independent oil and gas exploration company"
I will be interested in seeing the long ago stated strategy that you claim says otherwise. The high level of debt, that you mentioned, is because they have drilled too many dusters lately. They also wasted a lot of money and time trying to be a producer in Uganda, before all but selling out to Total.
TLW stated its strategy a long while ago, dyor. It's main focus is exploration but it retains some production interests in order to fund exploration and reduce borrowing. The high level of debt was taken on in order to kick start that and get it ahead of the game, not as a permanent commitment. It doesn't need to operate fields permanently in order to maintain that strategy, it can move on. Selling producing fields while retaining a non-operating interest is a lot more lucrative than selling on non-producing fields but requires good management and TLW has that. Ghana started that by providing the cash flow needed to service the initial debt.
The majors have exploited explorers for a long time, mainly because finding and selling is a survival game under the pressure of cash flow. Imho TLW will not remain an operator in any field on a permanent basis and we will see it selling and moving on while retaining an interest when the time is ripe. I suspect that will be as oil reaches $80, maybe sooner. It will continue to explore and to develop some fields to production before selling in the longer term but the time will come when the right thing to do is accept a bid from a major.
"The fact is that TLW is not a producer, it is an explorer that is developing and retaining production income to help fund exploration. "
How can you say that Tullow is not a producer, Brummell?
The company's business may be biased towards exploration, but Tullow have 35 producing fields, and expect to produce over 85,000 barrels of oil per day in West Africa. It may not be up there with Shell or BP, but just how many barrels per day do you have to pump up, to be a producer?
Note the word PRODUCTION in Tullow's own words.
"Tullow Oil is a leading independent oil and gas exploration and production company."
"In 2017, West Africa working interest oil production, including production-equivalent insurance payments, is expected to average between 85,000 and 89,000 bopd. Europe working interest gas production is expected to average between 5,500 and 6,000 boepd."
Cashman, many TLW holders will have a portfolio. Other holdings aren't really relevant to this bb. We know that there are many investment choices, but TLW fully deserves a place in the portfolio of anyone interested in oil exploration. Diversification is good, explorers provide a different type of opportunity
The fact is that TLW is not a producer, it is an explorer that is developing and retaining production income to help fund exploration. TLW has many prospects in train, it is developing its proven interests in Kenya and has retained interests in Uganda while cutting its ongoing liabilities there, it has developed TEN and increased production in Ghana. It is diversifying and emerging from a period of perceived risk due to its reliance on Ghana; Ghana has however been TLW's springboard. Many other irons in the fire that I won't bother listing but you can discover for yourself by referencing the TLW website.
If you don't understand how explorers work then you shouldn't really have been investing in TLW in the first place. Why waste time posting here if you have no interest in TLW? Or were you looking forward to the IEA numbers that are due out shortly?
My point was there are better choices of investment. I'm looking at JD Sports and Next at the moment. They have a good return on equity. Next is on a PE of 10. Good value is difficult to find at the moment. What is Tullow's expected earnings or prospective P/E?
Cashman, as you should know I don't "tell" anyone to do anything. Like other honest posters I express my opinions and others are free to agree or disagree with them. I don't see much value in claiming past gains which might or might not be hot air. Those who bought at higher prices did well if, like commercial, they stuck to their judgement and averaged down rather than realising a temporary loss. No-one makes a loss until they sell. Presumably you sold before the rights issue so lost the opportunity to average down by a significant amount then.
Some were telling people to sell at £1.16 (about £1 corrected for the rights issue).
What was your original point? Were you boasting about making a profit when you sold? Were you complaining about having realised a loss? Were you boasting about having profited from other investments?
As you are still posting here are you contemplating using the proceeds from your previous sale to buy at the current price? (That would be a good move). Or did you go short and are now suffering?
Congratulations to anyone who has profited by making wise decisions but, as I said, it is always easy to be wise in hindsight and to claim wins historically while forgetting realised losses. Today illustrates the issues. The news is full of bullish sentiment with talk of ISIS plans to attack Libyan oilfields, the meltdown of the Venezuelan oil industry, bigger than expected drawdown reports from the API, record long positions in oil by hedge funds, problems in Iran, record lows in exploration etc. etc. That bullishness is well reported but it also provides room for contrarianism in the short term, as always, if the market overshoots. I still think that the short term trading is closer to gambling though. The market may overshoot or it may not, the bullish factors may fade or they may actually occur.
Imho the bullishness is well founded in the longer term and I won't jeopardise future gains by gambling in the short term (much). Gambling is fun but investment is a different, cooler game.
As for TLW's debt, they played it very well. They borrowed a lot of money and were bound to pay a bit of a premium for that, but they borrowed at a time of low interest rates and low competition from other explorers, their timing and their decision to retain production income were impeccable. Borrowing big has it advantages, you know the saying "if you can't repay a £1,000 loan it's your problem, if you can't repay £1bn it's the bank's problem"; TLW bought a lot of support from its lenders. That has allowed them to take a big leap forward in terms of prospects, reserves and production during the lull. They are now in a great position to take advantage of even a minor recovery in oil while making substantial reductions in their debt. Imho that is going to result in a rebound in TLW's fortunes that will be worth the wait. If the recovery in oil is a major one then all the better, that rights issue will turn out to be a major windfall for those shareholders who took it up. Those who accumulated more at the lows will do even better (and we are still in those lows imho).
I sold this stock about 2 and a half years ago. No one predicted the crash in commodity prices, but Tullow borrowed too much and paid too much in investment. The share price is still under that I sold for. I hold gold, silver and platinum at the moment along with sterling, dollars and euros. There are far better cash generating companies around and they are able to return cash to investors as opposed to banks and other debt providers. However, stocks I paid 3 times and 6 times earnings for in 2009 are trading for over 8 times earnings....
commercia, sounds like you've played it about right. £7.50 wasn't a blunder at the time, No-one has a crystal ball and what goes down must come up again if it has buoyancy. The value has always been there with TLW, you only have to look at the way they have managed debt and overcome all of the difficulties that they have been presented with to see that. It's always easy to look back and see how you could have made more money but there's no risk in hindsight. The true value is even higher now and hasn't been anywhere near recognised yet. Imho the long term holders who have taken advantage of the short sightedness of the herd will be proved right. The trading of some of those who dug themselves into short positions at the lows of two years ago influenced the market but must be suffering now. They will be glad to cut their losses by milking those who feel happy to break even at the resistance points on the way back up.
I think that 2018 is the turning point for oil and TLW but volatility will continue and the real gains will come in 2020 - 2021. Still worth buying at the lows imho and continuing to trade on the long side. For most break even is only a stage in the recovery..
I have worked this so hard to recover from my blundering purchases a few years ago at 750p odd. My average today is 222p. I have a sizable holding now and hope to continue the good trading opportunities here. good luck to all those long termers out there
I would not put too much into the rise of AOI today. The stock is only responding to the end of "end of year tax selling ( for losses )" and hence buyers are now stepping in. That said it has broken out of it's downtrend ($1.50 ) and looks very attractive here. I guess for this to go higher will depend on the price of oil holding up and more importantly if there is going to be an increase in the 2C reserves after last years discoveries i.e Erut stc..
Shorts down again to 5.63% on yesterday's list. Brent and TLW looking healthy. At the very least the current oil price provides good hedging opportunities for TLW and if sustained it will assure higher than predicted profits in the next report. Still a lot of shorted shares to be bought back though (if the disclosures are to be believed).
With the FTSE at an all time high things are looking bullish for the New Year but the contrarians will have plenty to convince them it is a bubble. If so TLW will be in for the same rough ride as the rest of the market but the short interests have ensured that TLW has not yet fully responded to the lift in commodities or the improvements in its own situation. The majors are also showing signs of playing catch up in exploration to recover their reserves. That will imho lead to acquisitions and a more realistic view of the value of the independent explorers.
Imho the tail end short positions are set to suffer even more. Next week should be interesting.
Another reason for watching things like short selling declarations is spotting things like this.
Today's list shows an increase in the short positions of 0.07%. That is down to just one declaration, by Key Group Holdings (Cayman). Their previous declaration was for the day before, 19th December. Following the norm both declarations were made a day late. Their declared short position changed from 1.24% on 19th to 1.31% on 20th. That means that they sold around 9.7million shares on a day when, according to my feed the total volume was 13.6 million and the breakdown was 4.36m buys, 6.54m sells and 2.66m "unknowns" and TLW's SP rose by 5.70%. Really?
I guess that's just how they do things in the Caymans.
Always good to see well stated contrary views, that's what debate is all about. Imho the shorts are very relevant at the moment because they stimulate trading in one direction and order book "working" in the other. TLW is affected by short positions in its own stock and in the crude oil market. The volatility of crude is particularly important to TLW because of the hedging opportunities, which it takes advantage of very effectively.
The "best " way to make money is, of course, trading on a timescale that you feel comfortable with; in that respect we all trade even if over a period of years. The longer term outlook provides a level of security against short term volatility (especially that manufactured volatility). I don't discuss short term trading tactics because that is suitable only for those with the right aptitude and that can't be judged on a bb. Too often we see inexperienced investors encouraged into the wrong trades for the profit of others. Remember the negativity we were seeing when TLW was down at £1.16 in early 2016 (now about £1.00 corrected for the rights issue). Anyone who had the good sense to buy at those prices is now sitting on a handsome profit that provides a good level of security for the longer term ride.
If sentiment genuinely changes we will se a big spike in the short positions early on. That may be regarded as a warning or as a buying opportunity. Investors should do their own diligent research into that and make their own decisions about how to play it in the light of all relevant circumstances. Good arguments can be made in either direction, only the well researched long view gives true perspective. Risk is always present though, that's why we get reward.
In "short" I think that when institutional short sellers are present in numbers they are the major influence on the short-term price, regardless of fundamentals. Imho the really important factor is long term prospects, not short term churn. The short sellers don't always get it right, as we can see with TLW in at least one big institutional position that was built at those extreme lows at a couple of years ago. The period when they are trying to extricate themselves from their positions can be a very good time to buy.
For me the short positions are an indicator worth watching. The important factors for the PI in TLW are the longer term fundamentals, especially faster pace debt reduction and the eventual return to dividends that is rumbling. My own view is that TLW is in a better position now than it has been for years and that is due to well considered business judgements made long ago. Good luck to PIs either long or short. In the short term PIs will never beat those trading with the benefit of lots of other people's money though. Just as TLW dropped unjustifiably far in the bad times so will it rise as the institutional tide changes from short to long. Day to day it will continue to be volatile. I genuinely wish you luck in trading that because luck plays a big part when you are subject to the motivation of other players. Personally I see trading as a way of protecting and enhancing a long holding and I am comfortable with my own position with a much bigger stake and a much lower average price than I would have had without the volatility. As you say, with Brent again knocking on the door of $65 the oil company hedges continue to provide security for companies like TLW. We may, or may not, see TLW back down at £1.59 but I won't be selling in the hope of seeing that. I'm bullish enough to hang on to the value I have in the prospect of more to come but, all things being equal, I too would probably be a greedy buyer if we were to see that price again.
Interesting that you mention shale oil hedging. Those producers are on a much thinner profit margin at current prices, lots of drilling means lots of cost. For them a hedge can be a risk in that it could eat into profits if the oil price rises. TLW is making a good profit
Great to see Tullow through the £2.00 barrier again and particularly when circled by vulture hedge funds shorting. You can however not hold back a producer with a solid rising oil price. £1.50 was great entry point for many.
Can I just flag WSG - and an RNS update today. It looks like an elusive game changer of a contract is all but there - and should be delivered in phases.
Possibly the one to watch for 2018 and a January update.
The short position is not the issue anymore in my opinion. The key is when banks and other financers agree hedges on oil for 2018. The high ground is now in favour of oil companies and they need to get in a good hedge at plus $60 a barrel. Tullow will look for signs that shale providers are hedging and they follow suit.
As for Tullow sp I am not holding any but would be a buyer if I was in that position with cash to spare as I think it could be in a 240p high. I would then sell into a volatile market and buy back on dips back to 159p. Tullow is a good traders share. I have won here and there are plenty of chances of others to do the same. I would encourage folks to look at their holdings as a pool and be flexible how they manage it.
I hope my contribution encourages to add their names to the debate and dilute your add ins as a positive live board.
The list for Wednesday 20th December has only just appeared. The declared shorts total is up slightly from 6.34% to 6.38%. A mixed bunch.
Capital Fund Management from 0.98% to 1.05%
Key Group (Cayman) from 1.04% to 1.19%
Marshall Wace from 1.14% to 1.06%
Odey from 1.29% to 1.19%
Some preparations to restrain the share price for a burst of controlled buying over the quiet Christmas/New Year period or a genuinely split opinion over the short term future of the oil price? Of course, we only see declarations when they pass through one of those 0.10% thresholds. There could be a lot more trading going on within each threshold band so the declaration rules are a pretty crude indicator.
Interestingly of the 4, 3 were declared a day late once more, the publication delay exacerbated that. Only Odey's declaration was on time, dated 19th December.
Comparing Monday's short selling FCA declarations with yesterday's shows a reduction in the total from 6.54% to 6.34%. Blue Mountain Capital Management is a recent entrant to the list and increased from 0.50% to 0.61%. The other three changes were reductions, Key Group Holdings (Cayman) down from 1.21% to 1.04%, Marshall Wace down from 1.27% to 1.14% and Oxford Asset Management down from 0.70% to 0.69%. Blue Mountain made their contrarian entry to the list on 28/11/2017, their first appearance above 0.50%. Possibly getting swept out to sea while swimming against the tide in their attempts to close? But for their presence on the list we would now be down to 5.73%.
The interesting point about the list is a typical factor. ALL of the changes were dated 15th December, one day late. The FCA rules state:
"You should notify us of your positions by 3.30pm on the trading day after the day the position was reached. All calculations should be made as at midnight on the trading day the position was reached."
The rules and electronic declaration forms are very simple. The FCA publishes the list shortly after the deadline.
To be of any relevance the information needs to be provided promptly but late short selling declarations are now the norm, not the exception. Three possible reasons for late submissions are:
(1) A naive confusion with the rules for the disclosure of changes in long holdings.
(2) The funds declaring late have incompetent administrative procedures
(3) Calculated attempts to reduce the relevance of the information.
Whatever the reason one might think that the FCA would see persistently late declarations as cause to investigate the offenders further. Short selling regulation is just one simple set of many European rules. If the UK allows such blatant flouting while we are members no wonder the EU won't passport financial services after Brexit!
ec, just a matter of waiting for the short sellers to finish playing with oil I think. That will happen only when (a) we some sort of blockbuster news to bring in the buyers in strength or (b) they manage to close their positions. (a) is unlikely to happen before the next financial update from TLW and (b) will go on as long as the price can be restrained before (a) happens. In the meantime we will continue to see bargain prices so why not do as they do and just continue buying?
TLW is doing well imho and the financials will improve significantly even without any further help from the oil price. Higher oil prices would be a bonus but plenty of hedging opportunities for TLW in the meantime. Imho the real event for oil will be in 2018 if/when the Saudis realise that their Aramco sale is going to flop. They will then be left with debt, domestic expenditure substantially exceeding income and a lot of oil infrastructure that is in need of expensive maintenance after the volumes they have been pumping. If that plays out they will have to sell of much more of their oil than 5% and pass a lot more control to the buyers if they want to find a solution. Otherwise they will sink over the next 15 years or so and see a lot of domestic unrest and other problems on the way. Low oil prices were a short sharp shock and oil at anything below $100 will be continuing pain that will block their recovery I think.
The shorts were down to 6.54% on Friday and most declarations are made late. Odey is down to 1.29% (despite having again increased to 1.82% on 22/11/2017). Even that reduced position represents over 90 million shares.
If you look at the short selling history you can see that TLW's price has suffered because of the largely unfulfilled expectations of the shorters. Now is a good opportunity for their victims to recover their losses by buying back and holding their nerve imho.
All subject to the winds of fickle fortune of course, but TLW now looks to be set fair for a good recovery.
Accelerated debt reduction is anticipated by TLW ahead of schedule in reducing debt to 2.5 X EBITDA. since TLW's debt reduction plan modelled at 50 US oil rather than the expected av. of 62 US (Goldman estimate).
Tullow Oil's January trading statement is likely to be a positive catalyst for the shares, said Barclays, reiterating its 'overweight' rating on Friday.
Barclays, which has a 210p price target for a stock that is down 7% since last month's strong trading update, was surprised that the shares have underperformed oil prices after exceeding expectations on expected full year free cash flow generation and then nailing its long-awaited debt refinancing.
"We believe management has a platform to launch a strong outlook for 2018E, led by increased production and development activity in Ghana," analysts said.
The forecast for 2018 is for 93,300 barrels per day of net production and a capital budget of $405m, which compares to the current consensus of 89,600b/d and $475m.
"We believe cash flow generation (and debt reduction) is a key driver for the Tullow investment case, and initial 2018 guidance that exceeds consensus expectations could encourage investors to reassess of the company's cash flow outlook."
Sage in the hills.My guess would be, when you are out of favour with the market. You know by now, oil is poison and we will soon all be using clean energy supplied by the fairies. If we ask them nicely, they my be able to supply all the ten's of thousand of byproducts from fertilizer to medicine.
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