A big drop in the declared shorts today, down from 4.19% to 3.60% thanks to Millennium International who dropped below the 0.50% declaration threshold to 0.43% on 21/03/2017, so once again a late declaration.
We are now left with just 4 declared short positions,
Capital Fund Management at 0.99% (declared 06/03/2018)
Key Group Holdings (Cayman) Ltd. at 1.49% (declared 14/02/2018)
Linden Advisors at 0.57% (declared 12/02/2018)
Odey at 0.55% (declared 24/01/2018).
I have a hidden bullish divergence on the daily 1433 stoch on TLW, doesn't always work but it is a high probability signal. Often leads to a pop up. Might see us up to and past 195 in the very near future. But then again, it might not.
Interesting pov cash, but it isn't new debt, its a rearrangement of existing debt. Surely it's just TLW taking advantage of its improving credit rating from the agencies and possibly a step in escaping covenants and consultations that hamper the business decision making process. Good businesses are always better run by the management for the shareholders rather than by banks for the banks.
I can't see that the issue of bonds will have any affect on the resumption of dividends; the management has clearly stated that as being on the agenda.
It will be a longer time before investors get a dividend. 7% return on the new bond issue is probably less risky than buying the shares. There will probably be another rights issue before the new bonds mature.
Read the Wall Street article. Walter Gay with his pure maths degree and self taught investing knowledge can do a few crude ratios but can't read a set of financial statements for toffee.
The core business is now cash generative, and steepness/shallowness in the debt reduction line is because TLW are choosing now to pay it down...or not because returns from operations are yielding more than the debt interest rate.
Yesterday's list of declared shorts showed another reduction, now down to 4.28% with Polar Capital dropping out. They only popped above the declaration threshold on 08/02/2018, I suspect as a result of trading to close their otherwise non-declarable position. No general appetite for short selling though, just the opposite. 4.28% is over 59m shares, so still a long way to go in terms of days to close.
In the meantime there will still be effort from the short interests to putting a negative spin on the company and any news, such as this:
Which tries (possibly for political reasons) to put a spin on Tullow "relinquishing" its operational role while playing down the fact that another experienced operator is keen to move in. For me that is an encouragement. During a period when exploration has been uninviting TLW has used cheap debt to develop an income stream from production which will provide future cash flow. It is now starting to move away from the operational distractions of production in order to focus again on exploration as the oil market picks up and the shortfall in exploration has its effect on the oil price. In doing so it will keep interests in non-operational production for that cash flow. Exactly the strategy that it announced before the crude crunch bit.
Brilliant management and planning that will, imho, provide a lucrative return.
Eco and Tullow have identified leads on the Orinduik Block with the potential to contain in excess of 1 billion barrels of oil equivalent (boe)
Leads are updip from the Liza discoveries located on the Stabroek Block
Leads are currently being evaluated and matured to prospect status on recently acquired 3D survey data
Gustavson Associates of Colorado contracted to provide independent interpretation services and a CPR under AIM Guidelines and an NI-51-101 report under TSX Guidelines
Total is now interpreting the first batch of the 3D survey data from the Orinduik Block, completed last year.
As per the option agreement with Total E&P Activités Pétrolières (Total) announced on 26 September 2017, delivery of the final processed data to Total will trigger a formal review period of up to 120 days within which Total must determine whether to exercise its option to acquire a 25% WI in the Orinduik Block from the Group. A further announcement will be released once the formal review period commences.
Exxon recently announced resource estimates in excess of 3.2 billion recoverable oil-equivalent barrels for the Stabroek Block, adjacent to the Orinduik Block and the implementation of engineering and construction work for the field
First oil from the Liza discoveries stated by Exxon to be expected by March 2020, with production forecast to increase to in excess of 340,000 bbls/day by 2022
CGG GeoConsulting and the Petroleum Corporation of Jamaica have announced the discovery of two independent live oil seeps from different parts of the island.
The oil seeps were found during fieldwork for a recently completed multi-client study of the petroleum potential of on- and offshore Jamaica. Subsequent detailed geochemical analyses confirmed the oil seeps originate from two separate Cretaceous source rocks, CGG said in a company statement.
CGG highlighted that Jamaica and its offshore basins remain relatively underexplored.
Oil or gas shows have been seen in ten of the eleven exploration wells drilled to date. The discovery of these seeps indicates the presence of working petroleum systems on the island that are generating and expelling liquid hydrocarbons to the surface, CGG said in a statement on its website.
Sophie Zurquiyah, senior executive vice president of geology, geophysics and reservoir at CGG, said the exciting discovery of live oil onshore Jamaica builds a strong case for the island as an attractive region for future oil exploration within the Caribbean
"Meanwhile, offshore oil which suffered from slashed investments during the downturn is now coming back with projects that have improved economics, in some cases challenging those of U.S. shale. Thats due to the costs that major oil companies slashed after 2014, to simpler designs, and to the supermajors reshaping portfolios and projects to make as much money at $60 Brent as they were making at $100 Brent four years ago."
If that is so then it doesn't take much imagination to foresee effect of the Saudi cuts mentioned in my previous post on the oil industry, especially TLW which is OK at $50 Brent.
The Saudis look to be chasing a higher oil price pre the Aramco float. If the market predictions pan out it may not persuade the potential Aramco investors to pay a higher price in view of the longer term predictions here:
Haven't gone away, just bored with crude oil and the way it's price is being kept down. The market is starting to ignore the rig count with their big increases , remember we were told that wells can be drilled in half the time with new technology ...At least all the hype of electric vehicles has pulled back to a more realistic time frame. It will happen as oil shoots up..............Elon Musk flamethrower was a strange one........but you have to give him credit for Spacex Falcon launch..... Tesla still in big trouble.
Ready to bounce from this point
Has reached lower Band of the Bollinger Bands and today bounce back later on the day as the oil price is on the rise. Look well undervalued on a PE of 12. Indicators all at oversold and ready to go better from this point.
chart with Indicators
Good to see TLW getting busy after the border dispute delays. The main reason for the caution of the rating agencies has been TLW's dependence on Ghana but that also provides many synergies in the area that the company can now take advantage of. The reduction of risk, the reduction of debt, the increased geographical spread of production and prospects and the recovery of oil over the next year or so will return it to the high ratings it had previously. The agencies have never been critical of TLW's wider performance. A good recovery scenario all round.
I guessed at the possibility of oil dipping again in a previous post. If you subscribe to the economic war theory it makes sense in the lead up to the Aramco launch, especially following a period of hedging opportunity. The next IEA report is out next week but the current report says:
"The oil market is clearly tightening; in the three consecutive quarters 2Q17-4Q17 OECD crude stocks fell by an average of 630 kb/d; such a threesome has happened rarely in modern history: examples include 1999 (prices doubled), 2009 (prices increased by nearly $20/bbl), and 2013 (prices increased by $6/bbl). Since the nadir for Brent crude in June when the price was $45/bbl, the 2017 OECD crude draws have coincided with a price increase for Brent of nearly $25/bbl."
The latest drop is due to a claimed increase in the US rig count but the conundrum of US oil continues. All other things being equal, as US production increases then so its profitability decreases in that boom an bust cycle. The hope for US crude must be that both Saudi and Venezuelan oil output will collapse and that looks increasingly likely with a low oil price.
Meanwhile TLW is in an excellent position to ride out further storms,
Cash, I assume that you were addressing that to me. Do you know what a correction is?
Stocks have been in a bull market indeed and what we have now is a correction. That could develop into something more serious or it could become an over correction resulting in a subsequent upward swing etc. etc. but, at this point, it is not worth trying to second guess that. Why not just take it at face value until things develop, otherwise you might as well toss a coin. I'd say that descent into a bear market is the least likely outcome though, given healthy global growth. Look at it as the stock market trying to shake off competition from more secure forms of low risk low return investment.
As for oil, it is getting a knock on effect from that stock market correction. Interesting to see that the predicted rise in interest rates is due to very good news from industry. As earnings rise people will spend more money and inflation will have to be controlled by raising interest rates, encouraging them to save rather than taking on debt. Oil demand will continue to rise and then oil will be in a bull market, rather than a recovery. It has been impossible for oil to experience a bull market given the imbalance between oil supply and demand over the last few years. The end of that will be signalled by an oil market correction, which imho has started but been temporarily interrupted by tantrums in the stock market. At least that might provide an opportunity for the short positions in oil to be closed.
With regard to predictions, none of us has a crystal ball, all we can do is try to make sense of the vast amounts of data around the global economy and not pay too much attention to those who try to make sense of it for us in order to get our money. Dyor.
The fall in stock markets around the world is due to rising interest rates. Money is also coming out of the bond markets. It's hard to tell yet whether the stock market is just correcting or going in to a bear market. If the FED persists on increasing interest rates by much more after their latest tax cuts we will probably have seen the top of the 9 years bull market in stocks.
price doesn't close below 181. If it does, it brings 175 into play and that doesn't look like very strong support (in fact it's the kind of support that fails more often than it holds in my experience), if price got that low and 175 didn't hold then 162/163 looks easily possible on the rising trendline on the daily. I still think it's important not to lose sight fo the gap down to 129-131 area from January 2016.
Looks to me as though the next few days and the POO are very important here.
Kenya Operations Update
View News Release in PDF Format
VANCOUVER, BRITISH COLUMBIA--(Marketwired - Feb. 7, 2018) - Africa Oil Corp. ("Africa Oil", "AOC" or the "Company") (TSX:AOI) (OMX:AOI) is pleased to provide the following update on activities in the South Lokichar basin (Blocks 10BB and 13T in Kenya). AOC has a 25% working interest in Blocks 10BB and 13T with Tullow Oil plc (50% and Operator) and Maersk Olie og Gas A/S (25%) holding the remaining interests (collectively, the "Joint Venture Partners").
The Joint Venture Partners have proposed to the Government of Kenya that the Amosing and Ngamia fields be developed as the initial stage of the South Lokichar development. This phase of the development is planned to include a 60,000 to 80,000 barrels of oil per day (bopd) Central Processing Facility (CPF) and an export pipeline to Lamu, some 750 kilometers from the South Lokichar basin on the Kenyan coast. This approach is expected to bring significant benefits as it enables an early Final Investment Decision (FID) of the Amosing and Ngamia fields taking full advantage of the current low-cost environment for both the field and infrastructure development, as well as providing the best opportunity to deliver first oil in a timeline that meets the Government of Kenya expectations. The installed infrastructure can then be utilized for the optimization of the remaining and yet to be discovered South Lokichar oil fields, allowing the incremental development of these fields to be completed in an efficient and low cost manner post first oil.
The initial stage is planned to include 210 wells through 18 well pads at Ngamia and 70 wells through seven well pads at Amosing, with a planned plateau rate of 60,000 to 80,000 bopd. Additional stages of development are expected to increase plateau production to 100,000 bopd or greater. It is anticipated that Front End Engineering and Design (FEED) for the initial stage will commence in 2018, with FID targeted for 2019 and first oil in 2021/22.
A total of six appraisal wells have been drilled at the Amosing field, ten at Ngamia, three at Etom and two at Ekales. Additionally, extended well tests, water injection tests, well interference tests and water-flood trials have been undertaken, all of which have proved invaluable for planning the development of the oil fields. Tullow Oil plc has released (February 7, 2018) their updated assessment of resources in the South Lokichar basin. Details of Africa Oil's most recent independent assessment of contingent resources in the South Lokichar basin are contained in the Company's press release dated May 10, 2016. The Company intends to have an updated independent resource evaluation in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101") completed following the completion of the water injectivity and associated production testing planned for the first half of 2018.
Early Oil Pilot Scheme (EOPS)
An agreement between the Joint Venture Partners and the Government of Kenya was signed on March 14, 2017 allowing all EOPS upstream contracts to be awarded. Initial injectivity testing has started at Ngamia-11 and oil production and water injection facilities are being constructed in the field, which are expected to be ready to commence production/injection in the first quarter of 2018. Oil produced is being initially stored until all necessary consents and approvals are granted and work is completed for the transfer of crude oil to Mombasa by road.
Africa Oil CEO Keith Hill commented, "We are pleased that the Joint Venture has now agreed on an optimized plan to move forward with the South Lokichar Basin development, which will allow acceleration of a crude export pipeline through Northern Kenya. This development wil
Tullow Oil (LSE: TLW) released its annual results today, with chief executive Paul McDade saying the FTSE 250 firm made excellent progress in 2017. As a result, it posted its first annual operating profit in three years.
The shares are up 2% at 187p, as Im writing, giving the company a market capitalisation of £2.6bn. This is still well below the valuation it once commanded. In an improved oil price environment and after todays results, is Tullow a top turnaround buy?
Improving performance and bright future
The Africa-focused groups revenue of $1.72bn was 36% ahead of 2016, as its working interest production surged 32% to an average of 94,700 barrels of oil equivalent per day (boepd).
Despite $682m of write-offs and impairments, it managed a small operating profit of $22m, although after net finance costs of $310m and a tax credit of $111m, the statutory bottom-line was a loss of $189m. However, with the write-offs and impairments being non-cash items, the cash flow picture was considerably better: the company generated free cash flow of $543m.
Tullow got through the oil rout with a millstone of debt, helped by supportive lenders. Net debt remains relatively high at $3.5bn but is falling and is now only just above managements target level of below 2.5 times EBITDAX (earnings before interest, taxes, depreciation, depletion, amortisation and exploration expenses).
Looking ahead to 2018, the company has guided on production of between 86,000 and 95,000 boepd. City analysts are forecasting earnings per share (EPS) of around $0.20 (14.4p at current exchange rates), giving a price-to-earnings (P/E) ratio of 13. This looks an undemanding rating to me as I see scope for production upgrades this year, while the companys valuable development and exploration assets bode well for the longer term. As such, I rate Tullow an attractive buy
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