I get the impression that there are a lot of people in high places who would like to suppress the news of past activities but, as the old saying goes, the truth will out. It will be interesting to see if there is any restitution, particularly to the Malaysian sovereign wealth fund.
Yes, I think that if you follow the chart of any oilie with decent fundamentals you are really following the shape of the crude oil chart with some exaggeration ("leverage"). The advantage of TLW is that it was depressed not just by the oil price but also because of its debt so it can be expected to recover strongly as it pays off that debt. PMO is in a similar position. I see that it announced yesterday that it is accelerating the exchange of its convertible bonds, reducing debt but incurring just a 1% dilution.
I'm wondering about what might happen if WTI closed below 63.5, you could argue it would activate a H&S pattern on 4/2h charts which would predict around 62 dollars as a short term target. It's not happened, but it could. Longer term I'm comfortable with oil price and TLW SP and am waiting to buy back. From a chart perspective, I'd say longer term it looks to have much further to go to the upside, very much like PMO.
TLW following the oil price as usual I think. It's had a good run but taking profits is also good. Don't forget to keep an eye on it though. You should be able to get back in without losing many pennies when it continues the recovery. Personally I think that it is responding to minor resistance at £2.32 and could hit stronger resistance at around £2.38. All depends on the oil price of course but I expect TLW to move up a notch as a "leveraged play" with the annual report.
The latest BBC series on Saudi, "A House at War" is dragging up and fleshing out the detail on all of the corruption. It's difficult to see how they are going to get off the hook of previous sins. They may become carrion before the full recovery in oil, it's a bit late for repentance. Collapse could be sudden, which would give the oil price a boost.
I agree that there's lot's of potential for this to go much higher. The more oil rises beyond PMO's production cost the better the rises you might expect. If we get a pull back on it I'll reconsider. I've just started to worry about the wider market as I do from time to time.
Yep. Bitter Lake and Hypernormalisation should be on the national curriculum in my opinion.
If you can find it Adam Curtis did a 3 parter on the 2008 crash as well. It was for the BBC but I don't think it's on iPlayer. The opening episode was called All Watched Over By Machines Of Loving Grace. Greenspan comes out extremely badly.
Couldn't tear myself away from it once I started watching, although some of the complexity calls for at least one more viewing I think.
I've also got through the second episode which is of wider scope, covering economies and politics and the resurgence of the banks to deal with problems beyond the abilities of the politicians (and beyond the abilities of the banks). In retrospect the conclusions seem valid. They describes the failure of politicians to understand complexities so their strategies are based on simplified views of the issues that simply make matters worse. The description of the mishandling of Syria is pretty convincing. One specific and alarming claim is that the Lockerbie bombing was carried out by Syria, not Libya, although I have seen other claims that the culprit was Iran. The story is that Gaddafi accepted the blame because he wanted the importance that the notoriety brought. The story that the line of mistakes and mishandling led to the current dreadful situation in the region is convincing. Perhaps we need to be ruled by AI and robots!
The overall picture isn't one that supports conspiracy theories though. There are too many players involved. If correct it means that the new world order is a chaotic mess of conflicting conspiracies. We're all doomed Captain Mannering!
On Saudi, they are imposing some austerity but that is likely to lead to social unrest, especially in view of the privileged lifestyle of the idle rich. Remember the Arab Spring when they gave money to the people to placate them? Well they are now going to be taking more away from them.
There is also the secrecy around the true Saudi reserves, which have remained the same for decades, despite high production and no new discoveries. The Aramco financials are also opaque. How can any buyer be sure of the true value of the company?
It is telling that Trump is now predicting future US production at a level greater than Saudi or Russia as the Aramco float draws closer.
Well done for getting through in one sitting. Was two for me I think. I watched it such a long time ago that I can't recall a lot of the detail but the section on the founding of Saudi Arabia, deal with Roosevelt, Aramco and subsequent exporting of Wahabism fascinating. Shows how ruthless people really are.
Fully believe all the stuff on the finance industry after working in it for 20 years as well.
I think Saudi is actually moving away from that $100 number down to $60. It's a long term plan but they appear to be quite determined. Although there has been some push back. See the recent failure to implement new taxes.
An interesting development in the short selling declarations (if you find that sort of thing interesting). The total is up from 5.22% to 6.33% because of two new entries, Black Rock at 0.51% and Linden at 0.50%. Black Rock dropped off the list on 1st August and Linden on 21st June so I guess that they have both been lurking below the 0.50% declaration threshold. Possibly they have been trading to restrain the price and slipped onto the list.
Black Rock used to be a major shareholder of TLW but, if I remember correctly, fell out with the BoD over the decision to hang on to production interests to help to fund exploration, sold their shares and went short.
That policy has served TLW well during the crude crunch. It was also around the time that Shell was the operator of Zaedyus when they failed to find oil in 2013. That was after TLW found oil in 2011. The conspiracy theory at the time was that Shell would have preferred to take Tullow over to get its oil rather than just be a partner in French Guiana. Black Rock was, and still is, a major shareholder in Shell.
Bass, I watched it last night. Very interesting and, if correct, supports a lot of conspiracy theories encompassing not just oil but the alternative energy claims that don't really stand up to scrutiny with current technologies. I haven't watched the second episode yet.
I've always thought that the oil price is an economic war. The price is far below what the Saudis need so what we may see is the price volatile around the current level, perhaps with a dip in the run up to the Aramco sale. I see that Trump had said that he is going to open up costal drilling for oil by issuing licences between 2019 and 2024 (except Florida; I wonder why that would be). He's predicting US production will outstrip that of Russia or Saudi Arabia. All good fodder for restraining the oil price but how will the US oil industry recover its costs at the resultant low oil price, how will the US transport the oil without major infrastructure investment and how will the policy get past the now international environmentalist lobby? Most of all will Trump survive this term let alone get a second?
This article makes the case for the "balanced" oil price being $60
but it assumes that the oil market obeys supply and demand. If "Bitter Lake" is correct the bankers will be wanting to make lots of money after the period of low oil prices has achieved its aims and they will do that in only one way, much higher oil prices.
Venezuela has already been taken out by that economic war. Perhaps that is just the start? Saudi is not the only country that has been economically weakened.
ec, yes that's how I see it. TMW says they have hedged a specific quantity against a floor price. The cost of doing that is already accounted for.
The buyers of oil might start to hedge against a ceiling price. That would help the forward curve into contango, which is where the Saudis etc want it, when the holders of oil stocks are incentivised to keep it in storage for a higher future price rather than selling it into the market now. Whether contango takes hold remains to be seen, there is more political interest in the oil price at the moment than there is supply or demand pressure imho. In the longer term though supply and demand must prevail. Demand will rise and supply will take a long time to catch up. The cutbacks in exploration have disrupted the supply chain, which has a long timescale, You can't just spirit oil up out of nowhere.
Did anyone watch "House of Saud: A Family at War" on BBC. Worth getting it on iPlayer if you missed it. Another two episodes to come.
When I sold my wife's Tullow at 194p, I invested all of it on Centamin at 138p-139p. So I did a very good job for her. You can not win everywhere unless you have a big massive equity pot. Your portfolio is probably looking good as well.
I have invested differently on my on account which is heavily weighted to Hummingbird Resources. I just sold Centamin on my side that had a higher average price for a profit to get more HR on any dip. I believe Hummingbird will go to 50-55p by year end. I am in profit there as well.
As for Tullow it will get a dip when they shut down production to deal with Turrets and so forth. It will be a great share to trade in and out of in 2018.
"They say they will have material participation in any upside, whether that is through the unhedged portion or whether they can wriggle out of their hedges to some extent?"
I noticed that comment about upside too. Gubu.
However, I don't see quite how they can wriggle out of these hedge positions. If the oil price remains higher than the hedge, then the other party stands to make a handsome profit on this. Buying out the hedges could be very costly.
"A future hedge at $70 is worth a lot more than $50 or $60. "
That is self evident TornadoTony. If only we had got the $60 that we got in 2017.
However, I would not describe 60% of this years output being hedged as minimal. The price that it is hedged at though, is minimal - $52.23 per bbl for 2018.
As Shugg1e points out this does not look like a good time to bet on oil falling.
The current mid price between WTI and Brent crude is about $65, yet we will be paid just $52.23, over $12.5 per barrel less, for 60% of 2018 production.
During the second half of 2017 we have increased the 2018 hedged volume by 66% and the 2019 hedged volume by 128%, at prices of around $50 per bbl.
Oil hedges (at 30 Jun 2017)
42,500......................27,000...............9,732 Oil Volume (bopd)
60.32.........................51.53.................46.33 Average floor price protected ($/bbl)
HEDGING POSITION (as at 31 Dec 2017)
45,000................22,232...............997 Oil Volume (bopd)
52.23...................48.87.................50.00 Average floor price protected ($/bbl)
"In 2018, the hedge volumes reflect approximately 60% of total Group net entitlement oil volumes hedged on a pre-tax basis. In 2019, approximately 30% of total Group net entitlement oil volumes are hedged on a pre-tax basis. "
Why on earth would you hedge Oil output here Tony ????
Oil is just on the cusp of recovering from the longest bear market on record and with exploration spending cut to the bones will overshoot massively to the upside over the next 3 years as a massive shortage ensues to at least $150 a barrel again thats when you start hedging.
OPEC countries are short on cash and want at least $100
Looks very good to me, including the hedge with 45,000 bopd, 2,599 more than this time last year and at a lower price but they will adjust as necessary going forward and make decisions as to the hedging requirements as things develop.
Everything as expected, especially the debt reduction going well. What's more TLW's income and accounts are in $US, which protects it rom those Brexit fears that are being voiced (again). (just for stratty).
Hence why it has gone up further without retreating much and ignoring RSI and stochs overbought and just about everything else. A future hedge at $70 is worth a lot more than $50 or $60. The news itself was fully priced in regarding all the other issues imop. If it was heavily hedged at lower oil price and done within the quarter a peak would have been delivered and the SP retreated as I speculated out before. I am amazed they have not hedged more of their oil production. It implies huge inflationary pressures elsewhere if oil keeps going up.
Recovery mode: Higher production and prices put Tullow Oil on firmer footing
2 HOURS AGO
Tullow Oil showed the benefits of increased production and higher oil prices when it announced a surge in cash flow and a sharp fall in debt on Wednesday.
The UK-listed oil explorer said it expected to have generated $500m of free cash flow in 2017, beating previous guidance for $400m.
Net debt was expected to fall by $1.3bn to a year-end level of $3.5bn after the completion in November of a $2.5bn refinancing with lenders.
The trading update highlighted the recovery under way at Tullow after a torrid period of financial stress and operational disruption during the oil market downturn of the past three years.
Paul McDade, chief executive, said the company was now positioned for growth after strengthening its balance sheet and increasing production from its Jubilee and Ten fields in Ghana to an average 89,100 barrels a day in 2017, at the high end of previous guidance.
Mr McDade said new projects in Uganda and Kenya were progressing, while new licences acquired in Ivory Coast and Peru opened significant new exploration opportunities.
With our diverse low-cost assets and high-graded exploration portfolio we have a strong foundation to grow the business and further reduce our debt, he said.
Full-year revenue was forecast to be $1.7bn, with gross profits of $800m.
I'm only running profits at the moment so don't have a great deal to gain but hope for a good rise.
Then thoughts will turn to selling. There doesn't seem to be any point while the oil price is rising as it is and as regards recent discussions on here it's difficult to see Tullow being overbought with that background either. However, I'm sure the market as a whole is. It's in a crazy place. I also think it's prudent to watch the dynamics behind the oil price closely to see if it's getting ahead of itself. When the pullback comes I think it will be rapid and large regardless of Tullow's health.
Credit Suisse says its time to buy oilfield services stocks. The oilfield services sector - after suffering the sharpest decline in history followed by the sharpest recovery - is back to what appears to be at least a three-plus year run of somewhat normal growth,
A recovery of the services companies is a good sign of an oil sector recovery.
Another thought crossed my mind. I checked the FTSE 100 and the bottom position is occupied by Hammerson with a market cap of £4.233bn. TLW will overtake that at a share price of £3.06. It hadn't previously occurred to me that the rights issue was such a success that it actually reduced the gap between it and the FTSE 100. Another 85p gained a recovery specific to the oil sector could bring it back in reach of the FTSE 100 and that will bring in buys from all of the index trackers etc. It's not likely to happen tomorrow but it's worth keeping an eye on.
"WTI $61.73 +29c, Brent $67.78 +16c, Diff -$6.05 -13c, NG $2.84 +4cA modest up day yesterday, somewhat led by product prices in the US which is not surprising given the bad weather out there. As forecast, distillate stocks are running down as US ..."
Tlw was the easiest stock to detect the peak in the exploration cycle when the initial success of the Zaedyus well was not rewarded sufficiently. That was my cue to sell my position and stay away from that sort of risk in the sector.
Even though I may have made the right macroeconmic call on that
risk aspect in the sector it is still a very difficult task weeding out the truth tellers from the liars on the quality of their producing assets. Very few companies in extractive industries spend less than their operating cash flow and few give information on their depletion curve or they will hide negative information on a non producing asset.
With that said a weak dollar policy is good for most commodities so this sector should have positive momentum barring any negative surprise in operations.
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