With Brent approaching $75 and showing continuing strength there is now a belief that the oil "glut" has been exhausted. That puts Saudi in a stronger position to exercise some control but their "break even" oil price has come down considerably and is now around the current price (dyor). Imho Saudi will only regain a level control if they are seen to continue adopt a more acceptable attitude to human rights and foreign relations. If representative the sort of sentiments expressed in this article will alone sustain a bullish environment for oil:
If you believe in an oil based "economic war" I think that the focus is likely to move off the blunt weapon of oil as a more focussed approach is adopted following the collapse of Venezuelan oil production, particularly if the US returns to sanctions on Iran. Developments in Syria (and the UK) appear to put Iran and Russia more in the firing line now and if war crimes are confirmed they stand to become branded as "rogue states". Imho that will lead to more effective international action against them. We should not forget that Russia is a poor country. This list of projected 2018 GDP per capita shows it at 68th position and sinking. That puts it below countries like Turkey, Grenada, Romania and Equatorial Guinea:
AGM and Trading Statement next week, should be some good news. Got a feeling that the EIA figures out tomorrow will be good, they were a bit massaged last week......Tullow should get back into the FT100 THIS YEAR....
"In all three scenarios, investment in new oil and gas production will be essential to meet ongoing demand. Thats because demand for oil and gas shrinks more slowly than the natural decline in production from existing oil and gas fields under any credible scenario.
Interesting to see that they are continuing annual deep water investment of $5-$6 bn. over the next couple of years, $4-£5bn. in conventional oil and gas and £1-$2 bn. in shale.
Meanwhile Venezuela continues its not so voluntary support of OPEC rationing:
Perish the thought. As President he has to relinquish control of his holdings. There was quite a tussle over that at the time of his election but things then went quiet and I can't remember what happened.
Sound as if the net is closing in but how could such suspicions be true of a man of his outstanding moral calibre?
"We're at the pivot point. It's a binary outcome. If it's a pinprick in Syria, we've seen the price gains. We'll sell off afterwards. If Iranian assets, in particular in Syria, get hit, it's a game changer," said John Kilduff, energy analyst and founder of Again Capital."
""If this is all contained to Syria we've probably seen the bulk of the rise. The issue you get into is if there's a strike on Iranian assets in Syria, a direct hit on Saudi, or a scenario where the Saudis and Israelis team up to take it to Iran directly, that's where you get into triple-digit oil price land," said Kilduff."
The majors' supply line is faltering after the cutbacks in exploration and it will take a long time to make up that gap in the supply chain. Where else can they turn but to the smaller companies that were able to react quickly (like TLW) and continued exploring?
No agenda Shugg. The caveat was seeing a lower low and that has not happened this week when I thought it was probable. I was looking right for just one day. $80 oil suggests continued weakness in USD. Otherwise we have some real inflation coming down the proverbial pipeline.
Tony, jury is still out on that I think. Plenty of opinions around that say that the oil market is already in balance and that surpluses and deficits are just part of normal life and of reducing relevance:
"Its not the ceiling, but rather the floor of the pricing range that actually determines the direction of movement.
Once the dust settles, if the floor is rising, so are the pricing expectations.
That is what we have at the moment. And thats all we need to make money with targeted moves."
The main reason for recent volatility is Trump. Does anyone else think it strange that he makes a major market moving announcement before the US markets close and then reverses it before the next open (e.g. budget veto)?
People just need to focus on the fact that increasing demand means higher reserves. Oil will be superseded but not for quite a while yet imho. If you look at the numbers renewables are nowhere near filling the gap that would be left by fossil fuels. Electric vehicles still only amount to something like 0.2% of vehicles globally and oil is used for more than just gasoline. Electric vehicles have a way to go in terms of range (look at the problems with the new 40 Kwh Nissan leaf) and the charging structure and speed of charge aren't there yet, especially in less developed areas. TLW is reducing debt rapidly and has some hot property and prospects.
The main issues are imho related to what happens to the global influences and the odds are pretty well even there and probably in favour of oil when you take account of issues like Venezuela, Iran, Syria, Libya etc. etc.
5M barrels stock piled. Nearly 9M for all of March. API barrels mounting up implies slower USA growth and lower PMIs adding to that view. Large numbers of defaults on USA car loans starting to hit those who loaned out the funds as the interest rates go up. I suspect a pull back on the oil price to happen as we come out of a cold winter.
Dangerous time for Tullow is April to middle of August. I suspect a repeat of 2017 in the stock price. If this starts to form lower highs than the chart will be supporting that view.
(Holding no positions on Tullow at this time)
The Yanks are trying to isolate Ruskies. Would one of the reasons be, that it is making some friends in the Middle East, and with OPEC in particular. .................India made the claim that every car sold by 2030 will be powered by electricity get it is spending tens of billions of dollars (trillions of rupees ) building new oil refineries .................Tesla stock taking a bit of a hammering this month,down 8% today.......Oil stocks are unloved at the moment, that will change soon.
Hobby, imho the shorters push the price into a lower trading range because of (a) the initial (traded) short selling that artificially increases the supply of stock in the market and (b) trading the price down when closing their position. (Don't tell me that those with lots of other people's money to play with don't do such things.)
The volatility you refer to is a consequence of (1) the above (2) the volatility of the oil price and (3) general stock market volatility. TLW has adapted to the low oil price and will be able to pay off its debt more rapidly at higher oil prices. TLW is ok at $50 oil and at $70 plus it is in clover. Oil is up so TLW is up. Those short sellers who have left it too late and are trading hard to restrain the price now are doing the long buyers a big favour.
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.
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