paddingtonbear
04 Sep 2019
Solid Results Speaking as one of the people just keeping this company alive (retail bond owner, 6.5% expires May 2021), the results were a relief that the turnaround still in progress, albeit slowly. Compared to total debt, relatively little paid off and lots of expenditure across several projects. With Mr Trump at large, oil price could easily drop back to $40 and thus little positive income. Until six months ago I felt that I was certainly earning my interest, now for first time able to relax a little with Catcher outperforming. The swift sale of Zama would give breathing space if proceeds were used to cut debt. There is in my view a strong chance of a major credit crunch soon and hopes for lower debt rates may be dashed. Pb.
lots_of_sense
04 Sep 2019
2020 fcf Hi Beatley, Thanks for the FCF calculation but I think it might be a little optimistic, can I suggest adjusting the Oil Price down in your FCF to adjust for the UK Gas Price which I see at ~50% of the oil price equivalent (~$30/barrel) for Q419 and Cal20. I know its a pain, but given current spot gas prices are the equivalent to $15/barrel if I’m not mistaken with my calculations that $65 which is already $7.5 dollars above Brent for 2020 is looking even more ambitious. My quick calculation based split of 70% oil & 30% gas (from PMO website) using $60 dollars for oil and $30 dollars for gas as a starting point gives an average of $51 dollars. Not that I don’t like your numbers, but think they might be a tad difference in FCF with the change suggested above. I do recognize the gas sold in Singapore might be closer to Oil equivalent than UK production but that’s a level of detail too far for rough FCF calcs.
tes123
03 Sep 2019
Solid Results It restricts for new posters i guess. If you ask IR they might also give more color on the the basis points that they are trying to lower the interest % by. I think they are targetting 100-150bps lower in the '21 refinancing, ideal would be 4-5% instead of 7%-9% interest rate. RBL might be better than RCF if thats possible. Having net debt close to $1.5bn by YE2020 could put us in a strong position for negotiating lower rates but not sure if its enough time as they might need to start refin. negotiations before Jun 2020 given May’21 maturities and so might use YE19 fin.metrics. Most important for us would be getting rid of clauses around buybacks/dividends. 100mn can get rid of 15% of the outstanding shares. That’s powerful cashflow, esp. if UK NS based tax advantaged and at oil price above $70/bbl. What are your thoughts on refin.?
Beatley
03 Sep 2019
2020 fcf Indonesia was 11.1kboepd in H1, Premier are forecasting 13/14 kboepd for 2020, that’s where I got the additional barrels from, not from the impact of BIGP. That forecast was from a while ago though, so there could have been changes. Solan around 6kbpd next year and 7K 2021/2022 is what they were hoping for, so should help offset some of the decline from Huntington, Kyle, Vietnam etc. I believe the tax rebate on decom is 20%. Not sure about Alaska, it’ll be a good problem to have if the appraisal is successful but given the tax losses in the UK I would have given more weight to an acquisition rather than entering into a new area. The board sound very bullish on it though, so it’ll be interesting to see what comes of it.
Beatley
03 Sep 2019
Solid Results tes123, Not sure why you’re having problems, it has always worked quite well for me. I guess other posters wouldn’t agree, given the lack of comments on the site these days. I’ll fire off a question to IR about interest costs and phasing, we might get a better idea from their response. Any thoughts on what the refinancing might look like and the potential interest rates? RCF for sure and maybe another retail bond? I certainly hope they don’t go down the convertible route, especially after the fun games with the last refinancing. 100% agree on the need to add some more NS barrels. I can’t remember what point it was within the webcast but I remember Tony talking about the tax losses and that they were a benefit from Premier and its shareholders, reading between the lines I think they’ve enquired about assets and been given a higher price because the seller is aware how valuable the barrels would be to us. I do think it’ll happen in time, particularly with the balance sheet being in better shape.
tes123
02 Sep 2019
Solid Results Beatley, apologies, the site doesn’t let me post another reply on that same topic.V.restrictive. So posting the reply on this topic. Interests are half yearly. Not sure how the phasing works, but I’m guessing this years debt reduction will have its impact on interest charge for the following year. Hence, 2020 debt reduction would effect 2021 interest charges. Yearly lagged benefit for us. Cheers for the clarification on the WC adjustment. I think we definitely need to add more barrels in NS esp. before 2021 refin. Not sure why PMO doesn’t go after incremental/single assets that could add around 20kbpd more in UK NS, even if its slightly late life. I think PMO should have pounced on Chevrn assets with a higher bid, as it was a great steal at $1.5bn for delek (as delek received cash flow from start of year bringing their net consideration down from $1.8bn headline for the assets ). If i recall MOL was selling Catchers 20% stake around $250-300mn, something in a similar range can accelerate the use of Tax losses with marginal increase in debt or deals can be structured like SQZ did with not much cash outlay. That massive tax loss value is sitting dormant without being utilised/crystalised optimally.
tes123
02 Sep 2019
2020 fcf Indonesia doesn’t add any boepd as its take or pay and dependent on Sing. customer, as mentioned during HY results. Solan might already be around 3kbpd, so with the drill and potential decline in Huntington, kyle, etc. it could very well just be replacing natural decline even at total 10kbpd. You can see the production projection for 2020 on the slides which seems to be flat on '19. Would be interesting to calculate any tax rebates on decom expense. 2P reserves would be marginal for Catcher and BIGP. Tolmount East could come out with net 20mn. Do you think there is a potential to add 100mn+ in 2p reserves in 2020 if the Alaskan well flow tests well + more potential 2p if Brazilian well comes? Not sure how the 2p will get classed for the Charlie appraisal well…
Beatley
02 Sep 2019
2020 fcf Do you have more info on the phasing of finance costs? I know they’re paid in arrears but not sure what extent. I guess the question is when are cash payments made for the finance costs incurred in each quarter?! Maybe this is one for investor relations. $210m could end up being high depending on the phasing and when the Zama sale completes. According to IR we’ll be in position to start paying down the senior notes early next year, with the coupon on those as high as 9% then the Zama sale would allow us to remove some hefty costs, but again, I guess it depends on the phasing. H1-2019 FCF was negatively impacted by an adverse $100m movement in working capital adjustments, obviously that can’t continue I’m assuming a static figure for 2020. Of course they’ll ups and downs, but over the course of the year it’ll even out. Zama I’ve gone very conservative with the number being net of any taxation due, hopefully it’ll be higher, but even with $275m it illustrates Premier’s ability to embark on a significant deleveraging process next year, which from a shareholder perspective will be very welcomed.
Beatley
02 Sep 2019
2020 fcf tes123, Good spot on the finance costs, they are supposed to be in dollars, just have the wrong symbol in my spreadsheet. Updated below with 75kbpd, which is analyst consensus for 2020. Personally, I do think it’ll come in slightly higher with Solan and Indonesia likely to be up on this year, offsetting some of the natural decline from elsewhere. image.png751x540 13.4 KB
tes123
02 Sep 2019
2020 fcf Cheers Beatley. Just a quick question, are these metrics/calculations when compared to 2019H1 or 2018 FY numbers accurate enough to be good estimates (i.e.backtested)? Few points; I’d use a conservative avg. 73-75kboepd, as 1H might have more natural decline (huntington?) which might be offset by Solan P3? Finance costs - do you mean $ or £s? $240mn is for this year, on a conservative side around $210mn might be for next year due to phasing of interests. FCF - HY19 had FCF of $180mn due to Capex being $100mn. So extrapolating HY19, at $200mn capex, HY2020 would mean FCF for HY was $80mn? So don’t understand how come your debt reduction(i.e.FCF) is $80mn per quarter (c.$160mn for 6 months) , when in 2019 HY results FCF would have been $80mn for the full 6 month period after 200mn capex? Why Zama proceeds so low? Is it after tax or are you just being too conservative on the final net of everything proceeds? Thanks for the numbers again.
tes123
02 Sep 2019
2020 fcf Cheers Beatley. For some reason previous message didnt get posted. One question from that post was around your Debt reduction (ie FCF) numbers. HY19 had $180mn FCF for 6 months with a capex of $100mn. So if Capex for the 6 months was $200mn, FCF in HY19 would have been $80mn. So why do you have $80mn for 3 month periods in your 2020 FCF numbers with lower production, etc. ? Cheers
Beatley
30 Aug 2019
2020 fcf Assumptions: 2019 closing net-debt is $2bln Realised oil price of $65 for 2020 CAPEX & ABEX number taken from H1 results presentation Revenue based on 88% of Brent to take into account gas element of production 2P reserves include Sea-Lion, Catcher upgrade and a successful appraisal of Tolmount East Finance costs reduce through the year as the senior notes are paid back and cancelled using proceeds from Zama sale and FCF generation
Beatley
30 Aug 2019
2020 fcf Taken a stab at 2020 FCF, comments welcome… image.png621x546 11.8 KB
Ripley94
29 Aug 2019
Brent crude back over $74 again. Is $74.24 as I type this SOCO… XXXXX Part sale @ 61p about 20% of order.
Beatley
23 Aug 2019
Quiet on here Who knows, they’ve probably made enough of us anyway not to worry. Would certainly be nice to see them come down over the next few months as the Zama sale progresses.
