Markets live chat transcript for the chat ending at 12:17 on 23 Nov 2009. Participants in this chat were: Neil Hume, FT (NH) Miles Johnson, FT (MJ)
NH:
hello there
NH:
It’s 11.03am
NH:
and time
NH:
time for
NH:
Markets Live
NH:
FT Alphaville’s daily markets wrap
NH:
Lots to get through this morning
NH:
and Miles is here to help me try and make sense of it all
MJ:
morning everyone
MJ:
right where are we going to start??
NH:
well, I guess Kurdistan
MJ:
and your favourite oil company
NH:
although Lorcan wants to talk about Earthport
NH:
but he will have to wait for that
NH:
GKP
NH:
and today’s news
NH:
that Todd is losing his touch
MJ:
Shares up 1.25p at 109.5p
NH:
yep
NH:
and that’s despite finding more oil
NH:
Shaikan-1 has exceeded the most optimistic prognosis held at the start of
drilling. Each phase of drilling has resulted in significant discoveries, and
any one of the several target layers of the Jurassic or Triassic intervals
contain, by any measure, outstanding volumes of oil-in-place. It is our belief
that the aggregate volumes suggest an even larger future potential.”
drilling. Each phase of drilling has resulted in significant discoveries, and
any one of the several target layers of the Jurassic or Triassic intervals
contain, by any measure, outstanding volumes of oil-in-place. It is our belief
that the aggregate volumes suggest an even larger future potential.”
MJ:
hmmm
MJ:
why the muted reaction?
NH:
well, everyone man and his dog has got em
NH:
that’s one thing
NH:
and second
NH:
I hear, GKP has drawn down some more cash from its equity credit line
NH:
and they way these mechanisms work
NH:
is the provider sells short stock to cover the drawn down
MJ:
and that’s happening now?
NH:
So I believe
NH:
and also
NH:
there is a debate about the quality of the oil discovered
NH:
I am no expert on this, so I will have to defer to others
NH:
The Shaikan-1 well reached total depth (TD) at 2950 meters. Gulf Keystone then conducted its second test in the Triassic (the first Triassic test flowed 2000 bopd and 2 million scf of gas). This second Triassic test (2582m to 2849m) produced 6000 bopd of 53 to 55 degree API oil and 21 mmscf/day of gas or 10,000 boe per day.
The first Triassic test was severely limited by surface restrictions and down hole tool problems. Internal engineering analysis of the test data indicates that the first Triassic zone could have flowed at rates up to 14,000 boe per day.
The first Triassic test was severely limited by surface restrictions and down hole tool problems. Internal engineering analysis of the test data indicates that the first Triassic zone could have flowed at rates up to 14,000 boe per day.
NH:
now some LR member reckons
NH:
53 to 55 degree API is not good
NH:
as I say, I don’t know if that’s right
MJ:
but
MJ:
note the company is also talking about discovery rates in its statement
MJ:
but who knows
NH:
indeed
NH:
but it does look as GKP is losing a bit of its magic
NH:
Todd losing his touch
NH:
retail punters bored
NH:
right
NH:
before look at the wider markets
NH:
and some going on’s ion Kurdistan
NH:
some breaking news
11:08AM
NH:
RTRS-BIRDS EYE FOODS INC FILES TO WITHDRAW IPO – SEC FILING
11:04 23Nov09 RTRS-BIRDS EYE FOODS HAD FILED FOR IPO OF UP TO $350 MLN IN OCTOBER
11:04 23Nov09 RTRS-BIRDS EYE FOODS HAD FILED FOR IPO OF UP TO $350 MLN IN OCTOBER
MJ:
That is supposed to be being sold
MJ:
Hence the IPO withdrawl
MJ:
Neil is just digging out the background story
NH:
here it is
NH:
Birds Eye Foods is being sold by its private equity owners for $1.3bn to Blackstone’s Pinnacle Foods, it was announced on Thursday.
The deal, which will be funded with $300m in additional equity from Blackstone and $1bn in debt, provides fresh evidence that the long freeze in global dealmaking is coming to an end, at least for consumer brands promising steady cash flows.
NH:
that was last week
NH:
The purchase price represents about nine times Birds Eye’s most recent earnings before interest, depreciation, tax and amortisation, or about as much as Birds Eye would have received in a planned listing.
That listing, planned for this quarter, was dropped by the food maker’s main owner, buy-out group Vestar Capital Partners, after some strategic and financial investors expressed interest in the company.
MJ:
A growing theme these PE IPO companies being sold on
MJ:
More to come I am sure
NH:
(Thank you Debbie – so they have found gas at the bottom of this well)
MJ:
Right – surely we should move on to Heritage?
11:11AM
MJ:
as rumoured the company has sold its Ugandan assets
NH:
yes good idea
MJ:
Got a pretty decent price
MJ:
but there is a nasty sting in the tail
NH:
a very nasty one
NH:
merger talks with Genel are off
NH:
just a week after the company said this
NH:
Discussions with Genel are continuing with the terms of the merger nearing formal agreement. Both sides remain committed to completing the proposed transaction. It is hoped that the implementation agreement can be signed and the prospectus published before the end of the year.
MJ:
and they also said drilling would commence in Ugandan in the first quarter of 2010
NH:
what a mess
NH:
credibility in tatters
MJ:
The statement is full of contradictions
MJ:
: Following entry into the LOI with Eni, and in light of the continuing situation in Kurdistan where, in particular, the revenue payment mechanism for oil exports has not yet been established, discussions with Genel have been terminated.
Heritage remains committed to being one of the leading oil companies operating in Kurdistan and will continue to consider other opportunities in this region as and when they arise.
Heritage remains committed to being one of the leading oil companies operating in Kurdistan and will continue to consider other opportunities in this region as and when they arise.
MJ:
so there are a lot of questions to ask
MJ:
Like, when exactly did these “Ugandan discussions” begin?
NH:
Well, let’s break down the timing on this.
NH:
We had been hearing, and reporting, talk that Heritage was looking to sell its Ugandan assets.
MJ:
But recently as a week ago they were telling everyone that things were going ot be fine
MJ:
Now, I have been assured by familiar people
MJ:
that when various media outlets made calls about Heritage having sold Uganda last Wednesday there was no new news to report.
MJ:
And Carola Hoyos’s story went up on FT.com on Saturday that Eni had bought the assets
NH:
So the Italians must have swooped in sometime between Thursday and Friday.
NH:
Which seems a bit quick.
MJ:
Now we should add
MJ:
that Eni had been in the Tullow data room for weeks
MJ:
Tullow and Heritage share assets, and so Eni would have had time to do due diligence on both
NH:
Ok. So they could have moved quickly, in spite of the rumours that Heritage was selling for the past fortnight.
NH:
But this doesn’t explain why, considering the management talk about the risks involved in developing the Kurdistan assets, why Heritage has increased its exposure to the region.
MJ:
Yeah
NH:
so
NH:
the talks end because of the political instability
NH:
yet
NH:
Heritage decides to become pretty much a pure play on Kurdistan
NH:
by selling its Uganda assets, its natural hedge if you like
MJ:
yep
MJ:
I am struggling to make sense of this
MJ:
and of course
MJ:
let us not forget the deal with Genel was going to create a group big enough to exploit the opportunity in Kurdistan
MJ:
what happens now?
NH:
no idea
NH:
I presume they look for another partner
NH:
if they can find one
MJ:
still
MJ:
shareholders are getting some money back
NH:
indeed
NH:
and who are the biggest shareholders in HOIL?
MJ:
er… management
MJ:
Tony Buckingham – he owns 28.7%
NH:
surprise, surprise,
NH:
but look this is isn’t a normal quoted company
NH:
it has two tiers of shareholders
NH:
buckinging his friends and others
MJ:
ha
MJ:
It should have A and B shares
NH:
good idea
NH:
and let’s face it
NH:
Heritage should always trade at a discount to other oil plays because of it
MJ:
and
MJ:
whatever happened to that FSA investigation in the Genel guys??
NH:
dunno
NH:
and we will probably never know
NH:
like so much with Heritage
NH:
such an opaque company
NH:
but I don’t think these talks were called off
NH:
because of politics
NH:
I just don’t
MJ:
Wel it was never that clear where the money from genel was going to come from
NH:
(DJP = and the shareholders are….)
NH:
anyway
NH:
the end of the Genel deals means that any hopes of HOIL going into the FTSE 100 have gone up in some
MJ:
HeritaGE
MJ:
etc
MJ:
perhaps that’s why they are down
NH:
yeah. Probably contributing
NH:
although today’s u-turn and the ramifications will also play a part
MJ:
do we have any comment on this?
NH:
well, they are some nutty price targets around this morning
NH:
700p from Panmure I think
NH:
but the most balanced thing I have seen is from Caz
NH:
good overview
NH:
and conclusion
NH:
even if I don’t agree with the recommendation
MJ:
but they are house broker, right?
NH:
not sure, JPM Caz are advising on the ENI deal and the merger
NH:
anyway, like I said it’s pretty balanced
Heritage Oil (HOIL:LSE): Last: 489.00, down 18.5 (-3.65%), High: 533.00, Low: 485.20, Volume: 5.62m
NH:
wow
NH:
they traded at 533p
NH:
first thing this morning
NH:
before people began to pick the statement
NH:
to bits
NH:
anyway
NH:
here’s Caz
NH:
Key points from release
– Heritage has agreed to sell its 50% interest in Blocks 1 and 3A in Uganda to ENI for a consideration $1.35 billion in cash and a further contingent, deferred consideration of either $150m in cash or an interest in a mutually agreed producing field independently valued at a similar amount
– The proposed transaction is subject to various conditions, the execution of a binding sale and purchase agreement and approval from the Ugandan authorities
– Heritage has agreed to sell its 50% interest in Blocks 1 and 3A in Uganda to ENI for a consideration $1.35 billion in cash and a further contingent, deferred consideration of either $150m in cash or an interest in a mutually agreed producing field independently valued at a similar amount
– The proposed transaction is subject to various conditions, the execution of a binding sale and purchase agreement and approval from the Ugandan authorities
NH:
– A circular, which will include a Mineral Experts Report on the company’s assets, is expected to be published within two months. The transaction is expected to be completed in Q1 2010
– Under the terms of the LOI, Heritage has granted Eni an exclusivity period of 60 days for the parties to reach agreement on the terms of a binding sale and purchase agreement. During this period Heritage is prevented from soliciting any other competing proposals. Heritage has agreed to pay Eni a break fee of 1% of the market capitalisation of the company in the event that Heritage accepts a competing offer from a third party during this exclusivity period.
– Following completion, Heritage will consider returning a portion of the disposal proceeds to shareholders in the form of a special dividend, which could be in the range of 75 pence to 100 pence per share (c$361-482m)
– Under the terms of the LOI, Heritage has granted Eni an exclusivity period of 60 days for the parties to reach agreement on the terms of a binding sale and purchase agreement. During this period Heritage is prevented from soliciting any other competing proposals. Heritage has agreed to pay Eni a break fee of 1% of the market capitalisation of the company in the event that Heritage accepts a competing offer from a third party during this exclusivity period.
– Following completion, Heritage will consider returning a portion of the disposal proceeds to shareholders in the form of a special dividend, which could be in the range of 75 pence to 100 pence per share (c$361-482m)
NH:
- Following entry into the LOI with Eni, and in light of the continuing situation in Kurdistan where, in particular, the revenue payment mechanism for oil exports has not yet been established, discussions with Genel have been terminated. However, Heritage remains committed to being one of the leading oil companies operating in Kurdistan and will continue to consider other opportunities in this region as and when they arise.
NH:
Comments on sale of Ugandan assets
– This is the very first asset exchange in Uganda to certify explicitly the value of undeveloped discoveries and prospects. We had included just under $1.1bn worth of value for Heritage’s Ugandan assets in our core NAV, thus using the implied total consideration of $1.5bn would increase our core NAV (excluding Genel’s assets) by 14%, from 554p to 629p. We caveat that our core NAV includes 296p (47%) for Heritage’s Miran West discovery in Kurdistan, wherein we have assumed a gross discovery of 1.15bn barrels and approval for exports from 2011+.
– On a risked NAV basis, the total possible consideration of $1.5bn is inline with our core plus risked value for the discoveries and the H1 2010 6 well programme of $1.57bn (including risked value for Buffalo-Giraffe upside, Buffalo East, Leopard and Crocodile). Whilst we carried $1.1bn in core NAV and c$640m in risked upside for Uganda (including Pelican), we always caveated that in reality these numbers would likely be diluted given the huge capex requirements needed to monetise the discoveries, thus the consideration paid by ENI is arguably fuller than it appears.
– This is the very first asset exchange in Uganda to certify explicitly the value of undeveloped discoveries and prospects. We had included just under $1.1bn worth of value for Heritage’s Ugandan assets in our core NAV, thus using the implied total consideration of $1.5bn would increase our core NAV (excluding Genel’s assets) by 14%, from 554p to 629p. We caveat that our core NAV includes 296p (47%) for Heritage’s Miran West discovery in Kurdistan, wherein we have assumed a gross discovery of 1.15bn barrels and approval for exports from 2011+.
– On a risked NAV basis, the total possible consideration of $1.5bn is inline with our core plus risked value for the discoveries and the H1 2010 6 well programme of $1.57bn (including risked value for Buffalo-Giraffe upside, Buffalo East, Leopard and Crocodile). Whilst we carried $1.1bn in core NAV and c$640m in risked upside for Uganda (including Pelican), we always caveated that in reality these numbers would likely be diluted given the huge capex requirements needed to monetise the discoveries, thus the consideration paid by ENI is arguably fuller than it appears.
NH:
– In our opinion, the proposed return of capital by way of a special dividend reduces the hazard of too much spare cash given limited reinvestment visibility. However, we feel a share repurchase programme may be an alternative, giving investors a choice and supporting the share price, albeit it would lower liquidity.
– Overall, although the lack of a 6 well drilling programme will reduce the short term newsflow for Heritage, we believe the crystallisation of value for its assets in Uganda, which have not yet been booked as reserves and ahead of what would have been an expensive and lengthy development process is a positive. We note that Heritage’s share price was up 10% over the last few days, possibly coinciding with speculation that Heritage was planning on selling its Ugandan assets (source: FTAlphaville).
– Overall, although the lack of a 6 well drilling programme will reduce the short term newsflow for Heritage, we believe the crystallisation of value for its assets in Uganda, which have not yet been booked as reserves and ahead of what would have been an expensive and lengthy development process is a positive. We note that Heritage’s share price was up 10% over the last few days, possibly coinciding with speculation that Heritage was planning on selling its Ugandan assets (source: FTAlphaville).
MJ:
Hey – Alphaville gets a plug from Caz
NH:
MJ:
Very nice
NH:
indeed
NH:
although
NH:
there was not comment from the company at the time
MJ:
Neil -Thats because the deal wasn’t done until late on Friday etc
NH:
of course, silly me. must remember that
NH:
the two day
NH:
$1.3bn
NH:
deal
NH:
back to caz
NH:
and some comments on the aborted merger
NH:
Comments on aborted merger
– On the positive side, we believe the decision to abort the proposed merger preserves shareholder value, as the economic backdrop in Kurdistan has deteriorated since the merger was originally announced on the 9th of June. Primarily, this is due to the lack of a resolution over the validity of the licences and the payment mechanism. Indeed, since the proposed merger was announced, exports from Kurdistan have been halted as the partners (Genel, Addax, DNO) were not getting paid for their crude. We estimate that Heritage’s core NAV (assuming sale of its Ugandan interest) is 629p on a standalone basis as opposed to 574p on a merged basis.
– On the positive side, we believe the decision to abort the proposed merger preserves shareholder value, as the economic backdrop in Kurdistan has deteriorated since the merger was originally announced on the 9th of June. Primarily, this is due to the lack of a resolution over the validity of the licences and the payment mechanism. Indeed, since the proposed merger was announced, exports from Kurdistan have been halted as the partners (Genel, Addax, DNO) were not getting paid for their crude. We estimate that Heritage’s core NAV (assuming sale of its Ugandan interest) is 629p on a standalone basis as opposed to 574p on a merged basis.
NH:
here’s the FTSE 100 point
NH:
On the negative side, Heritage will no longer be large enough for inclusion into the FTSE 100 index (at least in the near future), which removes a potential catalyst from index buying. The termination of the proposed merger also limits Heritage’s exploration upside in Kurdistan to the Miran block, although we note that we had not yet included any upside from Genel’s acreage given the early stage of activities on their blocks. We estimate potential risked (unrisked) upside from Miran East and Miran West is 108p (578p).
NH:
This time last year, Heritage had a share price of 170p, and was primarily an exploration play on Uganda, with limited cash resources. Since then, Heritage has successfully monetised its position in Uganda and created a new foothold in Kurdistan. Our core NAV of 629p is split 5% Russia, 47% Kurdistan and 48% net cash. The onus is now on management to prove that they can deploy their cash resources into new, value creating opportunities, which their track record suggests they can. Aside from Kurdistan, where Heritage is expected to spud the Miran West-2 appraisal well shortly (results expected in c4 months), Heritage also has exploration assets in Malta, Tanzania, Pakistan, Mali and the DRC (awaiting ratification). In the coming months, we expect to get further clarity on these assets which have to date not really factored in the market’s consciousness. Potentially, 2010 could see drilling in Malta and Tanzania. We also believe Heritage ought to continue to merit a valuation premium given the risk of take-over. Indeed, it is possible that the explicit value placed in its Uganda position, derived as it has been by an exclusive bilateral negotiation, could trigger an unsolicited approach for the whole company. We note that the break up fee of 1% of market cap ie c£15m, is immaterial in the context of a potential bid for the company. We remain with our OUTPERFORM recommendation.
NH:
right
NH:
done
NH:
sorry if that’s a bit long
NH:
but it is the best thing I have read on this today
MJ:
I can put up Credit Suisse as well
MJ:
ENI has acquired Heritage Oil’s Ugandan acreage for $1.3bn according to press reports. This is $350m accretive to our NAV and represents a purchase price of $5.3/bbl of contingent resources (247 mmboe) and $3.1/boe when we include our view of risked exploration (+173 mmboe). ENI flagged its interest in Ugandan oil in August following CEO Scaroni’s meeting with the President of Uganda.
We have opined for some time that monetisation of the Ugandan portfolio via a sale was the most sensible option for Heritage. Lack of infrastructure, landlocked reserves and a waxy crude would have made for a costly development in our view. With only $255m of cash on the balance sheet prior to the divestment, external funding would have been required to fund an export pipeline to Kenya ($2bn estimated cost). We are not sure at this stage if the asset disposal is subject to 30% tax when the gain from sale is escalated to group level via Heritage Oil’s Canadian subsidiary. Nevertheless, in our opinion, the $880m cash inflow (net of dividend payments) should provide assurance for investors who had questioned the rationale of the proposed merger with Genel Enerji – a company with only $0.1m of cash on the balance sheet.
Drilling of Miran East could re-rate the stock further. The structure could potentially be as big as Miran West (710m gross oil column, 2.3-4.2 bn boe oil in place) and is scheduled for drilling in H1 2010. We caution that cancellation of the proposed merger with Genel Enerji could be a negative catalyst. Management recently stated both sides were working towards a signed agreement and published prospectus before the end of the year.
We have opined for some time that monetisation of the Ugandan portfolio via a sale was the most sensible option for Heritage. Lack of infrastructure, landlocked reserves and a waxy crude would have made for a costly development in our view. With only $255m of cash on the balance sheet prior to the divestment, external funding would have been required to fund an export pipeline to Kenya ($2bn estimated cost). We are not sure at this stage if the asset disposal is subject to 30% tax when the gain from sale is escalated to group level via Heritage Oil’s Canadian subsidiary. Nevertheless, in our opinion, the $880m cash inflow (net of dividend payments) should provide assurance for investors who had questioned the rationale of the proposed merger with Genel Enerji – a company with only $0.1m of cash on the balance sheet.
Drilling of Miran East could re-rate the stock further. The structure could potentially be as big as Miran West (710m gross oil column, 2.3-4.2 bn boe oil in place) and is scheduled for drilling in H1 2010. We caution that cancellation of the proposed merger with Genel Enerji could be a negative catalyst. Management recently stated both sides were working towards a signed agreement and published prospectus before the end of the year.
MJ:
The divestment increases NAV and target price to 669p/sh (based on $70 oil long term). Read-across to Tullow is less certain: the price paid by ENI suggests upside to our Tullow NAV, but the stock is already trading at a premium to this (947p/sh vs 1,260p/sh).
MJ:
That was clearly written before the Genel deal termination news
NH:
thank you
NH:
Waterloo
NH:
asking for the read acriss to Tullow
NH:
they are weak this morning
NH:
in a strong market
NH:
down 10p at £12.50
NH:
I would say today’s news is a small negative
NH:
here’s some comment in the meantime
NH:
from UBS
NH:
TULLOW OIL (B 1430)- 1) Valuation read Through from Heritage news is NEUTRAL- our implied valuation of Heritages block 1 and block 3A licenses from our Tullow valuation is $1.54bn which is pretty much in line with the $1.5bn that the assets are being sold for (although $1.35bn in cash and $150m in deferred compensation). 2) We actually see it as a positive that a major such as ENI is to enter the licesnes and essentially be a partner to Tullow, particularly from a development perspective, although this was widely speculated by the press . 3) Tullow is also in the process of selling down its Ugandan assets and is likely to complete this early next year. There is one less bidder now, but the press still reports interest from Asian oil companies (the Chinese?) and some of the other majors. All in all this is Neutral to slightly positive in our view.
NH:
and something from Numis
NH:
Heritage Oil has entered into an LOI with ENI for the sales of its
entire interests in Blocks 1 and 3a in Uganda. The consideration of
$1.35bn is 9% above our $1.235bn valuation for Tullow’s 50% interest in
blocks 1/3a or 21% above including a $150mn deferred consideration.
Implied value accretion to our Tullow NAV is 1% based on a $1.35bn
consideration or 2% including the additional $150mn deferred payment.
entire interests in Blocks 1 and 3a in Uganda. The consideration of
$1.35bn is 9% above our $1.235bn valuation for Tullow’s 50% interest in
blocks 1/3a or 21% above including a $150mn deferred consideration.
Implied value accretion to our Tullow NAV is 1% based on a $1.35bn
consideration or 2% including the additional $150mn deferred payment.
NH:
Heritage Ugandan farm-down accretive to Tullow NAV and de-risks
development: Based on our valuation of Blocks 1/3a Uganda we
believe that the deal is accretive to Tullow (+2% including
deferred consideration) and more importantly helps de-risk the
full scale export of crude from Uganda. We believe ENI’s
extensive
experience in West Africa should help de-risk the midstream
component of the Ugandan development and the company’s extensive
reservoir management and water injection expertise potentially
increase recovery factors at existing discoveries. We believe
that
Tullow is likely to farm-down 50% of its interest in Block 2
(most
likely to ENI) affording the company with a 50% interest in
Blocks
1/2/3a and a well financed / technically adept development
partner.
development: Based on our valuation of Blocks 1/3a Uganda we
believe that the deal is accretive to Tullow (+2% including
deferred consideration) and more importantly helps de-risk the
full scale export of crude from Uganda. We believe ENI’s
extensive
experience in West Africa should help de-risk the midstream
component of the Ugandan development and the company’s extensive
reservoir management and water injection expertise potentially
increase recovery factors at existing discoveries. We believe
that
Tullow is likely to farm-down 50% of its interest in Block 2
(most
likely to ENI) affording the company with a 50% interest in
Blocks
1/2/3a and a well financed / technically adept development
partner.
11:26AM
MJ:
Right – to the wider market
MJ:
And we are up
MJ:
FTSE 100 up 86 points to 5337
NH:
er
NH:
melt up
NH:
why
NH:
I can see the miners are leading us higher
MJ:
Strong metals prices
NH:
and a weak dollar
NH:
but why?
MJ:
higher “risk appetite” blah
NH:
oh right
NH:
risk appetite returned over the weekend did it
NH:
out of the blue
MJ:
Seems so
NH:
so that’s it
NH:
risk returns
NH:
and we go
NH:
alternatively
NH:
we could just say
NH:
we don’t know why we are up
MJ:
But of course, no one tends to admit things like that
MJ:
Causation is a generic requirment of markets coverage
MJ:
Gold is doing very nicely as well
MJ:
As Austrian banker, in his own unique style points out
NH:
so risk appetite returns
NH:
and gold goes up
NH:
I guess the precious is a punting asset now
MJ:
Would appear so
NH:
precious metal, I should have said
11:32AM
NH:
OH
NH:
GKP down on the day
MJ:
Price is now at…
Gulf Keystone Petroleum (GKP:LSE): Last: 108.50, no change, High: 124.00, Low: 108.50, Volume: 7.20m
MJ:
Down 0.9 per cent according to Reuters though
NH:
actually I got a mail from one of its supporters this morning
NH:
before the market opened
NH:
let me see if I can find it
NH:
damn
NH:
can’t find it
MJ:
Ah well
MJ:
maybe one for later
11:35AM
MJ:
So Neil, you were looking at National Express earlier …
NH:
yep
NH:
I was
NH:
been bombed with call on it
NH:
real feeling in parts of the hedgie community that Cosmen might be able to block the rights issue
MJ:
well, he has bought more stock this morning
MJ:
another 750,000 shares
MJ:
taking his holding to almost 20%
MJ:
and from what we hear
MJ:
Cosman and his advisers at Onda are doing the rounds today
MJ:
meeting more shareholders and trying to get them to vote no
MJ:
But that is RAW
RAW is market chatter – information that has not been formally tested through traditional journalistic channels (PRs etc). The story might be complete rubbish, but if we believe there is some substance to it we will say so. Either way, Reader Beware.
NH:
hmmm
MJ:
we should add
NH:
the Times claimed this morning that Cosman has 14% of shareholders backing his no campaign
NH:
and with another 18% of the company’s shares backing CFD, he may be able to block the deal
NH:
here’s the piece
NH:
The future of National Express could be decided this week by short-selling hedge funds and the banks that have lent them 18 per cent of its stock, in what will be seen as a key test for shareholder democracy.
Banks led by UBS, Credit Suisse and Deutsche Bank control the bulk of the voting rights attached to the 18 per cent stake, although the shares have been lent to hedge funds.
Their action is likely to fuel concern about the growing influence of hedge funds over the fate of British companies.
Banks led by UBS, Credit Suisse and Deutsche Bank control the bulk of the voting rights attached to the 18 per cent stake, although the shares have been lent to hedge funds.
Their action is likely to fuel concern about the growing influence of hedge funds over the fate of British companies.
MJ:
right
MJ:
but there looks to be some double counting there
NH:
yep
NH:
the NEX side are adamant: no shareholders apart from Cosmen have come out and said they will vote against the deal
NH:
not at all
MJ:
so where does this 14% come from?
NH:
no idea, perhaps people are looking at the 18% held to back CFDs and assuming they will vote no
NH:
but look
NH:
you can bet NEXT have had a proxy solicitation firm working on this
NH:
and they are very confident they will push this deal through
NH:
very confident
NH:
It needs a simple majority and proxy forms need to be in by Wednesday, I think
MJ:
and this 18% backing CFDs
MJ:
how do they vote?
NH:
depends on the relationship the prime broker has with the hedge fund
NH:
and NEX
NH:
I would be surprised if all if voted against
NH:
and as for the 14% I am told that figure is wrong
NH:
NEX don’t recognise it
MJ:
so
MJ:
Some hedgies stirring the pot?
NH:
could be
NH:
and Comsen
NH:
could be a lively EGM on Friday thought
MJ:
share price?
National Express (NEX:LSE): Last: 362.20, down 4.7 (-1.28%), High: 380.50, Low: 361.70, Volume: 637.36k
11:41AM
NH:
OK
NH:
I have the GKP email
NH:
Morning neil what a wonderfull morning it is buy virtual gkp at open might improve h&M’s balance sheet
NH:
glad we ignored that advice
Gulf Keystone Petroleum (GKP:LSE): Last: 107.00, down 1.5 (-1.38%), High: 124.00, Low: 107.00, Volume: 7.58m
11:42AM
NH:
Right
NH:
I suppose
NH:
we should do a quick Cadbury watch
MJ:
Becoming obligatory
NH:
even though
NH:
i am Cadburyed out now
MJ:
Me too
MJ:
So, more newsflow over the wekeend
NH:
yes
NH:
Nestle supposed to be interested now
NH:
well Bloomie say so
NH:
Nestle SA is weighing options including a possible bid for Cadbury Plc that would challenge Kraft Foods Inc.’s offer and a potential move by Hershey Co., according to two people with knowledge of the matter.
Nestle is reviewing its options with bankers and may not make a bid, said the people, who asked not to be identified because the talks are private. Hershey and Ferrero SpA said in statements this week they were also evaluating options. Ferrero, the maker of Nutella, is unlikely to proceed with an offer, said three people briefed on the situation.
Kraft’s unsolicited 10.4 billion pound ($17 billion) bid for Cadbury would create the largest maker of candy, threatening Nestle and Hershey’s market positions. Any bid by Nestle or Hershey may be countered with a higher offer from Kraft, which has never said its current cash-and-stock proposal is its last and final.
Nestle is reviewing its options with bankers and may not make a bid, said the people, who asked not to be identified because the talks are private. Hershey and Ferrero SpA said in statements this week they were also evaluating options. Ferrero, the maker of Nutella, is unlikely to proceed with an offer, said three people briefed on the situation.
Kraft’s unsolicited 10.4 billion pound ($17 billion) bid for Cadbury would create the largest maker of candy, threatening Nestle and Hershey’s market positions. Any bid by Nestle or Hershey may be countered with a higher offer from Kraft, which has never said its current cash-and-stock proposal is its last and final.
NH:
and then there was the big spalsh in the WSJ
NH:
that the Hershey Trust are pushing Hershey to bid
NH:
so
NH:
the shares traded as high as 819.5p this morning
NH:
counter bid being factored in now
NH:
price currently 13p higher at 813.5p
MJ:
Looking a bit toppy now
MJ:
Key financing angle here for nestle
MJ:
is that it can sell its majority stake in Alcon to Novartis for $20bn and build a warchest
NH:
Hmmm. Nestle management have already said they are not looking at large acquisitions. These things can change quickly of course.
MJ:
Now
MJ:
following from Hershey and Ferrero
MJ:
I would expect Nestle to be putting out a statement if there is something solid there
NH:
under pressure from the Takeover Panel
NH:
as happened last week
NH:
with Hershey and Fererro
MJ:
If they don’t, it would leave me to believe
MJ:
that this is not serious
NH:
indeed
NH:
but
NH:
I think Nestle will play a part
NH:
and if Hershey bids
NH:
they buy the gum business of Cadbury
NH:
they can’t own the chocs
NH:
too many competition issues
MJ:
Well they can’t buy the choc really due to competiiton issues, as has been pointed out on the right
NH:
and Hershey will need to make disposals
NH:
to fund their involvement
MJ:
We will wait to see if Nestle come out and say anything today
NH:
I suspect they won’t
NH:
there wasn’t enough detail in the Bloomie piece
NH:
unlike the WSJ stuff on Hershey
NH:
which triggered last week’s announcement
MJ:
Adn the other media reports picking up on the Bloomberg story
MJ:
used attribution like Nestle “are believed” to be looking at Cadbury
MJ:
which sounds a bit vague to me, and maybe to the panel
11:50AM
NH:
Right
NH:
RAW
NH:
not got too much
NH:
I have some Euro RAW though
NH:
on K&S
NH:
the big German fertiliser company
MJ:
Oh no. Bit of a bandit favourite that one
NH:
UNCONFIRMED ‘specifics’ re the capital increase. 4:1 rights issue with @ €35. Unlikely anyone would do a rights issue this week but either way the
stock is at day lows and a capital increase of some sort does seem inevitable at this point.
stock is at day lows and a capital increase of some sort does seem inevitable at this point.
NH:
other than that
NH:
not much around
MJ:
This rights issue noise is getting louder and louder for K+S
NH:
United Utilites – more disposal talk.
NH:
something about to be offloaded I think
11:51AM
NH:
OKay
NH:
the Varsity Comp winners
NH:
Rain very kindly created a list
NH:
and we will go throgh that
NH:
and announce the winners later today
NH:
four pairs of tickets
11:52AM
NH:
Okay it is almost midday
NH:
but a few more things to look at
NH:
Miles seen this?
NH:
Greek Website running a story that China and Greek govt are in
talks
talks
* Greek Website running a story that China and Greek govt are in talks
for massive Eur30-80bn investment by Chinese banks into Greek
private debt….not sure how reliable the Greek website is so
be careful.GGB’s are tighter by 3bps vs Germany in 10y…
http://www.axiaplus.gr/
NH:
You will need someone to translate as the website is written in
Greek.
Greek.
MJ:
Greek readers – please help
MJ:
Would be v. interetsing if true
MJ:
Hot topic at the moment
11:54AM
NH:
Right
NH:
HOIL’s flak is disappointed in AV
NH:
and ML
NH:
specifically our hysterical conspiracy theories
NH:
on the company
NH:
and that we have aired the positive notes
NH:
and so
NH:
here they are
NH:
Panmure
NH:
Heritage Oil has announced that it is selling it Ugandan operations to ENI for US$1.5 billion in what could prove to be the E & P deal of the year. This is a very good price and will leave the group with significant net cash with which it can continue to build its operations.
NH:
• On the asset valuation, we believe that post this deal, the company has asset backing of
approximately 585 pence per share. We believe that the shares will not trade at a
significant premium to this given the lack of exploration upside in the very short term. owever, this deal has shown that the management is more than capable of developing
the business to create shareholder value.
approximately 585 pence per share. We believe that the shares will not trade at a
significant premium to this given the lack of exploration upside in the very short term. owever, this deal has shown that the management is more than capable of developing
the business to create shareholder value.
• We maintain our Buy recommendation given hat the company is likely to surprise on the upside with its net cash.
NH:
Evo
NH:
Bowing out at the right time
EVO TAKE – The risk for E&P investors is that a company decides to take on complicated and expensive development projects and destroys value in the process. Heritage’s exit from Uganda prior to this stage then is strategically sound and has been achieved at a fair price. In addition, the deal demonstrates the undervaluation the market has been applying to Heritage’s Kurdistan interests. At 580p/share we believe their value is worth over 3x the implied deal value of just 186p/share
NH:
DETAILS – Heritage has agreed to sell its 50% interests in Block 1 & 3A in the Lake Albert Basin to Eni for $1.35bn in cash and a deferred consideration of $150m subject to certain criteria. The deal has been backed by the Ugandan government and is expected to complete in 1H 2010. The funds will be used to progress development and exploration of the remaining assets, make selective acquisitions with a special dividend of between 75p-100p also under consideration. Talks with Genel have been terminated.
VALUATION AND RECOMMENDATION – We retain our target price of 900p.
MJ:
There you go
NH:
and here’s Hanson
NH:
Heritage intends to sell its Ugandan assets to Eni S.p.A for up to $1.5 billion. The deal is comprised of $1.35 billion in cash with the balance in deferred consideration. The proceeds will be used to advance primarily the development of Heritage’s other assets in the Kurdistan Region of Iraq (KRI). We believe that this is positive news for the company and Heritage now represents good value. With the news that the proposed acquisition of Genel has also been terminated, we are upgrading our recommendation from a hold to a BUY.
NH:
so there you are
NH:
there’s the other side
MJ:
For the sake of balance
NH:
the non hyesterical
NH:
anti conspiracy theory
NH:
anyway
NH:
the market will decide
Heritage Oil (HOIL:LSE): Last: 479.30, down 28.2 (-5.56%), High: 533.00, Low: 473.40, Volume: 6.54m
MJ:
Readers can make up their own minds
11:58AM
MJ:
Moving on
MJ:
Where to next?
NH:
Small cap corner
MJ:
Yes please
NH:
what about Earthport then
MJ:
I thought that was coming – some of the ROTR are keen to ehar the latest
NH:
Well, today’s news is that the company has signed a contract that should provide a £3.25m nonrefundable franchise fee expected to be received by Earthport on 21
December
December
NH:
note the should
NH:
because
NH:
Earthport fees have in the past
NH:
not showed up
MJ:
(NJS – that is giving Monkey a run for his money)
NH:
anyway, this is good news and the shares up 18% at 27p
MJ:
But who is this deal with?
NH:
Zink Financial SA
NH:
and I can’t find a website for them
NH:
which is odd
NH:
but they have a relationship with something called Hatfield Oak International
NH:
which is an Earthport client
NH:
Our Mission
The company will provide proven financial tools for corporations, individuals and families worldwide at affordable prices.
We will further assist our clients in the educational process to avoid the unnecessary errors often made by others.
Company Profile
Founded by several parties from five different
countries – all with long-term business goals.
Duly licensed to provide Financial Services.
(To see our License – Click here)
Duly licensed to manage and administer
International Business Companies and
Private Interest Foundations.
(To see our License – Click here)
Duly licensed to distribute and manage
Debit Cards, and operate Payment Solutions.
(To see our License – Click here)
Extensive use of contractual business relations
with providers (no ownership) to avoid conflict of
interests and enhance client integrity.
The company complies with all international KYC
(Know-Your-Client) regulations while emphasising
stringent client confidentiality.
Internal corporate law firm with experienced
attorneys and skilled paralegals.
MJ:
Seems an odd company
MJ:
from that
NH:
it does
NH:
Why use Foundations ?
The Panamanian Government carefully designed the Panama Private Interest Foundation with the intention of creating a more modern, more flexible, and more affordable estate planning vehicle for people from around the globe.
NH:
just found that
MJ:
NH:
anyway Panmure Gordon
NH:
house broker
NH:
is very excited by the deal
NH:
strengthens cash position etc
NH:
Lemmy
NH:
you are right
NH:
Hatfield’s base is
NH:
Headquarter:
For Customer Service:
Hatfield Oak International
Ocean Business Plaza,
16th floor, Suite 5
Aquilino De La Guardia Ave
and 47th Street (Bella Vista)
Panama, Republic of Panama
MJ:
Didn’t the canoeist end up there?
NH:
John Darwin
NH:
yes
NH:
he ended up their
NH:
in Panama that is
NH:
anyway
NH:
here’s Panmure’s note
NH:
Franchise agreement
The company has signed a contract that should provide a £3.25m nonrefundable
franchise fee expected to be received by Earthport on 21
December. From a revenue perspective, we assume it is spread over monthly
instalments during a 12-month period; however, from a cash perspective it
should come in straight away and considerably strengthen its position while
also allowing it to become close to cash flow positive. Our target price of 44p
is unchanged, as much remains to be done before anything like its growth
potential can be realised; however, we see this as good news and expect it to
be received well this morning.
The company has signed a contract that should provide a £3.25m nonrefundable
franchise fee expected to be received by Earthport on 21
December. From a revenue perspective, we assume it is spread over monthly
instalments during a 12-month period; however, from a cash perspective it
should come in straight away and considerably strengthen its position while
also allowing it to become close to cash flow positive. Our target price of 44p
is unchanged, as much remains to be done before anything like its growth
potential can be realised; however, we see this as good news and expect it to
be received well this morning.
NH:
Franchise agreement. Earthport has signed an agreement with Zink Financial SA
essentially allowing it to receive a £3.25m non-refundable first year franchise fee
expected on 21 December. A more detailed franchise agreement is expected to be signed
in early 2010, which should provide definitive details of the agreement over a 5-year
period. At this stage we expect future franchise fees to be transaction based after year
one. However, the significant upfront fee clearly shows a strong sign of commitment
from Zink for Earthport’s exclusivity in its region.
essentially allowing it to receive a £3.25m non-refundable first year franchise fee
expected on 21 December. A more detailed franchise agreement is expected to be signed
in early 2010, which should provide definitive details of the agreement over a 5-year
period. At this stage we expect future franchise fees to be transaction based after year
one. However, the significant upfront fee clearly shows a strong sign of commitment
from Zink for Earthport’s exclusivity in its region.
NH:
Background on Zink. Zink represents a number of financial institutions in Central America,
South America and the Caribbean, including Hatfield Oak International, an existing Earthport
client. If the process goes to plan, it should provide an important cornerstone of Earthport’s
overseas strategy and endorse its roll-out potential across the world.
South America and the Caribbean, including Hatfield Oak International, an existing Earthport
client. If the process goes to plan, it should provide an important cornerstone of Earthport’s
overseas strategy and endorse its roll-out potential across the world.
NH:
Financial implications. The reality is that Earthport should receive the £3.25m upfront
on 21 December, which should bring its net cash position to £1.8m and make it close to
becoming cash flow positive on a monthly basis. From a revenue perspective, we
recognise it on a monthly basis across 12 equal instalments commencing in December.
This should enhance our 2010E revenue by £1.9m and 2011E by £1.4m. As a result, our
2010E adjusted PBT goes from -£4.2m to -£3.0m (EPS -3.7p to -2.7p) and 2011E from
-£2.3m to -£1.6m (EPS -2.0p to -1.4p). No further transactions have been factored in at
this stage until we can see clear trends emerging and/or the full terms of the agreement
post this fee have been finalised.
on 21 December, which should bring its net cash position to £1.8m and make it close to
becoming cash flow positive on a monthly basis. From a revenue perspective, we
recognise it on a monthly basis across 12 equal instalments commencing in December.
This should enhance our 2010E revenue by £1.9m and 2011E by £1.4m. As a result, our
2010E adjusted PBT goes from -£4.2m to -£3.0m (EPS -3.7p to -2.7p) and 2011E from
-£2.3m to -£1.6m (EPS -2.0p to -1.4p). No further transactions have been factored in at
this stage until we can see clear trends emerging and/or the full terms of the agreement
post this fee have been finalised.
NH:
Investment view. This is certainly a step in the right direction for this company, and should
allow it to become close to being in a position of being cash generative. Our target price of
44p continues to reflect the level of tax losses in the business, and with 89% upside potential
from the current share price to this, the shares remain firmly in Buy territory.
allow it to become close to being in a position of being cash generative. Our target price of
44p continues to reflect the level of tax losses in the business, and with 89% upside potential
from the current share price to this, the shares remain firmly in Buy territory.
MJ:
Ah good – some financial forecasts at last
NH:
yep
NH:
let’s have another look at them
NH:
2010E revenue by £1.9m and 2011E by £1.4m. As a result, our
2010E adjusted PBT goes from -£4.2m to -£3.0m (EPS -3.7p to -2.7p) and 2011E from -£2.3m to -£1.6m (EPS -2.0p to -1.4p).
2010E adjusted PBT goes from -£4.2m to -£3.0m (EPS -3.7p to -2.7p) and 2011E from -£2.3m to -£1.6m (EPS -2.0p to -1.4p).
NH:
so loss making for the next two years still
NH:
hang on
NH:
the earthport PR
NH:
has provided some more infon on Zinc
NH:
sorry Zink
NH:
Zink Financial is a Panamanian registered company which has common business management with a number of existing Earthport relationships, including Hatfield Oak International an Earthport customer for the past four years.
Zink intends to now locate customers and promote the Earthport business across the Central American, South American, and Caribbean Regions, and progress can be seen at www.zinkfin.com.
NH:
and it does have a websute
NH:
but it does not work
NH:
not on my machine
MJ:
All loooks very exotic
NH:
it does
12:09PM
MJ:
Are we done?
NH:
No, no. One more thing. From a small cap company.
NH:
Arsenal
NH:
Kroenke now less than 90 shares away from having to launch a bid for Arsenal after acquiring another 10 shares this morning at £8,500
NH:
On 20th November 2009, Arsenal Holdings plc (the “Company”) received
notification that on 19th November 2009 Stan Kroenke, a director of the
Company, acquired 10 ordinary shares of £1.00 each in the Company at a price of
£8,500 per share.
notification that on 19th November 2009 Stan Kroenke, a director of the
Company, acquired 10 ordinary shares of £1.00 each in the Company at a price of
£8,500 per share.
Taking into account such acquisition, Stan Kroenke has a beneficial interest
in, and controls voting rights over, 18,604 ordinary shares in the Company,
representing 29.9% of the Company’s issued ordinary shares.
NH:
He is welcome to them, as far as I am concerned
NH:
I have had enough of Arsenal
NH:
Or more specifically, I have had enough of losing to rubbish teams up north
NH:
And it putting me in a bad mood all weekend
NH:
And then having to listen to the manger bang on about our spirit and how it was a harsh result
NH:
So, I think it’s time to chuck in the Sky subscription
NH:
And go and do something less boring at the weekend
MJ:
Calm down
MJ:
Its not that bad
NH:
it is
NH:
I have finally snapped
NH:
I can’t take it anymore
MJ:
Well folks, you heard it here first
MJ:
I’m sure you will feel better tomorrow
NH:
what after we have bullied some rubbish from Belgium
NH:
doubt it
NH:
we are the ultimate flat track bullies
NH:
the Graham Hick of football
NH:
when the going gets tough
NH:
we fold
MJ:
Right
NH:
and Spurs
NH:
are also flat track bullies
NH:
they fold as easily as Arsenal
NH:
must be a north London thing
NH:
As I say
NH:
I don’t care anymore
NH:
and there will be no more footie talk from me
MJ:
So, anything non football related to finish up on?
NH:
Banks
NH:
Lloyds rights issue
MJ:
being priced tomorrow
NH:
pricing and terms to be announced tomorrow
NH:
yes
NH:
(Taxloss I was a season ticket holder at 14, hardly fairweather)
NH:
here’s how the rest of the timetable goes
NH:
General meeting 26 Nov
- Dealing nil paids starts 27 Nov
- Last acceptance 11 Dec
- New shares trade 14 Dec
- Exchange offers:
- Announce results: 23 Nov (Non US)
- Announce results: 9 Dec (US)
- Dealing nil paids starts 27 Nov
- Last acceptance 11 Dec
- New shares trade 14 Dec
- Exchange offers:
- Announce results: 23 Nov (Non US)
- Announce results: 9 Dec (US)
NH:
Miles, do we have any short selling interest on Lloyds
MJ:
Will try and get the data later – dont have it now
NH:
shares up 2.28p at 90.43p at the moment
NH:
time to make a few calls on this one
NH:
righ
NH:
time to bring things to a close
NH:
(Taxloss, I wish I had matured a bit earlier)
NH:
Izy needs to send out the Lunch Wrap
MJ:
Thanks for tuning in
NH:
Comp winnders to be announced later
MJ:
And thanks for the comments
MJ:
Bye
NH:
see ya