Unscheduled due to the amount of ramped messages.
Afren Plc (AFR) are being suited by quite a few companies and ramped by many. The short list is ever expanding including ENOC (DXB Government) and Heritage Oil (Qatari). In addition to SePlat there's allegedly ADDAX Petroleum (owned by SinoPec) and Nexen (CNOOC) are weighing up a bids (some allegedly submitted).
So without breaking down the balance sheets of every single listed entity operating in Nigeria the short list goes to SePlat (1:0.85 AFR) probable because of the longer-term upside in shares, ENOC (less likely) and Nexen's (£1) owners CNOOC Ltd and Sinopec (£1.09), the latter being able to afford a decent cash offer to entice those grappling with significant losses.
Without shaming people, whether their view is Afren Plc are worth 165-190 pence a share or not, perhaps they need to turn on a monitor and look at the current oil price. If they can find a value of 170 pence per share be suspicious there was more than brandy in the mince pies.
Contrary to some press speculation of being unable to defend a bid, are hedged to accommodate their capital expenditure for circa 12+ months, have had a good result in Madagascar (Block 1101) and some good shareholder support. It's easy to assume if one doesn't know the larger shareholders that the company is distressed because of the recent BoD issues; lack of permanent CEO, in fact lack of a lot of directors. The company, save for the BoD issues have good assets, albeit without opening a computer, Afren's estimated profit margin would be nil at current prices without a hedge. and barely 10% with.
The risks (common-sense) will be a sustained drop in oil prices (likely) and a bid not going ahead (unlikely) shareholders are limited in their choices in the current market so may feel compelled. Disappointing for a company with such good prospects and overly punished because of the corporate governance debacle that occurred.
Afren have allegedly had a few speculative approaches and this is the first to come to light, perhaps it would be wise to formalise an auction process to obtain the best for the shareholders.
Merry Christmas Fraser
Disc: Long.
P.S. Merry Christmas Atlas Iron Holders...whom informed me the share price has not dropped for a few days! (Christmas drink anyone?)
Fraser- Thanks for the update- is anyone not in the queue for AFR??!! :-)) I agree that they cant be making much at present, but Ogo could be massive and they have some other great prospects in E Africa plus the Kurdish assets, so some hidden value here. £1 would be a knockout for me, and a data room and some order to the process would get the best price, but the time for circa £1.70 is now in the past, as is $110/barrel oil.
ReplyDeleteCheers. The Leggie
Fraser- Any thoughts on VOG?- the news is great and its just re the two smaller Doula power stations, with the big one (88mw) waiting in the wings for the summer hopefully if they execute the first two efficiently. My fair value goes up to 91p when these new contracts are input, so still some value, albeit they have had execution problems on most projects in the past so that appears to be the key danger here. I did add at 57p and am happy to sit on this one now.
ReplyDeleteRe PPC- they couldn't get a flow test, which the mkt was expecting now, so despite the gloss they have spun around todays RNS, they cant really say its commercial yet. The share price reaction in low volume was probably correct but the potential is huge if they have what they think they have, even at current oil prices. Im long here too.
Cheers. The Leggie