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Highest short interest in FTSE 250 according to Sunday Times!

lse:pmo

#21

Was looking for the reason for the drop this morning, ie news on Zama sale or something but seems more more likely an over reaction to Tullow’s problems who have lost both CEO and Head of Exploration today and put themselves on the block along with a share price drop of 56% today !

Anyway as long as PMO don’t rush out trying to buy Tullow we should be ok. Debt down (good), debt up (bad) IMHO


#22

Good to see you’re still about Diesel, it is a little quiet over here so may take the plunge at some point.

I would say definitely Tullow related lots_of_sense, just goes to show how well Premier have been performing relative to their peers. That said, I have just sold a few of my holdings here and taken the plunge in Tullow at just over 50p. Always thought they were overvalued, but the current share price has overshot the other way.


#23

Beatley,

I looked very briefly at Tullow this AM and bit more just now and although it seems all the bad news is out, my concerns were as follows:

FCF reducing from $350m this year to min of $150m next year at $60/barrel.
Production reduced to max of 80 kbpd next year and then 70 kbpd from 2021-3.
Debt expected at $2.8 bn at YE, and $2.6 at end of 2020
Willing to listen to offers

So reducing free cash and forward production guidance and alot of debt = IMHO not touching it with a barge pole.

Now, if all is as they say it is (which is not great obviously), why say they are willing to listen to offers ? To me, that sounds like they don’t think they can turn it around and then the question is why ?

Interesting they quote debt to ebitda at 1.8 to 2.0 and being comfortable with the covenants with the banks, but surely not all the debt is sitting with banks and not sure the banks are as comfortable with the debt to equity ratio now sitting at over x3.25 rather than x1.1 last night ?

Anyway, I hope you get the steal of the century but I’m staying well clear.


#24

My reasoning…I’m sure no one will mind that we’re going off topic given that us and tes123 are the only ones that post.

Reserves position unchanged so NAV should remain the same, current price trades at a huge discount to this.

Even with the reduced production, they’re practically all oil so EBITDA remains better than Premier.

Lots of fat to cut, G&A costs are near $100m, Premier are a fraction of this.

Lastly, some good quality assets that could be sold. Although to be honest, if the price stays around this level or lower I think Tullow will be bought within 6months.


#25

Good evening,
Good to see the same old faces are still happy to promote this share.
This short is fascinating and has the potential to put the company into administration if the reported debt held by the shorter is correct.
I don’t believe it will or that the intention is to see the equity hit zero but the position they have created has to be admired and respected.

Let me give you one scenario of where they could have spent some of their reported $380m.

Take the retail bonds for example, they could well have been picking these up for under £40 during 2016 and around £80 in the run up to the 2017 refinancing so at an average of £60 they only needed to spend £75m for the crucial 25% of the votes needed to block any resolution at a bondholder meeting.
These bonds are now trading at or slightly above face value so potentially they are sat on a profit of £50m with the controlling vote and that is ignoring the coupon they will be receiving.

The above scenario is purely hypothetical but if they do have the controlling vote over £500m worth of the debt and one crucial financial instrument in the debt refinancing that has to be agreed and implemented by the end of May 2021 for potentially £75m or at worst full face value of £125m it makes you wonder where the rest of their reported $380m has gone?

This could only work on a heavily indebted company with limited scope to borrow due to the complexity surrounding the recent debt restructuring with several financial instruments interlinked where the senior debt of those instruments is equal, secured against assets held by subsidiaries of the holding company and had zero chance of being paid off at maturity.

This hedge fund appears to have played a blinder, it makes you wonder if they showed their hand as the negotiations have now begun.

This could make the convertible bondholders look like amateurs.

Good luck to the brave!


#26

So holding a company to ransom, that is providing energy and supporting British jobs is something to be admired and respected? Interesting choice of words there GK.

ARCM are playing games, anyone holding the debt knew it wouldn’t be paid at maturity and would need to be refinanced. ARCM could sell their debt in the secondary market and walk off into the sunset with a healthy profit on the back of Premier turning the business around, but no, they want another pound of flesh.

The outcome certainly isn’t clear but on the back on the back of the improved debt metrics this isn’t going to all one sided like it was last time, especially when the shale cowboys are still able to raise financing at rates better than our own.


#27

Am I missing something, PMO are in a much stronger position than when it was refinanced. Without going through my reasoning, but I think that point is indisputable. If that’s a given, surely common sense tells us that refinancing will be a lot less risky for lenders & simpler/cheaper to agree in 2021. Tell me what Im missing GK, I’m genuinely interested.


#28

“Lenders to Premier Oil are demanding a break-up of the FTSE 250 explorer as it hurtles towards a deadline to pay back more than £2bn of loans.”

The article suggests hedge funds own 40% of the outstanding debt, which gives them to power to block Premier forcing something through with a majority vote.

This absolutely stinks, given the improved debt metrics this refinancing should have been a breeze, but then your creditors don’t usually have the biggest short position in Europe against your equity.

Worse case scenario, Premier bow to pressure and have to raise some new equity giving ARCM a chance to close their short, probably at a profit.

Best case scenario, a new lending group emerges and ARCM have to cover.

Never bet against the debt holders is generally sound advice, but you never know.


#29

Beatley, PMO have tweeted that refinancing to be completed qtr1 2020. On that basis shorters are in a bad place, if they were hoping to force equity raise. If sp should dip on jittery pi’s selling & not seeing the opportunity,I’ll be topping up.


#30

Hi Diesel, the big inaccuracy within the article was the headline of the debt holders calling for the breakup of the company, or in other words, more asset sales. PMO have quashed that rumour, which didn’t make much sense anyway given the tax loss position in which most of the assets operate within.

Fully appreciate that Premier want to get the refinancing done by end of Q1, but I am still struggling with how we end up with a favourable outcome from a shareholders perspective. If these vulture hedge funds hold 40% of the debt and are working together, how do we get anything through that is favourable to the equity and detrimental to ARCM’s position? If the share price rises, does that just strengthen their resolve as the loss from the short gets bigger? The big concern from ARCM’s perspective would be a new lending group coming in, which would allow us to pay back the debt at maturity as we move to the new facilities, in that scenario we really would get some fireworks.

What are your own expectations? As to be quite honest, I really don’t have a clue.


#31

Exactly Beatley, as far as I know AMRC bought the bonds on the secondhand market & were not the original lenders. We know that pmo are in a much stronger position when it comes to refinancing, if we agree that’s the base case, then lending will be easier & cheaper this time around. A quick glance at the sp this morning, despite the scare tactics of the Telegraph article I think shows that the pi’s get it & I would hope the sophistication of the City would see PMO’s strengths. Of course it would have made sense to have rolled over the existing bonds, but raising new bonds to buy out the old should be bread & butter for the city.


#32

Interesting development if true, ARCM and Co are reported to have been buying up further debt in the secondary market to strengthen their bargaining position.

Thinking from ARCM’s point of view, it would make sense. If you held the biggest short position in Europe, would you capitulate on the position and start buying the stock back leading to a massive short squeeze?! Or would you dig in, strengthen your position and force Premier to go down the new equity route?!

Maybe the article is nonsense, and just timely placed to ensure the share price doesn’t get away from them, particularly with recent geopolitical events. The very fact I’m posting about it suggests it would be doing its job, sowing doubts in investors minds, especially those that are thinking of buying or holders that have big percentage gains that might decide to lock in their profits.

I will ask IR if there’s any truth in the article and post back when I get a response.


#33

You do have to laugh at some of the nonsense in the article, if Premier raised $600m from a rights issue, by my reckoning net debt would be just $750m-$850m at year end, or less than 1xEBITDA.

If ARCM do get their way and we are forced to raise new cash then I reckon it’ll be about $300m, or maybe the board will find a suitable acquisition to make any equity raise easier to stomach for investors.

“One US lending source told The Telegraph that Premier will need to raise between $800m and $1bn through asset sales and a rights issue – suggesting that they would require up to $600m to be raised through a combination of a rights issue and/or further asset sales.”


#34

Thanks for the update Beatley, yes I like how non specific it was regarding the debt sale by Barclays and that it went to hedge funds including ARCM but no details of how much of the $80m it was to them.

Must be hurting having that £45.5 m (~$60m) MTM loss currently ! I wonder what the costs of borrowing PMO shares is currently with so much out on loan and the Middle East looking a little tense ?

My other thought is with the FCF available between now and May 21, if they can get the other bondholders or new banks on board to extend and/or maybe increase, can’t they pay off the ARCM bonds on maturity ? Surely, non of the Directors of PMO will not want to willingly do an equity raise or cave in to this pressure when the company is looking in alot stronger position than a few years ago.

I guess we might hear more on Thursday at the Update.


#35

New debt holders are absolutely critical, we can’t be put in situation where a perfectly viable business is being held to ransom, when anyone buying the debt knew the maturities would have to be extended. A proper RBL and amortisation profile needs to be sorted out, although I doubt that can be done by mid-year which is when the debt becomes current.

Personally, I’m not overly fussed about an equity raise, I’ve always thought we’d do one anyway when the right assets came a long, so for me it’ll just be doing it ahead of time. Moreover, the biggest the thing that’s been holding the share price back is the debt concerns, take them away and the share price should reflect the improved balance sheet anyway.

Let see what Thursday brings, but it would be good to get some colour on what’s actually happening.


#36

As a side note, I’ll also be keen to see what they’ve done with the hedging position. Given that gas prices are still horrible, locking in the current forward curve is key to ensuring H1 revenues are robust.


#37

We’ll I didn’t have to wait long for details of the hedging. Lots of information but at first glance the word placing is somewhat concerning. Is that the get out of jail card for ARCM at the expense of diluting ordinary shareholders?!

Defo going to drop today, how much, who knows.


#38

Shows how much I know, share price up 14% lol. Market already pricing the 100k barrels a day and not concerned with unknown dilution bit? Quite a surprise to me, but happy anyway. Will shave a few off this morning, rights issue likely to be bigger than I anticipated so need to free up cash.


#39

Indeed, bit of a surprise on a few fronts. Buying assets as I think you have said before in the UK makes sense given the tax losses they have available and saying they have the equity raise fully supported is another good thing.

Poor old ARCM, now sitting on a negative MTM of -$85m on their short…must be hurting vs the gains on the $380m debt and surely no other hedge funds would decide to make them squeal ? Plus the other ones with another ~4%.

Nice to see ARCM put out a release when previously silent ! We are only thinking of all the stakeholders, LOL, they are only thinking of their companies position and their bonuses…

Anyway, happy day today atleast !


#40

Can you imagine having the biggest short position in Europe and seeing the price go up 17% on a single day, and that’s even before you’ve started closing. As you say, today is a very good day.

I’ve asked IR if shareholders will be able to take part in the placing, that’s my only concern out of all this, especially if the placing was say half of the $500m.