Yes, now sitting at -$93m MTM ! Feel the burn… I’ve let some go today but now am happy to hold onto the rest and see where the ride takes us. If ARCM are forced into the market as the short share owners want to sell…will be interesting times indeed…
They only have 140m shares to buy !
I don’t know the mechanics of it all, but what’s stopping the people they’ve borrowed the share from asking for it back? If I’d lent my shares to someone that had a huge MTM loss, I’d be getting worried they wouldn’t have the funds to buy them all back.
Sold some of mine anyway, locking in a 100% gain is never a bad idea
Looks like a fantastic deal to me.
But I think it will have a tough time to get this all agreed as ACRM are clearly going to fight it tooth and nail. But Premier would not have announced it if they did not think they could get this through the courts. Lots of legal fees unfortunately on the way but it makes a lot of strategic sense so hope it goes through.
The price of the placing / rights will also be key. If the share price holds up over the next three months then it may be possible to get this away at around £1. But that may be wishful thinking. If it is heavily discounted then ACRM will presumably buy in the placing rather than in the market to meet their short obligations. But either way they have to get 140m shares from somewhere.
I actually bought on the back of this. I have played PMO wrong for the last few months so I may regret this. But if this goes through then debt worries are gone for the next 2 years and we can then expect a proper refinancing in 2022 whereupon the equity should be worth a whole lot more than the current share price IMO. We shall see…
It even made the Guardian business pages.
Interesting times ahead…
I think you’re right about ARCM buying into the placing, once they’ve accepted their fate of course. If the placing is above a £1 then they’ll still have a decent sized loss, but it does stop them having to buy the stock in the open market.
Lots of positives in the announcement, I’ve always thought a UK acquisition and a rights issue was inevitable, the company told us as much, but the unknown placing details is still bugging me. If that becomes a large portion of the $500m then shareholders are again subject to dilution.
The finance costs are another frustration, the interest on the debt increases again with the maturity extension, but then with 100k barrels mostly tax free we become a cash machine, swings and roundabouts.
Definitely going to shave some more off today. I do think Premiers prospect are very bright, but no need to have some much risk here now after the gains I’ve had.
Hi, never got the chance to check your numbers unfortunately, been too busy but thanks for sharing.
I see the court dismissed the claim by ARCM yesterday ! IMHO, I guess we now know why PMO offered to increase the coupon to the other bondholders for the debt extension given that they needed to ensure they were all on board regarding both the debt and purchase proposals. Seemed a little pricey in the circumstances but hopefully in a few more years it can then be substantially reduced and ARCM can’t hold the company to ransom.
The debt holders always want something, but I’ll take the increased coupon over a long drawn out refinancing battle that’s for sure.
My numbers won’t be correct of course, too many variables, but it does give an idea of the cash flow generation with the tax free barrels from the BP acquisition and Tolmount coming online in 2021. Only problem there is that gas prices are horrible even in the middle of winter so I sure hope the board know what they’re doing with the increased stake.
Sold a few more today and for the first time in a fair few years Premier is no longer by biggest holding. It’s been quite a rollercoaster, I dread to think how many times I’ve bought and sold, but its certainly been worth it.
Did you see the story earlier this week about the other lenders reporting ARCM for not disclosing the short interest whilst trying to block the debt extension, its below.
Premier Oil’s Creditors File Report Against
(Bloomberg) – A group of creditors filed a report against Premier Oil Plc’s biggest lender, telling the Financial Conduct Authority the latter failed to disclose it had built a significant short position on the British explorer’s stock while trying to block attempts to restructure debt, the Sunday Times reported.
Asia Research & Capital Management disclosed a 17% short position on Premier Oil’s shares that dates from July, according to the report. The Hong Kong hedge fund has been resisting any potential extension of Premier Oil’s debt beyond 2021.
Last week, a Scottish court ruled that Premier Oil can go ahead with a creditor vote on a proposed change in the terms for $2 billion worth of debt. ARCM had sought to delay the timetable proposed by the company, saying it was “ambushed” by Premier Oil and had insufficient time to respond.
Premier Oil said it has 86% support from its super-senior debt holders and more than 75% backing from senior lenders for its proposal. ARCM holds more than 15% of the debt.
Now ARCM have put up a new website, including saying amongst other things they didn’t realise they had to disclose the short position ! If in case you don’t succeed, try try again…so it seems
Don’t play a game you don’t know the rules of. It could result in a red card.
I find the whole thing absolutely bizarre, it’s painful to watch the desperation from ARCM in their attempt to avoid what could end up being one heck of a short squeeze.
I love the FAQs on their website, I’ve tweaked one of their answers to the truth.
Q: Is ARCM’s short position linked to its opposition to the Company’s proposed scheme?
A: If it goes through our short position is absolutely ******, so yes, yes it is.
In was GK10 that said their position should be admired and respected, a losing position isn’t something to be admired, nor is a hedge fund attempting to blackmail a UK company into doing its bidding something to be respected.
I’m be looking to increase my holding again once the details of the placing are known, with some reasonable commodity prices (gas prices are a huge concern) Premier becomes a cash machine over the next couple of years, which most people, ARCM included, realise.
If anyone wants to ask ARCM some pointed questions I have done some quick analysis based on the latest production data on the Oil and Gas Authority website regarding the BP purchase.
So looking at the latest data covering Oct18-Oct19, Shearwater produced 60.6% Gas and 39.4% Oil whilst Andrew Area produced 83.3% Oil and Gas 16.7%.
However, PMO are only buying 27.5% of Shearwater and ~80% Andrew Area, so given this weighting I make the purchase 75.3% Oil vs 24.7% Gas.
Interesting they don’t mention this split, just that Shearwater is mainly Gas !
I get there point with the CPR report and the price assumptions used given the current forward curve, but the forward curve moves up and down daily. Gas prices have been massacred due to the mild winter, yet if we were in the grips of a beast from the East then the price assumptions would look modest.
Indeed, another thing ARCM say on their website is the following:
"ARCM’s short position is a hedge against a $455m position in the company’s $2.4bn net debt which becomes due in May 2021.
This hedge is a longstanding position which has gradually been built over the last three years in tandem with its debt position. The hedge is a large percentage of the Company’s market cap. This is because the market cap is relatively small in comparison to the size of the debt and the Company’s $1.2bn decommissioning liabilities.
ARCM hedges all its positions according to its investment principles."
Now, I wonder if they can also state that when they reduced their short position in PMO during the last 3 years that they at the same time reduced their debt position ? If not, they are clearly not following their “investment principles” as they claim.
I guess or hope the FCA will be looking at it.
Look at their short position in January 2018 when they obviously took big Tone up on his generous offer.
So yes the short reduces accordingly.
To highlight just how dreadful the current gas prices are for Tolmount:
Current spot price is 23p per therm, so say $0.30c
58 therms in BOE so the selling price would be $17.4 per barrel of oil equivalent.
Tariff costs are $14 for the first 250bcf and
OPEX costs are expected at $4, so for the first 250bcf (half of the field) the company would be operating at a loss for each barrel produced.
The forward curve is higher at 36p per therm for winter 2020, but definitely one to watch.
Did anyone else see ARCM reduced their short position on 31 Jan by 0.12%, however, I’m fairly pretty sure it was only posted yesterday ?
Have they finally accepted their fate ?