TD says potential for new equity issue at $1.00 per shareThis agreement allows the company and the Albanian authorities to start the previously announced process to seek a 3rd party audit of the 2011 cost recovery pool, which we understand is at the center of the tax assessment dispute. The management expect that the process could take around 60 days. The company is also pursuing a parallel process of communicating with the ICC and recourse to international arbitration can’t be ruled out.
Exhibit 1 presents our main estimates for 2015 and 2016. We are still assuming that the company will target an average daily production rate of around 20,000 b/d for 2016, which we estimate requires a capital expenditure of $97 million. Under TD’s current price deck, the company is expected to have sufficient funds to cover this budget as well as pay its monthly payments to the Albanian tax office. However, TD’s price deck is significantly higher than the current strip for 2016. Running this strip, the company would have a funding shortfall for 2016 and may have to cut in its 2016 capital expenditure, which would impact production.
With this possible downside in mind we have also assumed a dilutive equity issue to try to account for what we see as increased financing and liquidity risk for 2016. Our assumed equity issue is for $50 million at an issue price of C$1.00/sh.