RE:Surprising Biggest Chinese Bank is New Syndicate PartnerIn my view, this shows how much OBE wants to buy back shares while they are cheap.
In my view, this will turn out to be a short term matter.
Its still to early to predict oil prices in Q3 and Q4. Personally I see them being a lot higher, for reasons that don't need to be repeated here. Those who disagree are probably no longer shareholders.
Without this increase in the credit line, OBE would not of been able to start buying back shares until Q3 - probably August.
By the end of the year, they likely would of bought the 10% limit, and be very close to their $225 target debt limit.
That target debt limit implies $125 million in long term debt, and $100 ish on their line of credit.
They need another $65 million in extra space on their line of credit for liquidity requirements.
ie, a required line of credit of about $165 million at year end.
They now have $240 million on their credit line. The last $40 came from the Chinese Bank.
This looks more like bridge financing to me - with an option to extend if the strategy doesn't go as planed (ie oil prices don't go up as much as expected in Q3 and Q4).
ie, if oil prices increase in Q3 and Q4 I expect much of the line of credit to go undrawn, with rapid continued pay down in 2024.
Tomorrow could be an interesting day - the buyback rule requires they sit on their hands for the first 30 min of trading.
Today may of been the low for the rest of the year - time will tell.
Also interesting that this news came out on May 31. ie, they can buy back throughout June without having to disclose should they want to buy in stealth mode.