I have not been around for quite a while but it does not mean I have not been involved. Considering where we are price wise I think I needed to say something.
So, we went down because of extended shutdown of the pipeline early in the year, losses on the AGIP pipeline and delays in the new pipeline. That created a scare on the viability of the dividend.
The company is well aware of the importance of the dividend and they have done everything to protect it.
The cash is coming in and there is no need to hyperventilate. If you are a value investor 20% yield is not bad as you wait for growth.
The second leg of the SP down slide is not really related to the company but to some funds dumping stocks to raise money. Many funds are in trouble and it is hard to really point the guilty one.
What are the priorities for the company moving forward?
Of course the number one priority is the new pipeline. Unfortunately the company has limited leverage since they own only 15% of the pipeline JV. They do what they can to "help" but they are not the driving force.
We know that the pipeline delay was caused by 2 issues.
Massive flooding in the area
5km of right of way.
Well, the water are finally receding and the prediction is that it should be back to normal in early November.
I understand from MW that progress is being made but it is hard to announce anything until it is fully resolved. The last 200M are the hardest one. I want to remind people that the issue on Keystone is that 200M border line crossing so we are not alone.
My WAG is that we will make Q1for the pipeline opening but we should look toward the end of Q1
AGIP pipeline
This is a hard one to swallow but we are dealing with a company that does not put us very high on their own priority list. The big issue is metering of the pipeline many legs. Yes there is theft but it may not be the only cause of the losses. Other fields may not deliver the same water/oil ratio than we do or their feeder pipeline may suffer more losses than we do. The problem is that we all share what come out at the end of the pipeline. Mart is trying to do something about it (October 1st PR) but has limited power considering that if we were to push too hard legally we could be cut off.
Here are some good news:
The rumor is that the losses have stabilized and maybe even improving.
The flow rate seem to be good and improving.
There is a real chance to reach that 4,500 extra BOPD before year end.
The company will publish a PR with their September production numbers I guess early next week and should confirm that.
If we have a good PR the pressure will be off and we can happily wait until the new pipeline gets on line.
I am very optimistic about this one.
Next priority.
2 export lines will be great but we need to diversify. As prolific as Umusadege is we need another field. There is nothing we can do about the second round of marginal fields. It will happen when it happens.
The company has discussed several time that they were after new fields or working interest in new fields that are part of the majors divestiture strategy. There is a lot of pressure on the majors to do something this year since next year will be consumed by the 2015 election preparation.
There is more than a decent chance that the company may close on something this year. Several rumors included fields by Exxon but they maybe more. If it happens it will be big and transformative for the company.
Exploration.
So many targets!!
Apparently the second rig is not on site but should be there soon. Paperwork / permits etc are not helping speeding things up. Surprise surprise it is Nigeria after all.
The timing makes things interesting because since UMU11 is almost done that will give us 2 rigs at the same time and a lot of flexibility. The next 2 targets for this year are UMU8 deeper and the water injection well. UMU8 should be quick and give us the extra reserves since it will be done before year end. Water well is not very deep so it should also be quick. Next will be the horizontal wells and that can be Umu 3 or 4 and maybe even Umu 8 since the rig will be already in place.
The good news by the way is that we will not need a rig to finish up Umu10.
If you add it all up by Q2 next year the field could be at around 30K BOPD and all the buyers of the stock at $1.00 this week will look like geniuses.
Next week we will get our production update and I think we will all feel a lot better. IMO of course
Cheers