RE:RE:Youhou!
Still here, still holding Ithaca, although a painful experience it has been - still as bullish as ever on Ithaca looking forward.
The following post from TwistedMachine on iii was particularly informative.
Doug
:Oil companies don't report on opex cost $ per barrel for individual fields unless that is the only one they are producing them from. Ithaca have and remain one of the most accretive oil producers in terms of net backs on their production in the north sea.
from the last presentation of 2014 half year results
Unit opex increased to ~47$/boe from $40/boe
- Costs increased from third party shared processing
facilities – Sullom Voe terminal (SVT) and Anasuria
FPSO
- Potential exposure to late SVT 2013 cost allocation
charge
- Excluding high cost production from Beatrice /
Jacky, where operations are scheduled to cease
around year end, unit opex ~$40/boe
at $80 a barrel they are still receiving considerable net backs. When you add in approx half of current production is hedged at $102 a barrel for the next 2 years, Ithaca are effectively getting not the current $85 a barrel but $93-$94 on average per barrel once they crystallise those the financial value of their hedging instruments.
Add in $1.25 billion in deferred tax losses which comes in handy when stella is online, they will be cash rich as long as there are no major mkt / oil price issues ahead and stella isn't unduly delayed.
Ithaca has fallen recently in line with:
- macroeconomic woes, where mostly everything gets sold
- ithaca has a beta of 3.337 on the TSX against mkt rises/falls, hence a 1% fall in the mkt, means a 3.337% equivalent fall in ithaca. The TSX still has considerably impact on the direction of the share price, although less so than in recent years as much shares are now traded on AIM.
- sharp fall in oil price price over short period
- RNS of approx 10% expected to be missed low end of annual boepd guidance which although is part and parcel of an oil producers activity they should really have issued a news release earlier ,
- their debt / gearing ratio.When stocks are heavily geared which Ithaca is currently due to the planned outlays of bringing stella online its's unfortunate timing with the mkt falls because such highly geared stocks rise and fall in a more relatively pronounced manner to less geared stocks if the value of their main revenue source (oil price) falls / rises.
I am a long term holder of Ithaca and the drop in oil price and sp caught me off guard - it was a macro sell off.
There are some attractive valuations of oil stocks out there currently Ithaca among them if you believe oil prices will eventually rise in the near future and europe isn't going into a deep recession. I want to see where the oil price is going to bottom out at, and would also like to see the results of the ECB bank stress tests to be published next week. If these aren't good or create more uncertainty instead of clarity there will be a 'contagion worry' sell off. If the results look ok, or they are as expected, it could be time to buy some of these undervalued stocks. Another important calendar date for oil producers is how OPEC are going to react in November in terms of signalling if they are reducing oil producing capacity to support the price per barrel of oil or they intend to maintain current output and effectively oversupply. There's definitely some brinkmanship going on here, various reasons have been spouted such as international pressure on russia to pull out of ukraine, to halt or slow down US shale production and the price of oil forward contracts versus spot price (contango). I'm not convinced we still have the truth, but one things for sure when have OPEC not supported the price per barrel of oil in the long term for their own benefit to ensure future investment and line their pockets. Never.
TM