Cash flow out of Canada
About 1700 bbl/d at $40 netbacks = $25 million.
About $10 million of capex to hold flat that production?
So free cash of $15 million, so about 5 years to recoup what they spent acquiring it?
They're now saying Harmattan is a window into North American technology which, with better negotiated terms in Egypt (Egypt does need the oil and gas because they import much more than they produce), they hope to apply the same in Egypt.
What do you think about the Harmattan acquisition? Again from a forced seller, BXE, but as I caution these forced sellers are forced generally because of their poor quality assets. Incidentally InPlay bought something from BXE and for which they paid C$47 million. 900 boe/d of production, 25% of which was gas. EV/2P of $5.90 vs TGL's Harmattan buy of EV/2P of $3.76. RLI for InPlay's buy of 24 years vs Harmattan at 18.8, due to Harmattan's higher production at the time of the analysis: 3104 boe/d, 43% of which was gas.
Either way, I'm a numbers guy and don't like most of these Canadian assets. Too capital intensive for too little cash flow. I believe with TGL's CEO retiring and knowing he wanted to sell some shares, he figured the Canadian acquisition might remove the horrible discount TGL shares were experiencing. It didn't. The London listing did, but now TGL is again a laggard.
What do you think about the Harmattan land here? At least it looks like a better buy than what PPR recently bought with Marquee.
$66 WTI should be helping the economics. Of course the gas is worthless for the foreseeable future. Surely it has some value eventually, but time is money.
In general though, the lagging share price is baffling. What I'm seeing is money chasing the most beaten down names irrespective of actual fundamentals for a spring back reversion to mean effect. Fundamentally, especially on the Egypt side TGL at $75 Brent is a cash cow with no balance sheet risk.
In a presentation I heard Randy said they are on better terms with the Egyptian government than even Shell and Eni. They are the only international company in Egypt able to direct market their oil in the way they do it. This has really cut their credit risk and improved liqiduity vs having to wait on payments from the govt like SDX does.