The Evil Diaries: The Net Is Closing In

2 mins. to read

Evil discusses Afren, Ithaca Energy, Mitie, Trinity Mirror and rip-off fund managers…

Afren (AFR) have managed to persuade the bondholders to defer putting the boot in until end March. It doesn’t make any difference. Stay short.

In the interests of fair play, I also offer a counter opinion for Ithaca Energy Inc (IAE). This is originated by Cenkos, the broker not the horse:

“Ithaca has announced an operational update for the Stella field, with contractor Petrofac indicating that start-up will be delayed until 2Q’16. Whilst the poor ongoing performance of Petrofac is largely to blame, this is a disappointment for the company. We have adjusted our forecasts to reflect this with an updated price target of 88p.

  • The Stella development has been delayed due to the failure of Petrofac to commission the facilities on the FPF-11 on schedule,. Whilst progress is being
    made, it is far behind that previously expected.
  • Short term impact: Whilst this is disappointing, Ithaca is well placed to weather to lower oil prices, due to the company’s hedging programme. Ithaca has hedged a significant proportion of future production at an average price of $102. The company has a 2 year programme of 6,300bopd hedged out to July 2016. This greatly reduces the downside exposure that many peers are facing on the back of the collapse in Brent. Furthermore, the new developments will have lower opex costs thus mitigating the impact of lower Brent on netbacks.
  • No Debt concerns: We do not believe that Ithaca will be materially impacted with regards to its current debt position. Given that the company is close to peak debt at c $830m and that the material cash flow from Stella has slipped, the only impact will be on the facility headroom and capacity for M&A activity. On the face of it this may look like an issue, but we believe that Ithaca will not require to renegotiate terms in the way that peers such as EnQuest and Afren have had to do of late.
  • Still looks cheap: Whilst investors are retrenching away from E&P in general, we believe that this is the time for those with a stronger constitution to seek out the deep value opportunities in the sector. We firmly believe that Ithaca has been oversold, as investors have not fully appreciated the strength of the company’s balance sheet and near term development opportunity. Furthermore, with additional headroom in debt facilities, Ithaca would be well placed to make accretive additions of production from distressed peers were it minded to do so. Consequently, Ithaca is set for transformational growth in production and cash even at low oil prices. In our view this is the strongest UKCS production play at the current time.
  • We amend our target price to 88p and reiterate our BUY recommendation.”

Mitie (MTO) continues to self-levitate and is now over 300p. It’s possibly too early to attack.

Trinity Mirror (TNI) has today returned to payments of dividends. I still do not want to buy: there are matters to sort out.

Finally, the net is closing in on rip-off merchants amongst fund managers of pension pots. Today’s RNS from the FCA and the DWP is serious stuff. This is only the beginning.

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