Hot off the press:
http://www.ft.com/cms/s/0/2bee2044-852f-11df-9c2f-00144feabdc0.html
http://www.sharecast.com/cgi-bin/sharecast/story.cgi?story_id=3551412
http://online.wsj.com/article/BT-CO-20100701-710080.html
yes, they probably think lets let the price drift, give the impression that we might walk and see if people decide to sell out leaving a bit of an overhang, They seem to have removed the possibility of an 18.50 or 18.75 bid,
Watching this has been very interesting,
cheers K
The purpose of todays KNOC announcement is to kill off any hopes that AM success alone would lead to any higher offer. There is no point now holding out hopes for that, ie there is no point the market pricing the shares at a premium over the offer price for that. What you see is what you get, the only options are £18, a white knight, or reject the bid and see the SP fall to the low teens.
I think it's a good tactic to get rid of the over-£18 premium that was blocking KNOC. Thinking that the chances of a white knight were low and that any success at AM wouldn't lead to a large increase in the offer, I wrote yesterday that I was surprised the SP wasn't already say 1790-1792, and that's effectively what's happened now. There is little reason (white knight only) for the shares to be above £18 now, so I expect KNOC will shortly start buying in size and it will be over soon.
t,
"tell me again why you are determined to blame Cross for the impasse that has developed"
A third precondition in Calgary, as discussed on this thread shortly after, was that Dana required KNOC to sign an agreement not to go hostile, ie giving Dana management a veto. It was that precondition that led to the Calgary meeting falling apart. I don't accept such a precondition is reasonable.
I don't believe there's any significant chance of a white knight appearing, and since KNOC will not pay any more for AM I can no longer see any serious prospect of upside, and so I've just sold my whole holding in the mid 1780's. I think it was the correct decision to hold whilst there was a respectable chance of upside, but that's now over so as discussed yesterday "I'm out". IMO this will be over with irrevocables over 50% on 23 Sept or market purchases by KNOC before then. And the one with egg on his face will be Tom Cross.
There are some very high volumes now on the order book, more than 700k unfulfilled orders to buy on the book now. Perhaps a lot of business is being done to be reported with a delay after the close today(?)
Bon voyage and drive carefully.
Wouldn't it be politic not to mention polite to wait just a little longer to see the fat lady move centre stage and wait for her cue from the lead violinist?
If I were a white knight then I'd quite like to let things stew a day or three to see how the land lies. The weaker the SP in that time - the lower my counterbid need be pitched. Or have I misunderstood the rules of the game? (not for the first time)
If I were a white knight then I'd quite like to let things stew a day or three to see how the land lies.
Fair enough to try, but that's what I've been waiting for for months, and there isn't even the slightest press rumour of any white knight! There have been very few contested hostile bids in the UK E&P sector in history. It might happen, but maybe your guess of the likelihood is higher than mine!
It would be a fair question to ask me why I don't wait until the bitter end to take 1800p rather than the mid-1780s that I have done. The answer is that my shares were in an ISA account that requires a UK address (I have a kind sister) to which I don't have easy access for the paper mail, and so doing the paperwork with confidence doesn't really suit my geographical location. There's often a bit of a delay in receiving the sales proceeds cash as well, but for a UK-based person just hanging on in order to get the full 1800p would be a fair decision. Hanging on to the bitter end involves uncertainty that the bid really does succeed as well.
"there isn't even the slightest press rumour of any white knight!"
I should certainly hope not, than to be so unprofessional, however there was this in August:
http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7945838/Rival-bidders-line-up-for-Dana-Petroleum.html
If there is any credibility in this story, potential rivals would in any case would wait for KNOC to make its position clear, which it finally has.
I would expect Morgan Stanley to be working the phones/networks now the defence doc is public - given the success fee they'd make as intermediary - so there is still a chance of a higher/paper alternative, worth holding out for by some.
As the 23rd gets closer, obviously the chances recede.
Curiosity got the better of me (despite no longer having a Dana holding) and I downloaded the CPR. Certainly haven't read all of it but did find the answer to a key question I had been wondering about: what will the "Arran" (Barbara/Phyllis) and "Western Isles" (Melville/Rinnes) development add to production post 2012/13?
The answers were quite interesting. According to my calcs, Arran will only add 60mmscf gross,i.e ~2.2kboepd net to Dana's production. Western Isles (WID), OTOH, will add 30kbopd gross, ~20kbopd net. [Figures based on a rough average of 1st 5 years production]. Pre- the two recent deals, that means that WID was highly material relative to current production of ~40kbopd. However, that production was never shown in analyst reports that I saw, NOR AFAICR DID TC EVER DISCLOSE THOSE FIGURES IN ANY PRESENTATION. [see pp329-330 of the CPR for Arran & WID production profiles]
Unless I've got this wrong, I can see very clearly where SirL is coming from. I can also well understand tournesol's POV - who has developed a close relationship with TC over many years and has seen the business perform exceptionally well & deliver great returns (though much less great, until KNOC came along, over the last 4 years than the preceding 15+). However, for an investor like me, SirL or probably even Schroeders, we like hard numbers. Tournesol, were you aware of the figures I have quoted?
An interesting question is: how has this situation arisen? Rightly or wrongly I suspect that there is an element of paranoia or control freakery in TC's investor relations. One of TC's arguments, when broaching this subject to him in person, was concern about giving too much away to competitors. Until KNOC came along, that was fine - and may have been an integral part of TC's deal-making strategy. After all, when negotiating it is generally advisable to keep as many cards up your sleeve as you can.
Unfortunately, this secrecy may also have led to a disconnect between analyst valuations and TRUE value. After all, we know how bad such disconnects can be, even in the case of Soco, who I have found to be a much more transparent & straightforward to analyse company, by comparison.
In the absence of the data now disclosed in the CPR, investing in Dana boiled down to whether or not you trusted TC & his team to continue to deliver value [except when Dana appeared patently undervalued, as it did @ £11 & below, based purely on analyst numbers which we knew did NOT take Arran & WID into account].
Best,
Mark
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An interesting question is: how has this situation arisen? Rightly or wrongly I suspect that there is an element of paranoia or control freakery in TC's investor relations. One of TC's arguments, when broaching this subject to him in person, was concern about giving too much away to competitors. Until KNOC came along, that was fine - and may have been an integral part of TC's deal-making strategy. After all, when negotiating it is generally advisable to keep as many cards up your sleeve as you can.
Unfortunately, this secrecy may also have led to a disconnect between analyst valuations and TRUE value. After all, we know how bad such disconnects can be, even in the case of Soco, who I have found to be a much more transparent & straightforward to analyse company, by comparison.
A couple of years ago I was looking at getting back Into Dana - I have about 40 stocks on my watchlist and they seemed on the face of it to be attractively priced .However I always like to see the detail so went to the website to find out a bit more.
I have to say it was like wading through treacle .AlI had to guide me was masses of text - I started making notes on what I thought were the essentials and then after about an hour when I realised I was not much further on I just gave up.
My thought was why does this company make it so hard for me to be interested in it.?
I'd been used to seeing voluminous presentations from the likes of Tullow and Venture which gave me information in a nutshell and encouraged me to invest .I'm now looking at Dana which on the face of it doesnt want me to see the wood for the trees and I think what is their problem.?
Result - I didn't invest.I'm not surprised the price was 1100p in May or whatever.I thought about it then but thought if I went to the website I'd have the same experience because of TC's confidentiality issues.
Can I go to Aberdeen ?.Er no because I have mobility issues sometimes.
I don't doubt TCs professional ability but I'm afraid the opaqueness of their communication to the average punter like me has finally bitten them on the butt.
If they'd done a Tullow on communication they'd have every chance of not being in this position.
More in sorrow etc etc ...
Indeed. If the analyst NAVs are wrong, as has often been asserted on BBs, one has to ask: is that because they've done a bad job, or is it that they struggle to get information? Is it necessarily the analysts' fault if their work is illinformed?
I wonder how many shareholders will actually download this CPR - I haven't, as I think it's too late to do any good, I'm no longer interested in Dana's operations. I have a feeling the institutions and hedge funds might well not. In the absence of a white knight, it comes down to £18 or take your chances on what the SP would fall to. Perhaps it is sad if Dana ends on this sort of, well almost misunderstanding and poor information, but there's a moral there.
SirL
Indeed. If the analyst NAVs are wrong, as has often been asserted on BBs, one has to ask: is that because they've done a bad job, or is it that they struggle to get information? Is it necessarily the analysts' fault if their work is illinformed
I understand your POV but it is not supported by the evidence. My criticism of analysts is based on empirical evidence.
1) The valuations attributed to Dana by different analysts are very different from each other. (and have been for 10 years) This tells us that analysts are either using incomplete and/or widely varying data or are making very different assumptions from each other. Each of them has access to the information which Dana publishes and also to the additional information which is made available via analyst briefings. And each of them should be reading their peers work and taking notes. I used to contact Dana to inquire a) which of the analysts was closest to the company's own view and b) what Dana was doing to remove misunderstandings. The answers I received were consistent over many years. The co told me that they supplied the same info to every analyst but some analysts simply did not respond - they did not attend briefings, did not take calls and never contacted the co with questions. Once an analyst published a report which I found alarming in its pessimism. When I discussed it with Dana I was told that the co had not spoken with that analyst for over 2 years. There were many significant and obvious errors in that analysis. I myself tried to contact the analyst to point these out. After failing to get through I wrote him a letter. I'm still waiting for an acknowledgement some years later. His reports have continued to misrepresent the facts.
2) For some years I used to tabulate the analysts' output on Dana so I could compare and contrast their different figures. I found that there was no consistency at all across the analyst community. Even simple financials were often different to a very material extent. Even when the reports were prepared close to the year end - when most of the numbers were already actuals rather than forecasts - they were still widely different from each other.
3) Even worse than the lack of quality in the raw numbers was the fact that the conclusions reached by the different analysts bore such little relationship to the analysis on which they purported to be based. Looking at 6 or 8 analyses I used to find that the person most pessimistic about the numbers was often mmost optimistic about future prospects and vice versa. It was abundantly clear that the conclusions/recommendations had a different agenda to the "analysis" and had been inspired by someone other than the author of the detail.
4) I used to publish my observations on the above - initially on iii and later on TMF. Evebntually after years of diligent cross-comparison on my part I realised that the exercise was futile. The material I was looking at was not of marketable quality. The analysts were getting away with shoddy work because its consumers - presumably fund managers - were too busy to spend more than a few minutes on it. And also because those same FM's would see through the recommendations as self serving anyway.
5) I stopped doing the very detailed tabulation years ago but the point of the above remains evident from a simple comparison of the valuations published by the different analysts. See www.stockopedia.com/content/analyst-coverage-and-related-media-comment-29834. That alone tells you that whatever the analyst community is doing it cannot be regarded as the serious and objective pursuit of truth.
6) If I asked 6 structural engineers to calculate the size of RSJ i needed in a roof, I'd expect a narrow range of answers. Or 6 doctors for a diagnosis of an illness. I can;t respect a profession where there is no consistency and no consensus. You might as well ask taxi drivers for a view.
7) Had I listened to analysts I'd have sold my Dana holding on any of 50 ocasions over the past 10 years and woudl have made very little from it. As it is I sold just 4 times at times when there was no "sell" consensus and made money every time.- whilst overall I've been pleased with the long term return. The combination of LTBH plus judicious trading at inflexion points has worked wonders.
I think you and I are effectively doing similar things here. You are sticking up for members of a community (fund management and equity analysis) to which you yourself once belonged. I am doing the same (oil co management). But I'm not asserting the vitues of everyone in the oil industry - just some individuals I have had direct dealings with for years and have got to know and respect.
I am in complete agreement with those comments. And I have noted with other companies the precise criticisms that you make here:
I used to contact Dana to inquire a) which of the analysts was closest to the company's own view and b) what Dana was doing to remove misunderstandings. The answers I received were consistent over many years. The co told me that they supplied the same info to every analyst but some analysts simply did not respond - they did not attend briefings, did not take calls and never contacted the co with questions. Once an analyst published a report which I found alarming in its pessimism. When I discussed it with Dana I was told that the co had not spoken with that analyst for over 2 years. There were many significant and obvious errors in that analysis. I myself tried to contact the analyst to point these out. After failing to get through I wrote him a letter. I'm still waiting for an acknowledgement some years later. His reports have continued to misrepresent the facts.
....indeed it is the case that horses can be led to water, but they cannot be made to drink.
Some analysts do an excellent job - and the average analyst generally tries his best in what is a fairly complex business sector (and he may be covering 15 companies or so). However - the tail of analysts is extremely long .....and much of it is complete and utter rubbish. Genuinely some of their comments are often not worth the paper they are printed on (if anyone bothers).
Turning back to the comments of Marben and SirL, I can obviously understand the wish to have full and complete information. However, the situation just isn't as straightorward as that......because one of the MAIN aspects of the E&P business is that the quality of assets is frequently not a matter of fact, but is very much a matter of opinion! And that is REALLY important - and a vital distinction between the E&P business and, for example, making and selling widgits.
Let me explain why, using a hypothetical example (but where, with a little thought, you can see plenty of real world parallels - unconnected with any responsibilities I hold, incidentally):
Company A and company B drill an exploration well in Africa. It has results that seem inconclusive. The G&G people at company A are discouraged - but the G&G people at company B can see some real opportunities (having fully analysed the results), including on some nearby acreage owned by company C. If company B publish their view, then they alert the entire market to the opportunity. But if they keep it to themselves then they may be able to buy out company C and/or company A for much less than the real value....so it is clearly in their shareholders interests not to publish their opinion, despite the fact that their assets really do have more value than the market credits them with.
Examples:
a) Wintershall's purchase of Revus in 2008 for a 145% premium......check what has been discovered on those assets since ;-)
b) Tullow's acquisitions of Hardman and Energy Africa
c) Cairn buying out Shell at Mangala for about $8mn (IIRC)
Similar considerations will apply to things like development of discoveries, especially when one needs to negotiate access to third party infrastructure. I surmise that may have been the case with the Western Isles Development Mark refers to above:
Western Isles (WID), OTOH, will add 30kbopd gross, ~20kbopd net. [Figures based on a rough average of 1st 5 years production]. Pre- the two recent deals, that means that WID was highly material relative to current production of ~40kbopd. However, that production was never shown in analyst reports that I saw, NOR AFAICR DID TC EVER DISCLOSE THOSE FIGURES IN ANY PRESENTATION.
There is always a natural tension in an E&P company between:
a) telling shareholders everything and ensuring that the market value of the company is as full as possible
b) telling shareholders the absolute minimum and thus protecting the real value of the company itself and the opportunities available to it
Some may say that Cross erred more towards b) than was wise in retrospect. But that is REALLY not surprising for a company that has been a regular buyer and seller of assets. Information is money....and that money is the company's - and, indeed, the shareholders' !!!
And, in Cross's defence, I would say that is PARTICULARLY understandable to err towards b) if one cannot trust analysts to include all the value elements in their estimation of value. It is completely obvious that indeed analysts can't be trusted to include all the elements of value, even when they are made fully aware of them ...because they NEVER take account of drilling plans or developments that are planned to occur in a year or two's time, IRRESPECTIVE of how significant they may be.
A good illustration of this structural error in the analysis of E&Ps can be found in Goldman's May 2010 note on the E&P sector, which said of Dana (my bold):
Dana is trading at a more than 35% discount to its core assts at the
forward curve on our estimates. We believe that this level of discount is
unsustainable and that its reserves are attractive to investors looking
for leverage to the oil price. The exploration programme is also
attractive in our eyes – there is no exploration value discounted in the
shares and we believe that 2011 should see a material uptick in terms
of potential impact, with material wells likely in Guinea, Mauritania,
Senegal and Norway. Although this activity is currently too far out in
the future for the market to price in, this should roll onto an investible
time horizon in the next two quarters, further benefitting the shares.
So....Goldman (who were the only analysts I saw who even bothered to make the point) were flagging up future value that was ALREADY in Dana and in Dana's plans, but which the market wasn't taking any notice of!
No doubt the bid from KNOC has been driven by a very similar calculation, arriving as it did a mere 5 weeks after Goldman's note was published!
emptyend
"The valuations attributed to Dana by different analysts are very different from each other."
That tells me not that the analysts are idiots or not trying, but that there's something wrong with the way the company is giving out information.
"Even worse than the lack of quality in the raw numbers was the fact that the conclusions reached by the different analysts bore such little relationship to the analysis on which they purported to be based.....It was abundantly clear that the conclusions/recommendations had a different agenda to the "analysis" and had been inspired by someone other than the author of the detail"
Agreed. All professional readers of brokers analysis know all about corporate finance pressure, and read the analysis with that in mind. I have consistently tried to get BB amateurs to not even look at the headline B/H/S recommendation, and hardly at the top paragraph, but that message isn't always received.
"If I asked 6 structural engineers to calculate the size of RSJ i needed in a roof, I'd expect a narrow range of answers"
If you don't let them into the house, or give them the most fleeting of looks, or course you'll get a wide range of answers.
"As it is I sold just 4 times at times when there was no "sell" consensus and made money every time"
If every analyst says Sell, to me that's the time to buy. You shouldn't be looking for a Sell concensus as a time to sell. You've got to read the analysis knowing the game they play and how the system works. The time to sell is when excitement is hot and every bit of research suggests a Buy.
"the quality of assets is frequently not a matter of fact, but is very much a matter of opinion!"
I'm very well aware that the number of how many barrels of oil remain in a field is very far from an exact one. There's no dispute from me that there's a lot of soft judgement required. What I'd like is just a opening number of the companies best estimate put out, and if any analyst wants to dispute that he's welcome to do so in his text, but at least there's a workable starting position. If the numbers are independently checked every year, the "it's too subjective" line doesn't hold water.
"If company B publish their view, then they alert the entire market to the opportunity. But if they keep it to themselves then they may be able to buy out company C and/or company A for much less than the real value....so it is clearly in their shareholders interests not to publish their opinion"
I accept this argument, where perhaps there's a nearby block to be bought, but it should apply only to a few fields and only for a short finite time. Dana consistently almost never gives out detailed information on any of its fields, so that limited argument barely applies.
Incidentally, tournesol has in the past characterised my disclosure issue as being simply that the AGM presentations should be made available. I've seen a couple of AGM presentations, thanks to t himself who's sent them to me (or was it Dana IR, I can't remember). The AGM presentations don't contain the info I was after, which was reserves remaining analysed by field, and so whilst they were nice reading they weren't what I was after. It's not just a matter of publishing the AGM presentations more widely.
PS I've given up using the inverted comma tool for quotes. It's too difficult manipulating text from more than a screen upwards as the screen doesn't roll down if you pick up text and hold it at the bottom of the page, and copy/paste is not available. I'll just use italics for quotes from now on.
The AGM presentations don't contain the info I was after, which was reserves remaining analysed by field, and so whilst they were nice reading they weren't what I was after. It's not just a matter of publishing the AGM presentations more widely.
I'm getting a bit tired of all this. How many companies in the peer group that have stakes in, say, 30 or more fields publish such an analysis of their remaining reserves field by field on a regular basis? Please name names.
And whilst we're at it, how many companies do this regularly when they have only a few fields?
More Don Quixote than SirLurkalot, I think.......
How can the shares be valued without detail of remaining reserves on a field by field basis?
How can TC complain that the shares aren't valued at what he thinks is the right level if the information isn't made available? Isn't it a bit like asking structural engineers to calculate the size of RSJ required, without letting them into the house?
As you well know, no oil company regularly publishes the sort of details you criticise Dana for not releasing....which is why you haven't provided a list.
I don't well know that actually. All the other E&Ps I invested in have, sometimes in a bit of an obscure way, allowed out enough information to let me do a NAV spreadsheet. Dana is the exception.
Let's agree to differ on this. Continuing this same old Dana discussion isn't going to get anyone anywhere. IMO it's all over for Dana anyway.
Further to SirL's comment about TC potentially losing out financially from the absence of a loan note alternative, I wonder what his position would be in respect of LTIP shares if KNOC win the day? Ordinarily for a recommended offer, one would expect LTIP shares to be awarded in full regardless of unfulfilled performance relating to future release dates. Would that apply in a hostile situation though?
I see that TC has 480,000 LTIP shares due for release in November this year and October next. That's several million quids worth. Will he lose out on these? If so, in the absence of a counterbidder surfacing, will he change tack and recommend acceptance? Seems there might be an incentive for him and fellow directors to do so.
IMO, the market believes a counterbid is all but out of the question because of the mish-mash nature of the assets. They never were that attractive to anyone other than a unique lone buyer such as KNOC. I remain of the view that AM is irrelevant without a counter offer in prospect.
I note an article in Business week where KNOC plans to sell as much as $1 billion of debt to fund takeovers.
The Yonhap News Agency reported today, in the latest sign Asia’s largest economies are competing to secure global energy resources.
http://www.businessweek.com/news/2010-09-12/korea-national-oil-to-sell-bonds-to-fund-acquisitions.html
In reply to Davjo#705
I guess thats the last card left in the deck to play,with the DNX board voting through all the awards that crystalise on chabge of control(LTIP's etc )before being removed from office,but KNOC dont have enough momentum yet so dont think it will be played just yet..
FH
