The FT reports today that Heritage recently rejected an informal 425p a share bid from the Middle East as "too low".
I also note that PMO is being touted as a bid prospect so (when the dust settles) it looks quite likely that M&A will warm up in the sector.
Possibly HOIL would make most sense to a Middle East player, given the political risk profile?
ee
Had a nibble on these myself yesterday at 251...presumably the weakness is mainly pertaining to the outstanding Ugandan tax issue and the threat of legal action rather than any unforeseen problem.
One wonders who previously bid 425p/sh for this outfit too. Seems to be very much a case of market over reaction, and a perfect opportunity to buy value cheap imv. Still adding to Soco holding as well which has creeped up recently.
The timing of the take up of the options was caused by the company being in a "closed period" for insider dealing purposes at the time when they were due to expire in May 2010, and that closed period has only just ended, with the period for exercise having been extended just long enough for them to exercise. The options were granted in 2005 or thereabouts, IIRC, when the share price was much lower.
The reason that the options were not taken up before May 2010, I suspect, is that the company had probably taken the basic decision to exit Uganda early in the period when options were available for take up, realised that they would receive a very large payment for that asset, and anticipated a one off dividend to shareholders. That dividend now means that they pay (-52pence) per share for those shares, ie. they pay 48 pence and receive the 100 pence dividend.
In terms of the current low share price, my belief is that this is a function of several considerations:-
1. The Kurdistan asset is still a fabulous asset, but the politics are still a very major worry - ie. they could end up recovering their costs and not much more. The fact that it is mostly gas is obviously dissapointing in the short term, but I like the fact that they can start getting income from gas powered generation at commercial rates quickly, without presumably interference from the Iraqi government, while things, hopefully, get resolved for the long term.
2. They "specialise" in dodgy places. This is fine while everything goes well, but people get nervous when it doesn't. For example, the much acclaimed (by HOIL) connections in the likes of Africa didn't stop the DRC from pinching two huge and promising awarded blocks back, despite Heritage having been involved in early successful work discovering the big field they sold to Maurel & Prom (can't remember its name) years earlier in Congo. Kurdistan also fits the dodgy category, Russia also perhaps (remember the Imperial saga?), Pakistan is hardly stable, and the Maltese acreage is the subject of dispute with either or both of those highly stable democratic neighbours Libya and Tunisia, I believe. Some would also point at Uganda in this respect, although I'm not convinced that we are right / Uganda is wrong, in that particular case. But in "interesting times" such as we are encountering in North Africa, Afghanistan / Pakistan etc, as well as the British courts and the Ugandan Revenue, I think this specialisation weighs on the shareprice.
3. In a situation where the company has lots of cash and says it is investigating opportunities in Africa and South America (no wonder it needs an aeroplane), its much vaunted "connections" strength may have been severely damaged by the Uganda fiasco. Don't forget that whatever deals they do in Africa will be subject to approval by governments which may well not like what they have seen in Uganda.
Regards.
No point buying HOIL at the moment Imho. The reason being the legal's of Uganda will take time to play out which is likely to mean no bid from an acquriror until it is concluded & secondly Miran drilling does'nt start to July and that is expected to take 5 months to drill atleast.
Anyone who followed the Miran drilling last year will be very aware of the delays on Miran.
Taking that into account and the summer fast approaching it could see HOIL drift.
BRIAN SMITH - VP of Exploration dumped all his shares in a 6:15pm RNS today : http://www.investegate.co.uk/article.aspx?id=201105101815033290G
I have to admit paying £700m for a large gas field in the Middle East was never an attractive proposition for me even though they have a large cash pile.
I would prefer to be a buyer when most of the market cap is covered by cash. A market cap of £400million seems more attractive so perhaps a share price close to 150p rather then 250p?
I also think it is daft that an exploration company is spending it's cash on buying back shares regardless of how much they percieve it to be cheap. Explorers burn cash & it makes a lot of sense to preserve as much of it as you can imho.
You need to read a bit further down the RNS Isaac:
BRIAN SMITH STILL HAS 1,120,000 OPTIONS TO ACQUIRE THE ISSUER'S SHARES WHICH WERE PREVIOUSLY GRANTED UNDER THE ISSUER'S 2008 REPLACEMENT SHARE OPTION SCHEME.
nigel
Having actual shares are far more tanglible then options where the holder has the right not to excercise.
Holding shares means one is exposed to the price, far more at stake then options.
One has to apply common sense and ask why the exploration director is selling when the shares are near their lowest point in the last 2.5 years.
No point wearing rose tinted spectacles trying to make the situation look better then what it actually is. One needs to get real otherwise it can send you to the poorhouse imho.
Hope that helps.
Having actual shares are far more tanglible then options where the holder has the right not to excercise.
Holding shares means one is exposed to the price, far more at stake then options.
One has to apply common sense and ask why the exploration director is selling when the shares are near their lowest point in the last 2.5 years.
No point wearing rose tinted spectacles trying to make the situation look better then what it actually is. One needs to get real otherwise it can send you to the poorhouse imho.
Hope that helps.
Here you go again.
Shooting off without considering the facts.
He's got options over 1,120k shares at a much lower price than the 80k he's just sold.
He'll get to exercise those options THUS it's quite simply a no brainer to sell.
I'd do exactly the same in his very positive position.
He's got options over 1,120k shares at a much lower price than the 80k he's just sold.
He'll get to exercise those options THUS it's quite simply a no brainer to sell.I'd do exactly the same in his very positive position.
This kind of horseshit i.e. bullish spin posted on TMF and here is not excusable & thus I must reveal the truth.
Brian Smith excercised options on 28th April, a RNS released just before the long weekend at 6:15pm : http://www.investegate.co.uk/Article.aspx?id=201104281815016735F
Brian Smith then sells these shares 6 trading days later & again publishing a RNS 6:15pm.
According to Nigel it is a nobrainer as Brian still has options remaining.
What is a nobrainer to me is an exploration director who has access to all the data & has a very good understanding of the geology does not want to take the risk of holding the shares & is very happy to sell up near a 2.5 year low.
So why oh why should someone like myself be prepared to buy the shares in the market and take risk?
Ding Dong...Alarm bells go off........
To quote a famous poster over on TMF - ROFLMAO.
He exercised at 143p and sold at 241p -a great ROI over 6 days.
Like I said - a clear no brainer when you have options over a further 1.12m!
I'm not going to debate this one any longer since you've clearly got an agenda here which to be quite honest is pathetic.
P.S. Just to be clear - I'm not saying it's good news just that it's not the "oh my god, the world is ending panic"
To be fair Nigel, I'd have to agree with Isaac here.
I don't like to see directors taking up and then selling options rapidly like this. Retaining more 'skin in the game' is important to me. Hell, its not even as if he made that much on the exercise and sale (not in terms of total remuneration/life changing amounts).
No, its not a campaign against Hoil by me. As Davjo knows, I had HOIL from way back when it was HOC in Canada and made a pretty penny out of it so I don't begrudge them their rewards but it doesn't sit well with me in terms of director perceptions.
D
I don't like to see directors taking up and then selling options rapidly like this. Retaining more 'skin in the game' is important to me. Hell, its not even as if he made that much on the exercise and sale (not in terms of total remuneration/life changing amounts).
Ok, here's my logic:
I see options being akin to an employee receiving greater remuneration.
Directors earn options through their work for the company thus selling them doesn't really mean much.
i.e. they are perfectly entitled to cash in their remuneration!
Clearly in this scenario if Brian Smith had no options left or evenonly had 80k shares in HOIL it would be a completely different matter.
Also worth bearing in mind that some directors won't like to keep all their eggs in one basket and 1.12m options is one HUGE basket.
Yes and no Nigel.
Taking the options as remuneration, effectively as a cash payment is risk free. There is no on going risk of loss so no direct linkage to shareholders.
A big remuneration package of cash salary, pension etc is very comfortable but having invested your own funds into stock, especially if done via on market, gives a very real and immediate realisation of what its like to be a shareholder with personal wealth at risk.
That's my take anyway.
I don't begrudge them their rewards but it doesn't sit well with me in terms of director perceptions.
Far worse, imo, was EO directors' selling en masse 12 months after some earlier large sales when they said that they didn't intend to sell any more in the forseeable future. In my book, 12 months is forseable future. Not that I blame them but nobody seemed to bat an eyelid because the shares had gone up a lot. Ditto Buckingham, when he sold $150m worth when HOC moved to the London market!
In Smith's case, we're not talking a huge sum(£80k less tax) relative to his net HOIL worth and in any event don't know the circumstances. I recall, for example, Soco's ex Conoco guy selling 200k(?) shares to settle some personal liability. Who knows whether Smith wanted to help one of his kids onto the housing ladder, whatever?
Of no particular consequence in my book.
No position
Whilst I am very sympathetic to the idea that people should be sceptical about companies where executives exercise options and then sell the stock, I think it is very unwise (and unfair) to overlook the potential of there being some extenuating personal circumstances.
I've seen several instances elsewhere of forced sales in order to fund divorce settlements and would also point out that if, to pick perhaps unlikely examples, the sale of the stock had been to fund a care home for his widowed mother or to rebuild his house to accomodate a crippled child, then one might feel rather differently about the sale?
Why not ask some questions before leaping to assumptions and erecting the pillory? Remember that any such personal circumstances won't appear in an RNS - and may not even be disclosed on enquiry - but it would be my guess that there are some such unseen factors behind the decision to sell.
I'd also note that HOIL have an active share buyback programme at present, so the view of the board as a whole would seem to be that the shares are cheap.
Finally, I should point out that insiders have very much more limited opportunities to buy and sell shares than the general public do.
ee
Thank you ee for some commonsense on this. Having been on both sides of this fence it is more rather than less likely that its releasing some cash for other life related projects than losing faith. Now if it was Buckingham I would have a different opinion.
Dont get me wrong Macrus, Im under no illusions as to the pressure of being a director (exec or non exec) and the constraints that puts on timing of market deals. Nor am I unaware fo the needs for access to cash for unplanned events (divorce etc - boy can they be expensive). Its just that I would have expected a director of long standing to actually hold some physical stock as opposed to options after all these years.
I wasnt criticising Mr Smith for selling and thus showing a lack of faith (quite likely he isnt) it was more a comment on a wider corporate comfort level if you were (liking to see directors gaining or suffering in line with shareholders).
davjo,
Far worse, imo, was EO directors' selling en masse 12 months after some earlier large sales when they said that they didn't intend to sell any more in the forseeable future. In my book, 12 months is forseable future. Not that I blame them but nobody seemed to bat an eyelid because the shares had gone up a lot
I think two major discoveries in 12 months took Encore beyond the foreseeable future whatever the elapsed timescale was. How many other companies have made two such NS discoveries in the last 15 years?
By the time they took the money out they'd already formed XEO. Any guesses as to why they might need the money? Have they had many non closed period opportunities since to sell?
Answers to the three questions on a postcard please.
They did get a nice price though. Unlike 12 months before.
repo
FWIW,
http://www.advfn.com/cmn/fbb/pby.php?user=stumpie
stumpie - 11 May'11 - 10:10 - 16777 of 16779
Understand that Brian Smith was forced to sell as part of divorce settlement.
Buffy
Thanks for clearing that up Buffy.
Also, glad to read ee's and macrus's views on the matter - I thought I was going mad at first.
Tha't why I love this investing lark - throws up new ideas everyday - should indirectly thank Isaac as well for enabling the debate to take place ;-)
Time to get back in to HOIL IMO
I have bought this morning....The recent IMS stated ..
Strong balance sheet with cash of approximately $353 million as at 30 September 2011, excluding $405 million related to the tax dispute with the Government of Uganda
A tax tribunal in Uganda and a domestic process are ongoing and in May 2011 Heritage Oil & Gas Limited ("HOGL") commenced international arbitration proceedings in London against the Ugandan Government. HOGL is seeking a decision requiring, among other things, the return of approximately $405 million currently on deposit either with the Ugandan Revenue Authority or in escrow with Standard Chartered Bank following HOGL's sale of its interests in Blocks 1 and 3A in Uganda on 26 July 2010. Heritage, having taken appropriate advice from leading experts, remains of the view that no tax should be payable in relation to this transaction.
http://uk.advfn.com/p.php?pid=nmona&article=50048834
Ofcourse the above is not new to readers who have been following this stock, I just think at 180p it is a better low risk bet then it was earlier in the year at £2.50-3. So Tony I am happy to back you at 180p.
Any positive news on the arbitration will see this turn around swiftly, not to mention if they find Oil in Miran from the current and fortcoming wells in Q1, exciting times.
If HOIL recover the $405m plus cash on the balance sheet then the market cap is trading below cash with Kurd, Russian, Libyan, Tanzanian assets thrown in for free.
Also did'nt the FT report earlier in the year of HOIL rejecting a 425p bid ? I wonder if they come back, 425p must seem more tempting for management in the current markets.
