Q4 2019 Earnings Call
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Question during the session you would need to press Star then one on your telephone. Please be advised of today's conference is being recorded if you acquire any further assistance. Please press Star then zero I.
I would now like the hand, the conference over to your speaker today have with a Bailey General Counsel. Please go ahead.
Welcome to transatlantic Petroleums fourth quarter and year end 2019 earnings conference.
On the call today, we have Malone Mitchell, our chairman and Chief Executive Officer.
Michael Hill, our Chief Accounting Officer and myself.
During today's call, we will make certain forward looking statements, which includes statements regarding our belief goals expectations forecasts projections and future performance and the assumptions underlying such statements.
Please note that there are a number of factors that may cause actual results to materially differ from our forward looking statements, including the factors identified and discussed in our earnings press release, which we issued after the close of business yesterday and in our SEC filings.
Please recognize that that except as required by law, we undertake no duty to update any forward looking statements and you should not place undue reliance on such statements.
Now I will turn over the call to our chairman and Chief Executive Officer Malone Mitchell.
Thank you Dan good morning, ladies and gentlemen.
I mean that comments, you're gonna be brief and that are on track with her and we'll be glad to take your questions.
Our fourth quarter 2019 results were an improvement on both the third quarter 2019 in the fourth quarter of 2018 in many respects.
Is that since the beginning of the year have made most of this data irrelevant.
If you have questions about the fourth quarter 2019, or full year, we will attempt to answer those questions later.
After reaching nearly $70 a barrel for brand to hold on January bullish declined to approximately $25 per barrel in March.
Most respectable shore shoes now forecast this could drop further over the next 30 to 60 days before beginning a long recovery.
Hi, along with several of our senior management and directors have seen multiple price cycles in our careers, but there is never previously been a drop in demand of the magnitude. We are currently experiencing.
Actual numbers are hard to capture in real time.
The credible estimates place reductions and Consumptions at between 10, and 20 million barrels per day currently where our earlier imbalances lock in 2899, 11, or 2014 15 from a magnitude of two to 4 million barrels per day.
If in fact, Russia, Saudi Arabia, Iraq, Kuwait, and the UAE increased production several million barrels a day as they indicate very.
Very low oil prices and very high storage will result.
The drop in demand from slowing business in the Corona virus panic is now in real.
While the actuality and duration of increased production is still in the future and has an unknown duration.
We lifted our hedges on the rapid drop following the announcement of the as she had unrealized production increases that announcement move the market further than their announced target price.
Better force I would have realized a bit more proceeds.
The rationale to lift hedges and pay 100% are those proceeds toward debt were as follows.
First Michael material pay down debt.
And realize the bank.
Term loan payments.
To to basically eliminates a term loan payments on our bank debt for several months.
Next at that time resolution of the Russias, Saudi dispute was expected to increase prices, thereby reducing our proceeds and finally.
The desire to eliminate the tendency to procrastinate are needed changes so long as the monthly hedge settlement proceeds were available to support status quo activity.
There are four levels of expenses in energy company has to pay an order the highest priority there first our production operating expenses.
These are the electricity chemical field personnel, well repairs and some engineering necessary to keep the wells producing that their normal rates.
The cost to do this in our field to vary from six to $7 and our newer fields like Bahar any Evan arpatepe six to $7 a barrel.
And the increases in our own or less productive field slot shale model of up to 12 to $14 per barrel.
When you had the royalty the trucking topline expenses to these costs. These fields, Mike free cash flow from the price of oil is above 13 to $14 per barrel and our newer fields and above 18 to $20 a barrel in shell.
We will try to cut some cost in the operating cost of the fields, but our ability to do so was limited without jeopardizing operations.
Our next priority is our debt service.
Since 2014, we've been unable to secure revolver talk financing that our senior debt.
In February we were negotiating extensions with both our current bank and a new multinational by.
Those discussions were halted by the reduction in economics as a result of the oil price decline.
Our preferred stock represents an obligation of $46.050 million due in 2024.
Each month, we must select for that quarter, approximately 45 days before the ended the quarter to pay our dividend in either cash.
12% annual rate or stock at a 16% annual rate.
In February we elected at must pay this this quarter and cash.
At the current forecast oil prices. It is probable that all remaining 2020 preferred stock dividends must be paid and stock.
Since 2015.
Debt for the energy industry is generally secured by what you have in producing wells for your PDP.
In every way oil and every field in every country of the world.
Each wireless depleting its recoverable reserves every day.
This also means that accepting temporary increases from newly initiated secondary or tertiary fluids every well is declining and production everyday.
This dictates another priority in expanding which is to generate sufficient capital to either by drill for complete enough new whales are zones to offset the decline in production from your existing well base.
Without this any company will continually shrink.
And finally, your additional expenditure demands come from the other Gionee you have.
These are all of the things, which did not bring a barrel of oil out of the ground and get it to the refinery embattled.
Frankly, $25 oil doesn't work very well for our oil company or any oil company.
We need to make hard cuts in order to satisfy our operating expenses and very little will be left for any other priorities until we see oil prices rise substantially.
The board of directors has been discussing our revised 2020 plan on an ongoing basis since the dramatical price decline.
We will be releasing additional data as we approve modified plan.
I will now open the line to questions.
Okay.
Thank you as a reminder to ask the question you will need to press Star then one on your telephone to withdraw your question. Please press the pound team again that is star then one if you would like to ask your question. Please stand by what we compile the culinary roster.
Our first question comes on the line of 10 million with lean on from management. Your line is now open.
Yes, hi, Thank you for taking my question.
Good move for removing the hedges.
So you mentioned that.
We will remove that obligation for a few months.
Do you know when trends on ondeck need to start paying.
For the dad, and you have sufficient cash flow to cover that thank you.
We're paying interest only and our debt we only have a single loan out now which constitutes our 2019 loans. So our interest rate on that's about seven in a quarter percent.
I will resume pain partial payment in June and then we'll resume paying and pull payments in July.
And those payments for about $1.4 million per.
Per month.
If everything stayed as status quo right now we would not have sufficient money to pay.
That debt and maintain appropriate cash working balance is through the.
Maturity of that data.
We will make.
Cuts.
We will make cuts and but Tim to do so.
Okay. Okay. Thank you, though that that including and maybe we negotiate with the bank.
Extending alone.
Okay.
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We will make that effort.
All right the difficulty the difficulty is obviously.
Yes.
We will make that effort.
Okay. Thank you Michel I like on the Q.
There's no question.
Good things on the removing their heads.
Perfect perfect.
Perfect size would have.
Would have had asked remove it later in one of our one of our two ventures, we removed.
Much shorter duration.
The one thing I've found in the history of operating hedges or anything is it voice. It always makes you wrong whatever trade to make makes you wrong and obviously, if we have lifted it today, we could have realized.
Another but little bit more a little bit more money.
Well you cannot Pam the market.
Remember correctly those hedges within like around $70 last time, we pump.
We had one color, but it was over in April.
And.
Three white collar that had a base at $55 and than we had a pay fixed price edge on about a third of our oil production for the year 2020 that had I believe $60 30 seen yet although that may be off those numbers are all set forth in our 10-K.
Okay. Thank you.
Thanks.
Thank you as a reminder to ask the question you would need to press Star then one on your telephone.
One moment for questions.
We have no further questions in the queue at this time.
I'd now like to turn the call back to loan Mitchell for closing remarks.
I'd like to thank everybody that joined this morning, and as I said, we expect to update the public on the revised plan to Trans Atlantic in the near future. Thank you.
Good morning.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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Ladies and gentlemen, thank you for standing by welcome to the fourth quarter 2000, and light Pole Transatlantic Petroleum Ltd earnings Conference call at this time.
Like I listen only mode.
This presentation will be a question and answer session. The ask that question. During the session you only need the press Star then one of your telephone please be advised that today's topic just be a record. It if you acquire any further.
Please press Star then zero I.
I would now like the helicopter so what's your speaker today sat with the Bailey General Counsel. Please go ahead.
Welcome to transatlantic Petroleums fourth quarter and year end 2019 earnings call.
On the call today, we have Malone Mitchell, our chairman and Chief Executive Officer.
Michael Hill, our Chief Accounting Officer and myself.
During today's call, we will make certain forward looking statements, which includes statements regarding our beliefs goals expectations forecasts projections of future performance and the assumptions underlying such statements.
Please note. The there are a number of factors that may cause actual results to materially differ from our forward looking statements.
Including the factors identified and discussed in our earnings press release, which we issued after the close of business yesterday and in RCC filings.
Please recognize that that except as required by law, we undertake no duty to update any forward looking statements and you should not place undue reliance on such statement.
Now I will turn over the call to our chairman and Chief Executive Officer Malone Mitchell.
Thank you Dan good morning, ladies and gentlemen.
For me about comments, you're gonna be brief and that I think traveler.
Glad to take your questions.
Our fourth quarter 2019 results weren't Oh.
Third quarter of 2019, and the fourth quarter of 2018 in many respects.
But that's that's the beginning of the year have made most of this data irrelevant.
If you have questions about.
Fourth quarter of 2019 or four year will attempt to answer those questions later.
After reaching nearly $70 per barrel for at all in January also declined to approximately $25 per barrel in March.
Okay respectable shore shoes now forecast this could drop further over the next 30 to 60 days before beginning to Walmart Kerrobert.
I along with several of our senior management at directors have seen multiple price cycles at our careers, but there's never previously been a drop in demand the magnitude. We're currently experiencing.
Actual numbers are hard to capture in real time.
Credible estimates push reductions and consumptions at between 10 to 20 million barrels per day correctly.
Earlier in balances walk in 2899, 11, our 2014 15 or what magnitude of two to 4 billion barrels per day.
If in fact, Russia, Saudi Arabia, Iraq, Kuwait, and you are yi increased production several million barrels a day if they indicate.
Very low oil prices and very high storage will result.
The drop in demand from slowing business and the Corona bars panic is now and real.
Well, they actuality and duration of increased production is still in the future and has an unknown duration.
We lifted our hedge is on the rapid drop following the announcement of the actually net unrealized production increases that announcement moved the market further than their announced target price.
Her for so I wouldn't realized a bit more proceeds.
The rationale to lift patches and pay 100% of those proceeds toward debt were as follows.
First Michael material Paydown of debt.
And realize the bike.
Term loan payments.
To basically you eliminate the terminal in the payments on our bank that for several months.
Next at that time resolution of the Russia, Saudi dispute was expected to increase process, thereby reducing our proceeds of finally.
The desire to eliminate the tendency to procrastinate are needed changes so long as the monthly hedge settlement proceeds were available to support status quo activity.
There are four levels of expenses in energy company has to pay.
An order the highest priority there first start production operating expenses.
These are the electricity chemical field personnel, well repairs and some engineering necessary to keep the wells producing that their normal rates.
The cost of newness in our fails to vary from six to $7 at our newer fields like bar you any Evan Arpus happy six $7 a barrel.
And the increases in our own or less productive field schlock shale model of up to 12 to $14 per barrel.
When you add the royalty trucking pipeline expenses to these costs. These films, Mike free cash flow on across all is about 13 to $14 per barrel and our newer fields at above 18 to $20 of Merrill Lynch.
We will try to catch some cost and the operating cost of the fields, but our ability to do so was limited without jeopardizing operations.
Our next priority is our debt service since 2014, we have been unable to secure revolver talk financing that our senior debt.
In February we were negotiating extensions with both our current bike and I knew multinational bye.
Those discussions were halted by the reduction in economics as a result, with the oil price decline.
Our preferred stock represents an obligation to $46.050 million due in 2024.
Each month, we must elect for that quarter, approximately 45 days before the ended the quarter to pay our dividend and either cash.
12% annual rate or stock at a 16% annual rate.
In February we elected at must pay this this quarter in cash.
At the current forecast oil prices. It is probable that all remaining 2020 preferred stock dividends must be paid at star.
Since 2015.
Debt for the energy industry is generally secured.
What you haven't producing wells for your PT pay.
In every way all and every field in every country of the world.
Each wireless depleting that recoverable reserves every day.
This also lanes that accepting temporary increases from newly initiated secondary or tertiary plots every well is declining production everyday.
This stick takes another priority of expanding which is to generate sufficient capital to either by drilling or completing new wells are zones to offset the decline in production from your existing well base.
Without this any company will continually shrink.
And finally, your additional expenditure demands come from the other Gionee you have.
These are all other banks, which did not bring a barrel of oil out of the grab and get it to the refinery and they don't.
Frankly, 25 dollar all doesn't work very well for our oil company or any oil company.
We need to make hard assets in order to satisfy our operating expenses.
Very little will be left for any other priorities until we see oil prices rise substantially.
The board of directors has been discussing our revised 2020 plan on an ongoing basis since the dramatical price decline.
We will be releasing additional data as we approve modified flat.
We'll now open the line to questions.
Thank you as a reminder to ask the question you only need to press Star then one on your telephone to withdraw your question. Please press the pound kill again that is star then one if he would like to ask a question. Please stand by what we compile the culinary roster.
Our first question comes on the line of Chen Ryan Woodley announced and management. Your line is now open.
Yes, hi, Thank you for taking my question.
Good morning for removing the hedges.
Mentioned that they will remove that obligation for fuel.
Do you know when transatlantic need to start paying.
For the dad, and you have sufficient cash flow to cover that thank you.
We're paying interest only and our debt we only have a single loan out now which constitutes our 2019 loans. So our interest rate on that's about seven in a quarter percent.
I will result in pain partial payment in June and then we'll resume pay and pull payments in July.
And those payments for about $1.4 million per.
For Bob.
Yes, if everything stayed as status quo right now we would not have sufficient money to pay.
That debt and maintain appropriate cash working balances through the.
Surety of that debt.
We will Mike.
Cuts.
We will make capex and Tim too so.
Okay. Okay. Thank you, though that that including maybe we negotiate with the bank.
Extending the loan.
Okay.
Possible.
We will make that effort.
All right.
The difficulty the difficulty is obviously.
Yes.
We will make that effort.
Okay. Thank you Michel I like on the Q.
No question.
Well good things on that removing the hedge.
Well perfect perfect.
Perfect site would have.
For the past remove escalator and one of our one of our two ventures, we removed at a much shorter duration.
The one thing I've found in the history of operating hedges or anything is it a voice that always makes you wrong whatever tried to make might you wrong and obviously, if we have lifted it today, we could have realized.
Another but little bit more a little bit more money.
Right well you cannot Pam the market.
Remember correctly those hedges for putting like around 17 dollar last time, we pump.
We had one color, but it was over in April.
And.
About three white collar that had a base at $55 up than we had a pay fixed price edge on about a third of our oil production for the year 2020 that had I believe $60 or 30 seen yet although that may be all those numbers are all set forth in our 10-K.
Okay. Thank you.
Thanks.
Thank you as a reminder to ask the question you would need to press Star then one on your telephone.
One moment for questions.
Okay.
We have no further questions in the queue at this time I would now like to turn the call back to long Mitchell for closing remarks.
I'd like to thank everybody that joined this morning, and as I said, we expect to update the public on the revised.
Plan to Trans Atlantic in the near future. Thank you.
Good morning.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.