Category: Financial Markets
The portfolio of export-orientated mines is based in New South Wales, Australia. Salable coal production expanded from 10 million tonnes in fiscal 2014 to about 15 million tonnes in fiscal 2021, largely due to the ramp-up of Maules Creek and the expansion of the Narrabri mine. Equity output is expected to grow to approach 19 million tonnes by fiscal 2023.
Whitehaven focused on increasing resources, reserves, and production through the boom. Maules Creek was developed despite a challenging external environment, and the subsequent ramp-up and improved coal prices from 2016 saw the weak balance sheet quickly repaired. Favourable coal prices are critical to generating excess long-term returns, but on this front we are circumspect. However, from near-break even profit levels in fiscal 2020, we see material longer-term earnings upside as coal prices recover.
Financial Strength:
The last traded price of the Whitehaven Coal is AUD 3.30 and the fair value as per the analysts is AUD 4.30, which shows that the share is undervalued.
Whitehaven’s financial position is relatively weak. The balance sheet deteriorated with the rapid decline in the coal price in fiscal 2020 and the payment of about AUD 300 million of dividends declared with the final result from fiscal 2019. The speed of the decline in the coal price, the production issues at Maules Creek and Narrabri, and the impact on unit cost drove a spike in net debt to about AUD 820 million at end 2020. At this level, Whitehaven is carrying more debt and leverage than most of its peers. The company had liquidity of about AUD 410 million at end 2020 with about AUD 100 million cash and AUD 310 million remaining undrawn on the company’s AUD 1 billion debt facility, which matures in July 2023.
Bulls Say:
- It is increasingly difficult for new coal mines to gain approval. This could dampen future supply to the benefit of existing coal producers with long life.
- Whitehaven’s Maules Creek and Narrabri mines will likely provide a core of low-cost production, while Maules Creek brings a meaningful proportion of metallurgical coal.
- The company is development rich with projects including the Vickery and Winchester South deposits. This underpins a strong pipeline of production growth, including some coking coal, for Whitehaven for years to come.
Company Profile:
Whitehaven Coal is a large Australian independent thermal and semisoft metallurgical coal miner with several mines in the Gunnedah Basin, New South Wales. It also owns the large undeveloped Vickery and Winchester South deposits in New South Wales and Queensland respectively. Coal is railed to the port of Newcastle for export to Asian customers. Equity salable coal production expanded from 10 million tonnes in fiscal 2014 to about 15 million tonnes in fiscal 2021, largely due to Maules Creek. The Maules Creek and Narrabri mines should be the key driver of an expansion in equity coal production to approach 19 million tonnes from fiscal 2023. Development of the Vickery deposit could see approximately 8 million tonnes of additional equity production from around 2025.
(Source: Morningstar)
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
the company has earned solid economic profits for decades. It reached the front of the pack in wireline evaluation in the 1920s, and it hasn’t relinquished its position since. Since then, Schlumberger has used its unrivaled expertise in understanding oil and gas reservoirs to not only drive a continuous stream of profits in its legacy business lines (embedded in the reservoir characterization segment), but also develop other oilfield-services business lines with nearly unwavering success. As one of many examples, the company pioneered directional drilling in the mid-1980s, a technology that today is recognized as an indispensable ingredient in the shale revolution.
Schlumberger is now applying its expertise to a somewhat different strategic focus: lowering the cost per barrel of oil and gas development via the provisioning of performance-linked services. Also, the company is prioritizing its digital capabilities, which will further support its capacity to boost efficiencies for Schlumberger and its customers.
Financial Strength
Despite COVID-19’s disruption of oil markets, Schlumberger remains in excellent financial health, with net debt/EBITDA of about 2 times in 2019. The company has $3 billion in cash and $3.5 billion in credit facility availability, and only about $3.5 billion in debt is coming due through 2023. The company to remain substantially free cash flow positive in the near term even as oil markets are still in the recovery phase.
Bulls Say’s
- Schlumberger has long spent more on R&D than all its service company peers combined and more than all the oil majors.
- The company has a multide cade record of innovation and a proven ability to generate shareholder value in even dismal oil market conditions.
- Asset Performance Solutions is a hidden gem within the company, likely to generate growth with high returns on capital in years to come.
Company Profile
Schlumberger is the world’s largest supplier of products and services to the oil and gas industry. The company operates its business via multiple groups: reservoir characterization, drilling, production, and Cameron. It is investing more than any other services firm to make its offerings more bundled, which it believes is likely to be one of the key industry trends during the next 10years. Efforts on this front are most visible via the Schlumberger Production Management business, which now accounts for 10% of its revenue.
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
