The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
McLondoner,
I replied twice yesterday but both have failed to appear. Maybe I have filtered myself?
Anyhow in short, thanks for your efforts and explanations. My Jan / Feb figures differ by about 400boepd. I don't know how far back you went for averaging but I guess recent form at Magnus would explain that difference.
Trainspotting isn't far removed from Tanker Watching.
GLA XXX
Romaron, I agree these problems will be solved. The problem with an FPSO like Kraken, is that everything is bespoke, and design conflicts between the designers, the constructors, the owners (Bumi) and the customer (Enquest), coupled with the fact the initial designers are dealing with an unknown in terms of the exact production profile and water cut, make the chance of minor problems happening very high. The cost of not fixing them is high, so everyone is fairly well aligned, but the solutions then require bespoke engineering design and manufacture within the window of what can be physically installed, and minimising any production outages during the change. That is why there are planned shutdowns every couple of years on every facility of this kind, when the pipes can then be purged of flammable hydrocarbons, and parts safely changed out. I am sure a lot of changes are scheduled for the planned shutdown, but not much can be changed without 12 months of planning and manufacture, and the sheer logistics of changing out heavy parts in limited spaces.
Don't undersell yourself Londoner. Trainspotting can be stimulating and exciting. You'll find many fans here. What you bring to this board is valuable, especially in the fact that digging deeply into the figures drives away the more puerile posters who shrivel in the face of reality. Who knows what you'll dig up? Stress testing at this level leads to other discoveries and I follow the gist of most of what you write. I am also aware that this comment of yours is germane " I very happy with this because the 'not knowns' in total account for less than 1% and some of this will be fuel gas, so would reduce the error further." There is the danger of missing the wood for the trees but rest assured there are those among us who can only see wood (mainly because we can't do trees).
The performance of the FPSO or the price of oil can crater all your hard work but the complete picture is always worth knowing and feeds into our decisions, buy, sell, hold, continue watching or short the stock. You are definitely a welcome poster.
Years ago I met a deep sea diver on a skiing holiday (he had fcked up knees but tackled everything) he also rode a 1000cc motorbike. I guessed he was a risk taker and said that you need to be brave to do his job. He disagreed because he said the money involved (100's of thousands of dollars a day for a rig) meant that everything was done to ensure he didn't drown (think airline pilot). He also praised Bob Crow who as head of RMT ensured that he earned loads of money. The point of this anecdote is that I am in contact with another investor who doesn't post but works in the industry. He is confident that the problems with Kraken and the FPSO will be solved because there are very good success bonuses for the engineers that solve the problems. Maybe ProdOpt has a view here?
I missed out one sentence. Read this as the 3rd paragraph.
The net OAG oil numbers for Enquest production is 55,240 (Jan) and 51,825 (Feb).
The main benefit of this data is tightening up the revenue forecasts with a better gas split - roughly 10% of production is at the gas price of $36 rather than $65. That said a few bucks on the oil price or an extra 1,000 barrels of oil make the adjustment somewhat insignificant.
Maybe I should stick with my other hobby, train-spotting.
Hi Therapist, this is how I reconcile my EOG number to the ENQ number. I'll just take the Jan-Feb 2019 numbers as an example.
ENQ stated 67,700 boepd for the first two months of 2019. No Malaysian number given so I use the May update of 8,693 boepd and deduct that to get North Sea number of 59,007 boepd.
Now the gas. You know how tedious it is to transfer the OAG numbers to a spreadsheet. After testing the idea on Magnus I decided to average gas data since Jan 2018 for each asset to get a oil/gas ratio and use that in my spreadsheet to produce the 'OAG number for gas. My OAG gas numbers for Jan and Feb are 9,161 boepd and 8,705 boepd. If you've done it the hard way your numbers will be different but I hope close.
When I add the OAG oil and gas numbers together they are 6% higher than the ENQ number for the first two months of 2019. I guess you have got at least this far.
Now I turn from a mathematician to an engineer. The OAG gas number is for all gas production. The biggest Enquest gas producer, by a mile, is Magnus, so that's the one I first focused on. We know that 3rd party gas is pumped into the field - lift gas. I'm assuming that the OAG don't count the gas twice so the gas number is net (produced gas minus any gas pumped into the field). Enquest refer to a component called 'shrinkage' to cover process fuel, terminal flaring and value adjustments but it occurred to me that these are post field components. Terminal flaring is not field/rig flaring and process fuel is not platform fuel, e.g., "The Group is required to contribute fuel necessary to process the hydrocarbons at the Kinneil Oil Terminals". Therefore, to obtain the ENQ gas number we can deduct flaring and fuel for power generation. The Magnus field uses 12Mscf of fuel gas or 2,068 boepd so I deduct that from the OAG number. I researched each field and where there was no export gas option I deducted those numbers. The not knowns are left in. Some are fuel and flare. After all of these adjustments the total EOG number is 0.8% above the ENQ number. I very happy with this because the 'not knowns' in total account for less than 1% and some of this will be fuel gas, so would reduce the error further.
The purpose of this exercise is to predict ENQ numbers based on the reported EOG data.
I don't know how it will come out but the following is my gas table:
Jan-19 Feb-19 Mar-19
Gas
Alba 76 71 67
Alma Excess flared 0 0 0
Broom Lift gas 0 0 0
Conrie 4 4 4
Crathes 60 57 59
Deveron Gas export 54 44 46
Don SW Gas export 76 75 81
Gadwall Fuel not known 21 22 14
Galma 0 0 0
Goosander 20 20 18
Grouse 41 39 0
Heather Lift gas 0 0 0
Kraken Flared 0 0 0
Kraken North Flared 0 0 0
Magnus Net fuel 5,166 4,796 4,604
Magnus South 0 0 0
Mallard Fuel not known 107 95 93
Scolty 0 0 0
Thistle Gas export 447 474 449
West Don Gas export 39 35 32
Ythan Gas export 52 50 50
PM8 Seigli 0 0 0
Tomborran 0 0 0
6,164 5,781 5,517
10.0% 10.0% 8.7%
Hi,
All really interesting stuff being discussed currently so thanks enquestrians.
You're touching on production again and I thought I'd throw in that I added oga gas data to my sheet
https://www.dropbox.com/s/biy0t1an47e9aub/Enq%20BOEPD%20Total%20against%20Kraken%20and%20Magnus.jpg?dl=0
The intention was to find a logic in the difference between OGA and company figures but proved too complex in the end.
My neighbour has leant me "A History of Royal Dutch Shell ", three mighty volumes and appendices. I'm going to know some stuff to impress fairly soon. Look out . . . .
Svensk, MO, thank you for your responses. I've also taken up this query on another board and the responses are similar to yours, but I have got a spec sheet out of it. I've reached the point where I'll pass for the moment. The ENQ reports of 500K offloads is also a big slap in the face against my logic. But I'm inclined to continue using my numbers because in spite of everything they are giving me the reported bopd numbers from the OAG and ENQ.
The acid test will be the May and June numbers.
Best, londoner7
Svensk, thanks for your clarification.
londoner7
One will not use the gross- or net tonnage when computing a tankers cargo. DWT is the number you should look at, and deduct the weight of crew, water, fuel etc. which will be a rather small number, a couple of % of the DWT max.
Kraken can store 600kbo, therefore hook up will likely happen when at 500kbo to provide some extra time in case of issues.
Also, pretty much every offload is conducted by an aframax, which has a higher day rate than smaller tankers. That would suggest that a capacity of 400kbo is not enough - 500-560kbo is probably correct and fits well with the aframax standard capacity of about 750kbo.
gkb47, the OAG number for March Kraken is 32,288Kbopd. In their latest update ENQ gave numbers for Mar-April of just over 33Kbopd. Deducting the OAG march number I'm expecting an EOG number for April of around 34.7Kbopd.
I think tanker watching can provide insight into the number ahead of OAG figures. It's just getting the metrics right. I don't claim to know the right ones, I'm just trying to understand them.
The OAG also report gas, about 900boepd for Mar. But as far as I know this is flared, it certainly isn't exported. While reviewing past posts around the tanker question I noted comments that the gas is used as fuel. The power generator on the Kraken is BIG by common standards 63MW. In an earlier post it was speculated that it would use 1,500bopd of gas (dry?). Also, I've seen informed comment that ENQ are looking at a gas pipeline. I've assumed this is to import fuel gas. One of the problems reported with the facility is power generation. The spec for the equipment is that it is mixed fuel use. Pure speculation on my part but perhaps it struggles with 14API crude - it's heavy stuff.
MO, thank you for responding. I'll take each section in turn.
Cubic capacity - The cargo carrying capacity of a ship. What is your reference for 120324m3? I have not seen this term used for oil tankers.
Deadweight (dwt) - I think this is clear and we are in agreement. A weight measure, and the difference between an empty ship and a full ship. The difference is the addition of cargo, passengers, fuel, water, stores, dunnage and such other items necessary for use on a voyage, which brings the vessel down to her load draft. 105306t.
Volume and weight considerations - I agree with this part, "The volume is static 6.29 barrels = 1m3, weight is variable and dependent on the weight/API Gravity of the Crude, i.e. Kraken Crude is 14API". You say 14API is some 15% heavier than 30API I think it's more like 10% but let's use density numbers, and I know these vary with temperature, for 15API of 972,509 Kg/m3. The conversion factor for Kraken 15API is 6.29/0.9725 = 6.5.
You say, "this is where volume capacity is reduced, as the weight of the crude at max volume exceeds the deadweight, therefore max capacity has to be reduced." I think the more relevant statement is, if the weight of the cargo means the deadweight is exceeded then the cargo must be reduced. But we are talking about an oil tanker - we are not contemplating the transportation of gold bars.
Imagine I own an oil field and I want you and your oil tanker to offload and transport it to Singapore. Do I know your fuel, crew and supply requirements? No, and you wouldn't get the job. I want to know your cargo capacity to carry crude oil and I know the API of my crude. It's 15API so give me a metric I can use.
Tonnage - A measurement of the cargo-carrying capacity of merchant vessels. It depends not on weight, but on the volume available for carrying cargo.
Gross tonnage - The entire internal cubic capacity of the ship expressed in tons of 100 cubic feet to the ton, except certain spaces which are exempted such as: peak and other tanks for water ballast, open forecastle bridge and poop, access of hatchways, certain light and air spaces, domes of skylights, condenser, anchor gear, steering gear, wheel house, galley and cabin for passengers..
The 15API crude oil capacity of Atalandi is 59781*6.5 = 388kbo IMO
The offload time is a good indicator. If it's short there's a problem. If it's long it's generally good but we don't know if there has been any hold up. Until I have confidence in these numbers I'll use 388/26 = 15K barrles per hour.
Thanks again for responding. Needless to say I'm still not convinced about the offload quantities. Hopefully others can help clarify the difference between these 500-550K offloads and the reported bopd numbers.
Best,londoner7
Hi Londoner7
Are two parameters that ultimately limit storage on a tanker... First is Capacity, this is in Cubic Metres (m3), the second is deadweight usually in metric tons.
For Atalandi = Capacity of volume (Cubic (98%)) = 120324m3 and summer deadweight (colder water is more bouyant) of 105306MT.
The volume is static 6.29 barrels = 1m3, weight is variable and dependent on the weight/API Gravity of the Crude, i.e. Kraken Crude is 14API, so is some 15% heavier than 30API brent for the same m3 volume, this is where volume capacity is reduced, as the weight of the crude at max volume exceeds the deadweight, therefore max capacity has to be reduced.
http://www.sigma2c.com/16api_gravity.html
It can become further compicated with ballast and compartmentalisation etc, so is always best guess, a good indicator is AK offloads at around 20k barrels per hour.
Hope this helps a bit... MO
Good morning L3
I see you know your stuff and numbers very well with Enq.
But the way it comes out it sounded pessimistic talking about new Mercuria loans and OZ using Londoner numbers.
I am glad you upbeat about production and I take it as you use now 70k as a base case.
Please give your estimates for FCF remaining 8 months of the year given current oil price and hedge.
Also split the FCF for RCF and OZ.
I am also interested in your view of 2020 capex.
Personally I would vote for limit them as much as possible as after this year we fixed so many things.
4x2 Magnus/Malaysia drills, Kraken DC4, Pipelines in north sea.
For me it would make sense limit capex to 50-100 million or even close to zero and just run out FCF and come on top of the economic situation for the company.
Thanks Svensk,
I'm new to ship measures and thought it would be simple to determine a ships carrying capacity. You've used the dwt and used a conversion factor. I've struggled to clarify the measure and come up with a value that matches the 500-550K barrels many posters here expect, alongside the fact that every update from ENQ points to 500K offloads.
My findings suggest the gross tonnage should be used with a conversion factor of 0.73 (multiple) applied for Brent, with gives 436kbo. A conversion factor that's very close to yours except yours is a divisor. I would also apply some minor adjustments for the heavy oil and a conservative 95% loading, but that's detail.
We now have two numbers, your 750Kbo which would suggest the ship has sailed to the US at 70% capacity, or my 436kbo which very much at odds with other posters expectations, and the 500K offloads declared by ENQ - my confusion is compounded by the fact that I can't find an error in Enquests claim. I trust their number of cargos and the total production given aligns with the OAG numbers. Yet my numbers agree with the monthly April 2019 numbers declared by EOG and ENQ - for clarification I'm subtracting the EOG Mar number from the ENQ Mar-Apr number.
Can any of the tanker watchers clarify how the carrying capacity of the Atalandi is determined?
chilting, e121, MO
londoner7
105306 dwt would suggest ~750kbo. The math behind it is 106304/139.1. Where 139.1kg would equal one barrel of Brent crude.
L3, you're right to point out the fixed cost aspect in the OpEx - I had completely missed it in my response to the earlier query.
I understand the offload calculation around the 500K/ 12 day / 40K+ sequence. Every update seems to point to 500K offloads, but the monthly OGA number or ENQ monthly numbers don't seem to support it. Jan-Feb 18, Apr 18, Apr 19 all come up short.
Question to anyone. What is the max load (crude oil barrels) of the Atalandi taking the latest Kraken offload to the US? I'd appreciate a reference or calculation.
Blimey guys cheer up FFS ! Soon be Christmas. 5th year of the bear market in oil, soon that will change and when it does it will fast. Enq are though the storm and the sun is starting to breakthrough Another year of frustration and then the bull will be back in control
L3 - i wouldnt spend a second thinking about anything e121 writes - he gets emotional IF you write anything that doesnt sound vaguely optimistic.
All these great numbers and future FCF and we still stand at 19p !! The number crunchng means Jack as sentiment and market expectations for enquest is in the gutter literally.. At the end of the day we are all here to see a improved share price and some of us in profit because 99.9 % off us are not .. Even AB is underwater even though fundermentals are improving day by day but the bottom line is no one is making a bean here only a few lucky traders or shorters ..
Hi Londoner7, E121 and Pelle,
E121: Let me start by saying that the view that I am king/queen of pessimism and the epitome of a 'glass half empty' person, as you label me, misses a lot of what I wrote, and that i got right in the past. If you read what i wrote about Kraken's production, it is very upbeat. I am delighted with how AK/K is being turned around, and my production forecast is not pessimistic at all. W/ regard to FCF, I never said that the ring-fenced cash flow from the Oz loan does not reduce overall net debt. All, I did using Londoner7's figures was to highlight that the CFO will have to thread carefully with managing cash to meet October's RCF repayment, w/out having to resort to legitimate, but not liked by brokers (see WSJ article June 7 on the ways shale companies have to resort to manage their cash flow: "U.S. fracking boom are turning to asset sales, drilling partnerships and other alternative financing to supplement their cash flow. These forms of funding often come with higher interest rates or carry other downsides, such as giving outside investors a hefty share of future oil and gas production"; these are extreme and by no means what ENQ does, but ENQ has done two deals Mercury and the Oz Loan which are a very soft version of giving future production in exchange for cash now). That is all. Note that the figures provides by Londoner7 still bring net debt down to $1570M. So not bad at all. Indeed, that is on top of the repayment of close to $70M of BP vendor loans, the unwinding of the favorable working capital position, and a bit more of the $600M BP will eventually collect out of its 50/50 sharing deal. not bad!!!
Pelle: I was not pessimistic, but alluding to the sequence of cash flow calls. I forgot your Dividends :)
Londoner7: Many thanks again for all your great work. In the past Fernan10 use to marvel us with his detailed analysis. Since he left this board, it is wonderful to have people like you, who present a balanced view of the company's financials.
A few comments on your analysis/questions by others:
- ENQ's guidance for OPEX was $600M (the OPEX that you have is slghtly below that as you noted). This means it is like a fixed cost, so any revenue from extra production squeezed from the producing fields goes all to FCF apart from $5/bbl for transportation costs. So, squeezing another 1Mbbls would add $60M to FCF, using your $65 POO.
Hopefully the production for 2019 will surpass 70K boepd. I am hopeful Magnus will overdeliver (it is also possible that the drilling of the two wells gets delayed to conserve cash).
- Kraken offloads are on average above 500K bopd. Note that the first 35 offlloads amounted to 17Mbbls extracted, and there were a couple of light loads among those (MO or Chilting could tell you more). This means the average offload is above 500K. With 12-day cycles AK can be producing 43K bopd.
- Oz loan: cash sweep occurs every 3 months: 1st payment of interest/capital was in January.
B
Pelle, good spot.
"I see it more like cashflow was 50+50 million first 4 months" I agree.
"May / June looks like around 40k." I hope so, but don't think so. I'm not convinced by the 12 day offload schdule equals 40K+ argument A far as I can tell it didn't apply in April.
Without knowing the CapEx schedule we can't extrapolate the first 4 month numbers. There was a maintenance period on Magus during May - we don't know the impact of that. There are maintenace activities on the other assets in H2.
If my projections are correct and Brent can hold the $60-$70 range then Enquest will be siiting nicely going into 2020. If your slightly higher FCF projection is correct then even better.
ENQ wouldn't normally report production numbers between now and the interims early Sept. We'll see OGA numbers before then, but if things are looking very good or the market is spooked for some reason maybe we'll get something before them
Hi Londoner
At the end of April 2019, net debt was $1,724 million, down from $1,774 million at 31 December 2018 reflecting strong operational performance and a supportive oil price more than offsetting the anticipated unwind of the c.$50 million favourable working capital position at the end of 2018.
I see it more like cashflow was 50+50 million first 4 months
And Kraken average 28k gross first 4 months
May / June looks like around 40k.
So to get out FCF 100 million in 5 months should not be difficult.
And as you say they have 230 million cash too.
L3, thanks for your comments and highlighting the debt obligations. You point out three, OZ, Mercurial and the RCF.
OZ - I don't know if FCF is the right term here, I need a lot more detail to calculate that, or if operating cash is a more appropriate metric but I'm with e121 in the sense that cash flows from the 15% accrue to ENQ and they are required to make repayments from this, so essentially it is a fixed loan repayment to OZ. I note interest on this loan was capitalised in 2018 so presumably cash flows didn't reach some threshold (anyone?). More to the point, the OZ repayment wasn't shown in the slide graphic on the repayment schedule, so will be an extra outgoing payment this year.
Mecurial - this repayment is shown on the slide under the $25m 'other loans' and accounts for almost the entire amount. As you say this should have been repaid - I believe during April.
RCF - the facility dropped to $680m with a $105m repayment during March and April. A further repayment of $100m is due in Oct. The question you raise is on the headroom for that payment.
Here's my take:
At the start of the year headroom (cash and facilities) was $309m. Mecurial and RCF repayments will be $230m, with a $205m drop in the facility. Using my $194m FCF number I make end of year cash and facilities
309+194-230-205 = $68m, with my estimate of a $36m Oz repayment to come out of this. And the final RCF $100m repayment is due in Oct, so scheduling is something to consider.
We had an update at the end of April. Cash and credit facilities of $231m. Working the numbers, 309 (2018)-105 (RCF reduction)-231 (April)+25 (other loans) = $52m FCF.
This is corroborated by the debt reduction 1774-1725 = $50m, as it should be. Perhaps there are $2m of other loans still due.
The big unknown here is the scheduling of CapEx but I guess this is largely under ENQ's control as they are operators with majority share holding across all assets except Alba.
If FCF comes through at the same rate then in Oct after payement and reduction in RCF cash and credit facilities would be 231+75-100-100= $106m.
No doubt ENQ are focused on the same thing you've (L3) highlighted, but they do have options. Of course, as e121 points out, if the oil price cracks then it's a whole new ball game, but we all understand that.
Lol E, Squif is harmless and just making cynical jokes because disappointing SP. Let’s see how golf goes, looks like a tight field so far. Will be interesting watch Sunday
Yes, I'm watching the US Open on TV and (watching Brent too ) Justin played well. Maybe not as well as yesterday. Rory is playing now and I'll watch him for a bit. Henrik did OK too.
I thought the glass less than half empty was reserved for HRH Squid. ;-) Are you saying that L3 stole the crown today? lol...