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Hi,
Due to loss of dramatic impact I would like to make it clear that my glass is now full rather than half full. I thank you.
GLAXXX
Hi L3
update soon but . . . a bit harsh??. From the recent update . . .
Point 2 -
Magnus - Average production for the first six months of 2022 was 12,754 Boepd, impacted by a pump and well integrity failure in June. The 2022 well work campaign is underway, with the North West Magnus well expected online in the coming weeks. The long-term plan to enhance production and mitigate risk of future well failures is progressing, with two wells successfully returned to service in the first half of 2022 and with further well work planned in the second half of the year. Preparations are underway for the three week shutdown planned in the third quarter (hopefully July??), with the key workscope being a compressor overhaul." So the problem child is entitled to some downtime??
GEAD - "Year to date June production was 7,060 Boepd. Production efficiency remains strong at 95%, partially offset by gas lift maintenance and natural decline. The joint venture has approved a two infill well drilling campaign to commence in the fourth quarter of 2022, with first oil expected in the first quarter of 2023" Lets give that a bit of maintenance time also??
My glass is currently half full but as you can imagine I am very shortly going to make it half full before tomorrows update.
Can't say I haven't been disappointed before . . .
GLAXXX
hi Londoner7,
"I want to see bond restructuring complete, thereby easing market concerns on debt and substantial FCF, which is what's left after CapEx, Decom, law suits and other stuff is deducted from EBITDA."
no bond restructuring for a while, in my view. very difficult to convince investment bankers to lend money at an interest rate lower than current cost of current debt.
what do we know?
i) most likely RBL facility at $0 M at the end of August. why? because payment for oil&gas is 45/60/90 days after delivery in lots of contracts. so payments for april/may/early june production received in july/august. (april/may production was fine)
ii) ENQ could and can use cash raised through issuance of new Retail bond to buy back current HYB. So close to $70M available to buy back those HYBs.
iii) cost of debt of HYBs less than 9%. ENQ cannot issue debt with lower cost than that. not just ENQ. others cannot either. why?
1) fiscal regime is unstable (applies to all companies): 2nd EPL being discussed. worse, EPL is computed over adjusted profit which does tot treat interest payments as expense (this actually makes cost of debt 25% higher because interest expenses are taxed at 25%.)
2) production is low at the moment as per the OGA data. look at July data: "problem child" on her worst behaviour, wit only c. 10Kboepd; GEAD's production given ENQ's WI, at 5.6 Kboepd in July (huge decline from last year, totally tanking). fortunately Kraken doing fine, and malaysia too.
3) hardly any production in 2023 or 24 hedged.
So, i am afraid i am not expecting debt restructuring now. easier to keep buying back bonds with monthly cash flow or to accumulate cash for a few months.
anyway, i no longer follow ENQ closely. so, all above just a first pass.
ATB
Reflecting on the recent HBR and Ithaca updates I was struck by how low their realised gas price was in H1 compared to the 'month ahead' prices we often see reported on the news.
I suspect the company's realised prices are more reflective of 'day ahead' pricing and perhaps includes some smoothing, say last 5 day average - I'm guessing now.
I estimated the 'month ahead' pricing to be c.230p average in H1, but HBR stated a realised price of 176p, which is more reflective of the 'day ahead' price data I've seen.
The relevance to Enquest is that it prompted me to look back at a post here a couple of weeks back and make a correction.
I said, "Breaking down the 2021 numbers my estimate for gas is that Enquest sold 1,398 boepd (c3% of reported production) @ $86 boe, for $44m.
For 2022 using 1,400 boepd and a price of 250p/therm for H1 and 400p/therm for H2 (pick your own numbers). This leads to c$50m in H1 and c80m in H2."
Using HBR's 176p/therm I now see H1 gas revenues (excluding 3rd party purchases) at c.$32m.
* The debt ratio is NET debt to EBITDA and AB has mentioned a target of x0.5 but I don't recall any August target. I can see bond debt up to $500m in alignment with the 0.5x target. In practice gross debt may be a combination of bonds and RBL drawdown, assuming an RBL is still in operation after restructuring. In any event c.$150m of bond debt is in place out to 2027.
But what is the current EBITDA? The latest update implies $880m. Is that H1x2 or H1 plus 2021 H2, i.e. rolling 12 months. But EBITDA isn't my focus. I want to see bond restructuring complete, thereby easing market concerns on debt and substantial FCF, which is what's left after CapEx, Decom, law suits and other stuff is deducted from EBITDA.
Hi external,
A bit late to the topic but here is my take on gas.
https://www.dropbox.com/s/5qxu2z5gkfwlxdd/Enquest%20NSTA%20Boepd-%20Gas%20-%20Saleable%20Production%20-%20Jun%2019%20to%20May%2022.pdf?dl=0
This is gas that could go in a pipeline and be sold. If it does then not all income to Enquest, like what McLondoner said. Malaysia as always a big guess based on historic income. Magnus and Malaysia mostly but boosted by Golden Eagle of late.
GLAXXX
externaltothebox, the numbers I present are my estimates of cash flows from gas production, but I qualified them with operating costs solely attributed to oil production. Also, I should add that BP receives 37.5% of free cash flows from Magnus.
The numbers don't strictly represent gas free cash flows to Enquest. They are a construct to get me to an overall estimate of free cash flow for 2022 - oil and gas combined, with BP getting 37.5% of the Magnus contribution.
Thank you L7.
Yes Magnus has 3x frame 5 Turbine gensets, so flat out probably consume ~100MW, but maybe some redundancy.
It’s more straightforward to infer cash flow as you have shown and that’s quite an impressive step up in gas cash flow this year - ~10% of outstanding debt and ~20% market cap.
I wonder what the other 95% of enq production will contribute alongside that!
mrc, thanks for the clarification on Magnus fuel – diesel not an option.
Kraken power plant is also split between two generators. Yes, the generators typically burn diesel. But given the production of c800 boepd of gas and no gas export option, it is a waste not to use gas fuel if there’s the option. IR have told me that gas volumes are insufficient to fully support production – my interpretation is that no gas fuel is used.
I’m sure the NSTA monitor the situation and would insist that gas is used as fuel rather than flared if that’s possible.
Londoner - Magnus does not have capability to run on Diesel. Even if they could I doubt it would be much cheaper given high refinery margins and cost of bunkering regularly.
Kraken can run on crude, diesel or gas. They were running on diesel I believe when POO was lower and Kraken oil was commanding a premium.
externltothebox, you can extract gas production numbers from NSTA data – several posters here log the data and post excellent spreadsheets. Your 5% number for gas production is a reasonable estimate.
But most of Enquest’s produced gas comes from Magnus and a substantial part of that is used to fuel the facility. As you note there is also gas ‘passing through’ Magnus. This is gas contracted to be injected into the field but now not fully utilised and therefore passed through the export pipe for sale. There has been discussion here on any benefit to Enquest from these ‘passing’ volumes, but my conclusion is that it is effectively neutral. Gas volume sales account for 15% of total volume sales in 2021, so c10% of total sales represents contracted purchased volumes into Magnus)
As an investor, my interest is in the net cash flows resulting from gas. In 2021 subtracting the contracted cost of purchased gas from gas revenues leaves a net gain of $44m. I apportion total operating costs to oil production, so in my cash flow calculation the benefit from gas was simply $44m.
Breaking down the 2021 numbers my estimate for gas is that Enquest sold 1,398 boepd (c3% of reported production) @ $86 boe, for $44m.
For 2022 using 1,400 boepd and a price of 250p/therm for H1 and 400p/therm for H2 (pick your own numbers). This leads to c$50m in H1 and c80m in H2. A gain of c$85m over 2021, and a useful contribution to the c$250m expected loss on oil hedges in 2022.
An unknown is the degree to which Magnus gas fuel can be substituted by diesel, but I’d guess the impact is small in the bigger picture. Next month’s interim report will reveal the H1 cash contribution from gas, which can be easily extrapolated into H2.
Can someone help with what % of production is gas? I have used 5% but seem to remember there was some discussion around Magnus pass through being included in that?
Any gas that is unhedged will be giving us a boost while we work through those oil hedges.