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I get $69.80 now. Don't worry I think we're getting on people's nerves now. There is always a cost even if it is opportunity cost but it is the kind of debate that is better over a drink than filling up a message board. Just as people realise we're not gonna be hit by tops and bottoms for a percentage of our production. I enjoy your forecasts and the effort that goes into them.
Romaron, i don’t see any price for June 2023 in that link
Hi Pelle - is it? I've got $70.82
https://www.cmegroup.com/markets/energy/crude-oil/brent-crude-oil-last-day.quotes.html#
June 2023 is 67 now.
Give or take I guess floor could be set 57 and ceiling 77.
Or they could widen or narrow the spread between floor and ceiling
https://www.investing.com/commodities/brent-oil-contracts
No Romaron,
The hedge for Nov 2021 + 11 months equals 9m barrels and that’s approx 60% production and this hedge is fixed and won’t move.
Most of the 2022 was done around half a year ago if I remember correctly.
The hedge is costless itself.
You have a floor price but downside is that if oil price go to 100 you still only get 76 for 60% production
Hedging
§ c.2 MMbbls have been hedged with an average ceiling price of c.$74/bbl for the last two months of 2021
§ For 2022, EnQuest has hedged a total of c.7 MMbbls predominantly with costless collars, with an average floor price of c.$61/bbl and an average ceiling price of c.$76/bbl. For 2023, the Group has hedged a total of c.2 MMbbls with an average floor price of c.$56/bbl and an average ceiling price of c.$74/bbl. Golden Eagle production is currently benefitting from the current strong oil price
I've no idea how the 61-76 moves up and down the slide in 2022. The 61-76 relates to the previous hedges and oil prices at the time they were taken out and aren't necessarily what will be applied to new production. It says costless but you are protected on the bottom and limitations on the ceiling. It all sounds very good but the "cost" is in the price. You get very little for free nowadays.
I'm not going to get involved in the hedging debate but protection is never "costless" but happy that you allow for it. In my simple mind realising an average of $66 is somewhere close to the middle of 61-76 but that is probably coincidence. I'd need to know which date they'd chosen for the hedge and the oil price at the time together with the quote. An impossible task working backwards for us. As long as it is fairly consistent then your guess is as good as anybody else's.
Does anybody have the floor and ceiling price for June 2023 today ? The future is $70.46
Romaron, my understanding is that the hedge is cost free. And no impact within the range 61-76 usd.
60% volume hedged.
So if oil price average 100 next year.
0,6x76 = 45,6
0,4x100=40
They get 85,6 and this number I would use in my file
Hitman, around 700m with 55 at 77,5 oil
Just one thing hitman/Pelle. When you use an average oil price for FCF would it be be sensible to knock of the hedging costs?
So a price of say $75 will more likely be closer to $70. It is after all an insurance and premiums are paid. L7 went into it at some depth recently so maybe he has a suggestion for the price to use. I accept that it is only intelligent guesswork.
Hi Pelle - the question really is would taking the company private jeopardise the tax credit? I think that might be seen as a last resort because it defeats the argument of why Chrysaor did a kinda reverse takeover to move from private to public by merging with PMO. It looks like EIG wants out or at the very least the flexibility that comes with being publicly quoted.
There are gonna be plusses and minuses for corporate decisions but first and foremost is getting the debt down and production and reserves up. It doesn't follow that what motivates the majors and is behind their decisions impacts our future. You can easily make a case for the likes of EnQuest having several decades ahead securing the UK's reducing fossil needs and instead of creating a SPV for this purpose has already been doing just that since inception. Some might say it shows a lot of prescience and AB and team were early movers. There cannot be many more experienced companies in the slot they fill in the NS.
We built it. They will come.
Hi Pelle
what's your FCF for 2022 with Brent $75 for 1H 2022 and $80 for 2H.?
rather than the $85 used by Tarmak.
Romaron, 3b tax credits might last 5-10 years or so.
Unless we get bored to death before…
While other companies presented 5 years plans to return investments to shareholders AB gave nothing about future…
Seems like a low volume day.. my 18.20p top up average is expected to be in profit by eod.. Brent back to $72..
Just enough green to pay for my meal at Dishoom tonight...18.50p ought to be enough.
The subject is only for continuity. The Shell announcement does feed into the Wednesday 10.55 post. We know the majors are exiting the NS and I get the feeling that Equinor could be a less than committed partner in Bressay because of their status and political considerations. It certainly isn't all over as we are now moving further into the transition and resistance against renewables will build up if they don't deliver and at an economic price [they won't imo]. It would be beyond the mental agility of some who prefer to use erroneous figures from Morningatar and the like to challenge and understand the transition that is going on in NS oilies (it is elsewhere too but let us concentrate on our bread and butter). Harbour are a good indicator and it will be interesting to see what EIG do in March and for those interested, they aren't as responsive as EnQuest (or perhaps it's too early) in being relatively open about the share register (see HBR Thu 11:14).
The Shell percentage of Cambo is up for grabs and I believe it will go to the replacement funds similar to the existing holders of 70% of Siccar or a similar entity. They are Bluewater a leading global middle market private equity firm and Blackstone Energy Partners another energy-focused private energy business. Both not that dissimilar to EIG. Blackstone is massive and Governments take notice of them and need their goodwill for a variety of reasons. If Cambo is binned it sends out a terrible message to companies and the world that the UK is not trustworthy and doesn't stick to contracts. These private equity equity companies wield a lot of power and can influence governments. I cannot see EnQuest having a problem with their shareholders as if you feel that stongly about climate change you wouldn't be invested anyway.
This is our time imo. AB, along with his board and team have a lot of US experience and we are already a kinda hybrid with AB and the new hedge fund investors in percentages terms. If it gets too uncomfortable the going private is always an option but I think the government can appease the activists only to a limited extent but this government would fold if it ditched the NS too soon. It is the companies that can afford to move assets elsewhere. The UK will still need oil and gas for decades yet. Would it be sensible to let Russia, Saudi Arabia and the US control our energy future during transition?
I haven't changed my mind. We aren't going to have the traditional funds on our register. Many have bowed to populist pressure and there is no cavalry coming to our rescue. The numbers will do the talking and they will attract a more robust and less easily manipulated investors who are in the business of capital appreciation and cash dividends. I can't see much option than to transition to becoming a private company. I suppose our tax credits might delay that but they won't last for ever.
BTW - how long do we estimate before the tax credits are used up?
My view Tigar, whilst simplistic, does come from experience albeit of a currency background. My opinion is that what we're seeing is short term oil traders (some very experienced including hedge funds) who anticipated this period as being short of crude. They cut positions because of the double whammy of Omicron and SPR releases, exacerbated by the thin markets of Thanksgiving.
I'm always suspicious of gluts and shortages and often take the contrarian view. Nobody can predict timing so it can get messy and a glut is often the harbinger of a shortage heading your way. It is long because smart money has positioned itself. The shortage was assuaged by releasing the SPR and it isn't the physical that reacts first but all the leveraged and derivative positions stemming from that. I mean producers will still sell and match contracts whilst refiners will look after their customers. Biden chose the lesser of two evils in his opinion under political pressure and unpopular gasoline prices. The Omicron also acted as an enabler and took it off the front page of news.
I think it possible that the US big oil and Biden have come to an "understanding". They have enough oil to be self-sufficient in quite a short time and promises are there to be broken (COP26) whatever party is in.
Biden has played one of his strongest cards but a depleted SPR weakens security for the unexpected. They'll massage the news but he will encounter opposition domestically. For a start cheap oil doesn't speed up the transition and the OPEC plus reaction is unknown.
Then we have Omicron with scientists and experts telling us not to enter or leave the building until they deem it safe, like they did at Grenfell. I think they are building up unintended pressures that could blow in the near future. Oil could easily catapult oil past earlier highs in short order if Omicron is deemed less-lethal and current vaccines help control it. Too many uncertainties at present but many will see this as an opportunity and a bet on winter weather and the Omicron variant.
*I wonder how much of our stock is speculative retail? I'd call myself a LTH. Recent movements do suggest it is a casino and some of it is tail wagging dog due to low volumes.
Be Lucky
So who has been selling! presumably retail investors? short's? AB and Cobus have mopped up all sellers and those shares are now unlikely to become available to buy backer's or new investors at these prices.
I would like to 2nd that !.
Well done romaron. Great to understand more about ENQ holdings.
All the best.
JAN
Thank you for your work/effort and for sharing this, Romaron. I do believe ENQ will surprise many. Our peanut valuation warrants that.
The only reason large funds will increase their holdings is the fact they see the stock value increasing and also they must be forecasting shareholder returns in the near future. (18 months away)
It’s a big positive
Some of you may remember that I posted about the untrustworthy figures for the major shareholders. My worry was that the exiting by funds and institutions created a vacuum leaving us at the mercy of hedge funds, raiders and volatile retail holders who panic at the merest whiff of danger and rely on “free” sites and even message boards where anonymous, cowardly trolls tell half-truths and spread misinformation.
I think we all agree the world isn’t perfect but although this is “free” it does give some semblance of reality: https://simplywall.st/stocks/gb/energy/lse-bp./bp-shares/news/what-is-the-ownership-structure-like-for-bp-plc-lonbp
I use Morningstar and the FT for some idea believing that they must be somewhere close to the truth and better than nothing. They aren’t. I called our registrars and because of data protection I cannot see the share register even though I was prepared to pay. In fact they seemed surprised at my request.
I contacted EnQuest IR and my preparatory work did actually help. As I’d guessed they do take the register seriously and do regular analysis on a monthly basis. They also check on a material move in our share price with advisors on an ad hoc basis. This is important because although on the day it might be hard to identify buyers and sellers you can usually find out stuff in ensuing days.
Imagine my delight when I learned that our shareholders aren’t that different to those of BP. We have a hard core of 30 percent institutions (excluding AB) and with recent additions we have a substantial 50 percent (including AB) of solid and steady institutional and long term support. In fact there are even more at an unreportable level with the retail being estimated at 25-30 percent.
I understand we aren’t the same as BP and we can’t (presently) engage in buybacks or pay dividends. We’re also excluded by some funds by being B rated and speculative high risk. We are small cap but that is due to change too imo but you have to start somewhere.
When it comes to trading activity I got this reply “the majority of day trading is done on what are traditionally retail based platforms, and this is also true on those “abnormal” days when the share prices moves more markedly.”
We have a below the surface stability that isn’t always evident judging by the postings on here. This is a well-run company with serious professional management and IR department.
Build it and they will come. The timetable though can be subject to change.