Chris Heminway, Exec-Chair at Time To ACT, explains why now is the right time for the Group to IPO. Watch the video here.
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It’s not my expectation that Enquest will default. If that is your expectation it would be rational for you to sell your equity position immediately. I don’t think £40m will make or break a company with an EV way over £1bn. It would be unconventional to try and force through a buy back. Psychologically after the worst oil crash since the 80s, a buy back is scary. it’s the equivalent of writing terrorist attack insurance in October 2001, but they were the most profitable premiums ever written. The rcf is the bigun in Oct 2021. If you believe we won’t make that that get the hell out. Very simple
'intrinsic value'....'cash allocation' someone's been reading the beginners guide to bull****ting about stock and shares... what a load of meaningless drivel...
Enq are NOT going to allocate cash on anything but paying off debt and using a drill bit....'buybacks' get real...as for intrinsic value ...it is directly related on a day to day basis on the price of crude oil. The hedging has absolutely nothing to do with how the market values the company intrinsically only the price of crude matters.
Tom8080, at the current level of debt ENQ is highly geared to a recovery in the price of oil. Some might think the gearing (risk) is too high, clearly you would like it higher.
Unless the price of oil was to fall dramatically below the current price and remain there for say one year, ENQ will not go bust. No one currently invested believes that is a reasonable expectation, though anything is possible. However, it is a reasonable expectation that ENQ will fail to repay the SFA on schedule or will have to reschedule on less favourable terms. In that event it is also likely that an equity raise would occur. If $40m is the difference between those events occurring or not, I’d rather hang onto the $40m than spend it on a share buyback.
However, you, as an individual investor, have the option to increase your own gearing to ENQ through derivatives. That is not my recommendation, but that is the equivalence of what you propose.
As a result, you will have a roller-coaster of a ride and almost certainly end at a different point – higher or lower. Good luck, but I don’t want to join you on the ride.
I attended the 2018 AGM and asked about implementing the share repurchase program. At the time I didn't realise how tight cashflow was, Kraken was supposed to be fixed by July 2018. In the end nothing went right, and they dumped the rights issue on us to acquire Magnus. I only mention it as we have considerable cash in the bank and positive cashflow today. We weren't supposed to be in this position or opportunity to cancel out shares for 12p that had been issued at 21p. That's a fantastic return to reverse out the dilution. As all the projects are now finished , we don't need another rights issue. Within a business plan, all companies come to the end of their heavy capex periods, and then flick the switch and focus on returns. I believe Enquest has reached this point.
Its not a good time to think about share repurchasing in any quoted company - investors are far more likely to see a rights issue - hopefully that won't be the case with Enquest but we do still need to see Brent higher.
Even Whitbread, who were awash with cash after selling Costa, are now having a rights issue.
The share price is low enough for directors to make purchases. If its a choice between paying out a dividend or share repurchase, I'd prefer the latter as i think it would be more financially rewarding to see the SP rise. None of which will happen this year or even next year. But if Brent rises to $45 by mid July with airlines functioning, the SP should get a super boost like the rocket that was just launched from the USA. We also have the Western Flank Kraken wells to turn on if we need another boost in Q3 to get our annual production at the top end of guidance for the whole year. Set up nicely for 15p short term target...and then Opec meeting in June to steer the rocket with the right trajectory all the way to 30p and beyond.
I am one with the force, the force is with me. May the force be with you too.
*I also think share repurchase programs are nearly always done at the complete wrong time due to misunderstandings from management on basic capital allocation. They often fail to realise what is great at one price is dumb at another. Enquest equity likely to be significantly below intrinsic value after one of the biggest oil crashes in history. Now is the time to be rational imo. Not in two years when the share price reflects intrinsic value. I also happen to think many North Sea players would hugely benefit from this will retaining some funds to service the needs of the business. I can remember Jamie Dimon did a famous repurchase of JP Morgan shares in 2016 when they were in the 60s. Enormously benefited shareholders and great capital allocation from him.
Fair enough. Accept a steadily improving POO is no slam dunk however i do not think buying in 20% of the company's shares for £40m is risking the company's future but the benefits to the intrinsic value per share are significant. Just my opinion.
Disagree -
I would NOT expect company share buy-backs while POO is at these levels. It would not be prudent to take a chance with the company's future, surely. They would need the cash if a big second wave of coronavirus came in the Autumn and POO nose dived again.
NO - You will only see the company buying shares back when it is safe to do so, and sadly that is not likely until POO goes well above $50 . Also it would need to be at $50+ for many months . All IMHO of course.
All the best
JAN
I think he will commit to some buy backs if the SP doesn't change for the better in the next few months. It'd be beneficial surely
They already have 280 mill usd in cash.
Up to AB if comfortable use some of it
I need to look at the indentures. Would lenders by comfortable in loaning an extra £40m so AB could buy in 20% of the market cap? If he is bullish he could significantly increase his ownership, why not? It would kick the share price on significantly. If we all believe the market cap of enquest is below the intrinsic value of the equity why are management not pushing for this?