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L3, BUMI payment is under 'other receivables' note 20.
hi Londoner7
A bit more on the finance lease.
in h1 2018, enq paid half of $144.8M.
i have yet to understand how the credit for poor performance of the fpso enters the accounts.
but, in the report AB writes, "Net lease charter payment credits arising from the non-availability
of the Kraken FPSO in 2018 were approximately $45 million." this suggests that there is a credit that enq receives that might not be immediately paid. it should enter the accounts somewhere, but i have not found it yet.
also, we know from a RNS that "EnQuest PLC ('EnQuest'), an independent oil and gas production and development company listed on the London and Stockholm stock exchanges (ENQ.L and ENQ.ST), is pleased to announce an agreed compensation settlement with Armada Kraken Pte Ltd, a wholly-owned subsidiary of Bumi Armada Berhad ('Bumi'), in relation to historic issues with the FPSO. Bumi has agreed to pay $15 million to the Kraken partners, which is to be fully settled by 17 December 2018."
could not find this in the accounts yet.
offload #44: it seems that if AS only arrives on the 27th the offload cycle will be 16 days, which means production is down to below 35Kbopd ... of well!
MO: much appreciated the update on Magnus ENQ pipeline. also scolty/Crathes
E121: I will be happy with $440M for Zama. had hoped for $600M, i.e., $5 per bbl of reserves, but with poo low, values are down. i just had no idea of how low/high they were.
ATB
L3 - if anyone holds a share from 2016, then they qualify at LTH. Obviously, I don't know if you're a LTH and saying I'm an LTH on anonymous forums doesn't mean much; I'd be sceptical unless I've met them. ;-)
I saw a post from you regarding Zama. With oil caught up in the Orange man's crossfire, who knows if they'll even get a bid. I saw a sell-side bank had assigned a value of $440 million for that stake. It'll boil down to what happens with the trade war.
Ohhhh, not forgetting Farage down the local !!!
Lol E121
Did see a good call on the PMO board...
Time for a return of Spitting Image....
Imagine a Bo-Jo, can do wonders with the hair and speech... Trump + friends, say no more... I would do a Diane Abbot, loving up to Corbyn, the permutations are limitless, would be fun, but maybe impossible in this politically correct world !!!
I'm laughing, just thinking about it :-)
Need another spitter though, replace Roy Hattersly, needs to be a Lib-Dem !!! lol, MO
MO, Pelle,
Orange is the new everything, don't you know? I'm eternally grateful to my master, the orange buffoon, and henceforth that's the only colour I'm ever going to talk about..
Florida is where the master has a lot of properties. If golf is about the only thing I can do in that hallowed land, I'm game. Alligators or not - here I come Florida. ;-)
Hey L3
Is no discernible scientific method for what happens at SVT...
On occasion you'll get a note, i.e. Clair 600k etc, need to check for Sullom Voe port at...
http://www.sullomvoe.org.uk/CurrentTraffic.aspx
May need to copy and paste link as not https...
Was quiet during Magnus shutdown for maintenance, Chilts may be able to add more info.
Cheers, MO
Hi MO,
Your response is much appreciated. Those bbls from Scolty/Crathes are most welcome.
Magnus: How can see whether oil is being offloaded from there? It goes to SVT, and then is it exported via tanker or pipeline?
If the former how to identify which tanker is loading Magnus's oil? Not possible, I would expect.
E121: So, having first bought into ENQ late in 2016 do I qualify as a LTH?
Hey L3
Would guess Scolty/Crathes is now fully operating, maybe since end of July, is hard to guess, but no pipe/surf related ships observed for a while now !!!
New Magnus ENQ pipeline, has been going on a while, has quietened down but still diving ship at Thistle, maybe nearly done ??? Think is for a H1 results announcement
Have a great bank hol all ENQers, fingers crossed !!!
MO
Hi MO,
TA.
Any idea of the progress of any of the works you describe?
"Scolty/Crathes pipeline replacement and Magnus, NPR and Thistle pipeline works related to Dunlin Decomm".
I am eager to know when all starts increasing production.
Londoner7,
Many thanks.
I just sample the notes in the report. Had not read those ones. Accounting is an interesting subject (add, then subtract, then add back part of it, then subtract some more, than add it all back... all fine if at the end of the day if debits and credits are equal but opposite entries in your books... )
I agree that $55.8M should appear in note 6 under finance costs.
As far as note 28, i t is a long table full of additions and subtractions, but here it is what I believe is going on.
ENq is assessing the changes to its liabilities from 1st Jan 2018 to 31st Dec 2018.
Their initial liabilities were $3000.6M. They made payments in cash of $357.0M related to loans and borrowing, and paid $144.8M in cash for the finance lease. But, the finance lease liability didnot decrease by $144.8M, because $55.8M was interest. So it needs to be added back. So, I think that it is all clear, at least to me.
Not sure the marginal interest rate used in the finance lease should be the one mentioned. It should be 9%, as per the interest rate that any addition round of PIK (including the next one this year as the POO stays at its current levels) earns the creditors. That is the rate you have to pay for extra borrowing. Or at least it was at the time of renegotiating the bonds. Now, to be more precise, the Oz loan rate is the correct one, as it is the most recent borrowing.
ATB
Hello L7 - "Dig a little deeper. Note 6, Finance charges, has a $55.8m component 'Finance charges payable under finance leases'.
These finance charges are ADDED to 'cash generated from operations' note 28."
The finance charges aren't added to cash from operations; in note 28 they're captured under the change in liabilities from financing activities. That is more a reflection of changes to the Finance leases under liabilities itself, which is fine. However, the finance charges of $55.8 are NOT added back to the cash flow statement, under either of the operating or financial headers.
"Cash generated from operations is the first line of the 'cash flow statement'. The $144.8m component, 'Repayment of obligations under finance leases' is DEDUCTED." - again, the 144 mill is only shown in the cash flow from financing activities section and not anywhere in the operating cash flows section.
Best
Hey Pelle
Fingers crossed for Kraken works... Need it to stay in the 40k's per day for 2020, maybe if hot water handling is resolved can push higher for longer !!!
Agreed, this years pipeline works are one-offs (hopefully), so OPEX should improve next year, think ENQ would be wanting low 20's per barrel.
Good luck all, E121 is getting so ORANGE, he might be moving to Florida ;-} Can play golf with the alligators :-)
MO
Hi MO
I think from October forward production should be good after all maintenance.
Magnus in May
All small fields I spread over June-Aug
Kraken in September
After that we should have 6 really good months in my opinion.
Lets just hope we can get a good oil price then also
Nice one, MO. Cheers. Yes, Alma workovers was $30 mill last year and they did book it in Opex. I'd also agree ditto for Scolty/Crathes - not sure what the opex would be, but maybe there or thereabouts.
Hey Pelle, exactly correct...
Alma/Galia work-overs added $1.50 to overall OPEX per barrel, think it was around 30 million USD total for rig and ESP replacements.
I may be wrong was a long time ago... Hopefully are now seeing benefits from Scolty/Crathes, maybe 5k bopd gross extra, who knows... only ENQ and partners
Do think Aug/Sep should be good months as most works appear completed...
Cheers, MO
Hi MO
Nice to see you, good point. If I remember correct the change of Alma/Galia pumps last year was put on opex.
So maybe its possible reduce both opex/capex next year:-)
MO, you're right to highlight those costs. As I say, I'm open to argument. I've struggled to figure it out so now inclined to wait for the H1 update.
Hey all
Don't forget well work-overs and other operational related costs are attributable to OPEX, I would imagine this includes both Scolty/Crathes pipeline replacement and Magnus, NPR and Thistle pipeline works related to Dunlin Decomm.
Just a thought why OPEX may be higher than expected, ENQ have never previously included lease costs wih OPEX.
Good luck all ENQers, MO
Hi L3, I was about to respond to e121 when I saw your follow up. I agree with your reasoning on the $600m Opex number, but I was briefly on the same page as e121 last week so open to argument. However, I see e121's comment as an alternative opinion rather than fact. It doesn't dissuade me from my current view that the costs of production is the sum of operating costs and FSPO lease costs. I'm inclined to wait for H1 numbers and expect them to show 69K-70K production and an average cost per bbl of $24, equating to $300m production costs if guidance is achieved and less if it's beaten.
e121, welcome to the discussion. Good to see you and L3 on the same page wrt the $144.8m component, 'Repayment of obligations under finance leases'.
Dig a little deeper. Note 6, Finance charges, has a $55.8m component 'Finance charges payable under finance leases'.
These finance charges are ADDED to 'cash generated from operations' note 28.
Cash generated from operations is the first line of the 'cash flow statement'. The $144.8m component, 'Repayment of obligations under finance leases' is DEDUCTED.
How do you square the $144.8m and $55.8m lease components?
I maintain that cash payments to BUMI are $115m less performance penalties.
Hi Londoner7,
Hope you enjoy the Summer temperatures in the next few days.
FPSO figures. I do not mind being wrong. I am always happy to be corrected if wrong.
My view that the payment was $144.8M last year (not the $115M mentioned) is supported by that amount appearing in the Cash Flow Statement. That means that amount of cash was paid. That is the amount of cash that will also be paid this year.
I have just read E121's post that we are both wrong. And here was I decreasing the overall spend by putting part of the lease costs under OPEX, only to find out that what I was suggesting is pure ramping according to E121.
E121: But if you add $144M (or perhaps just $93M if you leave out the amount , i.e., c. $50+M that corresponds to the interest) to $600M, then the overall cost of running these operations per bbl is higher than I want it to be. I understand that the FPSO might not be OPEX after all, but you are paying BUMI to run the ship to produce oil!
PMO: As a LTH (I believe I can label myself as a LTH since I bought shares there in the early years of the decade) I was impressed by the results. And Catcher might eventually make-up for Solan's failure. But, the SP reacted much less than expected, and the IC article about them is only lukewarm. How much do you think PMO can get for 25% of Zama?
Pelle: Things running smoothly is always a big if. Let us first see how AK perform s in H2. Magnus has a very long and good past track record. I write this as a LTH (if buying late in 2016 fits the criterion).
ATB
L7/L3 - "You say, 'I Believe that the $600M OPEX includes the part of the lease that does not correspond to interest. ' I'm inclined to agree. As I said, I think ENQ put out that number as simple all inclusive OpEx guidance. "
Short answer is NO, the $600 mill opex guidance doesn't include the Finance lease costs. The Opex guidance only includes actual operating expenses and in so far as AK is concerned, that figure only covers non-lease operating costs for AK - such as fuel, ENQ's labour costs, transportation, etc.
I do take L3's point that the lease was a $144 mill cash out flow in financing cash flows in 2018. I haven't quite squared up how Enquest pays $115 mill in 2019 - one explanation is a reduction of rates/claw backs?
Hi L3Trader,
It looks like I may get a last taste of the summer this weekend so I've a couple of new local walks in mind.
You say, 'I Believe that the $600M OPEX includes the part of the lease that does not correspond to interest. ' I'm inclined to agree. As I said, I think ENQ put out that number as simple all inclusive OpEx guidance. I complicated it while assessing Squif's post, but in doing so I think I now understand the FSPO lease accounting.
On the accounting of the FSPO lease, I don't think I can explain it any better than I did in my previous post. You are touching on key elements but come to a different conclusion. I can't say you are wrong, I just believe my assessment is the correct one.
In 2019 ENQ will pay $115m cash (less the performance penalties) to BUMI. If ENQ are paying an additional cash payment which you refer to as lease interest who is it paid to?
There is no cash interest item on future payments to BUMI, but these future payments do have to be accounted for as a liability in the balance sheet against the 'right of use' credit under non current assets. The 8.12% 'interest' is determine by ENQ to be their marginal interest rate - the level that would be charged if the 'right of use' was actually purchased via debt.
The $144.8m is an accounting item, split between payment of lease principle and payment of lease interest reducing the accounting liability. The corresponding 'right of use' asset will be depreciated.
In yesterday's interims PMO used the term 'accounting net debt'. Look out for this term or something similar in Enquest's update when $82m is added to debt for the liability applied to future office rent payments due under a long term lease agreement. Cash payments to the landlord will be the same.
Hi L3,
Don’t think I said 80k.
My base case 2020/21 is 70k and 65 oil.
Capex 150
That will make FCF 1200 mill from Oct 2019 to end 2021.
But I do think that production coming winter and spring will be as high as 75-80k if things run smoothly.
And then dropping in summer maintenance.
Think AB will give some positive surprise also that we can’t see yet.
Either a new Magnus deal or re-finance both over next 2 year
Hi Londoner7,
Hope you are enjoying you walks around varied Lochs. I went to see some Fjords in Norway over the Summer.
I am sorry I have not had time to get back to you, as I am facing a bunch of deadlines at work, but before it is too late, here is what my brief reading of the 2019 accounts is.
I agree and I believe understood the meaning of all that you wrote, but w/out having time to read the 2018 and 2017 yearly and half yearly reports, here is what my thinking is. Let me start with the punchline: I Believe that the $600M OPEX includes the part of the lease that does not correspond to interest.
First of all the circa $115M that you quote is ENQ's share of the yearly lease is a figure that makes some sense to me. Why? $115M/0.705 = $163.1M (FPSO lease including CNE's share). Thus daily rate is $163.1M/365= $446.000. i remember reading this number somewhere in earnings calls. So far so good.
So, let us suppose that ENQ's yearly lease is $115M. A lease includes interest and what is left is seen as an operating expense, if I remember this correctly.
Now, if we look at the 2018 report, note 24 (iii), you can see that 2019's interest payment is going to be $144.188M-$93.169M=$51.018M. Also, that is supposed to pay $93.169M in addition to the c. $51.M. But, this leads to $144.188M payment this year (which is also the amount of money paid for the finance lease last year, see page 24 of the 2018 report, left column, under cash flow and liquidity you can find this figure as finance lease payments, which is higher than the $115M you quote and which squares with the daily rate I have seen here and there. So, these numbers do not add up!
However, I am now more certain that the lease payment every year is $144.8M, part of which is interest, which will decline as years pass, and the rest goes towards the "payment" of the principal, which also attracts a depreciation on the balance sheet.
In short, whenever I will scribble my notes in the future I will use this figure, $144.188M as cash payment for the lease (of course there are credits for the period when the FPSO breaks down, but I treat those separately, as I cannot predict then in advance! I cannot even predict when offload #44 will happen, as 12 days have now passed since the last hook-up!) and will not be bothered, which part is interest, which part is paying down the principal, unless I have insomnia, and will play around with a spreadsheet and the effective borrowing rate of the lease, advertised as 8.12% (ouch!), in which case I will post some numbers.
Of course, if the above is wrong, please do correct me.
Pelle: I questioned your numbers due to you suggesting 80K bopd in 2020 and 2021. POO might be closer to $60 than to $70, as things stand. I sold my call options yesterday before the US manufacturing figures came out. Only lost 30% of the investment! Now, I am planning to make money here, having first bought at the end of 2016, but most of the purchases were in 2017. I a