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Evening R,
IMO, You're spot on with where oil will trend in the coming years. I don't buy BCG's assessment that this will be the last oil super-cycle. That's too early to predict, but higher prices could spur a medium term shift to renewables in the developed world. India, China and other growing Asian/African economies will still need copious amounts of oil in the coming year. A turn down in annual oil demand may be more than a decade away - that's good enough for us.
Brent/WTI are hitting daily higher highs for the past 13 sessions or so, and is a bullish setup heading into Q3 demand peak in the US/elsewhere. Jeff Currie (GS) is on CNBC right now and he reckons that oil has the best potential for a higher upmove in the near term. The Re-opening commodity demand baton has been passed on from the US to Europe and now onto the Emerging Markets, India included. India's May demand for oil was a million bbls/day lower than 2019 and on that front demand will come back in the coming months. But, the markets are still not positioned for a bullish setup in oil and he reckons that trade will catch-on, if not in commodity itself, but certainly in these stocks. Demand is now at 96.5 mmbbls/day from 95 in just a few weeks, and will trend higher. And he reckons there's an upside risk to GS' $80 Brent target in Q3 because of all these factors. There will be bumps and moves lower in the coming days, but the trend is inexorably higher on the back of re-openings this year (and the next).
I just hope that Enquest finally gets their focus right and balance shareholder returns with growth. All of this focus on growth in the past years has resulted in nothing but shareholder wealth destruction. It's time to pivot their focus to shareholder returns and I'm still waiting to hear the right noises on this front from AB and co. The GE acquisition was a very good move, no doubt and was much needed to halt declines in our portfolio. No doubt these high oil prices will help right the Balance Sheet and set us on a fiscally sustainable path towards regular dividends. Will AB oblige? I sure hope so...
Thanks for the info guys
Shame we had to give up some of the nice gain but brent looking good
Hi E - these are mostly my thoughts too. Many of the majors cannot go back to basins they've left so any demand for more oil will be met by OPEC+ and smaller companies. To me the bet is whether the renewables will fill the energy vacuum in the West. Human ingenuity means that if you ignore price and value reduced emissions higher than money lost on moving to renewables then it can work. Unfortunately human nature and demands on our discretionary incomes means that price does matter. Emissions are unlikely to come down imo because the third world will value cheap energy against emissions and take full advantage of the economic advantage handed to them by the West and we'll just see emissions coming from somewhere else - we'll have exported them. It'll assuage our campaigners but create problems elsewhere. I expect China and Russia to look after their own interest first and economic advantage and fossil fuel income rates higher with them than promises which aren't even being met by western countries.
I no longer look at dates like 2025, 2035 or 2050 because they are practically meaningless but I would concede that is the direction regarding targets and vague promises to campaigners. I only need a steady Brent price for 7-10 years and I'll be walking away from EnQuest with buckets full of dividends. I cannot see the western plans working in the time scales they have laid out and "for that reason i'm IN."
EnQuest isn't about the unknown future 25-30 years from now. The present can be very lucrative when people are trying to read crystal balls. The damage done to the oil industry has been going on for some time and much is unrecoverable. I'd say that from 2015 it has been under heavy attack and the survivors are battle hardened. It has created a moat against new entrants and the future for at least 10 years is extremely bright for those with the right balance sheet and we have one of those.
Be Lucky
KO, they should continue build hedge.
This will increase the odds that we never ever talk about debt anymore in 12-18 months
Let’s hope Enq doesn’t do the opposite of what they’ve done over the past few years and hedge to early.
Hedging in the 80s was considered a pipe dream only 12 months ago. Can you imagine what the SP would look like if we find ourselves in that position?
Also great news on the GE front. Hopefully we get an indication of the increase in production figures at some point. Is anyone monitoring the current monthly production figures from GE? I'm currently assuming the previously reported figure of 10k per day.
Pelle - keep the calculations coming. Would be good to see what you (and others) think of year-end debt assuming 60k/$65 average production/POO for the year.
https://www.bcg.com/fr-fr/publications/2021/preparation-for-last-oil-price-boom
It's a good read - not that I agree with 100% of that, but a boom that lasts through 2022 is certainly welcome. Just how far up can oil go is a big question mark, but we'd love for Enquest to hedge into the 80s/90s when we get there.