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Very nicely summarized BlueRun - it was what I was trying to say in the original post. As you say the fundamentals will out and some of the FCF has got to find its way into the share price or paid out in some way.
With the RB now at par - the market has signalled a strong recovery - IMO it can be only a matter of time before the share price reflects this. Yes trading is thin and the SP appears somewhat manipulated but in the long run fundamentals will out. Time to hold for a decent profit.
And both Barclays and Jefferies wouldn’t have downgraded us
Over delivered ! If that were correct we wouldn’t have dropped from 26p to 20p straight after the Half year Results
Worth repeating. I know not everybody agrees but I do.
"AB & CO. have handled this in a fantastic fashion. They gave us zero expectations and over-delivered. Let's just wait for the market to come around." HMHn
HMH, agree. Almost forgotten about EP after all this time. But value probably increased exponentially the last 12 months. Cash or partnership will come within max 3-4 months. Give it close to 0% chance it will be scrapped now.
To finish - EnQuest is a BUY without EP, Bentley, Bressay or tax credits. Fundamentals support a higher rating. They are icing. Bressay alone could potentially double our reserves and Equinor haven't thrown in the towel there whilst Waldorf like Bentley.
We live in interesting times.
Hi HMH - I have my own system of valuing oil companies. Forget Shell and BP as they trade oil and also muddy the waters with "renewables" and just stick with (say) EnQuest and Harbour. Indeed, the majors are leaving the NS basin anyway so are effectively ex's. Companies that may never lift oil and fields that may never be developed (and that may include Bressay/Bentley) value 2C at c.40 cents and oil with a 2P CPR but no funding at around $1.40. It was used by Steve Brown of Orcadian who comes over as a bumbler but he worked for BP and as a rule of thumb it seems to work (on the basis that so much is wet finger in the air anyway).
With 2C not having much value it is almost worth discarding it (the stock market which has priced in oil to last less than a decade already has). Very roughly I get HBR 2P at $12.64 a barrel using EV and 2P reserves and ENQ $9.67. Easily rubbished but bear with me. At 50k a day our reserves will last 10.35 years and HBR 8.34 years @ 200k a day. These figures aren't meant to be accurate but are useful to my argument.
The stock market and its reliance on Institutional support cannot be seen to ignore ESG concerns and "climate change" and have only done what is political, expedient and expected (e.g. do bears sh*t in the wood).
I'm afraid this doesn't work for some investors here as their reliance is on these Institutions and funds reversing the path they've followed the last few years. It ain't gonna happen.
Much of the world is following an Evangelical path led by Greta and David Attenborough with The Pope, The Queen and now Biden tagging along. The pragmatists of the world including Xi and Putin (along with Canada, Australia, Japan and some others) will pay lip service but stick with 2050 or 2060 imo.
If renewables can become economic then my argument falls down but I cannot see any country giving up energy independence and security for a dream that some scientists disagree with anyway and levels of efficiency that may never be achieved. There is always a downside to any activity or chemical reaction and fossil emissions are well understood and coming down too.
We'll stay unpopular but make money hand over fist for a bare minimum of 10 years but most likely much longer. It'll be our "dirty little secret".
I also expect us to become one of the majors in oil following the retreat of the 'old majors' into renewables. I don't mind us only having an ecomnomic life of 15-20 years. The market only gives us about 5 at present.
Be Lucky
Hello Pelle,
EP is the feather it our hat. Could easily be worth more than half our current MC cash and way more as a farm-in payment in a new project.
Market don't price GE nor our warm-stacked FPSO.
Funny thing, is during several of the cof-calls I've attended, operators have been searching and bidding for FPSOs to get new smaller projects going. Gonna keep myself updated on this issue during the Q3 calls. I think stars are aligning for the Enquest saga. Let's just give it a little more time.
Best, HMH
Hello HMH,
Yeah, make the most of time while waiting.
Zooming out, AB done a good job reducing debt 1b over 3-4 years keeping production almost flat and that in a period of rather low oil prices.
The next 3-400m will come of very easy.
This position going forward will fit AB very well, picking up some smaller deals and also developing what they already have.
Hello Pelle,
I've been lurkin, but when plans are moving forward without interruptions in slow times I'd rather be golfing than forum-posting. I think the case is pretty straightforward. FCF at current oil price in the $800-1bn range and tax losses that will make that the case for the next $3.5-5bn of OCF depending on time-frame.
Bumpy road in the rear view mirror, and likely a bumpy road ahead. A great setup for a higher oil price environment.
Added modestly to an already vast holding today. I believe we're going to meet the leverage target in less than 5 month and thereafter the voice from management will change radically.
AB & CO. have handled this in a fantastic fashion. They gave us zero expectations and over-delivered. Let's just wait for the market to come around.
Best, HMH
Hmhn If it was as easy as that then the equity wouldn't be sitting where it is now, all the big hitters would have already filled their boots with Enquest shares or there would have been many offers to buy the company. None of that has happened and we are range bound with low volume.
Hello HMH
Nice to hear from you.
We really filling up with cash and even more so once GE included.
My guess is bonds will be re-financed in around 6 months. And then only the half amount, around 500m.
What a change this will be, after 3-4 years heavy debt reduction. Finally can re-allocate the cashflow priorities.
KO, you own a piece of a business. The pieces are up for sale daily on the stock market. The price are whatever some other holder of the equity is willing to sell that piece of the business to you for at any given moment. It means nothing, and even oil investors are jumping between companies to capture the value of the discrepancies is the market place.
Look 5, 10 years into the future. That's where the value has accumulated and we know wether we made the right decision to buy this company at present value or not.
*But I know you're a real piece of work and I hope you made some money. You should have given your swift shifts in bearish- & bullishness since forever.
Beat, HMH
I didn't say it doesn't matter , I said it doesn't make any difference to the equity holders obviously unless the the price rises, Saying that If we were to have a RNS in the near future that should boost the SP nicely. Getting a deal for a lower interest rate would be fantastic.
Anyway its nice hearing from you.
Of course it does master KO.
With bond-prices at par refinancing would put Enquest in a favorable position to refinance the outstanding bonds. When dealers are paying par there's an insufficient amount of paper put there in the nexus. We will probably see Enquest issue new notes or bonds to redeem the 2023 papers in due course. The interest rate of the new RBL is really telling regarding the state of banks willing to support the company.
*Chiltling not making his way into the conversation yet have me concerned. Hope he didn't smoke too much of the natural stuff and ended up in the carbon storage.
HMH
Doesn't help us equity holders out though.
Splendid HM. Bond players will always be the clever ones, but given the interest-rate environment I suspect both the bond- and equity cohorts have gotten more stupid.
The equtiy is doing nothing so I added a few today. Things are looking better than ever with GE around the corner, EP appreciating in value by the day and 2.5bn barrels of movable oil in controlled and owned fields, or 180 years or 2C at 38000kbopd around Kraken.
Our time will come. We're basically net cash within 18 month given future curve and heavier capex.
Does anyone know the covenants on the new facility? If they're light we could possibly be in for imminent shareholder returns. And we're trading at a 6-15x discount to American players.
Best, HMH
Meanwhile in a quite corner of the LSE Retail bond market ENQ1 is currently offered at a nice round 100p. Might just get out this capitalis intactum along with the numerous coupons and PIKs.
https://www.londonstockexchange.com/stock/ENQ1/enquest-plc/company-page