George Frangeskides, Chairman at ALBA, explains why the Pilbara Lithium option ‘was too good to miss’. Watch the video here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
Bareboat charter - I was going on memory. It’s actually nearer 4.5 years before the rate changes, but my memory of the hire rates is correct. Enquest share is 70.5%.
Here’s the detail from the RI Prospectus (page 271):
The original charter period begins on the “first production date” (which is 4 September 2018 being the date of issuance of the Acceptance Certificate) and expires, unless terminated earlier in accordance with its terms (including the charterers’ ability to terminate for convenience on 180 days’ notice) on 1 April 2025. Upon expiry of the original charter period, the charter period is automatically extended on an annual basis for a period of 12 months up to a maximum of 17 years in addition to the original charter period, unless terminated earlier in accordance with its terms (including the charters’ ability to terminate for convenience on 180 days’ notice) or if the charterers notify Armada of its election to terminate the bareboat charter 12 months prior to the expiry of the original charter period.
(small print)
The daily rate became payable from 6 July 2017). Hire rates per day are $447,352 during the original charter period and $139,860 during the extension hire period, payable by EnQuest Heather (subject to adjustments in the event of force majeure and availability)
[Failure by Armada to meet certain minimum requirements could result in compensation payments to the charterers. (my wording)]
The maximum compensation payable by Armada is $50,600 USD per day.
Bottom line: this is a significant drop in FPSO costs, assuming there is nothing in the lease agreement small print preventing it's extension to the Bressay field.
3-4 years might be close to the date that Bressay would be ready to produce oil economically too. You might not even have to move the FPSO.
L3Trader, you threw me with this comment, "Kraken: I think ENQ should try to sell 15% of Enq to CNE if it can get a good price."
I wasn't sure if you meant this in relation to collecting some cash towards a potential Exxon deal, or meeting any shortfall in the RCF next year. (On the latter, I'm relaxed about Enquest's position with the RCF because of comments made by JS in the recent call. He talked of the possibility of extending the RCF repayment and having good relations with the lenders. I don't think he would have made such a comment if extension wasn't a realist possibility.)
But then I viewed the idea of a partial sale to CNE in the context of a development of Bressay. In the recent call AB highlighted 'partnership structures' as being a factor in taking Bressay forward. EnQuest will make a contingent payment of $15 million following OGA approval of a Bressay field development plan. The contingent payment increases to $30 million in the event that EnQuest sole risks Equinor in the submission of the field development plan. This would take Enquest's share in Bressay from c41% to c82%. At that point Chrysaor might take a similar deal for their 18% share.
That would be a tidy position for Enquest if CNE with a 29.5% share in Kraken wanted to join Enquest in developing Bressay. At that point I think it should be easy to agree a suitable valuation for Kraken to adjust the partnership if required, say 55%:45% in the combined a Kraken / Bressay development.
I don't know if Bressay or other Kraken license tie ins offer the best next stage in development, but a supporting factor in any development is that in 3-4 years the day rate for the Kraken FPSO drops significantly, from a c$116m (ENQ share) today, down to c$35m. On say, 25K bopd net production, that's c$8 per barrel off OpEx.
Exxon sale -
I don't see Enquest being a front runner !
I agree with gkb47, the front runners will be offering cash, which we don't have !
Good PR for Enquest being "in the game", but that's all in my opinion !
gkb47,
The prize will be announced at Jan's 60p party. Perhaps we should not wait until that and announce at the 30/35/40p party I mentioned at some point. Pelle will bring the SEKS x 2 to pay for the drinks. Therapist will organize the entertainment.
Just for the investors who like numbers... Kraken premium related findings (Vincent is one of the best crudes):
https://www.spglobal.com/platts/en/market-insights/latest-news/oil/073020-australian-vincent-crude-quality-improvement-bears-fruit-as-price-differentials-surge
This means premium for Kraken will at the moment be lower than $8/bbl. there is also the difference of transportation costs. So perhaps max premium atm is $5/bbl.
Exxon sale: Pls read Exxon's news. They want cash when they divest to keep their dividend going. Vendor loan is not going to work for Enq. Enq would have to find financing from elsewhere. But the question is: why would you spend $6M laying people off to then acquiring Exxon's assets and have to hire people back? Seems like there is no LT strategy. We shall see how much knot theory AB learned as an UG...
Kraken: I think ENQ should try to sell 15% of Enq to CNE if it can get a good price. W/ the Oz loan to be repaid by 1/10/21, a sale of 15% to CNE, would keep the effective WI at 55%. Otherwise get a $100M loan like the Oz loan on a much lower interest rate...
GLA
GKB,
If you can wait till mid January then we will hold the party on the bulb of Enquest Producer as she sails into Nassau on the inaugural post Brexit "we loose" booze cruise. Attendees will need to follow current, current, at the moment, off the cuff, follow the science, but save the economy, f**k the poor guidance and provide their own socially distanced deck chairs. No diving. Could all go tits up if I get a buyer but curently no offers. All welcome of course.
GLAXXX
Hi Londoner7,
As a follow up on my earlier post, I do find it surprising that 2P are being valued at $15/bbl, which is also the often talked about cost of developing and putting into production 2C into 2P, unless for a coincidence. I am in no way questioning your calculations. In fact, I am grateful for you having posted them. I am just baffled by the kind of figures Mr. Market can throw at us.
Producing 2P reserves should be valued at the present value of (Poo - Cost) /bbl given the profile of production. If that is $15/bbl at the moment, so be it. But it tells us that Mr. Market is expecting the poo to stay low, because as we know for ENQ
Opex + Others costs (including servicing debt)/ bbl might be leaving on the table $15/bbl at the moment, but w/ higher prices would leave more (so perhaps the % increase of the poo expected in future years just equals the % used in the discounting of future streams). Until the valuation of 2P producing reserves goes up it is hard to see Mr. Market changing its view about Enq.
Your comparative valuation of ENQ, PMO and CNE has prompted me to look at a couple oil companies more closely, namely CNE, and i will post about it there at some point soon, when I find the time to review my brief notes. But one thing that I would add here, and in light of your comment that CNE is a cash shell is that ENQ might want to find a mutually beneficial deal with CNE that lowers its net debt.
All,
Where is E121 when you need him? Rigs down by 1. Shell slowing Permian drilling. Frac crews at 89. Impressive wave of weather events in the Gulf of M.
All this is good news to the drawdown of crude stocks, but OECD stocks still need to come down by 200MM bbls and we have no idea of the aggregate stocks of non-OECD countries. The latter could have a huge impact on the term structure of the poo.
Jet fuel is now being blended w/ other stuff for shipping fuel. Not good news for that Kraken premium.
Finally, gkb47 takes the prize for long term forecasting of Kraken's offload #85, and do not believe anything Pelle writes as he claims his account has been hijacked.
GLA