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I don’t think it’s about optimist or pessimist.
A pessimist would say it’s 40 now let’s lock this at least we survive.
Probably now is not the best time hedging, because I think prices go higher. Not 100% sure…
And it’s not been so during last 1 year up cycle.
But I don’t care, secure the profits and debt reduction at very healthy levels.
Worst thing that could happen is that price go higher, but we get it anyway later on with continue hedging.
I am very happy the banks now put requirements to hedge. And extremely happy we have quite high price now when this need to be done.
Chilling,
At this oil price hedging requires you to be neither. A 1/2 collar cover at current forward curve for 2022 would probably be a good call as of now.
Best, HMH
I guess with his hands on approach that AB likes to make the final call with hedging.
The problem is that he is an optimist - I think that you probably have to be a pessimist to be good at hedging.
Yes and Kraken only been approx half of Enq production. Autumn 2018 it was possible hedge 12 months flat out at 80. Completely missed it.
If they really nailed the hedging we could been close to debt free now.
Hope they secure it now, can’t stand another collapse
I got it wrong Pelle - the actual average is $59 so its closer to $0.5 billion - still very significant.
And what was the actual average you compare with?
Yes, that makes my point - around another $1.3b of revenue if Brent had been averaging $70 per barrel - based on guestimate, just looking at the chart for Brent.
According to tanker offload data, I make the gross revenue from Kraken to be about $3.4b @ $70/barrel average.
https://docs.google.com/spreadsheets/d/1U-z03jRcOCLzpPBXGKlelR1gSuVgZQ3EB8k7gxodP6M/edit#gid=0&range=J14
Chilting, that would be an excellent task for GKB.
He have too little to do. lol
Apart from the early problems with AK, Kraken has turned out to be a big success from an operational point of view and will hopefully continue to deliver, especially if the other two fields can be exploited with AK.
So, I don't think anyone can criticise AB for investing in Kraken - it wasn't his fault that the price of oil was so unfavourable when Kraken was in peak production.
It would be an interesting exercise for one of the number crunchers on this board to estimate how much revenue Kraken would have pulled in if Brent had averaged $70 over the last four years.
Hello mrc,
I know it was different time then and don’t blame him.
Personally I would not gamble that much with borrowed money when something expensive.
I remember when he got first sense of prices going down he hedged very much and if I remember correctly they made 500m profit on that hedge.
Remember production was low back then so the hedge was huge. It helped.
All in all I am impressed by the way he keep on fighting to clean up the mess.
Reduce debt bit more and going forward we might have an excellent market for AB to operate in.
Buying fields with 10-20k at the price of 2xFCF backed with a 60k production is low risk.
And I hope he don’t forget some Swedish shareholders wants quarterly dividend also. Lol
Good point about the hedging Pelle.
Shareholders didn’t want someone sitting on their hands in 2010. It was a very different world and I don’t think we can really blame AB for not having a crystal ball. Anyone who invested in those early years made the same mistakes.
Good morning Squif,
Sometimes it’s better sit on your ass for years waiting for the investment opportunity when things are cheap.
Both for AB and in general for us also.
About 80 average, think we need make an volume weighted average.
I think the biggest mistakes last couple of years is reduce hedging when prices where very profitable and we consider high. A couple hundred millions lost there.
Now it’s third time we have good prices and very profitable. Good the banks demanded hedging.
Magnus and GE have been and will be excellent investments.
Let’s hope this finally comes good now.
Development made us also sit with an unhealthy amount of shares:-)
Squif- he only owns 10%.
The majority of shareholders disagree with your view that AB should be removed. I’m sure you will be right though.
If this were a normal cycle and shale did not exist then We would all now be rolling in cash.
Magnus and GE have been good deals.
Can I ask if you have any problem with the decisions AB has made in the last 7 years? As far as I can see m, he has stuck around and cleaned up his own mess rather well. Do you think it would be favourable to get rid of him now?
Look mrc - if I didn't see there was potential I wouldn't still be invested in Enquest. Both Alma Galia and Kraken were rotten investments. AB is Enquest and this has become more the case since 2011. He owns an unhealthy amount of shares.
I seek greater visibility and accountability from AB and the company. I see the potential for Brent to rise and that should lift Enquest. AB needs to make and execute on decisions that are value accretive over the oil lifecycle. Forgot to mention that Brent average since start of Enquest is funnily enough $80 so he has plenty of opportunities to get it right.
As long as he makes NPV decisions based on Brent in the $60 range he should be able to start repaying investors. His problem is he has been reckless.
Oh, and to the point of what has happened with Tullow and PMO - yes they have not fared well either but there CEOs have been removed sometimes multiple times. CEOs need to be held accountable for their mistakes.
Oh dear Chilting.
We don’t have a market maker as far as I’m aware!
No reason to mark down even if we did. Nothing has changed that would affect SP (more shares but also more cash assets).
Not saying this won’t dip, but if it does it will be driven by buyers and sellers. Some may exit expecting 19p, but likely very short lived dip if the general markets are positive. If it’s a down day we might see 19p
Presumably, the SP will open lower on Monday when trading begins to account for the dilution - that will be programmed in by the MM's simply using the current market cap.
Its then a case of how it reacts during the morning that matters.
Personally, I think the SP will rise strongly to easily cover the opening reduction and then move on into positive territory.
What does everyone else think?
Squif - As I say there was one big mistake and that was developing Alma Galia.
Decision made in 2012. I think you should move on mate!
I certainly wasn’t an ENQ fan back then. AB has proved himself since then IMHO. I don’t think ENQ would exist without him.
Oxygen that's not your allocation shares then but your existing holding then!!!
Squif, I wonder what SP we would have if today was 2010? With 700-800m FCF projection.
As Mrc says after borrowing 2b for investment in top the cycle. And with years of low oil prices following and on top of that Covid.
Without making these capital raises we would be bankruptcy long ago.
Now it really looks like we can come out of debt fairly fast and 100-200p could be possible in 5 years.
I have two fears government trying to punish oil, or that AB trying to take a bigger piece of this somehow.
But who know maybe in 5-10 years the lack of oil in world is so severe that it’s the hottest sector and highest valuations.
2-3 year ago I made calculations of EV and it was around 2,5b the 1b we reduced debt have been eaten up by going to EV 1,5b.
At the same time now we have the highest FCF projection I ever saw.
Will be very interesting this over next 6–12 months.
@ammu. Easy, just sold equivalent volume from existing holding.....it’s not rock science !
Squif and how has other comparable shares like tullow and pmo have performed during that time?
Pmo from the heights of 400p to 18p
tullow from heights of 1500p to 48p.....
Oxygen how did you managed to offload your allocation when shares goes into account on the 26th....
load of bullocks over here from the usuals.
Ignore the noise and focus on Brent and fcf generation.......
So let's have a look at the facts mrc. Enquest started on the 6th April 2010 with a sp of 97.5p, total equity of $817.4M, 800M shares and a market cap of $1,188BN (£1 = 1.5228 back in the day). In 2010 the average oil price was $79.47. Rolling forward to 23rd July 2021, Enquest has a sp of 21.2p, total equity of ($65M), 1,69BN shares and a market cap of $498M (£1 = 1.38). Average Brent 2021 is $62.26. So the sum of all ABs actions has reduced shareholder wealth by $690M over a period of 11.3 years. Now of course Brent average is $17 (or only $5 looking at today's price) lower but still. Not only that the sum of his actions has reduced total equity by $882M despite shareholders pumping in an additional $250M. Loans and borrowings have ballooned from $0 to $2.6BN and total assets have gone from $1,172BN to $3,3BN (including deferred tax assets). So even with that measure he has borrowed $2.6BN and increased the asset base by $2,128BN.
I am sorry mrc but any other CEO who was not the majority shareholder of their company would be out on their proverbial butt with that performance but please tell me what your analysis tells you. As CEO your actions should be wealth accretive over a business cycle (7 years) but his have been wealth destructive (and not simply looking at the last year when oil prices cratered). At the same time he has increased his holdings 6 fold and reduced his average price. In 2010 he had 31M shares (3.9%) at an average price of 95p and now he has 180M (10.6%) at an average price of below 50p. So yes it is part of ABs plan to dilute shareholders, reduce his average price and increase his % ownership of the company. This is misuse of power, incompetence and a total lack of oversight by the "independent" board.
Slightly surprised the OO take up was this low, may be a reflection on average size of holding so as no to warrant bothering. Suspect SP will remain subdued until these shares wash thro’ so decided to offload my allocation today....a few grand easy money, so thanks AB.
Squif is a disgruntled shareholder who bought at the wrong time. Not ABs fault.
GKB - to say neither raise has added value is a bit silly. Both will most certainly add value over the time we own them.
The problem with ENQ has always been the 2 mega investments made at the top of the cycle. Alma galia was a complete disaster. Kraken saved the day but has not performed as well as expected at FID, and ENQ were fortunate they were able to cut costs when the POO crashed.
I’m not sure when you would sell when the cash flow and long term POO are starting to look promising, but each to their own!