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Hi hitman- I don't know what you're basing that on but atm you sound like gkb worrying that the Chinese rocket will land on you tonight. Depends on your attitude to risk and like Moody's worry about $35 oil. I might be comparing silk to cement but some of the shalers that survived refinanced at much lower rates. Chesapeake Energy 2029 bonds were got away at at 5.875% in February. The Barclays High Yield Energy Index dipped below 5.3% the same month, touching the lowest level since 2014. Of course if there is a total freeze on fossil loans it's all academic anyway.
I think Tullow ran it too close to the wire and who knows how hard ball the bond holders played. They will hold you to the fire. I listened to the TLW presentation and the new CEO is a new broom and a typical C-suite johnny. Competent but unimpressive.
I think I read that the new TLW bonds will be quoted from the 17th. That'll give us a much better idea when we see what the market thinks of them.
I see EnQuest as a hybrid (private/public) and this gives us flexibility in some respects but makes institutions wary of us. I didn't vote because there is no point because I expect the resolutions to be passed in the high 90's (as usual). It is also a good sign for me that there are no activists drumming up support. Let's see what Wednesday brings. Some of us will be proved wrong I hope. Just meandering on is soul-sapping.
I disagree that debt isn't a problem, Finex costs for EnQuest are too high and likely to rise as interest rates rise, which they surely will at some point and the loan rate is usually over LIBOR. You don't want to be carrying a load of debt if there's another huge market downturn due to a resurgence of Covid-19 because variants that have undergone antigenic escape (which is already happening) or because the Chinese, Russians or even Iranians have developed a new zoonotic viris. Don't forget Finex means less available for acquistions, share buybacks or even that which cannot be mentioned.
It's clear that AB's last statement in March advising the company has been transformed is true. We have left the old business behind.. you know the one that relied on squeezing out the last drops from older assets in a high oil price environment..
We are at the start of a new phase.. so let's see how the next 18 mths pan out. . Enquest think the company can support $1b long term debt, .. I'm more in the $500m range, but that's just me.. I don't believe Enquest will obtain low rate APR. TLW was 10%, even some car finance is 8.9% APR.. so $500m is fine for me.. after safety, the next important part is shareholder returns.. not expense in dead assets for the sake of doing so.. that's the old business, but I accept we had no choice.
The consolidation sideways travel phase of oil prices is coming to an end. It should tick up into the low $70s soon.. The US has so much stimulus masking so many problems, but it doesn't matter.. People are going back to work, buying lumber at 25%/30% more than normal , building new homes. It doesn't matter if people haven't paid rent for 6 mths on their homes or shop leases.. the banks don't even care either as the US government will take on the debt. There is a shortage of used cars as there aren't enough chips to build new ones . So much cash is being spent in the US.. These supply and inflation issues will last a couple of years.. and these costs affect oil drillers as well.. a shortage of labour , higher material costs and the Biden government. US production won't keep up with demand this Summer and we will see higher prices like Goldman says.. rising jet fuel demand will be the trigger.
I didn't ask to vote at this years AGM.. I wonder how many on this board asked their providers to obtain the paperwork.. I assume all the things on the agenda will just get passed as per normal.. Shareholder buybacks will never happen, but dividends might. There are several analysts listed on the Enquest website that cover Enquest. A few kindly give up their time to ask questions at the AGM.. I hope they ask questions regarding the future rather than historic issues.. which we know AB just says they will be sorted. only the Malaysian production issues to sort , the rest seems fine. Perhaps JS can finally give more info on the cashflow forecast for the next 12 to 18 mths..
Think 20p this week after the AGM is viable given we would be nearer to some of the European airlines opening up again and Brent should continue to consolidate in the $68 plus range..
I certainly don't want to be holding and accumulating for several years and then sell out just when things look better than they have ever been. Not only do I want a dividend , but also SP capital appreciation to compensate for the trauma for holding for so long without a dividend.
Enq were stuck at the traffic lights at red in 2020 due to falling brent prices
Enq i feel is at amber now that amber light is flashing Green will follow very soon 2021 Enq will be a diffrent animal
Debt is only a problem if you cannot afford to repay it - if that happens the vultures will circle and pick over the bones - by the time the equity holders come to get their share even the bones would have gone.
This is the irrational fear that drives the market and a failure to impress over a long period makes it worst - hence low SP's for oil companies. The problem is even worst when the SP for a company continues to fall for a long period.
I agree with romaron that there is light at the end of the tunnel and Enquest will bounce back - the bounce is from a very low level so when it happens the SP will go much higher than even the most optimistic forecasts but we need two green lights Enquest and Brent.
hitman 14.57 - " the stock market doesn't care either." That is true about the stock market doesn't care and it is a fact that it relates to past losses. In some ways it's like chopping off a leg to win the hopping race but there is an upside. Somebody might want to buy your slippers and if you are still mobile you can run an oil company. If you survive the operation there is also the option of the three-legged race in partnership. Harbour put a value on it but sadly for long suffering PMO holders they didn't have an AB at the helm!
Good point nick - some pundits don't like buybacks because it could indicate a management that has run out of ideas or growth is over. The majors are looking to buyback too and by and large they're not run by idiots.
I believe EnQuest cannot buyback without breaching covenants and there is a possibility that AB cannot because of the amount of deals going on and his insider knowledge.
Of course the opposite of that is that the current price is a bargain and if you can buy then it is an unmissable opportunity. People do not look at the business in the round and the ignorance surrounding debt is mind-blowing. I'm no expert but feel like the one-eyed man in the land of the blind here at times. Posters like L3 pontificate on minutuiae but are woefully ignorant on bonds. The bond market dwarfs equity markets and the world really does run on credit and interest rates. We are gradually escaping the clutches of the death spiral financiers (our HYNs are unlikely to be in friendly hands) whilst the existing RCF is covenant unfriendly.
I believe that with a leap and a bound we'll soon be free. The price limiters will be removed and investing in EnQuest really does become a simple numbers game with FCF, dividend and buybacks part of the equation.
*watching CNN on African transport. It takes 3 weeks to move bulky goods from Nigeria to Ghana by road. A distance of 1,000 kilometres and the comment that it would take 12 hours for the same journey in the U.S. It is likely (i.m.o.) that this will put driverless EV's back a couple of years in Africa. My guess is about 25 years minimum. Meanwhile back in the West its happening next year apparently. It won't and neither will carbon capture. That's why buying oil shares makes sense!
Build it and they will come.
The low valuation on ENQ is not just peculiar to us. Many oil shares have similar problems because some pundits (wrongly) think peak oil has occurred or is imminent. The Canadian company, Suncor, we're doing business with in the North Sea, considers its shares to be so undervalued that it's paying a dividend and buying back c5% of its shares each year. ENQ will need to clear the RCF but then with some debt reorganisation could start buying back its own shares. That's putting your money where your mouth is!
Totally agree hitman.
Bottom line is that oil stocks are not a long term hold - just trade with an eye on Brent all the time.
However, anyone who has held and is showing a loss has a much better than evens chance of making a profit in the next six months simply because Brent is probably on the rise.
Hitman - it sounds like you have already sold (in your heart at least).
I don’t think anyone would fault you bowing out at the next rise....but of course as you say it is easy to get caught up in the excitement.
For me this looks like an easy double up if you think the refinance will go through, EP will be put back to work, and POO will hold above $60.
I do not expect any stellar production rises. AB is normally very conservative with guidance - he knows things happen.
Tbf all oil companies have to deal with 'production issues' and Enq has one of the lowest operating costs in N.Sea. It is a tight run ship with AB a major stakeholder. So it has avoidedthr fate of Pmo.
Poo is at a level not seen for many years. Sp will shortly be at a level not seen for many years .... 35p plus imo !!
and please don't say $3b in Tax losses is a reason to hold onto this investment.. the stock market doesn't care either.
The problem is I then think all the problems are sorted, it's safe to top up.. only to realise a month later I should have been selling into it.. I once read the phrase.. accumulate (18p), manipulate ( 30p) , then profit release ( back to 18p). It needs an II to do this, but the pattern repeats itself over and over again.. If your a new holder at 18p, and then the SP shoots up 40%(25p), you should sell..
Many of us over the years have clutched at straws..to keep holding on.
1. Oil price and FCF
2. Closer to dividends
3. Change in Market Sentiment
4. EP sale at higher price than expected
5. Refinance of RCF potentially post 2023 to 2025
6. Production from 2C reserves, let alone 2P.
Should we really be basing our investment on hope and straws. Enquest needs to really deliver FCF without any issues, like wax in the pipes, old assets that catch fire, equipment breakages in Far East that aren't repairable, running out of cash and asking for a OO or RI , complex balance sheets made up of Wonga finance.. I appreciate we had some very tough times, but our investment reputation based on track record isn't high enough to attract funds.. This year might be the start of a good run for several years, if the FCF achieved by year end is strong enough and people believe in the production assets. On the face of it, it now appears sorted. Jefferies target of 27p seems fair.
5. Production from 2C reserves, let alone 2P
When Enq moves, it doesnt move. It rockets !!
Things take longer to happen than you think they will, and then they happen faster than you thought they could.
Im not going to call 60p by year end...but it’s not impossible. When she moves, she will move big time. I agree that refinance going through will be the catalyst.
Plans for EP are well advanced and could give us the first rung up to 30p
I have to agree.
Last presentation and Q&A had a lot mumble so who can be 100% sure.
But I really hope they didn’t buy GE without blessing of getting the re-finance through.
And that looks like 200% more sure now given oil price development.
Hope it’s a different tune next week and can start the 60p journey
We have to disagree then !
It is the market NOT having 100% assurance that the deal will complete. Don't forget it's NOT just aquiring GE it's also the refinance package that goes with it ! This is just as equally importent. I re-state when the deal and refinance has completed (not just announced) , actually gone through - Then and only then we will see our run up to 40p. Obviously with the "tide effect" of POO.
Pelle, I will remind you at the time !
I asked IR about it. Is it really necessary ask for 50m given Its around 1 month FCF.
Anyway I don’t see this as only reason why it’s 18p.
With better communication this deal should be reflected very positive. Oil higher and look like production might do better than 10k also.
So it might be worth double compared to what they paid.
Its the oo and GE deal, holding us back. This happened before with the RO. Once its gone through we could more than double as we did before !
Slift hit nail on head, Enquest to the market is $64m negative Equity, many things have to be accounted for in end of 2021 accounts GE completion, higher oil price massive increase in 2p reserves (267m) was Bentley 2p after EWT, GE allows some tax credits to be re-accounted for.
I am hoping for a bit of clarity in 12th update, a good reduction in debt before new RCF, sale or plans for Enquest Producer, plans for new wells at Magnus and hopefully terms of new RCF with no Open offer required.
We can see Enquest is not $64m negative but that is what Moody's etc see, it is in the accounts. Build it and it will come and AB is not going to let someone nick it from under him though I expect some are eyeing up.
Dw mate.... with Brent near $70 this will rerate significantly. Its inevitable and just a matter of time !
I will write to IR now so they have time in weekend prepare for the AGM:-)
Think everyone should write to them if they have any questions.
The balance sheet has also improved here following the acquisitions and cashflow from higher brent prices.
This company is no longer at negative equity - which bodes well for the refinance.
The value here really isn't very much appreciated by investors, and I look forward to the trading update next week to provide this company with support in share price it deserves.
Morning Pelle, This is why I get so frustrated, we could have £1b in the bank yet the Mcap would still be on its arse, I just don’t understand why the market wont respond. Oil prices could be on the way to $100 and still our volume wouldn’t increase. We have way out performed both Tullow and PMO over the past two years and still no reward. What the hell do we need to do to change this ? At this rate 30p looks like a dream away and 60p looks impossible
AB will just have to dish out £100m dividends each year - I’d be happy with that
Its completely unbelievable that this is still 18p.
Just the GE field must have increased in value around 200m based on 20 usd higher oil price.
The two other fields bought for future must also have added a lot strategic value.
Something needs to be done to create shareholder value. I been told here I should appreciate capital increase instead of pushing for Dividend.
But we see how it’s going.
Please give us a timeline given oil stays above 60 or something.
Other option is sell the company, clearly it must be possible get 2-4 times Mcap today with the tax credits included.