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Everything has its day. Property has but its beginning to show signs of wilting. My beloved reads Rightmove like others read the Times.. Every weekend I seem to be dragged around looking at piles of decaying real estate.!! I have little interest but a potential divorce would be worse than investing in the stock market!! I checked back and in 2018 I bought shares in Enquest at 37.6p. They say patience is all that is required in investing but its knowing when to buy and when to sell that is the golden goose....Truthfully I am a complete amateur. Usually I get lucky more times than I get it wrong. One thing I have learnt is never to fall in love with one particular share..And Never say never...
Interest rates havent helped property, but definitely keep you're other half happy :)
Historically I'd agree Enquest looks like hard work, but a lot of hurdles and milestones have been reached over the last 12 months or so and a lot is moving in the right direction. Charging a windfall tax when there is no longer a windfall isnt fair to anyone and will do long-term damage to the industry. That said Enquest is nimble enough and now delivering well. In normal conditions we'd be way past your 37p by now. SP will grow as debt is arrested, it always does.
I really hope so. There are some posters on here who deserve it...
You say the "SP will grow as debt is arrested, it always does."
Our debt has fallen from $1.8b to $370m and our SP has fallen with it
Since 2017 yes. The windfall tax (profit reduction )reset expectations tho didn't it? And isn't debt reduction now more rapid than when that debt started being chipped away at 7/8 years ago? I've only been here since last year so you may have a better overall picture of the historic's. My views are forward-looking based on whats happening now but I do get the frustration. Been locked in shares for years as well.
Kraken
My take is that In very broad terms EPL has reduced the value of 2P reserves by approx $10 per barrel which has reduced Enquest’s value by close to $1.7b. The reduction in debt has broadly offset the destruction in value created by EPL. The other issue is that while debt has continued to reduce in 2023 and hopefully further in 2024, Enquest CAPEX over last 2-3 years has not replaced the oil reserves it is extracting and the approx 15m barrels of oil extracted in 2023, without replacement, will have reduced the value of reserves and market cap by approx $150m. Equally the FCF generated will enhance the market cap and at present we are broadly in equilibrium with FCF post EPL similar to reduction in value of reserves through extraction.
Accordingly if FCF is $150m in 2024 and 15m barrels is extracted without replacement, we should not expect market cap to increase. I struggle to understand why the CAPEX over last few years has added virtually zero 2P reserves. The reserve replacement ratio is a key metric for O&G companies and Enquest has avoided mentioning this for last couple of years. Question for AGM?
Pacman - first of all on the property being less stressful - i literally couldnt disagree more! I have property i rent ( short and long term) and also quite a few other asset classes - equities and ENQ clearly bring part of that! Unless you use an excellent agent property is much more stressful in my opinion - shares are easy as long as you have the patience and ability not to get too emotionally involved - no stress - you just have to judge what works and if it still works - property on the other hand you have to take care of at some points and get your hands dirty.
As to your later points on enquest and resetting - now that i am 100% in agreement with - my litmus test is ‘would i still buy stock now’ and to be honest i would. We’ve made amazing progress and inflection point is coming - we’ve had some horrendous gov headwinds but we’re getting there
Stevo12 (12:48), you raise some interesting points.
I get the gist of your point on the difference between FCF and change in 2p being reflected in the market cap (though I would refer to the EV) but dispute the impact of EPL – my initial impression was that $1,700m was way to0 high, however on examination closer than I thought.
My calculation is based on 2021 year end numbers for net debt ($1,222m) and 2P (194m boe) and a peak price before EPL (32.6p April 2022). Peak EV on this date was $1,990m, leading to 2P valuation of $10.3/barrel (obviously a simplistic assessment, but I think a useful comparison as little else has changed from April 2022.
Two years on, April 2024, using 2023 year end numbers for net debt ($481m) and 2P (175m boe), price 16.75p, EV $882m, leading to 2P valuation of $5.1/barrel.
As I say, a simplistic calculation, leading to an impact from the new tax environment and other factors of c.$5/barrel, a 50% reduction. The reduction in EV over two years – from a peak – is $1,108m. One could add $100m for the reduction in 2P for $1,200m, so as I said not so far off your $1,700m.
The numbers above may be of interest to some, but the reason I’m posting is in response to your comments on CapEx and 2P replacement.
When I invested in ENQ back in 2019, talk then was of supporting capex of c.$50m p.a. and the question was also asked, how does this differ from Opex when 2P doesn’t increase. (Ithaca refer to it as ‘net supporting asset capex. In 2023, Ithaca spent $392m and added only 4m boe to 2P)). In 2023, this ‘net supporting asset capex’ for Enquest was $160m. It could be a rounding error, but perhaps this Capex added 1m boe to Enquest’s 2P (16m-15m).
Today, I take less notice of the Opex number and consider the cost of extraction. For Enquest in 2023 I have Opex ($370m), Capex ($160m) and FPSO lease costs ($120m), totalling $650m to extract 16m barrels @ $41/barrel. Again, this is a simplistic measure which ignores other costs, interest, etc.
Presumably, the Capex is that component of extraction costs that a company can present to tax authorities for tax allowance relief – valuable when 91 cents on the dollar is returned.
I’ve seen Capex on fields (not Enquest) which I’ve judged must be Opex, but the company has confirmed that the tax authority accepts it as Capex. If you can get it qualified as such then why not when it comes with a 91% tax allowance.