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Is it only me or are Enquest not saying they expect a relatively huge aquistion in the near future.
The title of the rns was Transformational Growth and in the presentation they said the want to be n the top quartile of producers. I had a quick google and that would mean 100k plus boe a day. Surely that means a deal with bp or shell?
They also hinted they would take on some decom liabilities to leverage their advantage in this dept.
Would their also be a EPL tax advantage in such a deal, beyond the tax credits against future income?
They also said a pivot to non uk would be enabled by new cash flows.
All from memory but the message seemed pretty clear to me.
Also bear in mind debt to 2027, sweden / canada plus bod shajeup. I think enquest are going to do something similar as to what harbour did.
Any thoughts? Thanks.
Byzantine - typo. The Siamese twins - Bressay/Bentley is the bigger prize. That would trigger a jackpot.
O/T I was out last night and my daughter's partner works for a company that handles PR and media exposure for large companies. One of his accounts was an ESG fund. I had another drink when he told me they'd gone bust (or closed). Slowly people are noticing the ESG model is naked.
Bzantine. I was going to ask what RockRose was going to do with the equipment they purchased. It doesn't actually move and there is just another label on the ownership. Clever but to get past HMRC you have to have a valid plan/project otherwise it wouldn't pass the smell test.
Years back when Bentley was owned by Xcite there was talk of them using gas from Bressay on development. Once Statoil mothballed it the writing was on the wall for Bentley.
The ball is now with Labour imo. They will have an important choice to make once elected. Do they abolish O&G production (both parties have conflated the two so very difficult to seperate) as threatened or accept that the transition is not a simple box ticking virtue sognalling exercise and brings valuable revenue and security to the UK.
I'm optimistic.
Kraken
If Bressay does not go ahead we actually get back more than the EPL we paid, if Labour do not remove the investment allowances.
If Bressay does not proceed, Enquest is required to buy back the 15% share of FPSO and spare equipment for $141m and receives a tax allowance of 46% which reduces the EPL payable by $65m. So a $15m profit and an interest free loan of $58m as a downside.
Sounds too good to be true but it due to the use of tax losses and the investment allowance at 91% vs tax on profits of 75%.
So if Bressay doesn’t go ahead and we refund the money does that mean we get the EPL charge refunded?
Https://www.thisismoney.co.uk/money/markets/article-13249739/MARKET-REPORT-North-Sea-oil-producer-Enquest-posts-loss-hit-windfall-tax.html?ico=mol_desktop_money-newtab&molReferrerUrl=https%3A%2F%2Fwww.dailymail.co.uk%2Fmoney%2Findex.html&_ga=2.154060144.938699434.1711746427-829466088.1679172563&_gl=1*149h79w*_ga*ODI5NDY2MDg4LjE2NzkxNzI1NjM.*_ga_XE0XLFFF16*MTcxMTc0NjQyNS44MS4xLjE3MTE3NDY0MzEuMC4wLjA.
Stevo12, from this:
"In December, EnQuest announced the sale of a 15.0% equity share in the Bressay licence and the EnQuest Producer FPSO for a total consideration of £46.0 million (c. $57.0 million). Subsequently the Group received $85.6 million for a 15.0% farm-down of capital items identified for potential use on the Bressay development. Through these transactions the Group has realised near-term value, expecting to yield c.$58.0 million post-tax cash flow in 2024, and delivered an important step in moving the Bressay project forward. "
$85.6m is the cash component of the transaction received in Jan.
The $108.8m is a component of the vendor loan facility, described here:
"EnQuest received $108.8 million repayment of the vendor financing facility. The remaining amount ($36.3 million) is repayable through net cash flows from the Bressay field in accordance with the agreed payment schedule. In the event, however, that the project does not achieve regulatory approval, there remains an option to deploy the assets on alternative projects. As such, proceeds from the transaction are reported within deferred income on the balance
sheet."
The $108.8m is recorded as deferred income.
Londoner
The vendor finance facility of $141.4m was to cover the original $57m and the later $85.6m equipment sale. Rockrose have repaid $108m in Jan/Feb and they have a further $36.3m to pay when Bressay is in production. Reading the details in the RNS, it appears that the $108m is repayable to Rockrose if Bressay does not go forward.
Unless i am missing something it looks fairly clear that Enquest received $108m in Jan/Feb. Can you provide a bit more detail on how you got to your $85.6m cash receipt from repayment of vendor finance loan. I attach note 19i from RNS below:
“(i)Additions relate to a vendor financing facility entered into with RockRose Energy Limited on 29 December 2023 following the farm-down of a 15.0% share in the EnQuest Producer FPSO and capital items associated with the Bressay development. $108.8 million was repaid in the first quarter of 2024 with the remainder of $36.3 million repayable through future net cash flows from the Bressay field. Interest on the outstanding amount accrues at 2.5% plus the Bank of England's Base Rate.”
Not sure where you have got your $85.6m cash received from?
Stevo12, you've opened up some interesting aspects, I look forward to IR’s response.
This is my read.
At the time of the announcement the total consideration was £46m (c$57m), including a deferment of £11.25m to be paid from future Bressay cash flows.
In the Feb update we were told, “In December, EnQuest announced the sale of a 15% equity share in the Bressay licence and the EnQuest Producer FPSO to RockRose UKCS 10 Ltd for a total consideration of £46 million (c.$57 million). The transaction was net debt neutral at 31 December 2023, with cash settlement realised in January 2024.”
Based on this update I assumed the January cash payment was £46m minus £11.25m (c.$44m).
Now, we learn, “With the Bressay-related farm down proceeds offset by a vendor financing facility of $141.4 million (from EnQuest to RockRose, arranged to manage the companies’ respective working capital positions) the Bressay transactions were net debt neutral at 31 December 2023. In the first quarter of 2024, EnQuest received a $108.8 million repayment of the vendor financing facility. The remaining amount ($36.3 million) is repayable through net cash flows from the Bressay field, in accordance with the agreed payment schedule.”
The $108.8m is reported as a gain from the transaction and recorded on the balance sheet as a deferred asset, so not a component of the reported net debt figure $409.6m, end Feb.
The year end the vendor facility ($141.4m) – from Enquest to Rockwall - is added to net debt but balanced by ‘proceeds from farm down’ of $141.4m, hence debt neutral at year end.
In cash terms, $85.6m has been received, presumably the cash settlement reported as paid in Jan.
I believe the net debt figure is affected as follows:
End 2023, $480.9m.
$85,6m received.
$32.6m ($36.3m is non-current deferred value) owing under the vendor loan facility, so current net cash gain of $53m from farm down.
End Feb 2024, net debt $409.6m.
Therefore, net cash flows from operations, Jan/Feb, is $18.3m.
Enquest say, “Through these transactions the Group has realised near-term value, expecting to yield c.$58.0 million post-tax cash flow in 2024”.
Based on this I see the tax impact as c$28m ($85.6m - $58.0m).
Given we were expecting c.$150m EPL payable in 2024, and reported current EPL is $175.1m, the tax impact on the farm out makes up the difference.
BFaith/ Dumby
Extract from page 3 of yesterdays rns
“In December, EnQuest announced the sale of a 15.0% equity share in the Bressay licence and the EnQuest Producer FPSO for a total consideration of £46.0 million (c. $57.0 million). Subsequently the Group received $85.6 million for a 15.0% farm-down of capital items identified for potential use on the Bressay development. Through these transactions the Group has realised near-term value, expecting to yield c.$58.0 million post-tax cash flow in 2024, and delivered an important step in moving the Bressay project forward.”
As detailed above total sale proceeds $142.6m of which $108m received in cash post year end (balance to come from Bressay cash flows or subsequent sale of assets). Post tax net cash $58m and so tax $50m.
I will check with IR but Enquest have laid it out very clearly.
Excellent posts all frac you are very right to state that 425,000 shares a day on average would need to be purchased. Some days the volume is very low and this will lead to 5% swings daily. Like you say if it’s a weekly purchase it wil need to be over 2 million.
Stevo you do add some excellent points but I do not for one second believe that we have to pay 50 million in tax on the sale.
The reason the sp dipped from the highs was the telegraph article. AB knows just how to massage the financials with windfall tax and also how to spin it with the media.
The RNS yesterday was absolutely first class and value will out in the coming weeks. I am going to trade some now as I only need 3.3p to break even with all my averaging down.
Many say 15 million dollars of buybacks was a small amount, given the fact the market cap is 260 million I think that is a nice amount for starters.
The buybacks are really tiny. But I assume the thinking is that the company must shed its expensive and non-deductible debt before proper buybacks. But with Brent at nearly $87, production high and no tax payable before 31st October 2024 that debt should melt away like winter snow. M and A just does not seem to be happening. But perhaps we keep it simple and focus on Bressay.
425,000 shares per dium @ 190 working days @ 14p!! Will have shorts swappers sweating if AB goes in once a week @ 2,1250,000 …. Risk for traders seems set for a badly calculated M&A …recon there’s some bite sized crumbs about that AB has his eye on