Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
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As you boys have net debt reduction below $200m this year I predict you see no bright future.
L7, where's your FCF and EBITDA for H2?
I predict OZ to be gone by Q2. Maybe OZ will refinance our PIK?
Balance sheet is clearing up way faster than you boys perceive.
Best, HMH
GKB, Greedy ask for SEK but I see the reason
e121, while reading the posts between you and Pelle I was reminded that Oct 2020 is a significant date. I couldn't remember why but just found it.
' In addition, the maturity of the Retail Notes will be automatically extended to 15 October 2023 if the SFA is not repaid or refinanced in full prior to 15 October 2020;'
On the OZ loan I suspect ENQ have little control over repayments unless the lender agrees to a change in terms. But sufficient revenues from the 15% Kraken ring fenced stake ahead of amortisation would help. It hasn't happened so far judging by the capitalised interest charge but that's probably due to the DC4 capex. Repayments in H2 should be better.
GKB, many things not acceptable in world. I just need protect my interest.
And I am winning!
Yes, you're right, L7. That's $120 mill RCF plus the PIK on Bonds, before any distributions of any kind. I'm not sure if the PIK on the RCF can be repaid ahead of maturity, as the amended RCF has this wording - "PIK amount repayable at maturity and subject to 9.0% interest, which is capitalised and added to the PIK amount on each 30 June and 31 December;".
Either way, we try and get rid of/refinance the more expensive debt first. With the USD 3 month Libor now at 2.15%, the RCF interest rate is just under 7%. That's the level the bonds are at too. OZ is now the highest cost debt that Enquest is carrying.
e121, my interpretation of page 276 (RI prospectus) is that the RCG ceiling drops by $120m 1st April 2020. It drops $100m in the current period to 1st Oct 2019.
My reading of point F) is that it refers to the capitalised interest on the Bonds (and perhaps on the RCF). This would make sense as at the time of writing these conditions the lenders wouldn't know how often the <$65 oil PIK event had been triggered. It represents a large relief to paying off the RCF so I'd guess they would want this cleared too.
Sorry, P - it's like I'm ****ed this morning. Clause F is clear that the entire Bonds/Notes' PIK has to be paid off first, before any distribution consideration. We're some ways from there.
This one is interesting, '(G) at least 10 business days before the date on which the distribution is made or paid, the
Company confirms to the SFA Lenders that all the above conditions are, or will be,
satisfied on the date on which the distribution is made or paid.'
I'll look out for any unusual share price activity 2 weeks ahead of interims and finals.
It'll be great if Enq can pay at least some of the $100 April amortisation, before the end of this year - I can see that happening.
Decisions, decisions. It'll be down to Brent would've been trending, IMO, as to what they decide to do. Unless Brent gets to the high 60s/70s and stays there for a prolonged duration, at least into Q2 2020, only then will there be meaningful reduction in debt from FCF to look at refinancing the remainder of RCF in H2 next year. It needs to be noted that most of the PIK is bonds related though and that's $117 out of the $132.5 mill. And to think about it, the distribution covenants would only apply to the RCF PIK, which is just over $15 mill and not the entire $132.5 mill. ;-) That must be a comfort to you, P. Do I hear distribution...
I'm sure AB and JS are laser focused on getting debt down ASAP. And that'll be good for us all...Divs in 2020 or not;-)
Hello E,
Ok, so you think after doing the RCF amortisation 1 April they will start focus on paying back the PIK to bonds?
And maybe re-finance remaining RCF also
Romaron - how are you? Not too many left from the old LGO days but I'm sure you're pleased investors have had a second chance there !
Lol..Auson
He is funny without knowing it himself
romaron, I have a similar level of investment in Cairn to my holding here so I follow their activities. I can't judge the merits or justification for their write down of Kraken reserves but along with the write off on the India asset (or should I say ex-India asset) I thought it was a straightforward and successful attempt to reset the CNE share price lower ahead of their long term bonus awards. I have more confidence here that AB's interests are aligned with shareholders.
As to any similarity in the recent performance of the share price I doubt it has any relationship to their common interest in Kraken. At its heart CNE is an explorer, very different from ENQ and why I view it as a very different investment. Its share price performance over the coming year will have more to do with the drill bit and the sanction of SNE (and the tax dispute for the punters) than how well Kraken performs.
But any ENQ investor should take note of CNE updates in relation to Kraken. They provide an alternative and sometimes more detailed view than that given by ENQ.
They provided an early heads up on the Western Flank development in 2020, although Enquest as operator and majority holder are the primary movers. Yesterday they stated that the development will be producing oil in 2020 H2. The information on the total Kraken well capacity of >47,000 bop post DC4 is a useful nugget. Their Kraken Capex expenditures are also informative with respect to the timing of Enquest's declarations. While the Western Flank development will increase their Kraken reserves I didn't get any sense that they are close to unwinding their earlier revision.
I fear an image that has formed in my mind of you in flares and Cuban heals may last the day!
Yes, I thought of GKB, when I said Divs. ;-) Below are the RCF/SFA conditions for a permitted distribution. Clause D is the $500 mill clause and F is the one where the PIK also needs to repaid before distributions. That's another $132.5 mill. There's a minimum $212.5 mill to be repaid before ($80 mm RCF + $132.5 mm PIK), before divs can be considered. It's all down to Brent and FCF here..
A distribution is a “Permitted Distribution” when each of the following conditions are
satisfied:
(A) the Leverage Ratio has been no greater than 2.0:1.0 for the four immediately
preceding consecutive quarters;
(B) the Company is not in breach of the Leverage Ratio on the day of, and taking into
account, the distribution being made or paid;
(C) the Company has delivered a Liquidity Test taking into account the proposed
Capitalised Interest demonstrating, to the satisfaction of the Majority Lenders (as
defined below), that the Group has sufficient funds available to meet all liabilities
when due including all amounts on the SFA Final Maturity Date with a surplus to the
extent that debt service in each six month period is covered 1.20:1.00;
(D) Aggregate Commitments under the SFA are less than $500 million;
(E) no event of default is continuing under the SFA;
(F) on the date on which the distribution is made or paid, a principal amount of the High
Yield Notes and the Retail Notes has been redeemed in cash by the Company in an
amount equal to the all Capitalised Interest (and any further interest due and payable
howsoever described has been paid in full); and
(G) at least 10 business days before the date on which the distribution is made or paid, the
Company confirms to the SFA Lenders that all the above conditions are, or will be,
satisfied on the date on which the distribution is made or paid.
Pelle,
One of my favourite Trump quotes
" I know words I have the best words I know all the words, I'm very highly educated"
Sounds good E:-)
But watch out for penalties from GKB and L3.
I am winning anyway after putting tariffs on GKB
Divi, no matter size, would be a v powerful signal.
"Higher oil prices with additional hedges in place would be key to that." Yes, no doubt KO...
A token dividend would certainly be extremely welcomed by our Shareholders and the Market would have to wake up to that.
Higher oil prices with additional hedges in place would be key to that.
Maybe just maybe the tide will turn in our favour
Enquest will have much more flexibility with 'distributions' once the RCF debt falls below $500 mill. We'll be at $580 mill next month and with the cash flow generated for the remainder of this year and for H1 next year, I won't be surprised to see a token dividend announced with the H1 results this time next year. Obviously, many factors can influence Enquest's decision, the global economic outlook and Brent price being key, but I can see this as a realistic outcome this time next year.
@Pelle - music to your ears? ;-)
Even a plan to reintroduce dividends in 2021 would give a something to look forward to and boost optimism. would mine !
Most of our Shareholders are all down in the dumps, No volume and the company not attractive to new investors as the stock hardly moves on good news. No Broker ratings over the last few months and when we do receive a broker rating they lie ! RBC should have been put straight immediately and threatened with court to be honest, that was very damaging and we haven't recovered from it.
"Operating loss US$182m from the impairment of Kraken following downward revision in reserves; net loss after tax US$1.1bn resulting principally from write down of Cairn's investments in India" 12 March 2019"
My opinion at the time was that it was an opportunity to throw in some additional luggage on a bad news day (India tax) although it was disconcerting to say the least. Looking at it again it didn't make much difference to EnQuest and we appear bomb proof on both sides. Nothing seems to shake us up and how recent the event was. I was trying to get some sense from tracking CNE as it is supposedly a peer and we do share an asset.
Conclusion: CNE is no more popular than EnQuest . CNE is back to about it was before the impairment and so are we. You can almost overlay them by looking at the 6M chart on these pages (lse). The sector is out of fashion. It's not all about us. Fashions do come back (the flares and Cuban heels still look almost new). Dividends are always in.