We would love to hear your thoughts about our site and services, please take our survey here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
Hi L7 - the man probably said something similar when he took on Alma Galia.
Hi romaron, thanks for your reply.
You say, "I'd like to see EnQuest buy or farm in on newer fields that don't have quite the scale or criteria required by the majors." And add the valuable reminder on Malaysia.
The man said, "'the acquisition of suitable growth opportunities, which will be aligned with our proven differential capabilities in managing maturing and underdeveloped hydrocarbon assets.
If there's a deal, I suspect your fears will be realised.
I invested in Enquest last May with three pillars of support. I felt the Kraken problems, were solvable, Magnus was a good deal (at least after the first year or two when most of the benefit accrued to BP - but it was their asset after all), and thirdly, I believed the spiel that Enquest were well placed and capable of benefiting from the big boy's cast offs in the North Sea.
I don't believe ENQ has the balance sheet to support a conventional growth route, without a capital raise, so I'm still hopeful they can pull off another Magnus.
My workings on the Magnus financials suggest the benefits really kick in this year - shame about the oil price, maybe next year. It seems fair enough that the early benefits accrue to BP.
I hope the 32nd licence round, due this H1, throws up an opportunity. Just hope it isn't another Alma / Galia.
Magnus very roughly numbers and simplified.
Assuming BP kept Magnus and 60 opex they might got zero FCF out of it last couple of years.
Now they got up until today.
100 mill vendor loan 25% paid of.
Maybe 200 mill more up to autumn 2018.
100 mill cash for the 75%
100 mill FCF
So in the range of 500 mill.
Enq invested 100 mill.
Got those 100 mill back within 9 months something. Plus around 100 mill more.
Now counting assuming 40 oil and 18k.
FCF equal 160 mill per year.
It will be split approx 50/50 because Enq still pay back 20 mill/year second vendor loan.
Very nice deal for both.
I didn't say it wasn't a win/win. In a perfect world all deals would be. It was more a criticism of parochial support by LTH's on most message boards. I was inferring that in the transferring of fields some companies will end up with a disproportionate amount of them. Could be Spirit or Chrysaor for all I know. INEOS ducked out of buying Conoco's assets after they'd put down a deposit in return for 3 months exclusivity in November 2018. INEOS aren't mugs.
EnQuest are extremely well positioned in my view but I'd despair if they bought any more end-of-life fields. I think the majors are close to giving them away so I struggle to see why anybody would buy them but if Magnus can be repeated???. It is a (seemingly) cheap bet on the future price of oil but with shale in the side wings not something I'd bet on. I'd like to see EnQuest buy or farm in on newer fields that don't have quite the scale or criteria required by the majors. Not every company can be a FTSE100 but why not aim for the top? AB and his team know their strengths and situations can change dramatically. There is no magic formula but I think 10 years still makes us a young company and we are now close to being fully fledged. It's a bit early on the debt front but I think there would be plenty of interest in any merger or take-over that EnQuest considered. The time is ripe.
*I also like our Malaysian interests but from a slightly different perspective. Most companies in the UK don't have an Islamic CEO. Malaysia is mainly a Muslim country and they put a lot of value on financial probity and charity where we score very highly.
romaron, in response to your comments on EOL fields, I asked, " where do you see Enquest going", if not in the growth opportunities AB described in his latest report?
I might comment on Magnus later. Like Pelle, I see it as a win win for both Enquest and BP. I certainly don't view it as pulling one over on BP and I don't recall any such comment on this board, but I wasn't around at the time of the transaction.
You say, "There will be new deals."
Returning to the point, what sort of new deals would you like to see?
Many fans of smaller oil companies often post on these bonds that they have had the majors over. They are more quick witted and flexible than the majors etc.... That may be true but the winners here have been the majors who shifted the EOL fields to the second (or is it third) rung of companies that deal in used fields and are now more protected from the slump in the oil price. Covid is almost the equivalent of the tide rushing out and showing who went commando or is it that a rising tide lifts all boats? I haven't really got my head around Magnus as it seems to much bigger than other fields we have dealt in. It may just be that it flatters BP's balance sheet, is a strategy anyway and there are clever terms that avoid EnQuest getting a giant windfall. It does seem a good deal but I don't think BP is run by dopes either. I think Magnus may be difficult to replicate. Our tax situation was instrumental too imo.
I do wonder what our competition will do. I doubt that old fields with fast diminishing returns have any value at present. This is why (I think HMH posted something similar) I believe we are unloved but also unappreciated. I don't care. The world will soon be in recovery mode and we've already seen a tentative improvement in the bonds as the search for returns continues and we all know that the bond market is far more cautious than the equity market. I believe it is a waste of time to go on a charm offensive and AB's perfunctory (but polite) treatment of analysts is a result of them not understanding the oil cycle. The analysts are well paid but nowhere near what a top executive of an oil company can earn when they get it right. The analysts are trapped by the numbers and they are always OLD numbers. The risk for them is the price falling and like surveyor's are always thinking of accusations of over-valuing or worse being accused of professional negligence; it is a mentality which whilst not wrong really covers loss protection. There is (imo) an antipathy between the two and I'm with AB. Let the forward numbers do the talking.
At the moment the problem is Covid. Does it return with a vengeance in the Autumn? This may be the last chance of getting on the bus. Unlike some other companies we haven't exhausted all of our options. We can afford to wait for the better deals because that is what EnQuest have done, restructured the company for the next stage of development. I am convinced that AB is ambitious and driven. There will be new deals.
Nobody anticipated Covid but we are well placed to come out of it stronger.
L7 - I wasn't using specific quotes or posts. If I have misread the sentiment of others they'll soon put me right.
Another Magnus deal would be welcome.
When Enq started at Magnus some years ago opex was 60 and now 15 usd.
BP must be very happy with the deal also.
Win-win
And I thought it was the devil..
Hi romaron, you say, "I think it also signals the end our interest in end-of-life fields and we have moved on. The economics of those fields mean that even if they were to become economic again they would trigger the re-entry of shale speculators which would put a cap on any long term benefit and the risk is too high for most. In fact only those with strong balance sheets can wait that long and we are almost there. I do wonder about other buyers of EOL fields as this cheap way of building reserves is over imo. "
I had a look at the Swedish site but didn't find any comment in this area from HMH or anyone else, so missing the background, but your comments surprise me and are at odds with AB's, who closed his Chief Executive's report in the 2019 accounts with the following statement:
'the acquisition of suitable growth opportunities, which will be aligned with our proven differential capabilities in managing
maturing and underdeveloped hydrocarbon assets.'
If you don't trust AB's ability to manage Enquest via these 'growth opportunities' then where do you see Enquest going?
I invest in a number of oil companies and I included Enquest in the list because of the attraction of the Magnus deal and the fact that they were showing no desire to go down the exploration or new field development path. I invest in other companies to target those areas.
Thanks to Therapist for his 23.32 post I found a link to another message board that I knew nothing about, Placera -https://www.avanza.se/placera/forum/start.html
It made a change to reading this board and I even found the transient visitor to our shores HMH who seems far more relaxed from his home base. I even looked up his longer name but it doesn't translate to well "he with the horn" but I kinda get the gist and it does explain some of his bouts of irascibility. Crossing the North Sea in an open boat and a horned helmet that might be too tight is enough to enrage even the mildest of us. But I digress.
It helps to get other's views and I like the way HMH simplifies things so that the likes of me can understand them. Like him I expect that as long as the building blocks are in place we'll be fine. I think it also signals the end our interest in end-of-life fields and we have moved on. The economics of those fields mean that even if they were to become economic again they would trigger the re-entry of shale speculators which would put a cap on any long term benefit and the risk is too high for most. In fact only those with strong balance sheets can wait that long and we are almost there. I do wonder about other buyers of EOL fields as this cheap way of building reserves is over imo. Like tobacco there is now a moat around oil companies and the decimation speeded up by Covid now means that those trying to raise funds on a shoe string stand no chance. A cull can be healthy and is more the Swedish way but it has helped EnQuest in the long run.
*for our Swedish friends - han med hornen translates to "he with the erection".