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This is just utterly unbelievable, we have broker notes of 33p, poo is about to go through 90 dollars and buybacks are days away we should be at 25p and not ruddy 15p.
Stevo. Bressay clearly has a current value to Enquest in that 15% has just been sold with 15% of that rust bucket which is Enquest Producer for $58m of net of tax upfront cash. It is soon to produce gas which will save $30m a year. Once we ascribe a value of say $400m or so to these assets alone we have already exceeded our current market cap. You have suggested FCF of $180 -$200m for 2024 and $234m for 2025 at more or less current Brent with no further deals. I am wondering if you have made similar forecasts for Serica? I do like the latter and it is an obvious candidate for a merger.
Stevo12
I agree about 2C resources. But even if we were to assume that all your numbers are correct, the company is still very cheap. The stock price is a joke. Should have already been over approx. 30 GBX.
Stevo12
Thanks for info I couldn't find that info in accounts on note 28? I was looking at note 22 and they did say " At 31 December 2023, the contingent profit-sharing arrangement cap of $1.0 billion was forecast to be met in the present value calculations" I am afraid accounts written by accountants for accountants.
Looking forward to 9% bonds pay out May, and shares will come good at some point.
AIMOking,
Sorry - The half million trade was NOT a trade ! (buy or sell)
It is the UT, Uncrossing Trade used by the market makers to balance their books and set the stocks closing price of the day !
OilKing
Not trying to defend myself but my 2023 FCF forecast were based on management guidance provided in September and November which turned out to be materially incorrect but thankfully positively incorrect - I guess I am trying to defend myself.
In response to your points
1. Enquest tax losses are higher than Serica’s - approx $200m higher at 40% rate. These will be used over several years and annual impact is not material. What is more important is that Serica can currently only use its losses against Tailwind profits..
2. Magnus represents 45% of UKNS production and I have assumed they will also account for 45% of 2P reserves (as not disclosed) and accordingly BP’s share is 25m barrels.
3. I have not explained myself clearly enough re Malaysia. As you not PSC are common place in many countries and in Malaysia The government apply a royalty of 10)% of revenue, take 40-50% of operating profit under the PSC and then tax residual profits at 40%. What I was trying to say is that while Enquest is producing approx 8K BPD and has 2P reserves of a little under 30m barrels, approximately 1/2 of the profit earned form these 2P barrels is paid to Malaysian gov under the PSC and Royalties. My goal was to provide a more comparable basis with UK production.
On 2C reserves, the market is not attributing any value to these reserves due to EPL. As an example HArbour gave up its share of Bressay 2C for no consideration and Shell also passed its interest in Cambo to Ithaca for no consideration. I recall Enquest paid a couple of £m for Bentley pre EPL. Nice to have 2C reserves but no value currently ascribed by MR Market.
Topped up again, if Brent holds at the $86-88 range or higher, then the sp will surely rise into the next update, backed up by buybacks - I wonder if the late almost half million trade was the start of the buybacks. I assume ENQ will want to get a couple of purchases and then RNS to say they have started buybacks.
SEK
I fear that the negative working capital of approx $50m in Jan/feb was a reversal of an unusual timing issue at 31 December 23 as disclosed by management and may not reoccur in March/April.
We will see at next trading update.
Kraken
We pay to BP the FCF earned from 37.5% of Barrels sold from Magnus. This is effectively 37.5% of Magnus revenue-Magnus OPEX- Magnus CAPEX.
What I have tried to highlight is that Enquest retains 62.5% of Magnus FCF but the reported BPD production and 2P reserves is 100% of Magnus
Rom
In simple English, Enquest have $1.7b of tax losses which are deemed likely to be used as compared to Serica who holds approx $1.1b. Enquest also holds Bentley losses over over $1b and not sure if theses are purely ringfenced for Bentley taxable profits.
Serica’s losses can currently only be used against the Tailwind profits and so does not eliminate 100% of core UK tax.
Tigar
Unfortunately not quite. The amount still to pay BP for Magnus is $824.9m (see note 28 of 2023 financial statements). The $461m is the NPV of the future projected payments to BP for Magnus. Copmpany’s projections are that they will not pay the full $1b of contingent consideration but this is of course dependent on future volumes, oil price and OPEX.
Company forecast 2024 BP payment reducing to $46.5m due to high Magnus CAPEX. Should be approaching $100m a year thereafter.
It appears the Arms Industry is about to have its own windfall moment, so I look forward to EPL being applied to any excessive profits!?!
Back to ENQ and EPL, when is the government going to announce the new EPL baseline figures?? Any increases should help a very little to underpin share prices of NS O&G's.
For me it is actually On Topic https://www.spectator.co.uk/article/when-will-the-bbc-apologise-to-toby-young/
Maybe instead of using the suffix O/T it might be more helpful to add "Politics" in the subject title because some of us are more interested in the political machinations than others.
I think things are getting very interesting away from EPL and companies' performances and suing Chris Packham would maybe make the "deniers of debate" rethink their slanders and libels that aren't supported by either science or facts.
Today the activists have disrupted the AGM's of BP and Drax. The SNP have split from the Scottish Greens (I think the ramifications of this will be massive). The Scottish people aren't happy and their famously pragmatic approach to finance will assure that there will be NO financial leap into the dark. Their claim to the NS is bigger than the rest of the UK imo and the climate debate deniers are losing ground fast. It has never been "settled science" and I'm sick to the back teeth of the likes of foreigners (non-UK) like Al Gore, Greta Thunberg and Tessa Khan dictating to me.
I think the defending of the arms industry by Sunak should reinforce the argument against why the government [if it cares about security] taxes the O&G industry at penal rates. Is the arms industry more ESG acceptable than O&G?
I also keep wondering whether we will have a few years of Magnus being 100% ours. This must particularly be so if production does increase (as forecast) and we have Brent at around $90 of more. We could clear the outstanding consideration to BP quite quickly. But I am bored and I want a big deal to happen. A merger with Serica is my dream solution. They have the cash we have the tax losses.
Hi Stevo12
I had a bit of time and looked through accounts and hey-presto found it $461,271m this I assume is balance of $1bn gross of the original deferred liability which means as we paid BP $65m last year and used our tax credit to pay 40% of that.
BP may get their money?
Or to put it another way Enquest have paid BP $539m from 37.5% of Magnus so we have cleared $898m
Is my maths correct?
I’m not sure the market takes much notice of positive notes any longer, it seems all about shorting nowadays.
Like I’ve said before we could strike gold be paying 50% dividends and still the SP wouldn’t rise.
We have been doing everything superbly well over the last few years, debt has fallen way over a $1b and still the market won’t reward us.
What more does this UK market want other than a fair tax regime .
About time - a few more positive broker targets would be helpful and over due in my opinion.
Sp performance has been dismal considering Brent is well above $88.
Just a month to the next update and in the meantime the price of Brent, buybacks, positive broker targets should all play into a higher sp, even in the absence of any other positive news. Plus AGM at the end of May.
I have been averaging down since the EPL (35%) news and only see this depressed ENQ sp which is barely off the bottom as the last remaining buying opportunity at these levels. 33p today would be amazing but I think this target will be surpassed over a two year timescale.
EnQuest - Canaccord Genuity raises target price to 33p from 25p.
Great to see a free market of thought here .. Stevo offers clinical fact and like all good cfos paints scenarios but I fall more into sekfords camp but would add more !! AB has made some strategic moves with Steve baker joining to develop our BB assets and the significant creation of Veri! In USA as a start up Veri would likely have a valuation north of £200m on its ambition and project pipeline alone!! The repurposing of SVT is a key part of a Scottish / UK diversified green economy whilst serving both fossil and renewable energy sources! For those willing to wait SVT & Veri will become an exceptional asset !
He is right to point out that BP in effect retains 37.5% of the Crown jewels which is Magnus. But I prefer just to look at the profit payments to BP as a cost just like interest or opex or tax. What to me makes Enquest so exciting in terms of the potential future SP is the likely FCF which of course takes all these costs into account. It is the advent of $87 Brent which may be sustainable which enables us to project forward an extraordinary daily wall of money which is retained by the company and is being used (or should be) to smash expensive debt. Stevo has also made the point that in January and February 2024 we were negative FCF if you ignore the farm down payment. That will be to do with the timing of deliveries and sales. That should mean that March and April will have been two golden months and we will see large reductions in net debt which be reported at the shareholders meeting in May.
What I still can’t understand is why Steve uses barrels as payment to BP etc, we don’t pay the profit share in barrels, the costs of lifting the barrels is big part of EnQuest’s business (we earn from each barrel lifted).
For instance in my industry all jobs are given labour times against them with material costs on our system but if we complete those jobs in half the time that’s a bonus on our part we don’t pass that on and neither would Enquest to BP
Hi Stevo12
Thanks for your accounting knowledge to this BB
I understand your figures on the profit payments to BP on Magnus, do you have a handle on the balance of the net of tax $600m we agreed to pay ongoing, the increased production figures in recent times must be making this look achievable?
Thanks Stevo - I looked at Note 9D however it was written in Sanskrit but appreciate the google maps assistance. I seldom go that far. Very difficult to compare I know but it has explained things to me. The reserves answer will make me look more closely at reserves. There is often an overlap with total reserves of a field and what belongs to partners in the field. The likes of Uplift and juststopoil are very casual about this and the difference between 2P and 2C. We know that 2C is close to worthless on fields that haven't been given the go-ahead yet. Our Opex is similar to theirs if you average the 50/50 split they have with O&G.
Thanks again for help.
@Sekforde/Stevo : Thank you for making interesting valuation comparisons Enquest-Exxon-Serica....
How do you see the merger Ithaca/Eni's UK assets?
I'm sorry, but you have been consistently wrong. Your calculations have time and again shown completely wrong numbers.You are also wrong here.
1. I think Enquest has 100-200% more in tax credits. So you are wrong. This is also why Enquest pays less in taxes than Serica.
2. Regarding the reserves, I would say that only about 15 million barrels belong to BP. The rest belongs to Enquest. However, don't forget that the company also has approx. 400 million 2C resources.
Regarding Malasiya, you are completely wrong. Many oil companies in world have PSC and then you mean that all the oil companies have 50% less reserves than they claim they have. You are unfortunately wrong again.
Enquest will make approx. 550 million in both 2024 and 2025 together in free cash flow. Calculated for oil at about USD 90 per barrel.