RE: Pacman121Today 15:56
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.