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Global Oil Inventories Counter-Seasonally Decline And Oil Prices Will Respond Into Year-End
Global oil inventories continue to counter-seasonally decline, especially in a refinery maintenance-heavy month like October.
Total oil stock inventories dropped 4.5 mbbls globally last week and what's going to be more staggering going forward is that we are just starting to see the global inventory decline accelerate.
We think the macroeconomic landscape has so far won against the fundamentals, but we don't think this will persist any longer.
At the moment, we have US crude storage finishing November between 390 and 395 mbbls.
Global oil inventories will matter, and prices will reflect this.
https://seekingalpha.com/article/4298860-global-oil-inventories-counter-seasonally-decline-oil-prices-will-respond-year-end
Capital Markets Day a significant opportunity for EnQuest to update institutional investors on progress with a full year of Magnus and further consistent production data on Kraken.
These are world class assets don't let anyone tell you otherwise especially considering Kraken and IMO 2020.
There will be new opportunities to leverage the value of EnQuest’s production e.g. downstream opportunity to develop Kraken crude oil as an IMO 2020 fuel compliant blend component.
In Malaysia, the giant PM8/Seligi development has also a large opportunity helper, and we are drilling, as we speak, 2 wells this year. We will be looking at doing 3 workovers next year. Seligi gas development is also in the horizon with a potential 3.5 Tcf of gas. And we have put in place the infrastructure to sell gas into Peninsula Malaysia.
https://finance.yahoo.com/news/edited-transcript-enq-l-earnings-173919788.html
In Kraken, we -- as we mentioned, this is the first time we are stepping out to the field development plan to develop the Western Flank, which has 100 million barrels of STOIIP. We also have an exciting development in the Maureen sands, which underlies the Kraken field, where 3 wells have intersected that sand.
In Magnus, we have 50 million. We are starting to drill end of this year, looking at 2 wells this year and 1 well next year; and we have 270 million barrels of movable oil, so a very large, target-rich environment.
Longer term, we have exciting future ahead and future opportunities, which we can mature in our 3 major assets: Magnus, Kraken and PM8/Seligi. Our contingent resources are not expensive to develop from $5 to $15 a barrel, a very attractive level to deploy capital, and there's about 200 million barrels of contingent resources in our assets.
https://finance.yahoo.com/news/edited-transcript-enq-l-earnings-173919788.html
Our franchise is incumbent on our safety performance. Our target is to be upper quartile, and I'm happy to report that we have no outstanding improvement notices or any other notices for that matter. That's a tremendous achievement for assets with an average life of 25 years, but some up to 40 years.
https://finance.yahoo.com/news/edited-transcript-enq-l-earnings-173919788.html
Our franchise is incumbent on our safety performance. Our target is to be upper quartile, and I'm happy to report that we have no outstanding improvement notices or any other notices for that matter. That's a tremendous achievement for assets with an average life of 25 years, but some up to 40 years.
EnQuest statement corroborates emails from IR:
Operator EnQuest have released a statement, that says:
"The decision was taken to proactively downman the platform and shutdown production following an inspection relating to a support element on a redundant subsea storage tank."
EnQuest has confirmed that the crew of a North Sea platform that was evacuated yesterday are now being flown home.
All 115 crew members were down-manned from the Thistle Alpha installation on Monday after a “subsea structural inspection” and taken by helicopter to the nearby Dunlin platform.
The operator has now said the inspection related to a “support element on a redundant subsea storage tank”.
EnQuest has shut down production at the platform, which will remain the case until remediation action is taken.
Bob Davenport, managing director of North Sea operations at EnQuest, said: “The safety of our people is our absolute priority. Our offshore installation manager took proactive action to transfer everyone from the platform as a precaution following yesterday’s inspection.
“This was carried out safely and quickly, with plans then made for their onward travel home. Further inspection work will be conducted and the platform will remain shutdown until that has concluded and any necessary remedial action undertaken.
L7 great post and my thinking also.
These platforms often get shutdown for unplanned maintenance its the environment they operate in.
Well done on EnQuest putting the rig workers first as back in the day I'm not sure some of the larger operators would have done the same!
We await confirmation from the company at the next operational update on the latest hedging put in place:
In order to support cash flow and our debt reduction program in the second half of the year, we have around 4.6 million barrels of oil hedged, which is around 40% of our expected production at the midpoint to our full year guidance range. Approximately 3.9 million barrels have an average floor price of $66 a barrel with a further 0.7 million barrels hedged at an average floor price of $56 per barrel.
We will, of course, look to layer in further hedges as appropriate.
https://finance.yahoo.com/news/edited-transcript-enq-l-earnings-173919788.html
2019 cash flow supported by oil price hedges
§ For full year 2019, the Group's hedge programme covers c.12.5 MMbbls. For the second half of 2019, the Group has c.4.6 MMbbls of oil hedges in place. Approximately 3.9 MMbbls are hedged at an average floor price of c.$66/bbl, with a further c.0.7 MMbbls hedged with an average floor price of c.$56/bbl in accordance with the Oz Management facility agreement
Massive buy by the CEO 2,154,756 @ 18.5p £398k
Interesting coverage by institutional credit experts - Guy Butler from back in January 2019.
Fascinating evaluation of EnQuests free cash generation:
Below we have estimated EnQuest’s free cash generation in 2019 based on an oil price range of $40-70 per barrel. We have based the figures on the group’s most recent guidance for production and capex.
Our calculation suggests that the group needs a price of circa $41 per barrel to break even; at $60 per barrel we think the group can generate circa $440m of surplus free cash flow. The actual result will be impacted by the extent of any hedging that the group puts in place during the year.
http://www.guybutler.co.uk/wp-content/uploads/2019/01/EnQuest-update-Jan-2019.pdf
We know that the company hedged 40% of production with 3.9 million barrels have an average floor price of $66 a barrel. We await to hear in the next operational update if the company hedged more barrels in the recent oil spike.
As Guy Butler conclude: Our assessment of free cash flow generation above suggests the group is capable of material debt reduction this year at oil prices above $60 per barrel.
Remember the current hedging 40% of production with 3.9 million barrels at a floor of $66
What’s fascinating is that OPEC+ is biting. The US becomes a net exporter of crude and petroleum products for 2nd week in a row for the first time on record - EIA
EIA highlights - refinery only at 83.1%!!!! - big product draws as expected - total inventories down 1.6mb and large adjustment factor.
Refineries back from maintenance and exports being reported from next week should see large draws coming.
From HFI Research:
Following the API report, tomorrow is likely to show a build of between 5 to 7 mbbls for EIA.
For next week's report, we are showing a draw of 7 to 8 mbbls for crude.
The whipsaw in this comes from import timing differences.