Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
E121 agree on the shalers although they have having a tough time with underperforming fields and financing. Could take a while.
Meantime EnQuest smashing the debt with record production.
Pelle, there are some analysts suggesting some high forward numbers for oil. EnQuest are highly geared to the price as we know. Debt reduction could be very significant over the next six months.
From Bloomberg:
The sudden loss of 5.7m b/d of #oil production is the single largest outage the market has ever suffered (larger in volume than the loss of Iraqi and Kuwaiti output in the 1990 Gulf War, and the loss of Iranian oil in the 1979 Islamic Revolution
How much free cash flow to EnQuest at $80 a barrel ??
41.55p gap to be closed from last October. Doesn’t sound unrealistic.
Basically double the market cap still cheap compared to other debt laden peers (with debt ratios above x2).
From a chart perspective the low today was 19p so ENQ hasn’t left any gaps from Friday’s close. ENQ has also pushed through the 20, 50 and 100 MA’s twice today. Looks positive.
More wells more reserves more production!
https://www.energyvoice.com/oilandgas/north-sea/207708/enquest-outlines-plans-for-landing-eagle-field/
EnQuest outlines plans for landing Eagle field
EnQuest has taken a step forward on the path to first oil from the Eagle field, which was the subject of a dispute with Dana Petroleum in 2016-17.
Operator EnQuest has submitted a letter of application to the Oil and Gas Authority (OGA) in relation to the development, notifying the regulator of its proposals.
The application is supported by an environmental statement and a public consultation is open until October 14.
A row erupted between EnQuest and Dana in July 2016 when the former announced it had drilled a well on Eagle in the central North Sea on a 100% working interest basis.
A few days later Dana said it held a 50% stake in Eagle and had not given EnQuest permission to drill.
Twelve months on, London-listed EnQuest said Dana had “confirmed its intention to withdraw” from the discovery.
Eagle is in the Greater Kittiwake Area, which EnQuest entered into when it acquired a 50% stake from Centrica in 2014.
The area consists of several fields, including Kittiwake, Mallard, Gadwall, Goosander and Grouse.
In its environmental statement, EnQuest said it intended to develop Eagle as a single well tied back to the Gadwall pipeline and onward to the Kittiwake platform.
Eagle’s single well should come on stream in September 2021, at which point it will produce a maximum rate of 8,500 barrels of oil per day and 3 million standard cubic feet of gas per day.
Those short oil of course
In the case of a $10 jump when WTI / Brent trading resumes, a lot of accounts will be way beyond the margin calls which cannot be issued by the brokers during the weekend. The fallout will be a big headache for the brokers who will be forced to swallow the huge losses.
ENQ should be set up for a great run over the next six months of oil goes above +$65 a barrel
US SPR release in response to Abqaiq, Khurais attacks likely not imminent: analysts
Washington — The US said Saturday it is prepared to release crude oil out of its Strategic Petroleum Reserve following attacks on Saudi Arabia's Abqaiq processing facility and Khurais oil field, but analysts said that such a release will likely not be triggered in the short term.
"I don't think a release is imminent," Bob McNally, president of Rapidan Energy Group, told S&P Global Platts. "Everything depends on how much damage has been done and how long will it last."
McNally, who was senior director for international energy on President George W. Bush's National Security Council, said he expects the US would coordinate any SPR release with the International Energy Agency. He said if Abqaiq returns in a few days, there likely would be no release at all.
"Only if there is a long-term disruption to the facility or expectation of increased military conflict and disruption would a release be seriously considered in my view," McNally said. "Right now, they will just reassure with verbal statements. My sense is they are not too worried about a long-term disruption, at least so far."
Kevin Book, managing director with ClearView Energy Partners, said the timing of the release depends on the extent of damage at Abqaiq.
"If there is good news to know, the Kingdom has every incentive to share it as soon and as widely as possible," Book said Saturday night. "If we don't hear good news before trading starts, and the DOE doesn't announce a release, the market seems likely to read through to bad news."
In a note earlier Saturday, Book wrote that rather than authorizing a SPR release, the US and other importing countries would likely wait for OPEC members to "make the first move at peril of an SPR release that could undercut scarcity premium the producers might otherwise bank."
"This tactic has practical value, too, because most OPEC producers can move faster than the governments who control strategic stockpiles," Book said.
On Saturday, the US Department of Energy said it "stands ready to deploy resources from the [SPR] necessary to offset any disruptions to oil markets as a result of this act of aggression," according to Shaylyn Hynes, an agency spokeswoman.
Hynes said US Energy Secretary Rick Perry directed DOE officials to work with the IEA "on potential available options for collective global action if needed."
MARINE CAPACITY LIMITS
Book said that the US could technically initiate a SPR release within a day, but Gulf Coast transportation infrastructure would likely limit the scale of such a release.
The US could move as much as 2.12 million b/d of SPR crude to global markets, but as much as 1.74 million b/d of addition marine distribution capacity would likely be needed in the event of an Abquaiq attack, according to a 2016 DOE report.
Hi Pelle,
Agreed the company gave that figure in the results every $10 is equivalent to an additional $250. Plus they keep optimising production.
This has to be one of the best recovery plays out there for sure.
$80 oil will make a significant dent to the debt and should further reinforce the investment case here.
If ENQ can break chart resistance at circa 24.5p it will run to 30p. Still ridiculously undervalued versus peers.
Saudi attacks, supply risk could cause prices to test $80/b: S&P Global Platts Analytics
Attacks on Saudi Arabia's Abqaiq processing facility and Khurais oil field likely will cause oil prices to climb above $70/b and may test $80/b, analysts with S&P Global Platts Analytics said Saturday.
"The sudden change in geopolitical risk warrants not only an elimination of the $5-10/b discount on bearish sentiment, but adds a potential $5-10/b premium to account for now-undeniably high Middle Eastern dangers to supply and the sudden elimination of spare capacity," the analysts wrote. "As such, prices are likely to break out of the $55-65/b options range, more likely testing the high $70/b previously forecast, if not higher."
They wrote that any additional risk premium "could see prices test $80/b despite Saudi Arabia today claiming production and exports will not be significantly impacted."
Brent could spike and pull ENQ out of the current trading range.
gkb47 quite some achievement substantially reducing Opex on Magnus.
On Magnus EnQuest initiated a new reservoir management programme. They moved from alternating between water injection and gas injection to water injection and gas lift. This saved on costs of the operation by saving the gas that is purchased for re-injection. This has also significantly increased the performance of the reservoir above the original CPR estimates.
On all counts Magnus was an incredibly good deal and is delivering significantly ahead of expectations.
In the second half of this year, Enquest expects to start the profit share arrangement on the 75pc stake, while still paying down the second vendor loan for the 75pc stake. It began its repayments in December 2108 and the repayment period is five years. At the point of entering the profit share arrangement, Enquest will have its $100mn, plus interest, repaid.
BP has entered into a number of innovation financing deals as it divests non-core North Sea assets, including its November 2017 deal with UK independent Serica for its stakes in the Bruce, Rhum and Keith fields. Serica agreed to pay BP £12.8mn upfront, as well as a share of cash flows over four years, 30pc of BP's post-tax decommissioning costs and additional payments dependent on future asset performance and oil prices.
Enquest also reported that it has reduced its debt-to-Ebitda ratio to 1.8 by the end of the second quarter, ahead of a target of under 2 by the end of the year. The firm would like to operate at the lower end of a 1-2 range, according to Enquest CEO Amjad Bseisu.
https://www.petroleum-economist.com/articles/corporate/finance/2019/bp-gets-magnus-money-back
BP gets Magnus money back
Enquest pays off first loan issued in innovative North Sea financing deal
UK independent Enquest has paid back the loan afforded to it by BP when the latter sold it a 25pc stake in the Magnus field in a January 2017 deal, the firm said when reporting results for the first half of the year.
The loan was repaid by Enquest through improved cashflow from Magnus, where the firm has increased production to above purchase case rates and reduced opex by 66pc from $60/bl oe in 2015 to $20/bl oe. "The key driver of our improved cashflow in the [first half of 2019] has been Magnus," says Enquest CFO Jonathan Swinney. "Improved performance from Magnus has accelerated the cashflow from the asset."
Enquest secured the 25pc stake in Magnus for a base consideration of $85mn, a price paid by a vendor loan from BP. That loan was fully repaid in August.
In September 2018, Enquest agreed to take up an option in the initial deal to acquire the remaining 75pc in Magnus. The base consideration for this deal was $300mn—although the 'economic date' of the transaction was set at January 2017. Cash flows from that point onwards were reclassified as accruing to Enquest, reducing the base consideration.
Enquest paid $100mn, which it raised through a right issues, towards the consideration, with the remainder—$200mn less cash flows accrued to Enquest—a second BP vendor loan.
The two firms also agreed to a subsequent entry into a 50/50 share of Magnus net cash flow from the 75pc stake, up to a maximum of $1bn to BP.
Booking more reserves through drilling. So currently drilling in Malaysia and then Q4 Magnus drills. Additional Kraken drills next year. If they come in then more value through booking additional reserves.
Hello HMH,
Good stuff and good job on the workings.
EnQuest are currently drilling in Malaysia and have two wells planned at Magnus in Q4. Could adding reserves be the catalyst to the SP?
Best
When have broker rating ever been correct. Countless cases where shares have risen and broker targets were later updated. PMO is a case in point.