Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
AB: "We've had a good year last year". Well, according to the SP, which in the last year has almost halved from 23.6 to 13.5, no, we've not had a good year! AB puts on a calm and serious brave face, which is what's wanted, but there is often the feeling of a tad too much spin, bordering on the spiv-like spin. Am I being too harsh? Could AB be Mr Hyde to Stevo's Dr Jekyell 😊 😊 😊
Now scheduled for next Monday: https://www.parallelparliament.co.uk/bills/2023-24/offshorepetroleumlicensing
Hehe, Auson, now we are all being so nice and polite to each other. And that is appreciated.
OK, thanks, I take your point that EnQuest is thinly traded and the holdings of some posters could therefore move the SP. Can you agree if I re-phrased by saying what happens on the board won't have a significant and long-term impact on the SP? And if not, and others agree with you, then I'll re-frame my thinking on this subject, which is that the big movements are driven by institutional investors.
Anyone who thinks what happens on this board has but a miniscule impact on the SP is deluded, The big things we know about which will impact significantly are details of shareholder returns and some M&A activity (and the company has repeatedly confirmed they are working on these two area). If a poster is considered constantly irritating the best is to ignore them or, better still, filter them. We all have to ask whether we have become too emotionally attached to any company/share as, generally, this is not good.
Below an extract from Offshore Energies UK boss David Whitehouse’s interview published today on Energy Voice: https://www.energyvoice.com/oilandgas/545250/energy-sector-to-work-with-every-political-party-in-2024-election/?utm_source=email&utm_medium=sharelink This indicates a more positive outlook for the sector independently from the outcome of the General Election. Some words from Labour to encourage the sector would be well received. Something showing a faster path to this “fair tax regime” would be a real bonus.
“The signalling from Labour and the Tories paints very different pictures of how the oil and gas sector will look depending on which way the ballots fall.
However, despite the wildly different messaging from the two front runners, OEUK says that the UK’s political parties are largely on the same page when it comes to the future of the energy sector.
“I think increasingly throughout the year the conversation moved to one that had become much more recognising that the way as a county that we will be successful in getting our sectors together,” Mr Whitehouse said.
Mr Whitehouse commented: “We need surety, we need long term planning and we do need, when conditions are right, we need a fair tax regime.”
Delivering this “fair tax regime” is something that OEUK has engaged in talks with the current UK government, the opposition, and the Scottish Government about.”
Jeremy Hunt just said on R4 that he “profoundly disagrees” with Chris Skidmore’s view and that domestic oil and gas production will create 3xs less emissions than imports and improve energy security.
The Offshore Petroleum Licensing Bill will address the licence offer aspect, but for offered licences to result in actually producing fields will require changes to the oil and gas fiscal regime. When will these changes happen, Jezza?
The General Election looks like taking place in late Autumn. The Tories want to max-out the North Sea. They will pass legislation to require new licenses to be offered each year if the UK is projected to be a net importer of hydrocarbons and the emissions from imports would be greater than domestic production. However, private capital to develop new fields is less likely to be available unless an improved and long-term stable fiscal regime is introduced.
Are the Tories more likely to make oil and gas sector fiscal changes before an election and underline to the electorate what they have done and would continue to do or, alternatively, pledge to make similar changes should they remain in power after an election? Which approach are they likely to think would win them more votes? (And more donations, but vote attraction is by far the dominant deciding factor.) If it is the former, changes before an election, then the Spring Budget in early March would have to contain the measures to improve and stabilise the fiscal regime.
My guess is that few voters will make the connection between the fiscal regime and actual production. Therefore, the Tories will just repeat the message they want to max-out the NS reserves and Labour want to stop new licenses, without making any fiscal changes before the election. Plus, making fiscal changes before an election would leave the Tories open to attacks from Labour that they have watered down or removed the Windfall Tax on the profiteering oil companies, and this would turn-off most voters. Does anyone see a scenario where the Tories think it is in their best interests to make fiscal changes before an election?
A very Happy New Year to all.
Stevo, why do you say the Viaro JV money is ring-fenced to a specific project? From the RNS the cash-advance initial payment is for “general corporate purposes” - see RNS extract below.
“Under the terms of the agreement, total consideration in respect of the Bressay field and FPSO is £46.0 million and will involve an initial payment by RockRose to EnQuest of £34.75 million, which will be used for general corporate purposes, with the remaining £11.25 million to be paid from future Bressay cash flows.”
All the communications position the deal with Viaro as paving the way to progress Bressay but, thankfully, stay well short of implying even a FDP will happen for sure. The deal structure gives Viaro decent protection if Bressay does not progress. It also makes clearer the value of EP. (Hiving off into Veri Energy the green/renewables part of the biz will also help to externalise the value mainly hidden whilst co-mingled with the rest of the business.) Viaro’s Mazzagatti (only 37, and clearly a forceful, determined, and somewhat controversial character - https://medium.com/authority-magazine/francesco-mazzagatti-of-viaro-group-on-how-they-are-breaking-the-cycle-of-non-renewable-30daa307565a) is trying to make Bressay a sort of litmus test for new investment in general in the NS. He, being freer of the encumbrances EnQuest/AB have, can speak his mind equally freer to the politicians, regulators, Unions, etc. He can afford to be politely yet uncomfortably direct and has cleverly put the ball in the court of the UK’s politicians. It would be economic madness to both turn away inward investment and not develop the UK’s own hydrocarbon resources (the UK people and their politicians are fast understanding they cannot afford “9 times cheaper” renewables) as well as create more emissions, impact national security, export jobs blahdy blahdy blah. Viaro may well be fronting for capital-providors who prefer to remain in the background, although the key politicians will be made to who it is and the consequences if they are not listened to and reasonably accommodated. Changes to the EPL or at the very least assurances about the conditions after the EPL will be needed. My hopeful guess is there will be a push, following the recent Fiscal Review, to bring forward a new fiscal regime with an in-built long-term fiscal stability mechanism. Viaro, and others who can decide to invest or not in the UKCS, are in a far stronger position now than the already invested Independents were. I continue to consider significant B&B’s status as fields already licenced by the NSTA. Time will tell whether the plan for Bressay works but what EnQuest and Vario are doing right now comes across as very clever. This, together with the combination of EnQuest’s and Viaro’s resources, direct and indirect, known and unknown to outsiders, should give serious encouragement for EnQuest LTHs.
Profit, mrc, yes, Viaro are buying into the package, 15% of both Bressay and EP together. My point is that at the moment Bressay has only a value if it is developed, this is more likely now but remains far from certain, whereas EP has a certain real today commercial value. By structuring the deal as they have at the very least, sort of worst case scenario, Viaro own 15% of an asset with a real today commercial value. The deal structure gives Viaro protection, and doing the same for future tranches could give similar protection. Is a clever deal structure. I am asking whether £230m could be a reasonable today commercial value for EP? (Leave aside, for now, that EPs value to its current owners to develop Bressay would likely be greater than its today commercial value.)
Mod, yes, Mr Catskiller! I lived a couple of years in Trastevere, in the heart of Rome, and got used to hearing the Romano version of wow, “ammazza”. Mr Mazzagatti sounds a smart and straight-talker, polite but unequivocal, and this IMV is needed. As i wrote before, as he is less encumbered due to Viaro’s existing position (yet with the desire and resources to invest) it is easier for him to tell truth to power and more likely the UK politicians listen to him and act. Ms Cook said similar things but was largely ignored and the result was announced last week. All hail the Catskiller!
Ukbbbbbb, Viaro will have first call options to increase their stake in Bressay/EP. On further reflection, it’s likely the initial £35m from Viaro is almost all “for” EP. Viaro by linking their investment also to EP have some protection should events conspire such that Bressay is not developed i.e. they would still have 15% of a sellable asset, EP. Is £230m the sort of commercial value EP could have?The 15% investment now, with £35m upfront, shows commitment and allows checking the regulatory situation.
From August 23, but still worth reading this too: https://energycouncil.com/articles/executive-interview-francesco-mazzagatti-viaro-energy-north-sea-focus/
Mr Mazzagatti appears an impressive and eloquent individual. He also appears to be more straight-talking than political with his words. It seems he has the power to make decisions to invest or not and is in a strong position in that he has the desire and means to be invest in the UKCS but not an entrenched position or obligation to invest. PMs and Treasurers, existing and likely, will listen to him than those they considered having over a barrel.
Romaron, re your 06:02 post, you’re right, i am looking for something not there in terms of projecting a forward valuation of Bressay based on the 2 tranches EnQuest purchased. The commercial details of the 2nd tranche, tho, should be available somewhere as both sellers and the buyer are publicly traded companies. Going forward, yesterday’s deal does allow some sort of valuation to be calculated, but as we don’t know the value-split between the field and the FPSO we can’t use it to accurately calculate the value the parties ascribed to the field itself.
I am trying to make some calculations.
We know:
-EnQuest in Jan 21 acquired from Equinor operatorship and 40% of Bressay for £2m upfront and $15m upon a FDP approval. (In hindsight this looks a massive bargain)
-In late 22 EnQuest purchased the remaining 60% of Bressay from
Equinor and Harbour.
-Dec 23 EnQuest sells to Rockrose 15% of Bressay and EP for £46m.
I cannot find the financial details of the 60% sale late last year does anyone know the details? We don’t know the field/EP split of the £46m and i will assume 70% for the field and 30% for the FPSO, is that reasonable?
As has been said, the conditions of the Rockrose purchase indicates well the total current value of Bressay/EP. A further arms-length sale of a tranche would solidify the valuation, and likely higher.
Worth having a read over the buyer’s comments too:
“Francesco Mazzagatti, CEO of Viaro Energy, commented: “We are grateful to the team at EnQuest for the smooth negotiation process on the Bressay acquisition. Long considered one of the largest developments on the UK Continental Shelf, Bressay is an essential component of the country’s effort to secure viable energy sources in the long term. Apart from its significant potential to contribute to the UK’s energy security, ensuring the development of Bressay is crucial in order to encourage more investments in the UKCS, where we hope the tax regime will soon stabilise.”
https://www.rockroseenergy.com/viaro-energy-signs-spa-with-enquest-to-acquire-15-stake-in-the-bressay-field-development/
B&B as already licenced fields are also more defensible politically. Maybe I give this too much value but, for example, B&B’s 2C reserves are only 30% or so shy of Rosebank’s, and B&B should be able to proceed relatively below the political radar.
Indeed, romaron, i was thinking the same thing, it shows how EnQuest Producer will be put to productive use, as otherwise why tie with Bressay a slice of it’s ownership?
This deal, as with the de-listing, is a stepping stone to bigger value-generating things. This is the bigger strategic message. Plus on a tactical level it has brought shareholder returns closer. I’m surprised the 15% jump did not hold.