IMO, Russia has come to the conclusion that it's not worth cutting production and feeding the shalers with more market share. There will still be growth in shale and large Permian players like Pioneer are actually still increasing capex for 2020 - sheer madness when their flipping CEO goes around saying that production will taper off this year and high spending isn't sustainable. Classic F**ing lip service being paid to capital discipline by these idiots. Sub $50 WTI won't cut it and maybe, just maybe will force their hand to actually cut capex substantially, and we're nearly there.
Moody's has this out on the upcoming debt maturities, although they're more loaded towards 2022 to 2024 for weaker companies.
We can see the slowdown playing out - whether this will lead to a retracement in production levels from the shale patch - that's still an unknown and will drive oil prices from Q2 onwards. I'm staying optimistic.
L7 - "In 2019 $100m of Magnus cashflow, before the profit share, was used to reduce the contingent liability for the acquisition of the 75% interest in Magnus. This did not contribute to FCF or reduction in net debt.". THis isn't correct. Excluding the circa $20 mill vendor loan repayment for 2019, the first $100 mill of net cash flow (post Capex/Opex) from 75% Magnus went straight to Enquest and then remainder of the net cash flow was split 50-50% between BP and Enquest.
This year, all of the net cash flow from 75% Magnus (after the $20 mill Vendor loan repayment) is split 50-50 between BP and Enquest. Say there was a net cash flow of $150 mill from 75% Magnus for each of 2019 and 2020, In 2019, Enquest would've received $125 mill and in 2020, Enquest would receive $75 mill. To state the obvious, where we would end up in 2020 in terms of FCF is riding a lot on how the Coronavirus spread pans out in the coming weeks. I continue to believe that we'll see the peak in the coming weeks and the economic activity trough in China will be Q1. Fingers crossed.
Exactly, although we're in a unloved sector and the moves won't be as dramatic, I'd suspect. Slow and steady works well ..
Poor HUR holders - down another 20% today on operational issues. Not quite the funding problems for future development, but apparently OGA requiring on of their key wells to be abandoned? We're sitting pretty though with no such issues at this time.
Morning Hitman - I believe the slide in oil prices in the past 3 weeks has forced shale to start cutting down on Capex for 2020. The first small one I've noted, Ring Energy (REI), has cut prelim capex from $150 mill in 2019 to $85-90 mill in 2020 - that's a hefty cut. FCF is the name of the game and shale can't live with $50 WTI.
It'll take time for this and other (hopefully) forthcoming capex cuts from the shale universe to manifest in production numbers, but we should really start to see rigs and frac spreads drop back again. Frac spreads in particular, have been on an upswing in the past 4 weeks and that's indicative of increased fracking activity, either on DUCs or alongside rigs. Let's see what the other shalers get upto..
A more than solid 2019 with gross debt down to $1.7 billion (lower interest costs - great). Decent hedge for Q1 and hopefully Brent will turn around soon after the virus scare dies down.
Hitman was spot on with his 2020 production prediction - the mid-point of the guidance is somewhere around his predicted 65 kboepd. Whilst a bit disappointing, that sets up ENQ to beat the mid-point easily.
I'm happily switching from Devon/Centennial into Enquest in the past couple of days, even though I did buy a chunk on Friday that I would've got cheaper today. C'est la vie - you can never time it right though and I'm happy to get a chance to buy today at levels 20% below the recent peaks.
Sachs' head of oil research was on CNBC last night and he was the one that called the $3 oil decline. Oil fell 20% when the SARS scare came out in 2003, and in end analysis, oil demand didnt fall much, but concerns about demand took oil down 20% back then. Unless, this outbreak becomes much larger than its currently assumed to be, there shouldn't be big falls either in demand or in Brent pricing.
Its demand concerns that are currently overriding supply outages if there's a bit of calm over the weekend, Brent may rebound next week.
Cole - not sure I follow your question. I'm sure they're selling all of Kraken oil at a premium. What that premium is, that's an unknown. Elevated levels is what Enquest IR could only confirm and CNE only said there's a premium for Kraken and Catcher. That's probably a sensitive piece of information that they don't want to give away that easy so as to not affect marketing of future cargoes?
Holy cow - this is not something that's discussed much in the oil industry, for obvious reasons. At best, the federal government can only ban fracking on federal lands and that would be a good start. Would help oil prices broadly too!!!
Yesterday's VLSFO price in Rotterdam was the equivalent of $72 versus $63 for Brent.
Prices are higher in the ME and Singapore, don't believe we're shipping there.
He was probably referring to the Santos crude grade that received high 90s recently when Brent was in the high 60s. Near enough to 3 digits, but that's the actual price and not the premium...Premium was circa 30, from memory.
The current move lower is just hedgies speculating on lower demand because of the Coronavirus. THat'll hopefully blow out in the coming days and Brent moves back towards the 65 price point, slowly but surely. Of course, it'll help if cuts are extended or even increased. And that's assuming the shale idiots play ball.
Evening P - that's indeed fantastic for us. Let's see where Brent lands in the coming days after the Wuhan virus scare takes a back seat. And of course - I hate the F'ing shalers, even though I own a couple of names. Which part of 'Don't f**k yourself' don't they understand? Clueless ******s - they've F**ked up gas and they have their eyes set on oil now - frustrating.
About the best thing I can say is that the Stock prices have dropped in the past couple of weeks by a good 10 to 20% for most players, and that's on time for when they set their annual capex budgets. We'll see whether the F**k nuts use their little remaining common sense to decide enough is enough with this over-production and that they need to cut hard. For the sake of our portfolios... ;-). They start reporting next week.