Member Info for epiphany121

Sanity prevails...not sanity previous.

OK, clear. ;-) He was talking about Growth vs Dividends as it was in 2013 - the US/Canadian oil market has pivoted to Dividends even when growth can be achieved. That's a paradigm shift in the past 2 years - the best SP appreciation is with companies that focus on shareholder return vs growth. And I'm sure that AB will focus on that in 2022, as opposed to throwing capex to grow in 2022/23. Ditto - I look forward to the update and all the good things in store for us LTHs, and I really hope that institutions do come to play ball. With a solid update and a view on how much FCF Enquest can generate in 2022 may shift the tide in our favour a bit.

And I agree with the themes in your paragraph about Renewables and their causal link to fuel poverty. The current price outcome is a result of a few years of underinvestment - at least that's how the hedgies are viewing it and repricing oil accordingly. I do hope that sanity previous and for adult conversations to be happening in the European climate circles. Transition that's ill-thought through will result in great suffering to the common man and demonising fossil fuels isn't the answer.

Fingers crossed for Thursday, if that's when the update lands.

Hi R - I've seen this before. The shale related views/facts are old and aren't relevant with the current reality. Permian is now the big daddy and there wasn't even a mention of it in 2013 when this speech was delivered. Shale world is an ever changing beast.

But looking beyond that and zeroing in on what you wrote "We might not have a Canadian listing but we have the next best thing. A CEO who has mortgaged his house." From a oil shareholder viewpoint this doesn't mean much, unfortunately. AB can have the very best intentions and run the company to the best of his ability, but in the current ESG environment, that just isn't cutting it. That distinct lack of buy-side funds investing in oil sector equities in the UK/Europe isn't allowing the share price to be valued at anywhere near fair value. I don't pretent to know what can change this blasé attitude in the UK, but once it does, that's our opportunity to shine. And hence my tongue in cheek comment about a Canadian listing - that could speed up the fair value journey. ;-)

Onedb - Here's a post that I made on the HBR board a few minutes ago - "there's a fundamental disconnect between UK oil equity prices and the underlying commodity price. Exxon's broken out to multi-year highs today and so have other US/Canadian oil equities that I track (and own quite a few of these) - APA, DVN, CLR, MUR, CPG, VET, PBF, AOI. Contrast the positive correlation between these equities and oil prices ,with what you see with HBR or ENQ or TLW, it certainly is mind-boggling. Maybe a positive production update could help, but the lack of institutional buying in oil equities this side of the pond is a telling factor. These shares are at the mercy of retail investors in the near term and that's a sureshot recipe for underperformance and a lack of positive correlation with oil prices."

This lack of correlation and underperformance has been unique to UK/European oil equities. There certainly isn't an issue with US/Canadian oil equities - they're merrily tracking Brent/WTI higher. Small caps/mid caps/large caps - every kind of oil North American oil equity has performed way better than the UK/European ones. I still believe that this underperformance is down to a lack of solid institutional participation primarily because of ESG nonsense.

I know you too keep writing about the idiocy of oil equity prices not responding to oil prices on the way up and that's frustrating for me too. Enquest will generate Free Cash north of $650 million for 2022 (assuming a $150 mill Capex) and I'm firmly in Pelle's camp on this one and not with my other mate, L3. To see Enquest trading at FCF yield of greater than 100% is mystifying, to say the least. And the Canadians were gushing over VET's ability to throw enough Free cash to trade at a 40% FCF yield valuation - mind-boggling to say the least.

Pleb - there's a fundamental disconnect between UK oil equity prices and the underlying commodity price. Exxon's broken out to multi-year highs today and so have other US/Canadian oil equities that I track (and own quite a few of these) - APA, DVN, CLR, MUR, CPG, VET, PBF, AOI. Contrast the positive correlation between these equities and oil prices ,with what you see with HBR or ENQ or TLW, it certainly is mind-boggling. Maybe a positive production update could help, but the lack of institutional buying in oil equities this side of the pond is a telling factor. These shares are at the mercy of retail investors in the near term and that's a sureshot recipe for underperformance and a lack of positive correlation with oil prices.

All we need is just a midly positive steer on production forecasts for 2022 and the SP should see a steady breakout to new highs about 27. OPEC+ JTC (technical committee) meeting is over and there's been no discussion of a hike about 400 kbopd for March. GS was probably setting up the oil market for a breakout with their commentary today about a higher output figure for March.

US and Canadian oilers have broken out to new 3 to 5 year highs today and we can hope that we aren't too far behind. Maybe Enquest should move its primary listing to Toronto and attract North American investors? ;-)

Chilt - Tech may bounce near term with the Nasdaq down 18% from the peak, but to me, that's just a trade. The medium term trend is inescapably lower as interest rates start going up in the US from March. You could buy a Square (block) or a Docusign or a Nvidia - or go with one of ARK ETFs, and get a 20%+ bounce in February, but that'll be sold into. Value is the place to be and oil sits in the sweeeeet spot. I get the UK/Europe headwinds for oil shares, but that'll change once funds realise the futility of the current ill thought-through green transition. We haven't seen it all yet in 2022.

Lol, P. You can't possibly go wrong with the 15% yield at PBR I imagine. Are you now split evenly between Enq, AOI and PBR ;-) Not a bad shout if you are.

FYI - I think that the Iran deal will be struck - oil will probably fall maybe 6 to 8% over a few days, and then recover quickly. There's no stopping 100 bucks come spring/early summer. And I believe that this year will finally see a breakout from the range we were stuck in since 2020 - Fat1 can't have it all his own way, can he?

That's a sensible take from the Danes at Saxo. Oil at 100+ in the coming weeks and possibly a touch higher into summer is what will force a healthy dose of realism down the EU/UK leaders' throats. Once the investing world awakens to this new paradigm, the UK/European oil equities will find their feet. Enquest will be a big beneficiary, after we get the next update out of the way and we get more institutional investors on board. They'll have to eventually come, even if they currently aren't.

Hey Jan - I don't think 100 bucks should be too difficult to hit in the coming months - if the oil market is trending so positively in January, can you imagine what it would be like going into mid to late March? There's still a lot of fed liquidity in the market and money is flowing to hard assets/commodities. Value stocks will be even more in favour in the coming months - Tech will be vice-versa. Yes, it's absolutely key that Enquest provides positive guidance, but even if there's a 'miss' of 1 or 2 kbopd, with oil trending towards 100 in the coming months, we should do just fine.

Iran is a potential bearish factor, but that may only have a temporary 5 buck effect to the downside. Shalers - we'll see in their Q4 reports soon. At a 100 bucks barrel, assuming Enquest can hedge in the 90s for late 2022 as well as 2023, 60p should be a formality in 2023. There will soon come time for AB to initiate some kind of shareholder returns package - possibly with H1 results announcement in September, if enough progress is made with debt reduction.

The volume of BS on oilprice.com is mind boggling!!!

Jan - the EIA was forecasting a 600 kbopd increase for 2022 (11.8 mmbopd up from 11.2in 2021) and another 600 kbopd in 2023. Any 1 mmbopd increase forecast is an outlier, IMO.

The key to note though is not the just the rig count, but also how the frac spreads count is trending, that is important. The greater % of capex spend on shale wells is actually on completions and not on rigs that drill the initial. Completing a large number of DUC wells in 2021 was how the US managed to increase production even with a relatively low rig count.

Even if Rig counts increase a lot in 2022, it isn't fully correlated with major production increase, unless frac spreads move up too. The shalers may just be drilling to replenish their DUC count for a rainy day with their excess FCF. We'll have to first see how their capex budgets are trending when they release their final numbers with their Q1 results.

I'm optimistic yet!!!

I doubt there would be a tripling of Capex this year as the author speculates, but if the oil prices hang around these levels in the coming weeks, then maybe a doubling to the $200 mill plus level is on the cards for 2022. There will obviously be an emphasis on hgh IRR and faster payback - high oil prices will cure these low price levels without a doubt, even in the face of the ESG brigade.

Enquest will do just fine with oil at these levels. Valuations of European oil companies has been a difficult proposition and we rehashed the reasons why multiple times on here. The biggest obstacle is the ESG brigade and their influence on European fund managers. if you're looking for a high degree of correlation with oil prices, then US and Canadian oil equities are obviously much better placed. What would be good for us from a momentum viewpoint is a positive production + financial update in the coming days. Both Enquest and Harbour didn't give good updates the last time around and IMO, is an additional dampener on our/their share price. Theses oil price levels + a good update should be very good for us.

If the ESG pressure tamps down even a few notches, then true value will shine through - We'll just have to keep our fingers crossed.

GL

Hey P - happy new year. I didn't know that you trained your student this well. We'll keep our fingers crossed for Spring - that can't come soon enough.

R - back now from a 2 week trip to Texas. I didn't quite make it to the Permian, but did catch glimpses of Lumberjacks closer to the Eagle Ford. It's good to see Enquest do relatively well and keeping up with oil, but we'd all like to see a positive production update, won't we?

The increase in shale capital spending is also a function of higher services cost inflation along with the higher depletion rates. I'd believe that they will spend well inside their cash from operations and that brings with it an implied discipline to capex spend. I dont think they're a threat yet to OPEC+, but we'll have to watch those cowboys closely. The deep freeze in Northern US/Canada + Kazakh unrest is pushing up oil prices at this time, but we'll take all that comes our way at this time of the year. Spring + Summer is when there will be some fireworks.

GLA

Cheers Mod. My big concern with PBR is government intervention. The divs yield is very high and the market is pricing either a cut or a further drop in SP. It may be unwarranted, but that's what its currently looking at. I don't quite know what'll push the buyside to re-look at European/UK oil equities, but $90 or more oil in 2022 may just do that. Maybe I'll look at PBR soon enough. ;-)

Canadian/US oil equities are in a different boat though and there's plenty of funds' support in that part of the world. I'm out in Texas and it's really heaving out here. Gas guzzlers are out in anger and people are mostly carrying out on with their business. There are few restrictions and mask wearing is just encouraged in indoor settings. We were out at an NBA game last night and it was probably a 50-50% split between wearers and non-wearers. People are getting on with it here. The US government has been a lot more relaxed over Omicron vis-a-vis the British governments. From an oil demand viewpoint, the US is what matters the most and their accommodating attitude is a PLUS and should be a lesson for European governments, including us.

Good luck with TGA - I have APA for Egypt exposure and they're signing a similar revamped PSC with Egypt. VET is riding the NBR/TTF gas prices higher and would be a FCF machine next year, along with CPG. I just hope that the market wakes up to Enquest's FCF potential soon enough,

Mod/R - Indeed, Omicron is but a short term aberration in the medium term oil demand/supply picture. I'm sure PVM is right in that there is a near-term oversupply building and that's reflected in the Contango pricing structure in the oil market. Let's not forget that price curve was in backwardation for many months prior to the recent Omicron panic, but I stand convinced that this wave will wash over in the coming weeks. As usual, our silly governments panic at the first sight of a new variant and give too much weight to all the doom mongers, before the evidence is out. Anecdotally as well as studies out of SA (and elsewhere in Europe) indicates Omicron's severity is lower. The chief concern is for the unvaccinated, but that's their choice - why should economies be shutdown because of the intransigence of the minority? The longer we stay clear of lockdowns, stealth or otherwise, the better chance we have of Covid becoming Endemic and that's a fantastic outcome for oil demand and by extension, all of us.

Yes, the BBB bill looks done and dusted - maybe it'll be resurrected in a form that provides a bit of stimulus to the US economy, helping oil along the way. We can't really call oil prices touching $100 and so on, im my view, until Covid is in the rear view.

I was reading Chilting's views on Enquest SP and it's correlation to production downgrades - there's some truth to that view. We're seeing that drama play out with other UK oil producers like Harbour. They've had production (and reserve) downgrades and that's weighing on their SP. We can also see that with US producers too when they start to downshift on production - it isn't rocket science. It's nothing that can't be resolved when Enquest provides their year end production update and assuming Magnus is back on track and production guidance is achieved, Enquest should re-rate and get back towards the mid 25s. Solid debt reduction is 2022 is what could take the SP into the 30s - all in my opinion. Brent 90s and higher should help, of course. We'll keep our fingers crossed for a mid 70s Brent price going into 2022.

"Our energy mix is roughly 50-50% for now and growing in favour of gas . Am surprised that fundamental investors are not pointing this out more.".

OneDB - whilst this is the case, circa 45% of gas is hedged ar about tenth of today's NBP spot prices for 2022 and in the low 40%s for the next 2 days. That is a factor in the current market conundrum over HBR valuation.. If they can forward sell (swaps) another 30% at the current 250p/Therm future prices for 2022/23, that could be a positive outcome. I don't see hang around these levels for too long - there's too much Russian gas supply fears built into the market at this time.

Yep - ignore the troll lot is the best we can do. Omicron should be in the rear view in a few weeks and things will get back to normal. Who knows what may happen in the coming days, but come spring, oil should be back to its merry ways.