Member Info for epiphany121

A sudden hyper quick up crawl just now...I wonder what happened at OPEC?? ;-)

Oh yes, a 1.2 million barrel cut..Sweet...

Afternoon Pelle,

First good news out just now - Iran has also agreed to the OPEC deal. Your prayers have been answered by SA and Russia.. ;-) They're better mates for us than the Numpty. Maybe we'll now slowly roll up into the mid 60s as this is where we need to be.

The CT losses were like $3.2 billion as of 30/6/2018. So, yes we do have a few years of UK CT tax free income from the UK production. Obviously, we still pay CT on Malaysian oil sales to Malaysia. Yes, spot on that GCA estimates that time frame when the CT carried forward losses will be used up.

From December 1st onwards, all of Magnus' net cashflows that are due to ENQ from 75% Magnus is shielded from taxes, which is great and wasn't happening when BP owned the 75% assets.

Brent - please crawl to $65 ASAP.. ;-)

Didn't see your post, Squiffy. I happened to pick up and smoke whatever left behind. Lo and behold, I had my own Epiphany about them outsiders AB and Faysal, and why you absolutely love them and their management skills.

As of today, never has their agenda ever been clear to me....thanks to you.

Yep, indeed GKP. :-)

Pelle,

I liked the overall tone of the update yesterday. You can't spin Kraken news anyway other than that it is disappointing and RNS confirms that there are issues with it. I don't believe it is linked to the reservoir and that there won't be
a reserves write down, although this is what is concerning the analysts at this time. We'll need to give up on the 50 kbopd plateau production rates I suppose and that's not good. However, 40 kbopd should be doable, and I do believe that the Kraken guidance for 2019 was on the conservative side. But, we can track loads and make our assessments anyway.

I liked that the net debt reduction is happening and the fact that debt will continue to be paid down, saving us interest cash outflows on the RCF. We'll be near circa 1800 mill net debt at the end of December and that's a good start. However, the most important thing for ENQ and the likes of PMO is that Brent needs to go up and stay at above $65 levels for meaningful FCF to be generated and debt reduction to happen. This to me is far more important than worry ourselves to death over Kraken; I still think we can get to the 40 kbopd range there.

At $65 a barrel, ENQ could be generating around $400 million FCF, and that drops circa $100 mill with each $5 down move in Brent.

I can't remember a December that has been this dour for the stock market in the past few years; even 2008 wasn't that bad. The frikkin numpty's trade policies are coming home to roost and this is what I'd been afraid off since he first kicked up trade wars in February,

AB and Faysal - the Arab dudes are up to no good in the UK, are they Squif? Do you they're spies for Lebanon or maybe they just want to take our money and move Kraken to the Mediterranean Sea outside Beirut - that could explain this farce, eh? ..

Maybe this link pointing to a post by a poster on ADVFN this morning, Steve73, gives his opinion on where the issue may be and that is as good an opinion as I've seen.

https://uk.advfn.com/cmn/fbb/thread.php3?id=33379162&bb_alert=1

Here's the full Times Article. The key risk flagged is around the amount of oil that could be recovered.

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Technical problems and drilling delays at Enquest’s principal North Sea site are likely to result in the company’s oil and gas production growing by less than expected next year.

Enquest said yesterday that the Kraken field, which started up in June 2017, continued to be affected by “a small number of system outages and equipment repairs”, while a drilling rig for a new well at the project also had been delayed.

The company said that it was making “conservative assumptions” and that it expected to produce between 30,000 and 35,000 barrels per day from Kraken in 2019, less than analysts had expected.

Despite the setback, Enquest said that it expected total production to grow to between 63,000 and 70,000 barrels of oil per day in 2019, up 20 per cent on the 54,000 to 56,000 barrels per day expected this year, thanks to its acquisition of Magnus, Britain’s most northerly oilfield, from BP.

Enquest is one of the biggest independent oil producers in the UK North Sea. It also has assets in Malaysia. It reported a $244 million pre-tax loss on revenues of $635 million last year.

The $2.5 billion Kraken development to the east of the Shetland Isles was one of the largest North Sea fields to start up in 2017 and was estimated to contain 128 million barrels of oil. However, its start-up was hit by technical problems and analysts said that there was a risk that Enquest could be forced to cut its estimate of the amount of oil that could be recovered from the field.

James Hosie, at Barclays, said that guidance for production from Kraken in 2019 was between 10 per cent and 20 per cent lower than it had expected.

Enquest shares rose ½p to 24¾p.

TripleCombo - again you've not been reading your god's gospel. Spend a bit of time educating yourself on it's contents and you'll have your answers regarding Kraken's production target rates, expected production efficiency and how the FPSO day rates are linked to these on a monthly basis. You may just have an Epiphany then!!!

Fernan - please read Romaron's post addressed to you. I don't believe there's anything more to be gained in this back and forth with you!!

Chilts - NO could be making a final move now towards AK, isn't it? It looks like it's approaching AK and is about a couple of miles out.

"The OPEX cost on the boat is high and as the production declines this means a higher opex per barrel and less cash."

I partly dispute this, TripleCombo. If you'd ever gotten around to reading your god's own gospel (the bi-annual earnings call transcript), he had stated on the earnings call that the day rate is variable and reflected in the production efficiency of AK.

Romaron - There's probably more qualified technical people that can comment on this, but I agree with your assessment that the declines should be lower than originally envisaged in the FDP, given we never hit the peak sustained plateau production rate of 50 kbopd yet.
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Amjad Bseisu

No. So the day rate, the contractor still has the same arrangement that we've had in place. So the contract does call out for the production efficiency to be reflected in the rate.

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Fernan,

Very high oil prices - define that for me, will you? We've had the negative effect of Hedging lower at circa $59 in H1 and only in H2 was it getting better because of Prices above $70. I'm under no illusion that Brent needs to be at least above $65 for ENQ to reduce debt on a meaningful basis. Full stop.

Again stating that $50 million is being repaid early indicates a couple of things - 1. confidence in future cash generating ability and 2. reduction in interest to be paid. Pray help me understand how that FACT is Irrelevant and playing tricks. ENQ have stated that meaningful debt reduction would only happen starting in H2 2018 and that's not hidden anywhere. Not quoting net debt figures when there's no meaningful reduction as of the May update is not tricks, in my mind.

If you do read the H1 report in good detail, you'll there was a backlog of deferred invoices from 2017 operational/capex work that had to be cleared up in H1 2018 and hence there would be cash outflows on that front. The Mercuria transaction would wind down in a few months too and so would the Magnus 25% vendor loan payback. Assuming that oil prices stay above $65, cash flows from these would go straight into reducing net debt.

Again, how's stating that Alba is producing in line with expectations irrelevant, when they're updating about the status of CNS assets? That's circa 1 kbopd net to ENQ. It's a fine balancing act between stating too much and giving a day by day commentary on how Kraken is doing versus giving a broad bush indication of issues and giving a reasonable production target, knowing the issues they've been up against.

Can you be sure of anything in this world? What's the chance that a powerful enough storm in NS creates a few freak waves more than 100 feet tall and knocks out the Magnus platform that was built to handle a once in a century storm of that magnitude? Do you base your investments on a black swan event of that nature occurring?

I like what I'm reading in the update with regards to early pay down of debt and thus, saving on interest costs. I'd like to see ENQ pay down sooner the RCF debt and they're on the right track there. If Kraken can be sorted and can produce closer to 40 kbopd, that's a big plus. And Most importantly, Brent needs to be higher than these levels.

Let all these come together, and we'll see faster debt reduction in 2019 and better valuation too.

I was hoping for a larger H1 hedge, instead of just the Q1 hedge that we've seen, albeit at much higher levels than now and we're assured of a $70 payout on 3 million barrels. Hindsight is a great thing and all talk in early October was oil breaking out to $100 and hence, JS may have taken a wait and see approach, and before you knew it, poof went Brent. It's a tough game predicting oil price moves, but agreed I would've even sold forward more barrels in Q2/Q3, as the prices were circa $80 on all of them early in October.

DD (and Pelle) - L3 is right that the $100 million Magnus payment to BP would've been made when the transaction closed in December and hence that $100 mill cash would be included in the October end cash on hand, impacting net debt (lower).

Obviously, cash on hand will reduce in December by $100 mill with the Magnus payment, but should more or less be 'negated' by additional cash generated in the last 2 months of the year, plus the cash receipt from BUMI. Net debt at the end of 2018 should end up somewhere on the $1800 million range, which is a good $200 million better than what the idiots at Jefferies predicted in their downgrade research note a few weeks ago.

Fernan - you think you're the only clever one of this board? If you think that the CEO is 'tricking' investors, and you need to be complete idiot to get tricked by something that's as obvious as Gross and Net debt, then you have ZERO reason to be long in ENQ as you supposedly were (not sure if you still are).

Now, there will be people that do stay long in spite of knowing that they've invested in a trickster CEO's company - either they are total nincompoops or have a zero sum investing thesis. Which bracket do you fall in I wonder?

L3 - you may have your reasons for being negative, at least it's not based on AB f'ing up. As chilts pointed out North Sea is a hostile environment to operate in and we all acknowledge that in hindsight, BUMI wasn't the right pick for Kraken. We couldn't quite afford the likes of SBM offshore and they would've done a much better job in the North Sea. I too see the headlines regarding Kraken not being good, TBH, but the 'hope' is that they can turn it around in 2019. A low bar has been set with the forecasts for 2019, even with DC4 in place and I do want ENQ to top these forecasts.

Brent price is the key with regards to paying off the OZ loan or the overall debt for that matter. Here's hoping that goes back above 70 soon.

Glass half empty, L3??

Kraken is disappointing, but it's a low bar that's been set. Whether ENQ comes in at the high end of their projected range or not, is probably largely down to Kraken. We'll continue Tanker watching.

I fully expect net debt to end up around these levels at the end of the year, after the Magnus payment. They're paying down the RCF with cash on hand and that means lower interest payments for us. These are all positives. They may make more payments yet in December or in early 2019, if Brent bounces up a bit from these levels.

Next moves for ENQ's SP is largely predicated on what happens to Brent from these levels. We'll know more after tomorrow's meeting, won't we? So, there are the usual issues, but great opportunities too.

GLA...

Pelle - purely from a financial hedging viewpoint, you're right that there's nothing stopping Enquest from taking on hedges for their entire production (or more if they wish to speculate), through either a pure put for downside protection or a collar to get back some of the put premium.

What they can't do is to sell the Magnus production in the futures market though...

Lol..now that'll be a waste of everyone's time there won't it? ;-) I like Jan's picture of what that celebratory party would look like and what won't fit in that would be a coming together of AB and Squif. Mind you, once AB is done with, Squif will move onto Faysal next.. ;-)