Member Info for epiphany121

For context - early October PMO was 147p and it's now 88p - that's a 40% drop. ENQ was 37.4p and now it's 24p for a circa 36% drop. If anything ENQ has outperformed PMO a tiny bit in the past 6 weeks or so. Could ENQ go lower - I'd never say no. I'm only providing a reality check for those who PMO are executing well and we're not and hence the SP is falling.

I'd say we're in a similar boat and depend heavily on Brent staying at around these levels over the next few quarters.

L3 (ignoring the resident 'dementor' on the board for a minute) - Let's not forget the simple fact that indebted oil companies need Brent higher and it's more important, in the grand scheme of things, than execution. I'm sure you do realise that in spite of this 'execution' by PMO, SP is now down about 40% from the recent peaks. ENQ is not an exception here. Execution or not, oilies will be swept up or down by the broader market trend and Brent.

Pelle has been equanimous in his assessment about production and where this may lead the SP to in the near/medium term - I think we will get a leg up too. We just need to let this volatile phase play out. Brent should stabilise at around these levels, and may get a small leg up to low 70s in a few days' time. OPEC Production cuts will happen soon and that should put a floor under this cratering Brent price.

I'm not expecting any debt miracles this H2 - A $150 mill reduction is good. Next year should be far more interesting given some of Magnus' cash flows will accrue to ENQ, and as there's no hedging the 75% Magnus production, it's all down to the vagaries of the Brent pricing.

KO - let's be careful what we wish for. This was the same 'let's bankrupt shale' motto by Saudi Arabia/OPEC that led to oil dropping below 30 in 2014, and they're still around and producing well. Currently, It's the smaller/mid-size players that are struggling with cash flows - the larger ones are who haven't hedged are doing OK. Even the hedged ones aren't too bad. But. this $20 drop in a month in WTI will be a reality check for them and I wouldn't see some of them pull the rigs back a bit in the coming weeks.

L3 - many, if not most shale companies are still burning through cash - their capex/opex is still higher than cash from operations plus debt interest. Interest costs are now moving up with USD rates having moved up 250 - 300 basis points in the last few years, and these companies are all saddled with large amounts of debt. At these price levels for WTI, a few of these companies will have to file for bankruptcy soon.

Some of the companies I follow/own project FCF in H2 2019 as production volumes go up in the next few quarters, but if oil trends at these levels OR goes down more, I can't quite see how they'll get there. This is looking like 2014 redux, unfortunately. Permian shale is currently 10 plus dollars below WTI and Bakken shale is $17 below WTI. These can't be good for their cash flow, but they don't seem to care at this time - how long can they do this is the million dollar question. If WTI drops a bit more, drilling will need to be curtailed soon, IMO.

Here's the CNBC article with a link to his tweet.

https://www.cnbc.com/2018/11/12/trump-warns-opec-against-cutting-production-prices-should-be-much-lower-based-on-supply.html

Didn't you notice that Hitler opened his gob yet again and sent oil lower? This happened at about 6 or 6:30 PM this evening and pushed both WTI and Brent lower.

https://thehill.com/homenews/administration/416274-trump-oil-prices-should-be-much-lower

Cheers, MO, Chilts and others for keeping us up to date with load #27 and all of the OPEC/NOPEC shenanigans. Let's hope that his puts at least a short term floor under Brent/WTI. I'd love to see Trumpty get shafted over.

IR did confirm that Puts were taken out for H1 2019, although no volumes were disclosed. DId anyone reach out to Ian as to when ENQ may be planning an Ops update?

Best

The only way production from Shale will decline is if they stop drilling new wells and this isn't one such indicator. The forecasts for next year from the US is 12+ mbbls and they'll easily get there. They are spending all their cash flow (and some) on drilling, but they'll still keep doing this unless WTI falls below 50 - that could deter additional drilling.

Only a combination of cuts from Opec+ and some Iran cuts, can help oil stable at these levels. Plus an actual unwinding of the trade war too will help turn the tide. Absent one or more of these factors, crude will head lower.

Morning MO - yes, indeed. I said a hope and a prayer last week :-) - hope's officially been shot down as Brent and WTI in a bear market currently. We're now not far from the price where ENQ will revert to PIKs for interest payments. Who'd have thought?

Here's hoping from #27 soon.

Well, oil's broken all technical levels on the downside, what with US and Russia producing at record levels, and Iran getting waivers. Brent looks good to break the 70 handle on the downside very soon. Not good for oilies

Pelle - I don't see why BP will benefit from ENQ's tax losses reserve - that doesn't make any sense. ENQ share of cash flow from Magnus will be protected by the $3.14 billion tax loss on ENQ's balance sheet as of H1 2018, whilst BP will have to pay taxes on their share of cash flow.

In Ajes' example below of $100 million cash flow being shared equally between ENQ and BP, ENQ will receive net $50 million because of the tax loss shield, whilst BP will receive a net of $30 million, after a 40% UK Corporate tax payment. As we know, BP is eligible for a total of $1 billion gross cash flow, as per the Magnus profit share arrangement.

Thanks for putting up your CF spreadsheet online. I'll try and find some time in the next few days to review and give you feedback/make updates.

Best

L3 - I don't think that an ops update would call out the fact that production stopped because a well is being drilled. The H1 update didn't say that - it only referenced the fact that the M-62 well was completed in May and started producing. The H1 update did state that M-63 kas completed and will start producing a few days after the update was provided on September 7th. It's only logical that the majority of the drilling work would've been done in August. We'll have to either wait for December OGA or the November end update to possibly know how Magnus is tracking.

Just another take on September, Pelle. September Kraken production should be at the same levels as August around the 35 - 36 kbopd rate, I'd suspect. Recovering Magnus production should push September up over the 60k bopd rate, which will only for the second time ever for ENQ, after February this year. It'll be a close call, but I think we'd get there.

All we need is for Brent to stabilise at around these levels - that's my prayer and I'm not religious. Lol.;-)

L3 - look at historical data in April/May this year and correlate that with facts around Magnus drilling that was taking place then, and you'll have your answer; you wouldn't need to speculate too much as to what was happening with Magnus in August. ;-)

Morning Pelle,

As MO pointed out, you just need to add in the Chevron operated Alba's 8% share to ENQ production. With that, we have 48.2 kbopd in August plus Malaysia - say 10K, and we're at about 58 kbopd. With regards to Magnus, my take would be that the M-63 well was completed in early September and hence production is August was down as that well was being spudded. This is exactly the same scenario e as in April when the M-62 well was being spudded and production was down to the 7K level and after the well started producing in May, production increased to the 16k levels. Production will be back to expected levels in September, but October should reflect the circa 18 to 20 kbopd runrate, IMO.

Best

Pelle - I'm not worried about ENQ's share price, TBH. What'll worry me if Brent breaks down below 70. It's all bearish headlines now and that's a 180 turn from just a month ago.

Production cuts next??

well - that's a 72.5 level hit in Brent. We bounced off 70 a couple of times in the past 6 months and that's possibly a solid support level. For our own financial health, let's hope that it holds the 70 handle..;-)

A 70K purchase by a non-exec director. Brent's down more 1% though - the path of least resistance is still down, even though the stock markets have recovered and seemingly trade tensions are ratcheting down a notch.

Cheers, MO. :-)

Morning Chilts,

As has been universally reported, the shale players are pumping in enormous amounts of cash to increase production maybe just that little bit, but at the same time through a combination of early hedges PLUS lower price realisation from shale (vis-a-vis WTI), they're just not generating surplus cash flow to reward share holders/reduce debt. Newfield Exploration (NFX) is a relatively large shale player in the non-permian region and they reported Q3 results yesterday. Their production is circa 200k BOEPD with oil at circa 70K BOPD, and NGLs and Gas being the rest, and even though they generated cash from operations (net of hedging) of $1.05 billion in the first 9 months of this year, their drilling and land acquisition cash costs were $1.1 billion. They've bled cash and their debt is still stuck at $2.5 billion.

This I'm certain is the case with many of the independent shale drillers, and at this time they're still investing and drilling without consideration for being net cash flow positive. The latest expectation is that the US will overperform in 2018 and WTI at 60 plus, well into 2019 as well. Maybe beyond, who knows. That is indeed the supply upside risk. And one of the bearish factors playing on Brent/WTI at this moment.