Member Info for epiphany121

Morning L3, KO (long time no hear) - Yes, Brent is trending well and that's a positive.

L3 - I wouldn't despair about AK (yet). One load doesn't make a trend and we'll wait to see when the tanker does show up and extrapolate production from that load. THe last 2 loads have been at the circa 40K production rate.

Possibly HK (again)? Left Rotterdam a few hours ago with destination not updated yet..

Cheers, MO. It looks like I have to put the rose champagne plan on hold, as Brent has dropped $2 after OPEC/Nopec was reported to be discussing a 500K barrel increase in their weekend meeting. ;-)

for a Brent close above $80 for the first time in a few years. We got above that level a few months ago, but never closed above that level...I'll pop open a bottle of Bubbly if it does.

MO - I have some Rose champagne lying around for this toast..;-)

Navion Scandia is not happening for AK. Let's hope for Stena Natalita...

Fernan - a Magnus spin-off is purely hypothetical at this stage. I don't see that happening anytime soon, if at all. The cashflow from Magnus is important for ENQ in the deleveraging process, and not to forget the profitability accruing to ENQ's books.

Morning MO - have you been scanning for Shuttle Tankers? Navion Scandia in Sture, Stena Natalita off MacDuff - these are a couple of possibilities. I'm not sure if Jasmine Knutsen, moving off MacDuff, could be an option.

Nice windspeed link you'd sent through yesterday. Cheers. It's also useful to check wind speeds whilst planning a round of golf. ;-)

The Dems can't and won't do anything about oil prices. When Obama was the president, he wasn't going around chiding OPEC that they were manipulating oil prices and that they had to bring them down. For a good few years of his presidency, oil was over $100 a barrel and if anything, you'd expect the Dems to be the ones who'd call for lower prices and be activist about it.

And we can bet our bottom quid that come November there won't be any mention of oil prices from the numpty, even if Brent gets into the 80s/90s.

OK - back to tanker watching..;-)

6 more weeks to their mid-terms and his rants have commenced. Republicans will get thumped anyway, so I'm unsure why these will help.

https://twitter.com/realDonaldTrump/status/1042733544466989057

is due in SVT even..

Morning MO, Chilts et all

Nordrose, the crude oil tanker that has carried a few loads from AK to the US, is die in SVT at around midnight tomorrow. We're coming to that time period where the next load is due in the next 3 days, in order to be around the 12.5 days mark.

I can see Navion Scandia headed to Sture as a potential. Are you seeing anything else yet?

Fernan - thanks for providing us the detail from ENQ's IR and your breakdown of the expected cash flows in 2019. This is now a lot more clear (to me anyway) and is (nearly) in line with what JS said on the earnings call about ENQ getting their investment back as a first call, and now we know it's nearly the case.

Brent spot price next year is the wild card that'll ultimately determine how much cash flow ENQ receives in 2019, and pay down remaining debt. AB was chuffed about Magnus providing $500 mill NPV-10 on a $100 mill investment at an assumed Brent price of $70. It would be nice if Brent were to average $80 next year, as ENQ will stand to receive an additional circa $30 mill cash in that scenario.

On another note, WTI is outperforming Brent today, for a change. Gasoline demand last week is the highest in the US since 1990.

Best

Afternoon MO,

Surely, they'd be able to tell how much was produced by Magnus as per the OGA report, for example, and the derivatives clause only applies to that volume. They can't sell forward (Swaps), but maybe they could get away with downside protection though..

Cheers.

I like the insight and pragmatism you bring to this board and your posts are most valuable. Please keep them coming, Romaron..;-)

Romaron - for a man who already owns the underlying assets (Stocks) and believes in the long term success of the US economy and the companies, Buffett doesn't mind writing puts and getting the premium, whilst being ready to buy these stocks at the strike price, should there be a big downturn for any unforeseen reason.

There is a time and a place for downside protection, and to me, buying puts are a better choice than swaps purely to benefit from an upside in the oil prices, in times of uncertainty where oil prices are being pulled in all directions by supply constraints and potential demand destruction (Tariffs and global slowdown). I'd suggest that it's because of ENQ's hit to the P&L because of the Swaps hedging in H1, that AB/JS have decided to move to a more put based hedging. If Brent does get to mid to high 80s in H1/H2 next year, I can then certainly see them take out Swaps as that's a win-win for ENQ, as you explained below. For H2 this year, I'd suggest that they're waiting and watching where oil prices go, and be ready to ride the upside, whilst protecting the downside, through these puts. A most prudent strategy indeed.

Also, Magnus' 75% share of oil can't be hedged anyway, and that'll always be sold at market prices till BP is paid off.

Morning Pelle,

We can use Nymex WTI Put options as a guide for how much it would cost to purchase a put option for early next year. WTI spot price yesterday was around $68.5.

Purchasing a put option for Jan 2019 at a strike price of $61 a barrel costs $1.14 per Barrel.

https://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude_quotes_globex_options.html#optionProductId=1353&strikeRange=Active

Purchasing a put for April 2019 at the same strike costs $2.26 per Barrel. Just change the month in the above link and scroll down to the strike price. For June 2019, the premium is $3.

If ENQ starts now to take out puts at around $70 on the Brent between Jan and June 2019, the average premium is likely to be around $2 a barrel.

The closer the strike price gets to the current futures, obviously the higher the premium would be, and hence I'm assuming around a $6-$7 lower strike than the indicated futures price for the relevant month next year.

Best

Pelle - I'd explained a few times previously that the nature of the hedges in H1 are fundamentally different from those in H2. The majority, if not all, of the hedges in H1 were swaps, which meant that ENQ would only ever receive that price and any sale price above that number (say $59 in this case) would go to the counter-party.

In H2, the 5.3 million barrels hedges are put options at $66 and all that means is that $66 is the floor price for ENQ and all upside is fully with ENQ. The hedge protects ENQ should Brent drop below $66 in H2. I see a $10+ upside in H2 compared to the net $59 in H1.

I expect ENQ to average 62k boepd as a base case in H2, and as Twalbyoff says, I expect at least a $200 to $300 mill net debt reduction in H2. If brent holds up next year in the 70s, that is where the big action for debt reduction would be. However, I'm unsure why Barclays can't work out why there will be a net debt reduction in H2.

Even Capex in 2019 should be lower, assuming there are no more acquisitions and there's no DC5 on Kraken needing more cash.. ;-)

A very quiet day today and I thought I get us some additional colour on why Barclays downgraded their Rating in ENQ. They're concerned about complexity of the financial transactions, less than optimal disclosure. OK, I get the less than optimal disclosure story given that nothing about the AK voidage was mentioned during the AGM. The Magnus transaction is indeed complex, as we can gather and then there's the OZ deal too with the ring-fencing.

However, Barclays seems to have thrown in the towel and are now predicting a no reduction in net debt for 2018, which sounds short-sighted to me, in light of the positives we'd be seeing in H2. The cash flow upside in H2 is more an Alma/Galia/AK and PM8 story for me. Magnus should really start impacting cash flows from H2 2019, hopefully.

Here's the link below.

http://www.oilcapital.com/companies/news/204941/enquest-downgraded-by-barclays-amid-concerns-over-complexity-204941.html

Blimey, MO. You were bleeding long to hit a 300 metre drive - that's a 100+ mph swing speed with the driver..;-) I don't know how many moons ago that was, but as you said, your golf may be better now with more control, sharpened by your legendary ship spotting skills. ;-) I do have a somewhat fast swing, but not that fast.

I can't say I have played too many lovely courses - I usually play in my local Bucks and Berks county courses, which are OK. Maybe once ENQ hits the 70p, we'll do a 9 hole golf celebration. :-)

Are there any other golfers on this board, I wonder?

Evening MO,

It looks like the Rose is treating you kindly. ;-) Back from a day of golf and I can see quite a few excellent posts/inputs already from you, L3 and Fernan. I'll read through your notes and try and write back later tomorrow. I have another early round of golf tomorrow morning.

Enjoy your evening all..

Best

Fernan,

Thanks for fleshing out these details from Magnus prospectus. That was useful and provides more clarity, above and beyond what the GCA CPR did. Here are some comments on your key summary points.

1. The BP vendor loan won't sit as debt on the ENQ balance sheet and I'm sure that we all know that by now anyway

3. UK corporate tax for oil extraction companies is 30% and hence, BP will receive a max of circa $850 million from the profit share arrangement

4. This makes sense

5. Thanks for this detail. So, ENQ will have rights first to the $100 mill cash, after the vendor loan is cleared and then the 50-50% cash flow sharing will kick in. In the earnings call, JS indicated this as well, but it wasn't very clear.

Best