Member Info for epiphany121

Hi L3 - I'd never heard of Liberty Oilfield Sevices before your post - they're low debt vs mkt cap from what I can see and that's a plus. Beyond that, no investment opinion on that stock. ICD - there was insider buying in the past few weeks and it's up circa 20% today. Debt in 2023 is an issue, but if spending comes back in 2022, rigs/services company will do well - ICD could deliver a few 100% points of gains. Equally, there's chapter 11 risk too - that's the trade off.

GE completion obviously helps towards debt reduction and sets the stage to dividends being handed out. I'm not sure though that AB is really thinking along those lines and it's a massive shame if he's not. Full value for Enquest's equity will never be realised, IMO. For the sake of investors who've been around for a while, I hope he does. High brent prices are a massive help and whilst the market isn't convinced that they will linger at these levels, I'm won't be surprised one bit if they do, and then some. More fiscal stimulus from the US is coming soon and that's another huge positive for asset prices. Hard assets will climb. SHort cycle shale oil companies aren't yet spending for now. If you light the fuse under the demand side of things, but forget about the supply side, what is this easy money going to do? Pick out these hard assets that are in under-supply and boost prices. I just hope that oil doesn't over-extend quickly - that's not good for anyone. SLow and steady is good - sadly it won't be I think.

NM - personally, I think he owns more than 4 quid worth of shares - say 1000 times that number to be generous. When someone says I don't lie and I never do, I say that's indeed what they do all the time. ;-) BTFATH is a self-confessed trader - KO is nothing but one too, IMO, but thinks he owns millions of shares and when asked to either come to the AGM or prove it via email, completely skirts the topic and now says ho, ho, ho - the other chap pussed out of a challenge. Weird world we live in, but it takes all. KO used to wind me up with his constant moaning, but I've now reached a zen state and am completely de-sensitised to this daily moaning. ;-)

Hello Tarmak - I'm not talking about Production that shows up on Page 3 of the H1 2021 report or even in pages 21 through 25 of the 2020 Annual Report. If you can dig a little bit deeper, you'll know that there is a difference between 'Reported Production' from Malaysia in BOEPD and Entitlement Barrels from Malaysia in BOEPD. Entitlement barrels are the net salesable/revenue producing barrels for Enquest, NOT reported production.

I'll give you an example - look in the 2020 AR. Enquest's reported production was 59116 BOEPD in year 2020. The breakdown was 50334 (UK Upstream - page 21) + 2346 (Uk Decomm - likes of Heather, Thistle, Dons, etc - Page 24) + 6436 (Malaysia - Page 25) = Total reported production of 59116 BOEPD.

But, read page 25 carefully. Working Interest Entitlement from Malaysis (because of the PSC) is 4394 BOEPD. That is what Enquest can sell and get revenues from - not 6436 BOEPD. That's about 68% in 2020. It varies between 65 to 70% depending on oil prices - the lower the oil prices, the higher the entitlement.

We've known this for a while and isn't a surprise. Here's a calculation to confirm this. Malaysia is high 90% oil and for simplicity sake let's say the entire barrels were oil sales and let's just link it Brent and ignore Tapis, which is a premium to Brent.

If you take saleable barrels to be 6436 BOEPD, you end up with 2.35 mmbbls and Brent averaged 43 in 2020 and so revenues should be $101 mill.
If you take saleable barrels to be 4394 bbls/day, then the total barrels for sale in 2020 is 1.6 mmbbls and at Brent 43, revenue is $69 mill.

Enquest reported revenue from Malaysia for 2020 was $63 million.

Now - what do you think is the correct Saleable barrels figure?

Best

Spot on, mrc. The deal struck was very good for Enquest - $50 mill is all they get as contingent payments in 2023. Suncor is a big company and doing quite well now in their Canadian heartlands - they won't be complaining.

Enquest and Harbour seem to have company specific issues that's leading to this underperformance vis-a-vis the broader market. The key reason in my mind is coming in at the lower range of production guide for Enquest and lowered production guidance for HBR and UK stocks and the funds buying them aren't just a dynamic or forward looking as the US funds/investors. The valuation gap between Enq/HBR and US oilers is just silly as they are so much more correlated to oil price movements than we are. We may need more positive news to drop on the market such as GE closing before the rather useless/backward looking buyers/funds step in.

Hello Kamrat,

Are you adjusting your Malaysia production barrels for actual saleable barrels? Only 65% of Malaysia production is saleable for Enquest, even though we quote 100% production in our production. If Malaysia is an average of 6 kbopd, then Enquest can only sell/receive cash on circa 3.9 or 4 kbopd volume.

Best

The market will recognise HBR undervaluation soon enough - none of us can say when. There's that old saying - the market can stay irrational for longer than we can be solvent. If you're long term investment minded, you just need to wait it out.

GL

pdosullivan - thanks for the article and some good info in there. There are sector and company specific issues that's currently holding back HBR and a few other UK oilers such as ENQ - they're slightly untethered from the reality that oil prices are just not in a temporary upswing phase, but have solid fundamentals underpinning them.

The sector specific issues in Europe
1. ESG concerns are a lot more ingrained into pension (and other buyside) funds investing options than they are in North America
2. European funds are not yet seeing the writing on the wall and the enormous cash flows and resultant dividends that O&G
companies would be throwing out in the coming years
Company specific issues
1. Too much gas (and a fair bit of oil) hedged via swaps at for the next 2 and half years at about 20% of the current spot price
2. PMO creditors' share selling overhang (they own more than 15% of HBR)
3. No dividend distributions yet, although they'll be incoming from H2 this year, even though their debt/EBITDA levels are low in the grand scheme of things

Where oil/gas (and almost every other commodity you can think of) is at now is a combination of the gargantuan amount of M3 money supply unleashed by QE around the world, coupled with under investment in upstream O&G production mainly because of ESG/Energy transition issues - not thought through at all. There's more fiscal stimulus coming from the US - circa $ 2.5 to 3 trillion in the coming weeks. There's only one place oil/gas prices can go and that's up, after acknowledging that supply is also being held back by OPEC+ and Russia. Even the large US producers aren't throwing their FCF at producing more - shareholder give back is the current name of the game.

If I compare HBR with a bit larger US O&G company, Apache/APA corporation. Their 2P reserves were 873 mmboe and HBR was 609 MMBOE recently. As you pointed out EV is $7.2 bill for HBR and for APA it's just over $18 bill. Their production is circa 350 mboepd vs 210 mboepd for HBR. Where the slight difference is they aren't really hedged and will ride the current upside, but they also pay small dividends and will probably ramp up. And many US funds don't have an issue chasing returns in the polluting O&G sector. There are region and company specific issues at play.

With oil prices where they are HBR should be a lot higher, but for now this is a day trader's paradise. And the quality of posts on this board reflects that reality. ;-)

And finally, the one key area where I differ with you is that you state the net debt won't fall in H2 as much as it did in H1 because there is a higher capex component in H2. I'd go the other way - HBR will reduce net debt by more than it did for H1. There's the matter of higher production in H2 and the fact that the average gas prices in H2 are higher (much higher in gas' case) than in H1. Assuming there are no acquisitions that need to be funded from cash new debt, net debt reduction will be higher t

Chilts - I suppose it's no different to what OPEC is doing with Oil supplies. The reality about what's causing spikes is not just that it's down to artificial supply constriction - it's just the enormous amount of liquidity in global markets to give asset prices a big jolt upwards. And there's more fiscal situmulus coming out of the US via the Infrastructure bill and the circa $2 trillion build back better bill. What do you think all these will do to asset prices in 2022? Fed will have to start hiking earlier in 2022 and will kill off the Growth sector themes that's keeping tech shares up still. Hard assets in 2022 - all the way.

More signs that Covid will eventually be in the rear-view in 2022.

https://twitter.com/Reuters/status/1447462040742899712

European O&G sector still has a long way to go to catch-up with the North American producers - but get there we will. If not now, then its a quarter or so out.

The current high prices for oil and gas can be easily traced back to
1. QE globally and US in particular
2. Re-opening boosting need for non-renewable energy supply
3. US democrats pulling back from encouraging large scale drilling in line with their climate pledges
4. ESG curtailing non-renewable energy investments when renewables aren't just there to provide reliable energy supply to a growing world population

What we're seeing now is the revenge of the old economy, as Bloomberg put it the other day. This may even break the resolve of populations globally to support this rather ill thought through rapid transition to renewables.

Meanwhile - are we there yet with new highs?

Hello L3 - OK, yes ICD owns shale drilling rigs. The largest stand-alone Frac Spread equipment owning company (outside of the big boys Halliburton/Baker Hughes/Schlumberger) is FTSI. In terms of Frac Services, CFW.to (Calfrac Well Services) in Canada is a very reasonable option. These stocks may only bounce hard next year when Capex comes back more, but they're worth keeping an eye out for.

I do hope that the GE deal closure will come through later this month - I'm not speculating what the final adjustment might be, but hoping that it's chunky enough. Associated gas production at GE isn't a lot, but every little helps.

@Mod - welcome back to civilisation. I've no doubt you're pleased with how VET and CPG have done - VET moving up as TTF prices moved up a lot, but TTF has sold off hard in the past 2-3 days. I have no doubt that Enquest will come good, but AB needs to speed up that process by laying down plans for SH returns via dividend payouts.

OK - does a runner from the AGM, does a runner from the email sharing of holdings and does a runner from an easy fight. Don't know what to make of it - my simple mind can't quite fathom this state of the art flitting.

R - Missed this post - but these are golfers' favourites (I love the look and fit) and we'll need to get you kitted up and on a course as a warm-up to the big party.

BTW - did the much rumoured pistol (or was it scissors) fight between you and KO take place today? Or did he do another runner after you gave him your email so that he could share his Enquest holdings screenshot with you?

mrc - i remember you bringing this up back in August when Enquest had that run to 27p. Golden crosses are generally good and we've had a good upmove today wth 2 broker upgrades and backed by solid volume. If we can get a good follow-through day tomrorow on high volumes, that's a great sign. Now, if Amjad can only bring up that dividend topic with the market, that'll be the icing on the cake. It's been proven over and over again with US and Canadian O&G companies this year that dividends reinstatement and/or increase announcements has resulted in an out-sized SP appreciation.

BTFath's strategy has turned out to be only game in town vis-a-vis Enquest. We're still stuck in a trading range and correlation with Brent on the upside has been weak and then to the downside...oh well. Until there's a confirmed breakout with high volumes into the 29/30p range, this is still a trader's share.

Morning R - I already said we need to ignore the volumes shown - I can't believe that's capturing everything. The option premium is a good guide for us to understand where they're priced at. Enquest has taken out 1 mmbbls collars at $55 and $75 for 2023 - costless presumably. I know of plenty of shale ones. What these companies are doing is being prudent and protecting downside risk at the potential cost of being caught out at the ceiling end. That's the price you pay being costless. And if you're getting a counter-party to take on this trade, and I'm sure there are many, then that's the sign of a deep market to me. And the oil market is a deep market.

I trade stock options on the US markets and you do get long dated options that go to Jan 2024, but yes the spreads are wider for various strikes as you move away from 2023. We'd definitely like Enquest to try to lock in more for 2023 at these levels - they were caught out badly in 2018 not doing this and in 2020 doing this at a lower point. Timing is everything and when the market is still concerned about your debt levels, best to be prudent.

Hello L3,

Yes, noted the $60 mill BP loan moving formally now coming off the cash balance as of 3/06. Higher oil/gas prices + bter hedges and of course timing of cashflows. They wont realistically allow net debt to be higher than H1. ;-) The fireworks will happen in 2022 with GE adding its production tally to overall production.

ICD is the shale drill rigs provider I mentioned previously.

Best

Can't agree more, P. Until AB sets out a roadmap for how he'll address shareholder returns, primarily dividends, I really can't see Enquest's potential being fully realised. Roadmap in March 2022 maybe? ;-)

L3 - " If I were ENQ I would delay paying suppliers and squeeze clients to get a net debt figure below the H1 level. About the bet, does that include the GE completion or not?". With completion, of course. OK, this was delayed to November, but will still close this year and with a few mill reduction based on net cash flow for October. I'm obviously not happy we didn't close in Q3 and the market showed its displeasure too!! However, Brent 80s for a few more days will be all that it takes for the market to forget.

"You mentioned you are invested in a fracking shale company. May I ask which one?". Did you mean the drilling equipment provider OR actual shale oil producing companies?