Member Info for epiphany121

A lot of discussions with L3 about RBL/Resreves/PIK/why bother refinancing flipping useless loans, etc. Mine is a simple question for L3 - how's that short position in Enquest doing? Is it doing as well as your $60 Brent average call for 2021?

It looks like they're discussing an average of under 500k bbls/day hike over the next 5 months. Quite bullish if this is the case.

https://twitter.com/TradeFloorAudio/status/1410571961030397959

R - I can also already see the alloted OO shares rights show up in my IG Spreadbet account. They haven't yet shown up in my II ISA/SIPP accounts yet.

Lets not forget that it isn't fully Enquest management's fault that the current SP doesn't reflect progress made in the past 18 to 24 months through the pandemic - as I said many times before this isn't generally a Enquest only story - most if not all European oil shares are in the same boat. Debt levels are down and so is OPEX costs - they've done what they had to go to get costs down. H2 2018 Brent prices (80 plus touched) will mean so much more for Enquest's bottom line and debt reduction, than it did back in 2018.

I'm certainly not saying that the management has been saying/doing all the right things - They could provide proper FCF guidance every half year - every other oil company does it - why not us? Lay down dividend plans to the market - communicate clearly what needs to happen first before dividends are commenced. THese should be no-brainers for any management team that care about shareholders. For me, it isn't enough if they just focus fully on the operational side.

I'm hopeful they'll turn that aspect around sson.

Chaps - you're wasting time trying to convince glass half empty mugs and shorts. ANd this is someone who was predicting 55 to 60 Brent average for 2021. Best leave them in their cocoon and stay clear.

And back in the real world, anything under a 1 milliom barrel increase today by OPEC+ will spark a further Brent rally to break out aobve recent highs. 80s are at a touching distance now.

GL and stay focused. Leave the shorts to their own misery...

P - no, there's another link called 'Presentation', right below Prospectus. Here's the direct link. Opex at $14 with GE's opex included.

https://www.enquest.com/fileadmin/content/Golden_Eagle/Golden_Eagle_acquisition_investor_roadshow_presentation.1.pdf

Here's the kicker for you/Hitman/Jan (if memory serves me right) and others that mentioned Negative equity. on our balance sheet Because of the GE acquisition, a large deferred tax asset would be recognised in H2 2021, Deloitte has signed off that a $300 mill deferred tax asset would be recognised on the balance sheet with this acquisition, based on a proforma financial statement with the assumption that the acquisition happened on 31/12/2020. This tax asset may actually be higher now with Brent being a lot higher than it was back in Dec 2020. Watch out for a big bump to the 'Shareholder Equity' in the H2 2021 report, along with a positive asset revaluation in H1 2021 results in a couple of months.

Let's not forget that Tullow refinanced their $1.8 billion debt with a secured facility at a 10.25% interest just a few weeks ago. We got ours for less than half of that rate - we know who the debt market rates better. ;-) I wonder what Level 3 would say to this blasphemous/Treasonous act by the banks? Our time will come soon - maybe sooner than when the OO closes.
I'd hazard an educated guess that our management is pushing to get the GE deal closed at the end of July. the sooner the better for us - get reserves/production/cash flows on our books from that date PLUS save tax on the net cash flows that Suncor was/would be paying till the closing date.

P - I guess it doesn't matter much that you're not allowed to subscribe to the OO - it's a minor dilution anyway. I pinged you an email.

GLA..

Thanks, Hitman for posting the 2022 hedge details -I hadn't got to that yet - but a $65 floor is nothing to be scoffed at for the 3.1 million bbls in question. Even if Brent does go to high 80s, that $10 loss can still be easily justified given what we had to go through last year.

It's 4.25% Margin above the Benchmark rate (LIBOR 3 month possibly, which is less than 0.15%) - so, yes the interest rate is a pittance. Per the terms of the RBL, 60% of annual production from the first utilised date's quarter MUST be hedged via puts/collars/swaps - that's not a bad thing to force on Enquest at these high Brent levels. Interest savings on the full $750 mill drawdown will be good at circa $30 mill or so annually.

It looks like Enquest if factoring in $203 RBL drawdown to pay for GE and $352 for the SFA (to be repaid first before closing GE). I need to check balance outstanding against Sculptor and BP Vendor Loan - both very high interest rate loans.

And the multi-million shares holder only moans on this board and volunteers others to speak with IR. Lol.

That's the life!!!

SA - the reality, IMO, is that we can't say a dividend announcement is around the corner. We don't know what dividend restricting covenants the new SFA/RCF facility will have (we're awaiting the prospectus) and we know that the HYN does have covenants that restricts dividends. I can see why the management is focused on debt reduction first with all these restrictions imposed on us, but it doesn't prevent them from laying down clearly to us and the market what their intentions are with regards to dividend payments and lay down clear metrics when they can start paying out dividends - after DEBT/EBITDA gets to level XX or Gross debt gets down level YY.

There are reasons why the SP isn't responding as linearly to Brent as we'd expect and without laying down this guidance to the market, we may only be grinding uowards at a much lower beta to oil price. Enough has been written by Modestus about how well Shale has done and there are clear reasons for that and they've communicated this to the market in multiple ways such as a few below.

1. Focused on reducing debt than spending outside free cash and growing
2. Ramping up dividends alongside debt reduction
3. Weaved in shareholder return metriccs into their exec compensation plans

Obviously, they did fall a lot during the downturn last year and the bounce back has been that much dramatic at 10 to 30 times returns in the last 15 months for companies of ENQ's size is nothing to be scoffed at.

Lets hope that our management do their bit and lay down plans to the market clearly - we can yet hope.

GL...

Unfortunately the same debt covenant restrictions apply to buybacks as they do for dividends...

I doubt it. This hedging advice is likely related to the new debt facility and how it can be strcutured in the contract. I can't imagine a law firm managing a O&G firm's oil hedging strategy. That's best left with an internal team working with counterparty investment banks/large oil trading houses OR if anything directly outsourced to an IB/trading house - not sure how that would work contractually.

Relax, chaps. A few points swing here and there is of no consequence to the near term trend in Q3. Brent's going to 80 in the coming weeks - that's when Enquest should serioudly layering floor hedges for 2022. We just have to hope that there's now a competent hedger in their ranks!!!

Thanks both.

The detailed covenants are on pages 37 through 40 of the HYB Prospectus (link below). Dividend distributions are not prohibited, but are restricted. Mrc has pointed that the PIK amount on the HYN needs to be redeemed in any event before any consideration.

https://www.enquest.com/fileadmin/content/Corporate_actionsPDFs/High_Yield_Bond/HYBProspectus20161125.pdf

Clause 14 on page 40 needs to be understood better. In any case, the all dividends covenants go away if the HYB is rated as an Investment Grade bond - anyone fancy taking the Moody's analyst out for lunch?

PTUECK - why would HY bond date extension be tied to an inability to pay dividends? There certainly is a condition in the secured RCF covenants that restricts dividends being paid unless specific conditions are met and lenders give an OK. I haven't seen any such condition either in the HYN prospectus nor in the automatic HYN maturity extension RNS.

Please do post a link to such a detail if you've seen it - we'll be glad to take note if there is indeed such a restriction. I don't believe there is such a restriction, but glad to be corrected.

Nah, I'm marvelling over your thought process when it comes to making investments! It leads me to the inescapable conslusion that thinking and analysing is over-rated when investing!!

Doh, I wonder what that forced quarantine in government mandated hotels for red list countries is all about? Covid hides for 14 days and pops out as soon as they're out of quarantine and starts spreading - nice!!!

Let's ban incoming travel to the UK from all red-list countries and watch jet fuel demand shoot through the roof and take Brent with it. That's a mighty fine investment thesis for buying oil shares

Doh KO!!! The time to close the borders to India/put them in the red list was a long time ago when there was no community spread here and good old BJ was dragging his feet over putting it in the red list. What practical benefit would 'closing the boarders to India' - whatever that means, give us at this point in time?

Brent will be back on an upswing soon enough when the current pittance of profit-taking is exhausted and stocks regain their footing from the current taper tantrum.

They'll probably exit at 11.5 to 11.7 MMbbls/day at the end of 2021. And maybe around the 12 mmbbls/day at the end of 2022. 2022 is harder to predict because if oil does get to higher levels from here, then there will be a call for shale to produce more and with the amount FCF they're generating now, drill they will. Will that lead to another oil war with OPEC+ - twe just don't know.

It's all speculation at this time - let's wait and see how the rest of the year plays out for US production. And we need hard 914 production numbers - not the weekly estimates that bounce around wildly.