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From what I can see, it's the usual commentary from the SA writers. In summary, product inventories are at 2019 levels and approaching 2018 low levels. This will lead to bigger crude demand and once WTI breaks 67, it's on the way to 76.

Don't tell this to L3 or GKB though. Best to keep this under wraps - they won't like this unfounded optimism.

KO - Lol..only what I'd stated in my post earlier about Shale and the producer lot here in the UK - can Enquest do something out of the ordinary to shake the boat? Truth be told, I doubt much would out of it and we'll beat the mercy of Brent - that isn't a bad thing when I fully expect Brent to be in the high 70s/ low 80s in late Q3.

P - wrote an email to Ian and copied you on it (your MSN email address). We'll see how he responds. ;-)

Mod - oh no, but LTHs do vent their frustrations on an hourly basis - just in case you didn't know.

I had some Laredo as a trade - got in at $16 in December last year and sold out at 38 in early March. It went to the high 20s after I sold and now it's at 55 - what do I know. ;-) I don't particularly like their gas heavy profile and the fact that they're 80% hedged in the mid 40s on WTI. But someone knows better and good you're in that trade. CPE, CLR, VET, ICD, CPG, CDEV - these are some of my bets in shale land. ICD is a rig provider, but at under $4 with a a $40 Book value, that should come good at some point. ;-)

Hi Pelle,

Will write to Ian and it can't harm. I agree with what you write about Enquest telegraphing future intentions to the market about what to do with excess cash flow in 2022 - that can only help. The good news is the fact that there Debt is being whittled down each month with Brent at these levels. Even with the Iran deal almost certain to happen in the next couple of months and sanctions easing from later this year, there will be a solid deficit with US and Europe running full steam ahead, and Asia following suit in the coming weeks.

I just wish Enquest stop relying just on Brent to carry the flag, but look at a holistic Debt reduction + Dividend intentions + ESG BS (well we've mad a start I suppose) to bring new institutions on board.

There's a big difference between wailing every hour about Brent price and how it's not moving the SP versus pointing out the obvious facts about European oil shares' underperformance vs the US ones and what the causal factors for this underformance could be. ;-)

Krak doing what he does best every single day - cracking jokes. I'm indeed still cracking-up and I suspect, so are most of you.

@Mod - it clearly is a European Vs US SP performance story, majors included. Their second rung oil producers have vastly outperformed ours and it's not a ESG story. Their managements are much more shareholder focused than we are. They've committed to spending with operating CF and are sticking to it, for now. 3 years ago I could say Enquest has a compelling investment case versus Shale - not anymore.

And they're far more progressive in setting up shareholder initiatives like linking management compensation to share performance and handing out variable dividends based on the level of FCF.

Can we push Enquest management to do more - I guess not. And they don't seem to get it too!!! Sigh.

It's the Iran concerns at this point in time that's driving the price action and the market is already discounting this. It'll climb this wall of worry soon enough. Covid resurgence/Iran - any other roadblocks - OPEC + infighting maybe? These are the key roadblocks.

Near term - who knows where the bounce may happen, but come it will on the actual news.

GL..

Yes, Brent is in the 70s now and hopefully closes there for the first time since Covid broke out.

We should see big Gasoline draws in API and EIA this week, as people emptied Gasoline from US pumps, but that will reverse next week. I suppose it's enough to get Brent to stay in the low 70s and push up our SP..

GLA..

Mod - I do follow Laredo closely. I sold out a couple of months ago, and I still don't really like them, in spite to their recent acquisition. Too much oil hedged in the low 40s this year and doesn't quite interest me for now. SD - I dont follow really. I know they got out of Chapter 11 like OAS and a few others, and maybe they are a good pick now with net cash on the balance sheet. Don't know much. The non chapter 11 shalers like CPE and CDEV should do well in the longer term.

@Jan - point taken there. ;-) The hope is that enough free cash from higher prices goes towards debt pay-down and AB can hand out dividends in 2022, if oil sits comfortably in the 70s and higher into 2022. None of us can really predict the timing of a break-out, but I'd keep an eye out for high trading volume when Brent gets into the 70s. That's a good first sign. We wouldn't need to wait till September, IMO. I'd guess a few days/short weeks should do it.

Lol..shale has latched on to that investment sweet spot around investing within means and putting out a big focus on shareholder returns. We've always been good with living within means - certainly since 2017. It's the shareholder focus or the lack of it, that's the key problem. Mod -it's not a surprise that they get rewarded way better than us.

Lol, P - point taken about the AB effect. However, European CEOs fundamentally think different to the North American oil CEOs from a shareholder focus viewpoint. A few shalers have their Executive compensation policy tied to shareholder holders. Some like Devon have committed to handing out a % of FCF as dividends and has done so in the past 2 quarters. There's a zero chance we get close to what these guys are doing.

There certainly are reasons why they're outperforming UK oil companies, but this underperformance isn't an Enquest specific story only though. I wish the management could be more proactive and shareholder focused, but I've given up on that notion a while ago. ;-) We're a good leveraged play on Brent and maybe that's the best we can hope for. Who knows - AB may just surprise us.

Brent 70s this week anyone?

Slift - I'm not assuming anything. The RNS notes below clearly states this fact.

EnQuest plans to finance the Transaction through a combination of a new secured debt facility, ***** interim period post-tax cash flows between the economic effective date of 1 January 2021 and completion, ***** and an equity raise (collectively the 'funding arrangements').

MRC - I did type up a message that we've had this exact type of trasaction with Magnus back in 2018. But, I didn't really want to engage on this topic much longer as it was getting animated between you and Slift. ;-) L7 gave a good detailed breakdown of what the Purchase Price adjustment could look like and we may end up with a circa $100 mill adjustment on the original $325 mill purchase price, give or take a few.

On another note, Covid is tempering a bit in India with localised lockdowns in key states to be woud down from next week and apparently their homegrown vaccine works well just as well on the Indian variant as it does on the kent variant. They noted a slight decline in efficient on the Indian variant though. Given that the AstraZeneca vaccine efficacy was better than their homegrown one, it just may be that AZ vaccine works just fine on the Indian variant too.

Brent 70s soon enough.. ;-)

Col is spot on. It's not just the GE transaction that needs financing, it's also the refinancing of the remainder of the RCF + BP Vendor Loan + (maybe even the tiny outstanding Sculptor loan component). All of these will be wrapped into the new facility and it must be the lenders' condition that the new facility needs to be underpinned by a new equity raise.

Slift - I can't see how you get a $240 mill FCF from GE that accrues to this transaction. If we assume 270 days production at 10k BOPD with even net pre-tax cash flow of $55/bbl, we end up with circa $150 mill pre-tax cash flow and a post tax cash flow of $90 mill (after a 40% UK tax) - the $90 mill is what would reduced from the $325 mill transaction price on the economic date of 01/01/2021.

P - I couldn't join the AGM meeting as I was on another call. Did someone read out your questions?

Maybe you could've also put AB/JS in a bind by asking that they tie performance bonuses to Share price performance.. ;-)

It was a solid report - no suprises and decent hedging and upside till 72 is retained. Oil is going a lot higher in the coming weeks - Inflation will take off (and is taking off already ) and that isn't good for growth stocks. Value is the name of the game for the rest of 2021 and this is where we squarely sit. As Slift pointed out, 50% of the remainder 2021 production upside is capped at 72, and I'll take that. We do have agood floor protection at 63 for the remainder 6.2 mmbbls in 2021.

Could ENQ do better - 100% they can do a load better. Tying your bleeding compensation to shareholder returns would be a good trend-setter that's already being followed by progressive shalers in the US. Why not be the first here? Will they do it - I'll give it a 1% chance. Right now, Enquest is purely an undervalued and leveraged play on higher Brent prices. That isn't a bad thing, but the upside potential is so much more if AB gets around to making more market friendly noises.

I don't think we should place too much emphasis on US shale thsi year. Production won't decline hard as some prognosticators reckon, but neither will it shoot up like some on here reckon. The big shale guns are religiously parroting shareholder returns as their mantra for 2021 and will hold their horses till early Q4 at the very least, depending on what oil prices do in the meantime. OPEC+ production is the key factor that can influence oil prices more than Shale will in 2021. EOG and a couple of other large shalers have gone on record saying that they don't see themselves returning to meaningful growth until OPEC+ surplus is out of the way and that will be well into 2022.

All that's holding back oil prices from breaking out into the 70s/80s is Covid resurgence in India and once that stops being thr focus of oil markets sometime inside the next 2 to 3 weeks, an upside breakout WILL happen. All hard commodities are front-running fiscal stimulus and the massive money supply growth this year an next - Copper has just all-time highs as you'd have noted. I'm not saying oil wil go there given that supply is not constrained like it is for Copper, but a solid breakout is incoming, IMO.

Bodes well for leveraged oil players like us.

GL...

Good evening R - we do take a bit of time before the hand brake comes off, but I'm with you about the GE closing PLUS the refinancing news being an important catalyst. The shalers are 'on a tear' today and they did lead us to the upside when we got to 25p in March and I'm hoping this will bea repeat. Their Q1 results have been solid and they're still prioritising dividends/debt pay-down over production growth. I know L7 was/is sceptical on that count, and I wouldn't blame him, but they've been good lads so far in 2021. If they don't pver-produce, OPEC+ has no incentive to rush to open the taps up more than they should. Will their discipline hold - we'll know at end of their Q2 particularly when WTI woud have had a very good run in May/June.

Our FCF will be a lot better in H2 with the H1 hedges overhang dissipating and the GE acquisition closing. We may end up with a 2021 average Brent price closer to your call (72.5) than mine (76), but an upside surprise is always welcome. Looking at the EIA report, US crude exports jumped this week and that's what caused the big draw - refineries inputs were only marginally higher over last week. However, the direction is still good - if only India can get Covid under some control, Brent will be off to the races. And we'll inevitably follow.

Production steady under 11 mmbbls/day. 8 mmbbls draw. What more could we ask for? Some more trading volume perhaps...we need that to break out successfully.

Good shout, Therapist. ;-)

Moving on, this is a good reminder as to what could happen to oil when Covid eases up in India in the coming weeks.

https://twitter.com/sjcasey/status/1389692215493120002

Back in 2011, oil was 100+ - could we get there in 2021/22? Never say never as there's enormous liquidity still sloshing about and the Biden infrastructure bill, if it passes congress/senate, will be the perfect icing on the cake.