Member Info for epiphany121

Mod - I wouldn't say most of the shale plays have strong balance sheets, but many of them are up a good 5 to 10X off the lows. As an example, QEP has similar debt levels as us, hit 24 cents in March last year and is now over $3 - even without FANG buying them, they'd have done well. I partly put it down to the fact that they were hedged way better than Enq ever was in 2020 and that was a massive missed opportunity. CNE did that well, so did even PMO. Most shalers did it well too - that's an area where they're very nimble and on the ball, year after year. Couple that with the opacity of our debt mix, you can see why the market hasn't treated Enquest on par with other oilers. Hopefully the new RBL facility will simplify our debt structure and provide more transparency to the analysts. Like many on here have said, I also believe Enquest SP will align with a rising Brent soon enough - that's the biggest thing going for us at this time. I also believe that the GE deal had to be done and Enquest has actually paid $75 mill less - $325 mill versus the $400 mill being pushed for by Suncor. A much higher Brent has made the NPV a lot higher and far more easy for banks to agree to the new RBL. I like that they've done collars for 4 mill bbls in 2021 and the ceiling isn't too bad in the Brent low 60s. We should want them to do this more when Brent is in the high 60s.

There's no doubt we've underperformed peers + oil companies in general since the March lows, and the reasons for this can be debated endlessly, but a rising tide does lift all boats. Brent 60s and 70s (very soon) will mean lower dilution in the OO. I look forward to more transparency in our debt structure - every little helps in changing the market's perception of Enquest.

Mod - did you say you were in Canadian oilers? I had some ERF previously and I've come across VET recently and considering that.

Hello L3 - I replied about the Equity raise topic on another reply. We're firmly tied at the hip to Brent pricing and that'll be a key driver for the SP. I see a Brent 80s spike in the summer and that'll be the time to hedge for the next 2 years. I'd think that the refinance would only happen early Q2 and that gives enquest to show the market as to how the debt reduction is progressing till then. I didn't expect a further diution and that's a negative for me, but they're doing their best on the debt reduction side. We'll see how this shakes out.

I'm sure that the existing equityholders WILL be included and this will be an RI. With higher oil prices assumptions, they may be able to refinance debt at a lower cost now, but that remains to be seen. It's broadly a positive release with the equity dilution being a further headwind. We're float or sink with Brent at the moment and I just hope that the market can see the positives.

They haven't done sh**te amounts of hedging, which is good and most of the hedge is Kraken related and with a collar - even better. It's a slow grind, but we'll need to see the final details of the refinancing.

I'm not 100% sure how the market will read this Acquisition + Rights. The RCF facility due in October 2021 will be re-financed alongside with raising the new debt for this acquisition which removes the short term headwinds of net being able to pay back or refinance this upcoming debt. Opex costs are now at this low field which is a plus. It's now all down to how Brent goes from here.

GLA

Hey Mod - I haven't posted in a while. It's a general echo chamber of daily complaints about a few % points up and down, and I thought I'd stay out of it. But, I couldn't resist after the best bullish signal for oil in 4 years was confirmed yesterday. ;-)

I still have some shale holdings and they've bounced 5 to 10 times off the lows in March last year (not that I bought them at the very lows ;-). CDEV/QEP/GTE/REI/CLR are some holdings now. THey've been careful with spend in the past 3 quarters and that reinforces one of Goldman's pillars for higher oil prices incoming quarters. For everyone's sake, holders here included, I can only hope they keep up with this. Shale won't go away, and that's a given. It's whether they can constrained by regulations and debt/shareholders pushing for restraint - that's the big question. I think they will be and that's good for us.

Do you hold any shalers?

Hi Jan, Romaron, P

I hope you're all well. After a horrible 2020, with Covid running riot in my extended family (myself included, but thankfully no fatalities) and mates, I for one look forward to a positive 2021. And like I was saying back in late 2019, a democratic govt in the US is indeed the panacea for low oil prices and the part of the puzzle is in place. Enq management's capability in terms of operational delivery has been fantastic in the past 2 years - they proactively cut higher cost production along with optimising Kraken production , all great news. And the final piece in solving our debt conundrum - higher Brent prices, is now firmly in place. 2021 and 2022 will be great for oil prices. It may not happen right away and Brent could get choppy in the near term, but looking out further towards the middle/end of Q2, Brent will roar. I'm not too worried about Covid much after Q1 this year. Vaccines combined with the high level of already infected, and we will be getting close to Herd Immunity soon enough. The biggest Covid wave (ongoing) will be behind us and animal spirits will be unleashed soon after. We've seen this happen in the 1900s after the last great pandemic. Roaring 20s again...

P - no panic hedging and NO hedging at higher Brent levels - if these are avoided, then the SP will be in great shape a few months from now.

GLA..

I thought I'd chime in after ages. The Dems coming to power under Biden is the single positive factor for oil price in years. Thankfully the orange baby orangutan has been kicked out of the White House and that's a massive relief for international political/economic order. The id*ot was so short-sighted that he didn't realise that by promoting unrestricted drilling through next to no regulations,che was setting up Shale on an unsustainable path of no FCF = long-term destruction of shareholder value. But then that delusion is emblematic of the MAGA populism that was bound to burn and crash. Numpty single-handedly gave the 2 Georgia senate seats to the Dems - good for us oil bulls,

What's to come now from the Biden admin.
1. Massive amounts of fiscal stimulus - Covid relief + Infrastructure = runway hard asset prices in 2020 with oil and base metals to be biggest benefactors. Brent 70s/80s this summer is a given, with a good outside chance of Brent hitting higher levels.
2. EPA restrictions on flaring + possible federal land fracking restrictions - either one is positive on it's own in curbing runaway production. Most of the Permian 'sweetspots' in NM are on federal land.

IMO, with Covid in the rear-view mirror by late spring, I expect a hard Brent rally going into the US driving season. Patience is the key in the coming months and we'll do just fine with the RCF repayment in 2021, and then more.

GLA - keep the faith. Jan - you may get your 60p party by 2022 once the market gets wind of Enquest FCF generating ability at the incoming much higher Brent levels. The Dems may just have ensured that for all of us. My one caveat is that I'd like to see Enq get smart with hedging - they haven't got this right since 2016, whilst the vast majority of our competition has got that right. If they can solve that riddle then we'll be all the more better for it.

Stay safe and patient. A bullish late spring/summer beckons.

Hi Romaron - your point about Shale and Tar sands patch being knocked out first with oil prices being lower for longer, is valid. I don't think that shale will get large investments next year, particularly if Joe Biden is elected in November and that bodes well in 2021 for oil prices. Enquest's report today was solid - both from an operational execution viewpoint as well as debt reduction. Even with the hedging for H2 that isnt optimal, there'd be more net debt recution via lowered capex + the 2 Petronas receipts. I won't linger on the sub-optimal hedging for too long - the world was a different place back in March/April and this move sought to protect larger downsides. COuld they have hedged less - Hindsight is 20/20 and Brent could've gone lower too.

As someone said earlier on this board, it's all down to macro now. Enquest is executing well - we just need demand to come back and confidence from a vaccine being ready will be the trigger to better demand outlook and Brent 50s in Q4. These price levels are just not enough for US shale and we should see another production drop in 2021. Inventories are being worked through in the US, and OECD should follow. Rig counts and frac spreads are yo-yo'ing in a range where they'll just about arrest 2021 declines for a few low cost shale producers; the marginal production is just not viable.

There's no point in commenting on day to day moves in oil and SP - I'll sit back and wait for 2021. No doubt, Covid has set us back a lot, but not to the point of being unviable. TLW/PMO will be long gone before we are.

Stay safe and GLA..

Chilting - my base case is that we'll have a vaccine in 2020 - Astrazeneca/Oxford are in a sweet spot there, followed by the much hyped Moderna. Pfizer isn't too far behind with their vaccine projected to be ready in early 2021. I hear what you're saying though, but my bullish thesis rests on a vaccine, which is nearly there..

Hitman - if Biden is elected president in November, I can see Brent doing a whole lot better in 2021. If he wins, it's pretty much a given that the Dems will also win the senate and we just need to keep in mind all the new fiscal stimulus (Infrastrcuture + the $700 bill 'Buy American' that was announced last week) that'll also kick and oh, not to forget the oil sector regulations that'll kick in. Production will be constrained just as demand goes up, and oil will average in the 60s next year, IMO. The price risk is squarely to the upside in 2021.

Enquest will do well next year with FCF, just as long as they don't do any panic hedging for 2021.

The Americans need to get a handle on the Virus spread quickly. The re-opening has been highly politicised and we're now seeing what bad outcomes look like - localised shut-downs that don't inspire confidence in the economy bouncing back quickly. Personally, I can't wait for November to come around quickly enough. I have no doubt that 2021 will be a great year for growth and oil in particular. US oil shares have been rolling over in the past couple of weeks - we've held up better in the grand scheme of things.

https://www.enverus.com/dailyrigcount/#:~:text=About%20the%20Enverus%20Rig%20Count,to%20make%20time%2Dsensitive%20decisions.

The daily rig count link above shows a small increase in rigs in the past week - BHI this evening should show a small increase as well.

At these levels - we'll still be generating decent FCF and can wait out a few more months of uncertainty.

The market drop this morning is due to the $3.1 billionTariffs threat on the EU by Numpty's STR..

In my first line in my last post, I mean to write "Lockdowns by themselves will NOT work". These are just not a long-term solution.

Morning Tom and Chilts - In hindsight and knowing what we know now, lockdowns by themselves will work. The infection spread will just be held down and as soon as that population is back to their normal activities, then the spread continues, as we're finding out in the Southern US states. I do agree that there shouldn't be another lockdown as human/health cost from large scale unemployment is huge. An element of social distancing combined with larger scale use of masks is probably the best way to keep Covid spread under wraps, until a vaccine is found. Our scientific knowledge WRT Covid is still evolving, but all the latest pointers are that using masks in indoor settings and crowded public areas does hold down spread, and if the choice is between wearing masks at the cost of someone's liberty VS holding the spread to othere who're vulnerable, then the choice should be easy, IMO anyway.

To the point about the US protestors, there were a couple of mitigating factors - 1. these protests were mostly done outdoors and 2. the majority of the protestors had the common sense to wear masks. Scott Gottlieb, a former FDA commissioner and a daily CNBC contributor, has long been espousing large scale use of masks in non-outdoors settings. And for good measure, he's a Republican too. His big concern now is that the Republican states where the spread is now accelerating and is quite concerning for the US (and world) markets, have no consensus around using masks and are leaving it to local businesses to implement their own policies. Talk about abdication of their basic duties.

California has woken up and is mandating masks in public settings where social distancing isn't possible. This is a realistic solution at this time when a vaccine isn't available and the elderly are still at risk. If only the Republican states recognise this soon enough and stop impeding the economic recovery progress, oil and stock prices will be on a much better trajectory with all the Fiscal and Monetary liquidity sloshing about..

https://www.marketwatch.com/story/after-seeing-the-highest-daily-spike-in-coronavirus-cases-california-made-face-masks-mandatory-heres-why-other-states-may-want-to-follow-its-lead-2020-06-19

The Frac Spread count came out a few minutes ago and they were up at 78 from 69 last week. The DUCs are being worked over to completion a bit more, and these frac spreads have gone up from a low of 45 on 22/05 to the current count. This is in the face of still declining rigs and that doesn't obviously bode well for next year's shale production. What little capex the stronger shale companies are spending in Q2, a fair bit is going to completing these DUCs whilst not meaningfully reducing reduction of production from existing shale wells. Primary Vision reckons that net declines are still in the 15% levels at current frac spread levels.

UK oil companies fared well today relative to the shale/US E&Ps. which were off a anywhere from 5 to10%, which is a nice outperformance by the NS producers.

I'd put the increased rates down to the idiocy of the republican states in the US that have opened up with gusto, without enforcing basic virus transmission prevention norms like using masks in an indoors context. The reason why the current spike in cases in these states with low hospitalisation rates is down to mostly younger people getting infected in bars and restaurants in enclosed settings, and this population is certainly in the low-risk category. The danger here is that these infected people then go on and infect the vulnerable in their families or their broader social circle even if they're not aware that they're infected. The mask is now a symbol of political divide in the US when that should be a no brainer, IMO. Republicans hate masks and Dems are the opposite, and that is now a false choice among Trump's clone army. If only they put aside their political leanings aside for a minute, pay heed to the latest science around masks (I know this is evolving still, but this is probably as close to consensus as we can get as this time) and prevent spread of Covid, so that the US economy and the market can start functioning in earnest. The Tory government have done a fantastic job is holding down the infection and death rates, and their caution in not fully opening up the economy quickly before the infection rates are 'controlled' is commendable. If only the right in the US had half the foresight of our government, then the re-opening would run a lot smoother.

Zero hedge is pretty right-leaning and LIbertarian as it gets, but even they agree with the stats around these spikes (link below) and why these false political choices are a causal factor. California has now mandated masks everywhere (pretty much) and hopefully the cases will start tapering off there. I have no doubt the republican states won't and the misery will drag on for longer.

https://www.zerohedge.com/geopolitical/china-blames-beijing-outbreak-european-strain-global-covid-19-cases-top-85-million

Evening L7 - you haven't missed anything in my view. He's extrapolating a 'potential' drop-off in the shale patch (this is by no means a given for me) to the wider US production, and that's nuts to me. I don't believe the oil market is basing it's pricing on this type of deduction, TBH. GOM declines will be nowhere close to the 30% decline over the whole of 2020.

I know that Art is a lot more left leaning than the average oilman in the US is and his wishing for a large scale oil production decline to put Numpty in a hole is a key driver, but I don't buy that theory, however much I dislike the orange buffoon .

:-) Indeed I am, and so should all of us. OIl rigs off 10 and gas down 3. Permian's down 5, Eagle ford off 2 and Williston off 1. WTI/Brent's been stable since the minor sell-off after the Apple store closures news in the new virus hotspots in the US - Florida, Arizona, North and South Carolina. Texas has been sh**te as well. However, the fact that oild ended up more than 2% in spite of this news is a testament to how strong oil is. We just need to wait this out a few months, KO's impatience not withstanding and that's pretty predictable anyway. ;-)

Chilting may not have have the faith in Brent prices, but I do. ;-) So should all of us. Stay patient and stay safe all...

On balance, Berman knows his stuff and provides useful facts. But his analysis is a bit warped and does take on a very negative view of oil prices based on his perceived economic growth trajectory worldwide. I seriously doubt that US production will drop off a cliff, read 5mmbbls/day by this time next year just because shale isn't investing right now. There's plenty of DUC inventory that the frac spreads can start working over should WTI go into the mid 40s and stay there for a while. Frac spreads have already moved up to 69 from just under 50 about 3-4 weeks ago - not a big move, but that's telling to when shale thinks they can start working over their UC wells inventory. Rigs may not come back in anger this year, but they don't even need to because of the DUCs. I'd only take some of his predictions with a handful of salt.

Cheers, Mod. US and other economies around the world have made a choice that lockdowns are only as effective as long as they last, and once they're lifted economic activity does slowly come back closer to normal, and have gone down that route. Granted when the lockdown restrictions are lifted without mandating masks, the virus isn't easy to contain as we're finding out in the US states like Florida, Arizona and Texas, and that adds uncertainty to the economic outlook, but the world has decided to move forward anyway.

I'm still of the opinion that gasoline demand will be quite strong in the US in the coming weeks and that'll keep Brent/WTI buoyant, even with some shale production coming back in June. Yesterday weekly report had US estimates production at 10.5 mmbbls/day and that's a good drop from the circa 13 mmbbls/day at the end of March. Oil will rally into Q3/Q4, even though the world won't be operating at more than 90% strength this year. The production cuts will more than compensate for this loss in demand + not to forget all the fed liquidity.

Good times ahead..