Member Info for epiphany121

KO - try google translate - that's not too difficult. ;-)

I agree, Squif. The rise in SP may not come as quickly as most of us like, and I'm resigned to that fact. JS pointed out on the call that circa $150 mill capex is what they would need to maintain production levels - they may go with a $200 mill budget next year, depending on how Brent tracks before the results announcement. 2P Reserves could be upped through this additional drilling at the usual suspects - Kraken/Magnus/Seligi. Magnus additional drilling costs are now guided at circa $15 mill, and that's lower than what was factored in at the rights issue time. Ditto for Seligi. They could drill 7 add-on wells for a $100 mill budget.

I don't believe AB is going anywhere though. ;-) Like I said in my last post, I do take your and Pelle's point that comms to sell-side /market needs to be sharper. I do get L7's point about ageing fields and risks of breakdown compelling a conservative stance on guidance, but that may hold us back some though. I don't believe the cashflow and vendor loan structure are overly complex - these are flipping 'analysts' and we'd expect them to model such cash flows without too much ado - but, evidently not.

P and Squif - I listened to the CMD call yesterday and I'm sure that multiple salient points have been put out on this board by fellow shareholders. However, if you listened to the last question on the call from the chap from Aberdeen Asset Mgmt, JS and AB did sound exasperated, and not without reason. The question was how do we plan to tackle near term debt maturities. They correctly pointed out that there's only a $120 mill amortisation due next year (i'm sure they'd have paid some more of that in the last 2 months of this year, given their guidance on net debt below $1.5 bill by 31/12), and that bonds can be extended some more - essentially pointing to the fact that they're barking up the wrong tree.

However, the market is still concerned about this. I take your points about 'better communication' - there's definitely room for improvement in that area - IR and AB need to up their game. But importantly, given risks in the global economy, we need solid, focused execution, and that's what AB and the team are providing. The SP may not move in the short order as you may want, but given a trade deal (boosting Brent) and the resultant higher cash flow, will strengthen the balance sheet. That to me is more important and sets the scene for more returns to shareholders via buybacks/divs - a 2021 story to me. In the meantime, ENQ will move with Brent - as simple as that for me.

I'd go with Pelle's link. That has a more immediate and discernable relation to spot oil prices...

P - the reality is we would need a higher price. The market isn't still fully convinced that debt can be easily tackled with Brent at these levels. I get circa $475mm 'FCF' with your forecast figures, but what's $100mm between friends, eh?

Market doesn't give a damn about net profit - the only real end metric that it focuses on is DEBT. You could show a s**t load of net profit on your P&L, but have a f**k all debt reduction - just talk to the US shalers and why their SPs have been decimated 80-90% in the past year, and you'll have your answer.

A solid report and it won't really wow the market, IMO. Debt reduction is steady and trending towards what I said it would a couple of weeks ago - on par or maybe a bit better than H1. I'd called between $1450 and $1500 mill at the end of the year and that's where we should land with better cash inflows in the next couple of months from Kraken sales from the past few loads. They're paying down RCF like I hoped they would and I'd wager it would get below the $500 mill balance by the end of the year, giving Enquest the flexibility to look at distributions should Brent move up 10 bucks from these levels. The reality is that any 'rerate' will only come about through higher/faster debt reduction and for that Brent needs to be higher (high 60s/low 70s) than these levels. The other good news is that net debt reduction in the last 4 months was actually driven by gross debt reduction and was't purely a cash flow timing metric. And that's in spite of a shi**y Brent price in these past few months.

Hopefully, Enquest bounces today, but in the medium/longer term, we're inextricably tied to Brent.

GLA...

Hello Hitman,

The OZ loan doesn't have covenants associated and can't restrict distributions. It's the RCF that restricts distributions when, alongside other conditions, the RCF balance is greater than $500 mill. The balance as of October 1st would've been $580 mill and it would be nice to read tomorrow that they've paid some more RCF debt in advance in the past couple of months.

IMO, unless Brent moves upwards of $65, Enquest will not substantially move up. This isn't Enquest specific, but will apply to every listed UK oiler. I do hope for good news tomorrow - GLA..

Hello P - yes, you're right. At this time, we won't be that far away from the threshold though!!!

It'll be fantastic if they give an early 2020 production guidance with at least the proviso that it will be refined early in 2020 after capex decisions are finalised. I'm not sure if any of the UK oilers do give out such an early guidance, but some American oilers do and it can only show the market that Enquest is turning things around and being more market friendly. Fingers crossed.

Until there's a trade deal in tariffs removal in place, Brent will be range bound, I'm afraid. What happens next on the trade front will determine whether Brent goes up 10 or down 10 from these levels. Here's hoping for the best outcome (obviously).

Cheers, YoY. Orkney Harbour site confirms that NO is coming in from Kraken on the 20th - that points to NO going to Kraken from Willhemshaven hopefully later today/earlier tomorrow and getting there for Monday/Tuesday. Monday 4 PM arrival is 11 days from time of last arrival (not departure) and Kraken's obviously running at circa 45kbopd - that's great news.

Keeping my fingers crossed for Thursday's update and trade deal news. GLA..

60p, the majority of Dallas Fed respondents in October indicated that Q1 next year is when rig count will bottom out. Whilst we may get the odd week or two of increases, the trend is still down. All the Q3 commentary from Shalers is saying the same thing. Off 10 today and that's brilliant. Once a trade deal is announced, Brent will be back firmly above 65.

Yet another bullish piece of news. Oil rigs down 10 to 674 and down 214 from last year. Permian is off 4 and Williston is off 1. Can't ask for more, can we?

Good weekend all. Thursday next week beckons and should give us a lot more clarity..Brent should move is along now.

Nope - trade war, trade war, trade war!!! That trumps whatever SA may get to with tinkering supply

P - noted your email about PM8/Seligi Malaysia oil premiun. I was factoring in a circa $4-$5 premium over Brent, but not a $10 premium. I did note that it's the 73 API grade and very low Sulphur (Very light and sweet), but I can't find $10 premium pricing anywhere. Is there a site where Terengganu condensate price is quoted?

Lots of trade optimism today crushing the downbeat IEA report for 2020, which still calls for a more than millbbls/day increase from US crude. Rigs in under 2 hours to end today on a high!!!

GKB - "I don't know whether you picked up on this but I found slide 24 very interesting because it shows a declining rig count doesn't correlate that closely with production, look at 2015 and 2019 in particular".

My take on this is when you look at 2015, then was no real shale activity in the Permian. Most of the activity was in Eagle Ford (More oil than gas), Haynesville (gas) and Barnett (gas). Most of the Permian activity was in conventional wells and at that time, Permian shale was just about to get started. As rigs are removed, the production doesn't fall off a cliff right away. Its when the well get into year 2, that the decline curve really steepens, and this is when more rigs are needed to drill wells to keep production levels from previous years stable and maybe growing (more wells than the previous year wells need to be drilled). Given that the rigs counts only started dropping in January this year, the one-year cycle doesn't start until 2020, IMO. Based on the above, I'm not surprised about 2015 production rates only flattening a bit, and I'm certainly not surprised that the 2019 production rate isn't falling or even flattening yet, but that should be noticed in 2020.

BB - I have no doubt that some Tier 1 areas in the Permian and other Shale basins have a lower break-even than even $40. The Dallas fed link that GKB posted makes very interesting reading. In Q3, many more shalers generated FCF after capex with WTI averaging $56 or so in Q3. The other interesting piece of news from them is that they're reducing drilling costs quickly - both from squeezing suppliers and driving other drilling efficiencies. Maybe that's why they can do more with lower capex in 2020.

I'm not in the sceptical camp when it comes to shale. You disregard them at your risk is the reality. And it shows up on days like today when you read that US production hit a new high.

The 4-week average I pulled together is reported every week in the weekly EIA report, and it's based on their reported weekly production number for the prior 4 weeks from the current week's reported date.

EIA does say that historically their model's variance to monthly actuals is under 2% . We'll see what the actuals come out for August.

HMHn,

Point taken that the weekly model could well be overstating numbers because of the adjustments figure that they use on a weekly basis and the 914 report is what should be the 'gospel'. However, i've pasted numbers showing the difference between the 914 report and the 4-weekly average at end of month (from the weekly report), and for the past 5 months, the average overstatement has been circa 110 kbopd and that isn't a huge overstatement.

We'll see where we land in the August 914, but the lower rigs effect on reducing /dampening production is not likely to be seen till next year at least.

Monthly 914 EIA 4-week average Overstatement
Apr-19 12,123 12,200 77
May-19 12,113 12,250 137
Jun-19 12,060 12200 140
Jul-19 11,766 11950 184
Aug-19 12,365 12375 10