Member Info for epiphany121

WEny,

If I look at your question not from a SP viewpoint, but how ENQ would operationally perform, then consider the following.

1. A dollar 'collapse', unlikely in my view in the near term, will have to be driven by a strengthening global economy and not a weakening one. THis will lead to a much higher oil price and will boost ENQ's dollar based revenues

2. On the flip side, most of ENQ's operational costs and debt is in GBP, and they will increase in dollar terms - however, that's vastly compensated by much higher revenues.

Net net - a weaker dollar is great for oil and ENQ's profits and for lowering debt. Itsa has given a good view on his SP forecast and I won't throw one in there..

The answer depends on what you mean by profit. If it's paper profit on the P&L, sure they'll show profits at these levels. However, do they generate operating cash flow to pay down debt - NO, is the answer across the small/medium E&Ps as a whole. We've grappled with this question long enough - many of them are hedged with WTI in the low to mid 60s for 2019 and so, they're still producing. However, at these price levels they can't hedge in the future and can't make such large capex spends anymore. The treadmill needs more investments just to keep up production and that's already being impacted in the rigs count dropping. It'll take a few months for it to show through in production data, but production rates should be peaking in the next few months for this cycle.

Shiite..there must be a big crude build coming up today. PMO is off 5% and we're about treading even..The US idiots don't know what's good for them - I still can't believe the Brent-WTI differentials are just about $8

Arrival at Orkney is indicated at 16:00 on the 13th and that would indicate a morning hook-up tomorrow and in reality a 14th morning hook-up with Atalandi in Orkney. It's been the best performing stretch at AK without question - if only Brent can keep up.

Careful now, KO. We've seen what happened when SA did that in 2014 - Brent at 35 wasn't expected, was it? Shale will slow down towards the back end of Q3 and it's not in the realms of fantasy that we may even see a decline in US production in 2020 from 2019 levels, particularly if WTI hangs around these levels and Capex keeps getting cut.

Spot on I'd say, Ponzi. There's not much that OPEC can do at this time - they're not controlling Brent/WTI prices and the
US shalers are about the key players at this time. I'm reading that Cushing had builds from today's private tracking data and that's not good at all.

Tom - The DUCs and Capex, and their tie-in to production also need to be taken in the context of higher oil prices last year and a decent amount of hedging that was last year by US producers for 2019. That has all but disappeared now with WTI in the low 50s, but producers were making capex decisions based on what they could get for 2019 on their hedged prices, I'd suggest.

Beerbull pointed to cashflow at any cost being the driver for production - that I don't believe is the case at this point in time. As you've pointed out, Wall Street is now asking E&Ps to show them the money and that they can actually live within their means. Q1 2019 has still seen overall negative cashflows from operations and that means debt can't be paid down. We're in no good shape now in Q2 compared to Q1, and that tells us that there'll be bankruptcies in the shale patch and production growth should stagnate. However, the US is now producing huge amount of oil/condensates and this is the main reason why the EIA inventories aren't coming down and are still increasing.

Capex is still needed to bring these DUCs to production and we know that cash flow break evens vary depending on where these wells are located, even with the Permian ( for example - Delaware being lower than Midland as a simple rule of thumb), and to your point, at current prices, it doesn't make too much economic sense to bring them to production and they may stay plugged for the foreseeable future.

Nice spot, Chilts. Cheers..AK is chugging along nicely

Morning MO,

It was work related - a couple of days in Prague, then back home for a meeting in Sheffield and then a work golf charity event yesterday near Nottingham. It was hectic.

Tom has articulated key points (Cheers, Tom for taking the time) regarding DUCs. It is a well knows fact that all areas of the Permian don't have low cost wells - Midland basin being higher than Delaware, and both areas have high Nat Gas being produced too. The current price levels with WTL about 5 bucks lower than WTI in Houston is making matters worse. Putting aside the Equity raise freeze for Shale drillers, refinancing debt is also a massive issue for them. This is why rig cuts are being made and we'll start seeing real slowdowns/falls in late Q3/early Q4.
Please check this article regarding WTL being not in demand much and unless you're a new refinery, you need to mix these with the heavies to get to a 'refinable' mix.

https://www.reuters.com/article/us-usa-oil-permian/as-permian-oil-production-turns-lighter-price-outlook-darkens-idUSKCN1T71B7

Yes, the Mexico issue resolution is indeed good news and we should see a Brent move up on Monday as that indicates that the US will not really push the China trade war issue too hard. If anything, the weak US Payroll number yesterday would've convinced numbskull that a face-saving 'resolution' of the tariffs with Mexico will be required, given how damaging that would've been for US companies/consumers.

If the Shale idiots are finally convinced that their production growth at all costs isn't good for their companies and their stock prices, then this declining rig count trend will continue in the coming weeks. This recent WTI fall has been yet another rude awakening for them.

Good luck for next week..

Hey MO,

Back after 3 days of hectic travel. The BHI internals are better yet. Oil rigs are down 11 this week . Permian's off 6 and down 34 over this time last year. The lag time between rigs dropping/increasing and production following suit is typically about 9 months or so. Given that rigs started to drop in November last year, and real reductions many not happen till August.

I won't be surprised if actual production is currently around or above the 13 mmbbls/day figure, given there is still an adjustment factor of circa 800kbopd in the EIA report. This is a big reason why there is so much oil sloshing around in the US at this time - IMO.

Simple.They're producing more than they can refine + export. Classic definition of an idiot, but with a Numpty at the helm, you can't blame them, can you?

I'm not trading my holdings, KO. The odds are currently stacked against Brent at this point, but there's no saying what the idiot does and what that could do to Brent and consequently, ENQ. I'm sitting tight!!!

Brent will flounder until there's clarity on the trade wars and also where US demand and production. Right now, there are way too many bearish factors pounding Brent and there's nothing that OPEC+ or IMO rules can do about it.

I too think that Numpty will eventually come around to an amicable resolution, but I'd think that won't happen soon enough to Brent to avoid the mid to high 50s leg down!!!

320K Purchase...

I'm not sure I follow you, Jan. I'm not assigning fault to one party and ignoring the other. I'm only talking about how the rhetoric by the neocons has gotten more belligerent and is trending on a conflict path, rather than a peaceful one. If there's anything the Americans should've learnt by now is to avoid getting dragged into a Middle-east quagmire with no good outcomes to both themselves and the wider world. I know the trigger happy Republicans could care less, but that's where I was going with my comment.

I'm under no illusion that the Iranians powers that be are all only looking out for the Iranian common man. But then the answer isn't regime change via a armed conflict!!! That is my point.

Chilting - that's the war mongering US Neocons for you. You put Bolton in charge and belligerence/conflict is all you get!!! That's where this conflict is trending - it may be good for Brent, but not for a peaceful outcome.

Off to Orkney for a hookup with Hydra.

We just need Brent to play ball now. Here's hoping...

Hey MO,

I'm too on the bubbly this evening. Its good to let the alcohol drown out the Brent sorrow.

Its shiite what the Yanks are doing to the global oil stockpiles and their own inventories in particular. How the idiots think that won't impact oil price is beyond me.

And i can't believe that the differentials with Brent have come in over the past 2 days..

Ok, back on to more bubbly now...

Good weekend all..

Yep... Permian is up 1 as well. The buggers get what they deserve, I suppose in terms of a tanking WTI..

Brent off 3 and WTI is off 2.5. If anything, it should be the other way around. I have to say - suffer you Yanks..

Cheers, Londoner7..