Member Info for epiphany121

KO - I've given up on predicting SP targets. It's as useful as the targets set by Barclays/RBC Whatever number/valuation we can assign on ENQ based on say P/E, is just an arbitrary number as the market is still valuing ENQ as an uber risky company. This will be a wait and see year for ENQ, IMO, and we need to see how they now execute with Kraken and coupled with better Brent prices, how much debt they can reduce. Until net debt falls another $300 to $ 500 million, I can still see the market not valuing ENQ properly.

I'm usually not a betting man, but given the head-winds we have through the market failing to grasp ENQ's asset strength and execution issues with Kraken, I feel that it'll be 2020 before we get to the 60p target and the party..;-)

A couple of things could change that assessment though - Brent prices climbing into the 80s and Kraken getting close to a 35 to 40 kbopd average. This will result in debt falling rapidly and will increase the market's confidence in ENQ.

Lol, Pelle..I'm a numbers person working in a completely unrelated field to O&G and also not even remotely connected to the world of finance/investment banking.. ;-)

It was in the H1 2018 call in September, not the 2017 results, as the contract was re-negotiated prior to final acceptance in September.

You can read the transcript of the call, with the aforementioned details, here.

https://seekingalpha.com/article/4205046-enquest-plc-enquf-ceo-amjad-bseisu-q2-2018-results-earnings-call-transcript?part=single

This topic was discussed in the H1 2018 results call back in December. Here's what Bob Davenport said on the call.

" With regards to the day rates, I'm not going to comment on specific commercial arrangements, but we have an arrangement in place to set targets on a monthly basis. And there's a sliding scale impact based on our achievement of those targets."

The actual commercials aren't disclosed, but there will be an adjustment to day rates based on production levels achieved.

Chilts/MO - Spot anything yet? MO's favourite Amundsen Is headed to Skagen from another Danish port further south. Could that be a possibility?

That's not how it works on this board, Profitaker. I have no doubt you'll be amazed to find out. ;-)

There was that exact trade 15 minutes ago - I can believe KO on that count..

DD,

Only the RCF debt is subject to covenant testing; the USD/GBP bonds as well as the OZ debt is not. Again, it's not necessary that this large EBITDA translates to cash flow, but some of that could be a timing issue. We'll know more with the actual results/Annual Report.

Pelle - to your point about AB quoting $750 to $800 mill in the interview. Yes, that makes sense if RCF had reduced more than the $785 mill figure in the December update.

Best

I haven't heard anyone comment on this point from the update today.

Credit facility net debt/EBITDA ratio expected to be around 0.9x compared to future covenant threshold of 1.5

AFAIK, RCF debt was $785 million as of 31/12 (It certainly was as of the December update). On that basis, EBITDA for the year is over $860 million - that's an EBITDA of $550 million for H2, up from $311 mill in H1. That's much higher than anyone is forecasting at this time, including Moodys or any of the peerless sell-side analysts.

Even if RCF was reduced to $700 mill by 31/12, that's still a circa $780 mill EBITDA, which is much better than expected, even with lower oil prices in Q4.

Best

As usual, I don't get what Iffy is going on about. Why is giving a guidance of $600 million for 2019 Opex a sleight of hand? To me that's a lot more clear than giving an Opex per barrel range.

Pelle - I'd assume that the pipes replacement work at Scolty/Crathes would fall under Opex, in line with the ESP replacement at Alma. The other work over items at Thistle and Dons may well be Capex related. This is not a definitive statement though - I'll check with IR.

L3 - TBH, I'm not going on a chest-thumping spree on the back of an educated guess on where Net debt may land. It was a guess after all and poking holes in one's numbers, which are based on a set of assumptions, is only welcome. I'd like us all to be kept honest by other members.

Yes, my take is that all of the $100 million should be collected by Q3 this year, if Brent is in the mid-60s, and we then go straight into the 50-50 profit share with BP. The additional assumption is that Magnus is circa 18 kbopd average for 2019.

Maybe someone more technical on this board can take the question about Kraken FPSO. I'm not sure if the voidage issues are now out of the way or if they are somehow linked to the 'broken' part replacement that had to be done last month. We were processing 40K in some months of the summer last year as well.

Sorry - interest rate on the vendor loan is 7.5%, not 5%

Hi Pelle - that's the only correct version of the cash flow split as detailed in the Magnus prospectus. Yes, I remember Fernan posting this before and I concur with that. The exact vendor loan amount would be spelt out in the AR/final accounts next month/April, but is likely to be around the $100 million figure as previously guided by ENQ. This will need to be repaid over 5 years through quarterly installments at a 5% interest rate.

We'll get our $100 million back very quickly, certainly in 2019 assuming that Brent is in the 60s. Remember there's no hedging Magnus' 75% production.

L3 - I have a few points to clarify for you. Unlike what you assume, the Vendor loan repayments are NOT a first lien on the net cash flows; they're quarterly repayments over a 5 year period, with 5% interest accruing on the loan. The repayment for 2019 will be $20 mill principal Plus interest on the outstanding loan balance. The exact vendor loan balance figure should come out next month in the AR. Basically, there's a circa $6.5 million to be paid quarterly next year to BP on this account. Net cash flows subsequent to this will go straight to ENQ until the $100 million paid to BP to close the transaction in December, is paid back. This may take a few quarters. Only subsequently will we go into the 50% cash flow split with BP.

The deferring of the $30 million capex for DC4 happened only because TO didn't start earlier as originally expected. I'd assumed a lower capex spend for 2018 was the case when I called for net debt in the $1700 mills. Please note that in H1 2018 we had deferred capex payments from 2016/2017 that were made and so there is a case to be made that the net debt could've been even better if these payments weren't made...

BUMI will get a lower dayrate when AK is producing less than what was agreed when AK was signed off last year. This is clearly stated in the H1 Earnings call - the answer is YES. I've long said that using someone like SBM offshore would've been ideal for the Kraken FPSO. But, the BUMI decision was made in 2013/14, presumably because they're cheaper, and we didn't have too much cash to pay...Hindsight is a wonderful thing.

Kraken is a sticking point, KO. If it can get to a sustained 40 kbopd, then I have no doubt that we'll get another upgrade. Till then, it's a wait and watch on Brent prices.

Barclays numpties said NO Debt reduction in 2018. On a net debt basis, we reduced a good $215 million in 2018. Go figure that out that you analysts...

Ezhik - nice to hear from a Magnus veteran. The old beast is still marching on indeed.

Morning Pelle -

Yes, you're right about FCF from the 75% Magnus (not even the 25% ) not accruing to the cash balances in 2018- although as a dampener December was a sh**te month to be producing more. Lol.. However, that trend has also continued in Jan 2019 and that's great.

Cash on hand would be circa $235 mill as of 31/12. The 3 big pieces of debt (RCF+OZ+Bonds) amount to $1930 mill Gross, with the RCF being $785 Mill. An amortisation paydown of $110 million is due in April and I hope that we continue to pay down more of the RCF as more cash is generated in 2019. We just need Brent to co-operate. And I do see that happening in Q2, just in time for us. ;-)

GLA. I can't predict day to day SP moves, but maybe today will be a Green day.

KO - "now let’s get K sorted out". Do you mean that you'll finally stop responding to trolls every time they post and stop clogging up the BB? ;-) That'll be a welcome day...

So, I noted that, L3. Like for like production (25% Magnus) would still be circa just over 54K. I didn't expect any additional hedging for 2019, TBH. I suppose we'll be more prudent and look to hedge proactively when the opportunity arises - the move downwards in Q4 was indeed a painful lesson for ALL producers. PMO was better at this, as noted previously.

I'll take the 1.5 mmbbls of OZ hedging for the remainder of the year. $68 ceiling isn't too bad and that's what I'd expect we'd realise in the upcoming quarters.

No reserves downgrade at Kraken as some of the Analysts, useless might I add, were SPECULATING. The FPSO issues are the main bottleneck, I'm afraid, and DC4 may not help much with these issues lingering. Nevertheless, any upside is welcome.

Malaysia production trended up to 9.5 kbopd for the last 2 months of the year, up from an average 8.2 kbopd in the first 10 months. That's a good sign with more drilling at PM8/Seligi this year.

Best..