Member Info for hitman1a

This is like New Years Eve , I’m staying up to watch Brent reach $60

"EnQuest has agreed to acquire 100% of the shares in North Sea (Golden Eagle) Resources Ltd, a new company which
will, at completion of the Transaction, hold Suncor’s non-operated equity interest in the Golden Eagle area. "

https://find-and-update.company-information.service.gov.uk/company/13148646/filing-history
Checked companies house.. incorporated on 21 Jan 2021. Guess we wait for L7 to report back .. but E121 seemed to think it's from completion date and cashflows from 1 Jan 2021 are "post tax" as per indicated by Enquest already.

"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’)."

Thanks for the reminder about contingent liabilities L7. That gives us a good explanation. Indeed I found the cashflow statement on P115 of the 2019 accounts very useful as it shows the 2018 comparative $100m loan and 2019 instalment repayment.

In a way for the benefit of all including the analysts of larger brokerages who might be writing something this weekend ., I looked at the other non-current liabilities (>1yr) on the balance sheet ( 2019) apart from net debt. The "current" ones from the 2019 accounts would have been paid in 2020.
1. Lease Liabilities ( 614m). Kraken lease, payments being made annually to reduce.
2. Contingent Liabilities ( 545m), Magnus , payments being made annually to reduce.
3. Decom Provisions (707m), Work done every year.. so balance should come down $50m /year.

It's an important point .. not only are we paying off the "net debt", but we are also reducing the above 3 large liabilities every year.. The balance sheet should strengthen very strongly from both aspects if Brent prices behave/ remain stable going forward.

Can we also confirm the "net debt" figure quoted by the company doesn't include the Magnus vendor loan.

Be interesting what "end date" they give the new RBL of say $700m.. They said it would be fully repaid by 2023. If that's the end date, then that provides an opportunity for another decent non-operated acquisition so long as Brent behaves. A 2 year payback period on initial purchase gives us until Oct 2021 to get another one banked..

How much emphasis does AB gives to "growth". Quite a lot.. It seems to make more sense to delay our short payback drills on our existing assets (bit shy on releasing info on last Kraken drills, but the tankers are still filling up as per norm) and just spend a larger amount on assets like Golden Eagle.. Perhaps the next one can be $600m , something decent mid-life from all the other parties in the North Sea apart from Exxon,BP etc.. which adds 20,000 bopd.

That just leaves the bonds to renew in Oct 2023. Perhaps a combo RBL/Bond. ( 50/50). at say 7%

I've got a feeling the BP Magnus vendor loan balance might not be included in the new RBL.
Is it interest free? , paid out of cashflow when it arises. No point including it in the new RBL and paying interest on it if so.

Perhaps the new facility includes the existing RBL, Suncor acquisition cost, all rolled up Piks, OZ loan , less FCF earned in 2021, and fresh equity of $50m. JS said a $700m facility, but I think we won't be using it all if we complete in Q3 2021.

Is this year the last of the Magnus $20m vendor loan instalments?

Yes you can include the Kraken lease in opex if you prefer.. I think from the Dec 2019 accounts we still have many years left on the original lease.. perhaps to early 2025, and then we get a cheaper rate.. but our production would be far lower by then..

https://www.reuters.com/article/golden-eagle-ma-enquest/update-1-enquest-to-buy-stake-in-golden-eagle-project-sees-lower-2021-output-idUSL4N2KA1ZE

Thanks E121. I always for the Magnus percentage..

We still have some good points: 2020 Free cashflow breakeven was $32/Boe
Based on 2021: most optimistic..: 52,000k. Opex: $265m/18.980,000 barrels. gives Opex 2021 of $13.96/Boe( 2020 was $15/Boe): $1 saving. .

If you look at 2021 Capex and abandonment expenses of $120m, our ongoing costs of the old business are now ($265+$120: $385m/18.980: ie $20.28/Boe. Very similar to the new Golden Eagle combined Opex/capex costs quoted of $20/Boe

Add the Kraken premium on 24k/day.. and even if Brent is $62, we could be achieving near net $65 as Kraken is about 40% of our production.. It's good we closed the old stuff.. ok we have abandonment costs, but we would of had these anyway.. Perhaps we closed Thistle too early. With hindsight it was ok, but it's too late now. They all lost their jobs too.

When we look at 2020 : Cash break even of $32 , opex./capex was 21.31/Boe so that's $10.69 difference to explain away with leasing costs and interest, plus any other bits that the company won't break down easily for me.. At the moment I assume cashflow breakeven for 2021 is also near $30.. the same $10 differential as 2020 on 59k/day cost $215m (so for $112m lease payments and say $103m interest)

But it gets interesting if you add in the income from Golden Eagle from the start of the year.. It's cash flow positive already.. I read an article that quoted JS saying it was earning us $13/mth.. so the 2021 free cashfow break even for 2021 looks like a number we can't work out yet, .... because it's acquisition dependent.

But if we get 2021 at net $65 for entire production., less $30 breakeven cash figure., leaves $35/boe x 52,000 x 365 is net FCF $664m to put towards deleveraging in 2021. ( I have mentioned a $50m/ mth figure before)

Plus 2021 : $13m x 12mths from GE is $156m.. Total $820m. ( i think JS would have based his calcs on Brent $59/$60

Start debt off at $1280 on 1 Jan 2021 plus $325m: is $1,605m less $820m :
Leaves target 31 Dec 2021 : $785m net debt : outstanding, perhaps too good to be true as it relies on a net realised figure of $65 for 2021.

I think the $50m equity raise will be successful, but pointless. We don't need the money given the progress of vaccines and the ability to make new ones. It's looks embarrassing to even ask for .. but then again, the oil price is so volatile.. perhaps we might need it at the time. ?

GL.

Looks like the equity raise will be fully subscribed , the FCF at $65 is fantastic if you include the Kraken premium . Net debt near $950m at end of year and perhaps only $300m at 31 Dec 2022, Think the SP will rise once we see a few broker notes and the rapid deleveraging.

On Golden Eagle : is it not $5 Opex and $15 capex , combined $20 ?

I'm not sure what the Chinese is for "let it rip, potato chip", but they are certainly ahead of the game. EU is 4 to 6 mths behind. What happens to oil in say Q2 and Q3. WTI at $65 looks reasonable when the US normalises.

Does anyone else feel the ops update and detail of the new acquisition was very comprehensive. The first time in a long time they could tell all. It has felt over the previous years they have tried to release the least amount of information as possible, but yesterday felt like a turning point. We will find it much easier to be net debt zero by October 2023. I predict a 50p SP when this happens, but of course Enquest will be looking to retain some debt and purchase another even bigger midlife asset. AB wants growth whereas I could have been content with a debt free smaller company.

Once the acquisition goes through, I think the market cap could be near £500m by this year end with $50m monthly deleveraging.

We also had negative equity on the last set of accounts, so another reason why the bankers may have wanted an injection of $50m.

The Saudi 's want Brent $70 in April... I say let's give it to them..

Not quite.. any shares not taken up , will be offered to J P Morgan to place.. Then AB will step in.

Unfortunately there are those that will offer J P Morgan a very low price.. so perhaps AB will be given the choice.

Ammu boarded the train, but his chauffeur left his baggage on the platform.

Feels so good , I guess Ammu just bought back in before the train leaves the station.
Collect $50m every month .

Hi L7 , you made some very good points..

1. The change in strategy.. buying good mid life assets.. rather than end of life fields that require lots of money .
2. The war chest.. Chilting will be happy.. perhaps invest in green energy projects like he suggested.. It's an option if the returns are better.. but $5 opex seems like a good deal.. are there any more.?
3. Bressay : agreed ..talk about in 2022 when we drill the Western Flank.

Reluctantly I have to agree with you .. The bankers want a $50m injection to gain a fee of say $10m.. I say pay them the $10m anyway and waive the open offer if we are in a position to do so in September 2021. Net $40m to Enq is never going to make much difference anyway.

The beauty of a production asset not having any debt equals high market value.. Cairn is a good example..

Just imagine in Oct 2023 when our debt mountain is a mere ( well , much reduced).. I'll think of word later on.. But our market cap will be enormously better than it is today when our net debt is £1095m at the 31 Dec 2021. Even better at the end of 2022 when it's near $500m.. You can see the trend.. $50m/mth net FCF (perhaps $55m with Brent $65) .. and that allows for Western Front drilling in 2022.

Truth is the finance on Golden Eagle depends on securing a new RBL, all post tax receipts of the company from 1Jan 2021 to completion day and equity raise.. There wasn't enough discussion on the flexibility. Perhaps we won't need the equity raise if Brent performs better than expected. It certainly is at the moment.. I can't imagine the banks were thinking this was possible.. They weren't aware SA would cut 1m b/day for 2 months, nor would have been aware of the speed of the vaccine rollout.. But a discussion can happen if we are in the position to do so.. in August/Sep 2021. Raising £37m is a waste of time .. We can all see it today.. but not last Nov 2020 when oil was $40 and the terms were written.