Member Info for hitman1a

Hi Pelle
Just googled FT Enquest and got the info from there.. no direct link to J.

I do have an issue with some of the Jefferies numbers ie FCF of $410m for 2021.. based on 62k /year.. implies $18 FCF/barrel.. Add that to the $27 costs Enquest mentioned, add $2.5 for sales discount and you generate $47.5 Brent.. But add $18 to Jefferies higher numbers of $31.2 (all costs) and $4.3 (discount) and you need $53.5 so I think Jefferies quoted FCF figure might have come directly from Enquest.. and Jefferies might have got the numbers wrong on their summary. As you say, it's hard to get $410m FCF on net cashback of just $12.

Jefferies using cash costs of $31.2, sales discount to Brent of $4.3 and net cash to company of $12 , if Brent $47.5 in 2021. Enquest using cash breakeven of $27 for 2021.. so there is a difference of $4.2 to investigate/discuss.

I think our Kraken premium on Brent helps offset the discount on Magnus.. so Jefferies overall sales discount to Brent estimate of $4.3 might be too high by $1/$2.. I expect Brent to be higher in 2021 leading into the supercycle in 2022.. but accept we might have 1b excess in the market to drain. Might be 800m barrels, but even so.. Jefferies are implying we need another 18m to use the excess. fair enough.

Enq will probably beat the Jefferies estimated FCF and EBITDA over 2021.. The estimate of 2021 Brent $47.5 appears too low, but I'll accept it for now.. I want it to be higher but he has the right to amend later on. Analyst seems alright.. I remember he attended the 2018 AGM and wondered why Kraken was leaning into the water more on one end than the other. He though it might be a problem and the BOD assured us all the FPSO was fine.. The BOD thought he was making a joke.. but he wasn't. Pretty sure he wouldn't write positive news on Enquest if he didn't have to .. in this case the numbers could be quite impressive if Brent averages $55 in 2021.

1. For 2021 , with Jefferies Brent forecast of $47.5 , cash netback $12/barrel to Enq, ( PMO $7.4) mainly due to less discount to Brent on overall portfolio.
2. EBITDA 21/22 Average $410m ( PMO $759m).. Enq has low growth, but high netback.. PMO has organic and inorganic growth.
3. Enq and PMO both have EV/EBITDA multiple values of 3.5 : Enq 18p/ PMO 57p
4. Current Target price of 17p ( PMO 68p)
5. Closing old sites and high-grading of portfolios has been long overdue.. Enq raised to a buy ( first time ever). Interim results should confirm stable Kraken production and their net debt forecast sitting 12% below consensus.

In conclusion, the growth that might come from addition wells at Magnus/PM8 will just keep us where we are, so Jefferies aren't expecting any production growth.. (agreed). so we need a higher oil price in 2021. Another $5 gets us say another $110m/yr with Brent at $52 in 2021 which should see the Target SP raised again...... Enq described as a levered cashflow winner.. I want to see a 30p/40p TP if Brent gets to $55/$57 early next year.. A Biden win will help control US drilling and fracking.

Biden leads Trump by 5 points in Texas poll.. was thinking a Biden win would result in reduced fracking and flaring...boosting prices in early 2021.

We should be above 14p on Monday.. rather than sitting in the 12p/13p range...

Brent $45 by end of month assuming flights increase : ie Delta have scheduled 45% of domestic US flights compared to pre Covid numbers for August but we will see how many actually take off.

FT says : prices can't stay depressed for ever.. JP Morgan analyst Christyan Malek says demand will get back to pre-covid levels by late 2021, but there will be a sharper decline in production along the way.. 1m bopd lost due to old fields, and 4mbopd lost in deferred projects.. so the seeds are being sown today for an oil supercycle in 2022. and much higher prices. Larger oil companies are accelerating their transition to cleaner fuels..

Another article in early July also in the FT said there was a lack of deals in the NS.. mentioned PMO as a target and it's large tax losses.. which might be useful to a US company looking for a deal.. but no mention of Enquest..

Hopefully Philip will be in profit by end of June. Target 18p

Saw an interview with the General Manager of Atlanta Airport( also Delta's US hub) this week.
He's expecting 800 flights / day in June.. ( that's arrivals and departures).. 1,200 in July.. 1,400 in August but expects it to take a year to get back to 2,800 /day .. the pre covid level..

From the above, if we are at 90% fuel use today , then we should climb to say 93% by Q4. Thereafter worldwide natural declines and Opec+ cuts will be felt stronger even with some US extra production.. boosting the price near $50 .. so I sort of agree with the Seekingalpha article.. Q1 2021 sees a large deficit that enables the excess to be drained at a higher rate, supporting prices.. Parsley think US production will still be 11 mbopd even in Dec 2021.. so even higher prices after that seem very possible once shale starts to tail off. If more flights are brought on earlier than expected then we should see the US mid stream or UK second tier oil sector rerate positively.

Hi L7.. your correct.. I seem to remember it as having 25% and the option to RBL once we had clean title on 100%..

Guess their is a lien on the title until the vendor loan is repaid in full.. My view is Magnus had really good production initially once Enquest took over.. and is now ok.. so the RBL might not be so valuable as JS initially believed. Anyway if their is a supercycle in early 2022 for a couple of years, we won't need it.

Lufthansa have mothballed their A380 fleet for 2 years.. so at the moment long haul demand isn't expected to recover as quickly as say short haul: eg Delta in the US are adding more domestic flights.. as demand picks up in Q3.

Even watching Bloomberg Asia last light, the bridge behind Heidi is far busier.. perhaps x3 as many cars on it now. So demand at 90% of pre-covid consumption might be true.. and Brent $42.50 seems very good as its only 19 June..

JS always believed that a RBL could be obtained on Magnus, so that provides a cash flow option, but at current rates and the expectation of higher prices trending into Q4 2021, i'd say the SFA should be repaid in full.. as AB has already said he wants a stronger balance sheet.. At the moment, their doesn't seem to be much left for equity after debt repayments.. so we need Brent above $50 asap. I'd repay the full SFA in Oct 2021.. and continue saving to April 2023, repaying all the bonds on time. If needed a small 3Yr RBL on Magnus to bridge any gap is fine.

Yesterday Novak said on Bloomberg that he would be content with $50, so I believe we will see this in Q3 . ie when some including Russia expect a supply deficit.

Just read an article on shipping scrubbers. apparently not so many are installing the units.. just paying for low sulphur fuel instead as the price difference isn't that much.. which bodes well for demand of Kraken oil. … and the premium above Brent.

plus AB implied at the recent interview that they ( ie the Board) expected prices to head back to $40 to $50, so our cashflow would be quite significant with costs at $25 for the rest of the year.. so what was the point of the swaps at $31. ?

Anyway back to 16p tomorrow and 18p by end of month.. there's still a deficit on the way . Target Brent $46.

Re Airtravel in US, The Transportation Security Administration (TSA) screened 441,255 people on June 7, its latest data shows. This is the most since people began staying home in large numbers due to COVID-19 in March, but it remains below a fifth of the number screened on the same day a year ago.

U.S. airlines have slowly been adding flights back after deep cuts in April and May. In July, American Airlines will fly 55% of the domestic schedule it flew a year ago, Delta just over 38%, Southwest Airlines over 62% and United Airlines nearly 30%, according to Cirium schedules.

Slow restart, but passenger demand should get better...with oil prices rising a little in July as jet fuel demand increases.

I was disappointed with Fridays close. I'm sure I saw 13.88p on Thursday, so the UT under 14p on Friday needs to be looked at. Perhaps it was the large trade holding this down, we saw the flash crash on Thursday at the close when it dropped to 13p, then another attempt early Friday perhaps to trigger any stops . I also saw 2 "1 trades" I think on Thursday, so I believe we should see an RNS on Monday. AB has deep enough pockets to add 2m plus . Maybe we need $45 to break 15p. Otherwise we should be approaching 17p tomorrow on the expectation of seeing Brent $55/$58 towards the end of July.

High Sparrow says hi. ...but too many sinners on our shareholder register. GL

we know Brent $45 covers all liabilities.. so perhaps the 1p rise for every $ starts again once we are past this point.

$55 : 23p .. not bad. say Q4. bit disappointed with the lack of SP movement so far this week.. was expecting 15p

Just seen a headline that Parsley are beginning to open up wells which were shut down only a few weeks ago.. These were part of the duo that wanted Texas to bring in production quotas. I guess if they have pipeline capacity , they might as well produce., demand must be quite strong in US.

Back to 30p / 40p target by Xmas then if WTI averages $60 in Q4 2020.

Brent above $38, but doesn't look like the 1p rise for every $ rise in oil is working this week. In previous years Enquest hasn't risen with Brent initially..I guess because of the constant issues that we never knew the full extent of.. but we don't have any issues now. If Opec meeting goes well, I think we should see Brent $40 plus by end of week.. surely the SP should then be 15p.

I attended the 2018 AGM and asked about implementing the share repurchase program. At the time I didn't realise how tight cashflow was, Kraken was supposed to be fixed by July 2018. In the end nothing went right, and they dumped the rights issue on us to acquire Magnus. I only mention it as we have considerable cash in the bank and positive cashflow today. We weren't supposed to be in this position or opportunity to cancel out shares for 12p that had been issued at 21p. That's a fantastic return to reverse out the dilution. As all the projects are now finished , we don't need another rights issue. Within a business plan, all companies come to the end of their heavy capex periods, and then flick the switch and focus on returns. I believe Enquest has reached this point.