Member Info for hitman1a

A bit odd to sell one day before G20 meeting.

But then again I said the same before the Opec + meeting .

Saudi are chairing it. Not sure what they can offer the world apart from oil supply/price stability.

I bought Legal & G (152p) and Aviva (230p) earlier today. ( have enough Enq)

Even BP is now back to £3. Fund managers will look at the strongest companies. see past the 21 day lock down and look forward to a corona free environment .. if the strategy works.. Might need an extra week or two but in theory it should work, even if full recovery might take 12/18 mths.. Dividend yields are quite unusually high even if they cut them. Bank interest is zero. Chase real dividends. but that means fund managers will continue to avoid the likes of Enquest as they get no returns to fund their salaries..

Need to wait for virtual G20 meeting on Thursday to stabilise oil markets.. Putin is also participating, Novak spoke to his oil companies yesterday.... so perhaps best position now for a Opec+ deal by the weekend. US can join in June if they have already given their word.?

http://saudigazette.com.sa/article/591167/SAUDI-ARABIA/Joint-G20-action-plan-urged-to-offset-COVID-19-impact

https://www.livemint.com/news/india/extraordinary-virtual-g20-leaders-summit-on-thursday-pm-modi-to-participate-11585022972774.html

GL.

Bought into today for the same reasons. SP recovery in all stocks after vaccine made. ( 12 mths)

Very attractive yield today and future SP capital growth.. DOW supercharged. ( bought some AV. too)

Last weeks headlines were all about demand destruction ,..... now it's all about storage issues. US firms , especially the larger ones will have to reduce rigs and frac crews to zero until Corona gets a vaccine. ( 1 yr away).. That just leaves Opec/Russia + and US to stabilise the market over the next 3 mths.. Target WTi $50. . Yes demand will stay lower for longer.. so no point bringing on more oil if storage is full.. Certainly no extra tankers around.. We need about Brent $32 for rest of year to be cashflow neutral which I expect in early April, trending to $40 by June, even higher if the US agree to something in June to get to WTi $50. At that price, the SP might return to 20p+ again.. We need Brent $60 to get past 30p.

Thanks

Even better news
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Hi Squif, as we already have $268m in the bank, surely that could be used to repay the RCF balance. Add that to the $140m earned if we get $45 average this year, which means we could accept $35 average next year ? . AT $53 , our FCF would be very significant. Over $400m at 57k in 2021. ?

Option 1: 1 April; Continue Q1 Opec+ deal into Q2 with Russia indicating it's prepared to cut 500k at June meeting so long as US joins in.

Option 2: 1 April: Russia agrees to 300k cut in Q2, with OPEC + new deal running in Q2.. with Russia accepting extra 200k cut in June meeting, so long as US joins in.

Both options allow Russia to fill customer orders in full.. the market is smaller today.. so they don't have the customers anyway.. if that's the priority as per Rosneft. And we all benefit from higher prices straightaway . Saudi can cut a lot extra for 3 mths if others join in the process. Instead of adding 2m extra from April 1, it might cut 2m in good faith until the June Opec meeting.

Hi Pelle, the company have already said they need $38 to be neutral FCF for 2020 and $35 for 2021. Your $30 looks too low.. It's important to be cashflow neutral in 2020 to protect our existing cash reserves.. If the Rosneft plan works to the timeline , then we can sweat it out for 6 mths if we see $50/$60 in Q4. Given we now have the government paying wages for 3 months.. on the basis we have a 1,000 employees, I suggest we cut 50%/75% for 3 mths to lower our $38 FCF point.. maintenance only.... we might get to $30 like you said.

All the articles since the OPEC+ meeting all suggested Russia and Saudi had enough financial reserves to sustain this war for many years.. But the situation has changed in the last 2 weeks.. eg in the next 10 days, US corona cases could exceed more than the ROW combined.. albeit they are testing lots more people.. but significantly all countries are now implementing social reforms and handouts which need massive funding... Same applies to Saudi and Russia , so the boasting of how long they can sustain low prices is now changing and will come to an end.. I accept Russia wanted to see Q2 data before cutting to maintain market share, but that was pre-corona. With hindsight sacrificing 300k/day was very minor.. a 10% cut would mean Russia cutting a further 1m in June. It's living off half income and needs to find extra for handouts like everyone else today.. Quite frankly Russia should make a clear statement that it accepts the 300k cut from Q2 as the situation is very different to when the OPEC+ meeting happened and will do more in June with others, once it see the data. But I guess Saudi won't dial back until they do, unless the US convinces them in the next 10 days.. I read there were plenty of diplomatic efforts being made over the next few days.

https://www.reuters.com/article/us-oil-opec-russia-rosneft/russias-rosneft-ceo-says-we-need-to-maintain-contact-with-saudi-arabia-ria-idUSKBN2173GU

https://www.rferl.org/a/russia-sechin-rosneft-oil-opec-saudi-arabia/30500656.html

Got a feeling existing deal will be extended into Q2, with no ramp up by Saudi or others. The above articles look like Rosneft are reaching out without loosing face. Perhaps they didnt explain themselves that well at the last meeting. That gets Brent back fo $35. Barkindo has already met the US Texan and been offered an idea of a 10% cut. Shale would have declined by this amount anyway due to the inflection point, but does it want production to fall further? Texas is too relaxed about Corona when compared to California or NY. It seems every state decides for itself, yet Texas is a very heavily populated state so should follow full shut down like others. This should shut in qùite a lot of activity including new drilling, maintenance and could accelerate existing onshore production declines. I believe Rosneft expects to see this happen in Q2, so it can study the affect without further cutting its own production. In a way they are right and want to demonstrate this to Saudi.

US attend Opec + meeting in June and propose a cap on Texas Oil production. Saudi add more cuts to speed up recovery in oil price, and Russia proposes it cut number based on Q2 data. Trump and Putin step in to close the deal, which gives Q3 for all quotas/adjustments to take place bringing up the price to the $50/$60 range from Q4 and trending up for many years assuming we are past Corona.

GL. 40p by Xmas?

Pleased to see the update today. $38 cashflow neutral should be ok, given Trump is now on the case. A couple more weeks and we might have a deal to curb production and bring Brent back to $38 very soon and then $50 in 2H. That enables us to keep our cash reserves intact and increase it all the way to Oct 2021 to repay the RCF. Our SP should improve accordingly. Longer term we still need Brent back to $54 to cover all liabilities. Somehow Trump will steer WTI back to $50 asap....it's cheaper than a bailout for the industry.

MBS might be able to help via another way. What policy can he offer other than lower oil supplies to balance out the market over the next 6 months.

https://www.reuters.com/article/us-health-coronavirus-g20/spain-says-saudi-arabia-to-call-g20-meet-on-coronavirus-in-coming-days-idUSKBN2133HD

The SPR will start within 2 weeks , so WTi should get some further support in April imv.

If we stay at $40 , and no credit markets for the energy sector, then natural declines worldwide would be say 5% to 7%, say 7m bopd. In a way the US credit markets for energy are already at this point. If demand declines as well.. then fair enough.. but given population growth, this would indicate more demand going forward.. so we get a shortage of fuel.. and higher prices to encourage investment. Nothing wrong with no capex for a year or two to help us get to the super-cycle.. Likely we would get to Brent $55 with tight credit markets on purpose, so the banks guaranteed they got their money back..

All this is Saudi / Russia wanting more market share now they see a weakness in US shale to exploit. It was declining anyway.. the wound was open and now they want to do real damage to change the culture of their thinking.. It's apparent that with unlimited funding over the years, they would have just grown and grown production without making a profit, and serviced buybacks and distributions with debt.

It's only been a week .. CV will pass through in 2 quarters.. Trump knows the US has energy independence even if Shale contracts. Reducing supply will boost prices and save an Industry and lots of jobs. Quick solution.. always works, but bound to see some casualties.. If only all the other issues he has on his plate could be sorted this easily.. I'd like to see US troops leave SA and let SA defend itself if it thinks it's smart enough. MBS can sort it out himself...… for the period he wants an oil price war to last.. They managed to hit the installations before, so another would be likely, especially if people in Iran and Iran aren't getting paid next month.

I think Enquest will dial up the production where possible today to maximise the total value of our existing Q1 revenue with the Q1 hedge. Only they know the Q2 hedge if done. Personally I thought Opec+ would do a deal and so would not have hedged anything below $54.

Annual Maintenance is something that can be tweaked to occur in Q2 while prices are down.. Then production boosted to max in Q3 when I think prices will be slightly higher . We always seem to lose a months worth of production on every asset during the year going by the annual average calculations.. it's never the best month x 12.. more like 11.

Alternatively if prices are too low, then maybe they can't stop for annual maintenance.. We might get reduced maintenance to maximise revenue production 365 days in 2020 with no stops, but that seems unrealistic.. . Windows safe mode on all assets, but I wouldn't shut anything down.. I would cancel Magnus and PM8 Drills later in the year to save some cash capex, I think Squif calculated something like $30m/$40m.. which I guess relates to this.. No doubt our RNS will highlight our existing cash reserves.. and Brent $ cashflow neutral rate like PMO which would be useful to see. but Enquest has plenty of time to decide about the Magnus and PM8 drills later in the year. You never know.. they might just do them if the suppliers are happy to work like before.. ie pay them when you can... that's how they finished Kraken.

Let's get it done..

Not really.. we haven't got any projects to finish nor any acquisitions like Magnus in the pipeline.

But as you have now mentioned it, it's put a doubt in my mind.. lol. 11p again on Monday am

For 2020, I’m thinking they might still be able to generate something per month FCF to set against RCF , it they go into maintenance mode with Brent $35 now and climbing to $55 by end of year, We did after all have $1b Ebitda to play with when oil prices were higher.

Saudi extra supply is all the grades nobody wants. I have read that buyers want the decent stuff, but Saudi aren’t able to fulfil the orders for April , Once they run out of tankers , it’s essentially just stock , whether it’s held underground , on land storage or sea, it’s just reserves going nowhere . be nice to see a glut of unwanted Saudi oil floating about, albeit if they corner the market on tankers , how will everyone else transport their products?

The article does say Premier break even is $47, but that includes $18 of capex.

So if Enquest break even is say $40, even $45, So long as we go into capex maintenance only mode in 2H , we should be cashflow neutral at Brent $30. Most of our capex for 2020 is weighted in 1H so cant be changed but decent hedging covers some of the cost. Like Premier we can sustain Brent $35 for considerable time , but we do have the RCF repayment in Oct 2021 . Cashflow neutral doesn’t give us the ability to repay debt, so the RCF would be paid out of our existing cash reserves, But Shale cut backs will boost the WTi price back to $50 within 3 to 6 mths , imv. Perhaps sooner if Saudi calm down. The article from seekingalpha explains it better. (Modestus post)

With Trump buying oil to fill up the SPR, we could see Brent $40 next month but Q2 brings a flood of Saudi oil ensuring Shale actually carries out its capex cuts .

As well as Shale declines , we also have non-opec+ net natural declines ... $55 Brent seems a reasonable target to aim for with Shale cuts doing most of the visible steering. nice to see their 35% cut more or less matches the numbers the Shale companies are quoting as well. sure be glad when we get there. Perhaps Enquest have several weeks hedging in Q2 to help out as well ... but unlikely to be the full Q2 above $50