Member Info for hitman1a

Yes Romaron. what we had is a downgrade to the recovery factor (RF) of the field.. not the field itself, so the Polymer or solutions that will be required in future years will help.

We need a new more visible Enquest business plan geared to shareholders, not something that based on the old system of spending everything you have and taking on more loans to gear up as much as possible so you can do even larger projects.. but one that doesn't chase any further large projects . If we limit Enquest's capex at say $50m /annum for 2020,2021 and 2022, and focus on Malaysia and Magnus. then net debt free in 4 years is my target. Excess after that gets returned to shareholders. Even Cairn said in the audio if the cash built up, it would return it to shareholders.. unless there was a a really compelling opportunity. Now why can't Enquest say that ?

We need to hear it from Enquest..to attract equity investors.. change the name to New Enquest.. worked for Labour.

Yes Romaron. what we had is a downgrade to the recovery factor (RF) of the field.. not the field itself, so the Polymer or solutions that will be required in future years will help.

We need a new more visible Enquest business plan geared to shareholders, not something that based on the old system of spending everything you have and taking on more loans to gear up as much as possible so you can do even larger projects.. but one that doesn't chase any further large projects . If we limit Enquest's capex at say $50m /annum for 2020,2021 and 2022, and focus on Malaysia and Magnus. then net debt free in 4 years is my target. Excess after that gets returned to shareholders. Even Cairn said in the audio if the cash built up, it would return it to shareholders.. unless there was a a really compelling opportunity. Now why can't Enquest say that ?

We need to hear it from Enquest..to attract equity investors.. change the name to New Enquest.. worked for Labour.

Hi Dol03

I've now listened to the Cairn audio, and understand better why they reduced the max production profile in the FDP from 50k to 40k. 40k seems to be the max if equipment becomes more reliable, but the oil is so heavy, you just need more water than first envisaged to move it.. The field is still the same..but the data models suggest the daily output will be less than the original plan. They seem confident of slightly better production this year. 30k/35k rather than 30k

It's still a decent asset and with optimization, could produce more..

Western Flank will add reserves to balance sheet at a later date if sanctioned.

But the SP today allows for the write down..as per Cairn imv.. I agree cashflow forecasts look good going forward for Enquest even at the 30k mark gross, so let the accounts do the talking. Deleveraging is still the most important thing to do for 2019 and 2020. Even AB said lets get to the end of the year and the ratios will look a lot better.

Hi Fernan

Yes 30mb 2C is a decent amount to assess compared to the original number of 137mb gross quoted way back in 2013..

I do fear writing positive notes encourages people to top up/invest more/ average down..but in this case, the current price does look like a very good deal.

Thanks for your excel spreadsheet too. I look forward to your revised version if you get time after the 21st.

I haven't listed to it yet, but via E121, DC4 first well online.. Production to go back up to 30k plus once TL finished.(expected to leave 31 March).. I guess second well finishing today and 2 weeks to bring online.

Kraken 2020 :can only be Western flank 30 mb: 2C .. only assessing.. So much to sort out, so no point drilling imv.

I did read a lot time ago the recovery factor in the original Kraken FDP was in the low 40% range (maybe 44%.. so also another good reason why Enquest don't want to write it down. They would expect to get more out over several years.. nearer to 50%.

Hi Auson

Imv, The FPSO struggles with high volume of liquids .. that's one issue., It can process it all, but the specification of what's produced isn't to spec.. reliability of equipment is another.

The oil reservoir performs very well, so long as you inject a lot of water too. ie.. you need the Karcher pressure washer working in high setting all the time.. so I can see why Enquest believe the field is fine and doesn't deserve a haircut.. but Accountants go by actual production data.

Enquest will convince their accountants that they need one more year before any impairment discussion.. which i doubt will happen. After all Enquest is the North Sea expert in extending older fields with higher water cuts.

Just comes down to two different angles/ models/ approaches .. as the RNS has said.

The excel analysis looks good so long we can do 67k this year.(brent $67 plus)( Kraken average 30K gross) so Enquest will have to punch out some very good total company numbers over the next 18 months.. to reverse the current negative sentiment.. The next few tankers will probably get us back over 20p with DC4 working.

It would have been based on the book value at the 31 Dec 2018 ( original cost), but remodeled on actual historic production since first oil, v expected for the same period. It's definitely less than expected, so they took a haircut on the book cost.... prudent view.. as there is a higher water cut than first envisaged, plus other issues.. Definitely not made on basis of low Brent price at tail end of Dec or Results day.

We should do the same at somepoint, but Kraken is still a "work in progress" so perhaps not this year. Accountants think 12 mths data is more than enough to make a judgement on. It was 6.8MB for Cairn , a big deal for them,

Should we take a £300m impairment off our book value if Cairn have taken £127m off theirs.. It would certainly explain 17p of SP not in the current share price. Otherwise we would be at 33p. Shame Kraken production has been poor since Nov/Dec.. It's been low for too long.. so the SP relfects Cairns view..

Enquest can say what they like , but the Market just values Enquest on current Kraken production.. and doesn't really give any benefit for the substantial lease reduction costs or planned works or DC4 , but i do. .

Back of mind says 35k is the average FPSO Bumi have made in the past, so settings on Kraken are tuned to this level. Bumi fixes so far based on prior experience.. none of which is in the harsher North Sea. 35k can't be a coincidence.

Lucky for us, Cairn aren't taking any more bs from Enquest or Bumi.. they have the design of Catcher and are now more involved in helping resolve the deeper topside issues. I anticipate 30/35k from 1 April..

Longer days in Summer, much warmer,,, easier to carry out work..

Fair enough Chilting..

No details really regarding topside fixes so will have to rely on your tanker skills to gauge how well it's doing..

It should be near 30k with DC4 pumping until repairs start imv (18 days)

I'd be disappointed with 63K/day (23M/yr) especially after reading Kraken 30k-35k average for 2019 being a conservative number.. I was running calcs on 67.5K/ day average, looking for 70K.. Brent $67 plus for rest of year

Early days.. but 63K implies they are running Kraken at 23k for the rest of the year,

Cairn have already confirmed well 1 from DC4 is already running, so 30k plus must still be the reasonable target..

Hi E121, Thanks for your number.. I'm happy to accept yours.. we can certainly trend down to mine in time with actual debt repayments and lower interest charges..

I was going to ask before where you got the $157m lease cost from as i had it at $118m,
Would you recall?.

Lets see if they comment on the debt repayment due in April , or kick it down the road again.

The balance point is around $47 imv. Brent is at $67, so $20 per barrel to play with to fund annual debt repayments (pay off your mortgage) and further capex.( pay for extensions/home repairs).

Hi KO

Price at which Enquest puts "Cash in the bank" is an unfair question to ask on the phone.. Simple answer is Enquest never does put cash in the bank.. because it spends everything, once the direct debits have got out.. It's the same answer as asking which months does Enquest have the ability to pay dividends.

Net debt is an enormous anchor around the balance sheet and servicing the debt is also large weight.. I would like to revisit this question when the accounts have been released.. but in the meantime i think $47 is where we are able to break even and pay loan interest .. but without any ability to pay debt or fund further capex.

Annual 2019 production guidance average of 67k at Brent $67 is a good position to be in.. it's only mid March and trends are that Brent will firm up to $70 plus over the year.. Also important is that US shale shareholders are demanding more returns, and it's costing them more to replace the production from older mother wells.. Drilling a child well nearby might cost less now, but the returns are also less, bearing in mind it also affects pressure in the nearby existing wells too.

So we have a runway marked out in the US now where growth isn't going to be what it was.. Even the optimistic IEA is now revising downwards its projections slightly.. so that encourages more funds to add a few more longs..

So long at Brent trends to $70/$72, then that's where Enquest starts to rake it in.. I calculate $23m extra per annum for every $ above $67. Bearing in mind it was only last year we where still talking about going concern issues, today's company with Magnus is far better and stronger.. The low SP today is a bit of mystery..

Now i'm not expecting Saudi will settle for anything less than $75, but it will look towards shale to calm down in order to really get there... it will just take a longer time.. Another $8 plus narrowing of the heavy oil discount into 2020 say ($2), gives us potentially an extra $230m each year.. so that's where i see the revenue improvement heading. I'm not concerned about the Kraken reserves downgrade .. it's minor compared to improving the Magnus recovery factor from 50% to %55 .. which adds 100M boe . We have much better things to be doing as well as planning more drills in Malaysia.. Lets judge Enquest on financial accounts and the next ones in 6 mths time.. and enjoy the more frequent Kraken tankers over Summer with DC4 pumpng.

Last year we skipped our Sep maintenance, because we were told it had been done in March.. but i guess that's what also caused the partial downtime in Nov/Dec 2018.. Get those oil changes and filters changed per the manual.

L3T

it's based on rights to cashflow on 15% of Kraken over a period of time.. not rights to the asset..

Compound interest works both way. In our case the tide turns at the end of the year. Added bonus is that Interest savings with deleveraging in full over 4 years cover the OZ capital principle if your worried no monthly payment will ever be made.. Credit where it's due though, the derampers have been more accurate regarding SP so far..

L3T,

Enquest at Brent $67 could be net debt at zero in 4 years time if it wants to..( if it sacrifices new capex from 2020)...

Ring fenced cashflow from 15% of Kraken to settle OZ.. if not repaid by 5 years. then Enquest write them a cheque for the balance.

Cairn confirmed that the water cut on the older wells had stabilized and that current production was the same as average production for 2018.. so not sure Enquest see water cut as an issue really.

It's just higher than the original FDP estimate.

Cash is king. so will have to wait for 2020..

Odd that a company focusing on improving recoverability from Magnus, where each additional 1% adds 20M boe to reserves.. gets marked down this much.

16p .. hard to accept all the forward cashflow is only worth this much to equity.. Wonder what price it has be before they repurchase some shares.. I know they said they wouldn't, but £50m spent now would be a fantastic deal.. better than drilling imv.

Thanks Auson

So if Cairn wrote off 6.8M boe, from its share of 29.5%, , then Enquest should write off 16.25M boe

Deducting 16.25M off the approximate 250MB in reserves..is what today's sell off is about.. seems very unfair given no change to annual production guidance, DC4 coming online and fixes on the way.

Very harsh SP reaction indeed.

Telling a company that specializes in end of life assets.. with high water-cuts that others don't want anymore, and then makes them go on much further is hardly going to say they agree with the downward revision, 18 mths in on a 25 years project..