Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Earlier this week Bloomberg had an article out about the massive premium ($31) fetched by the Australian Pyrenees, a low sulphur and low API oil.
https://www.bloomberg.com/news/articles/2020-01-09/top-quality-crude-offered-near-100-a-barrel-on-new-ship-rules
Finding it interesting, I dug into this a little deeper. The pyrenees is at a 0.21% sulphur and got an API gravity of 19.0.
Kraken oil is at slightly above 0.5% sulphur and has an API of 13.8.
In my view they are extremely similar as blend stock, and would likely be able to produce similar amounts of VLSFO.
This leads us to the $300m question. Does the Kraken crude fetch a similar premium to brent? A $25 premium would add around $300m to our yearly revenue and it would all end up in our pocket.
The pyrenees fetched a premium of $1-4 last year, so this hike has pretty much happened since the beginning of december. We know Kraken had sold a few loads above Brent from the CMD, but that's all we know for now.
Thank you for the report Chilt.
Gonna add that NO has a maximum capacity of just north of 700kbo, so at 50kbopd today would be the limit to empty Kraken fully before sailing off into the sunset (or whatever weather you've got in the UK...).
Hi Pelle,
I have not looked into that company. Future numbers looks good, but one must make sure the projections are really solid before investing after a 100% 3m rally. We all watched Tullow get ripped apart.
That said, I have no clue. Alot of cheap companies in the oil realm atm. ;-)
Best, HMH
Hi Plethorus,
Next year capex/opex should be down by $2-250m. Adding that to this years FCF we should hit $550m+ (at ~69kboepd average).
I think we'll end up with a 78kboepd average 2020 and at $65 brent that should yield around $800m FCF.
The ~$600m is Pelle's and others estimates, but I guess we get fairly close if we use the same assumptions. Jan/Feb production guidance should give us a better view of what to expect at different oil prices.
Best, HMH
Squid,
I still got north of $800m (read the paranthesis perhaps?). Maybe you should check your eyes - you've misread two posts in this thread so far (the IR email and my post). Would have saved us all the countless moaning posts you've managed to produce this christmas.
Have a nice one.
Hi, Pelle,
Yes, buybacks.
Hitman,
None of us have a clue how Enquest will divide the cashflow for 2020. They might refinance the 2021 $400m + the capitalized PIK-interest. Who knows? It would be the safest way to handle it and we'd likely get rid of the restrictions.
You are assuming we're heading for net debt well below 1, which is kind of a strange as the company is targeting a leverage ratio of 1-1.5x . But you also assumed a few months back that the company wouldn't pay dividends til the bond was payed cash, so I guess you've got a rather conservative view of leverage...
If we reduce debt by $325m next year we'll likely add $300m+ of cash to the balance (lowest 2020 FCF-estimate on this board).
2020 will be an inflection point.
Best, HMH
Hi Pelle,
God fortsättning!
Sure, wording is not perfect - but I'm confident IR did not try to release proprietary information to a lone shareholder via email.
Guidance in a month or so will be interesting. Net debt should be approaching $1.4bn, and by May/June the company should be in the clear for dividends/buybacks. Putting a £20-40m bid under the shareprice should do the trick if we're still treading water.
Good times ahead.
Best, HMH
You guys are unbelievable. There's NOTHING new in that email.
The mail is in no way a guidance of the future - it is wholly based on whatever information the company has made public. One of the first sentences states that GUIDANCE will be released in Jan/Feb.
Also, it reads "DEBT REDUCTION" and not net debt reduction. Enquest does not have as high scheduled payments next year, hence the slower debt reduction. That does not mean that the cashflow will slow down - might just see the cash going elsewhere than debt reduction *wink wink, Pelle*, or they may keep on paying down the credit facilities. What our net debt reduction will be is going to have to be based on whatever guidance of production the company will deliver next year.
We're probably already within Net debt/EBITDA 1-1.5 range, but IR is professional.
Good to see that the bond will not be repayed cash, this we already heard from our CFO.
10 posts full of nonsense.
Best, HMH
This jump in rigs usually happen at the end of the year. Reason being that starting a well will grant you full tax deduction for the project on the current year, so it's plausible that it's just window dressing to boost 2019 results.
Let's see in a month or so.
Best, HMH
Hello L7,
Cannot find current TCE rate for an Aframax in the north sea, but basically we pay ~$80k/day for charter (maybe I'm off on this number).
Also, if we produce at 35kbopd net Kraken has a full storage after 12 days (Bumi reads "Storage tank in excess of 600kbo" but let's stick with 600). In that case we were shut down for the equivalent of 4 days which amounts to >$9.1m in lost revenue.
Wasted might be the wrong word, but some margin of safety would have been warranted when a storm was looming.
Hello L7,
This is not an accounting issue. Would guess it's a weather hedge as last offload was impaired by strong winds. Now we don't have to pay the Aframax dayrate for an aditional 2 days. I have not viewed the forecast, but I guess we wasted almost 400k + downtime of 35kbopd/day for 4 days during the last storm. Easy to see why this is a viable option.
Best, HMH
Hello lads,
Regarding earnings, I got $180m FY. This however, is kind of misleading since we're off-setting earnings by exercising "UK corporate tax losses and allowances" to reduce our taxable income.
Since this non-cash item is part of our assets in the balance sheet, our earnings takes a hit because the earnings is essentially the change in assets minus liabilities. Without this our earnings (non-cash) would be bigger, but we would pay taxes which is cash outflows.
The FCF is the important number, since it's the cash the company can use for investments/amortization/dividends. Diluted earnings is just including all stock options and warrants etc outstanding in the calculation of the undiluted earnings, which is earnings divided by shares outstanding.
Regarding reserves; the more the company drills the more they understand the fields. We heard during the call last month that Maureen sands was not booked as reserves yet (after intersecting "tens of millions"). Guess some of this will be booked and additional PM8 and Magnus drilling should add some as well. Also the Kraken overall performance increase may be good for some additional barrels. Guess we'll be flat to slightly higher.
I get a bit confused when people want the share to instantly rally (<1 year) after they bought it. Truth be told, if you bought Enquest back in 2017 or earlier you probably had a finacial deathwish as debt-level and production figures was pointing towards bankruptcy.
The company you own is now doing well, and there's consensus around here that plausible dividends of $2-400m yearly can be distributed to shareholders starting 2021 (with a possible taste in about 10 month) given current production numbers and oil price. The financial position will be strong enough.
If we're not to be the only company in the world with a 50-100% well covered dividend yield, shareprice should rise to the point where dividend is say, 7.5%. That would put a valuation on the company of $2.67-5.33bn.
The daily whining about the share price not moving is just plain stupid. People should log into their brokerage account less frequently - it will probably relieve some of that stress.
Investing is a waiting game. If you're here to reap the rewards of the company maturing, what does it matter if the share moves? I'm thrilled Enq is trading at this price with CEO buying massive blocks and balance sheet firmly improving. If the marked valued this like Tullow I would have never gotten the chance to buy in in the first place.
Best, HMH
Hello Ko,
Yes, that seems fair. I'm in no way a nice guy, but I believe opinions should be well grounded if you are to put them in a public enviroment in the first place.
Experiencing the oil shocks of 1973 and all the mess ever since I believe I'm kind of dull with regards to the option of people like yourself who owned 7 million shares 6 month ago and have now increased their holding to 1.4 million shares...? Some people are just full of ****.
If you ever get to the point where you get to trust your own assesment of an investment you'll understand.
Best, HMH
Hi Pelle,
I'd blame the board. Total fraudulent forecasting and the 100kboepd+ target for 2019 was complete bs.
Analysts also created thos buying situation so I guess it average out.
KO,
Yeah, people like you and I "knew". I said a few months back that i wouldn't touch Tullow with Neilhannon's d*ck.
That said, most people cannot read the financial statements and do not understand accounting while looking too much at the share price (like yourself and your daily whining). They also don't compare market-cap/production/cashflow/earnings etc with peers. Look around you, this is like 95% of the population, what do you expect?
During the DoTcom collapse I knew of a few people who offed themselves leaving the family behind after losing everything. Tullow will not battle on. Tullow is done, and so are likely a sad few of its shareholders.
It's a tragedy, for many people.
Tullow will not stay in business with the presented numbers, so the move today is understandable.
However, alot of people are losing chunks of their saving today, many running with leverage and with Christmas around the corner I bet it will spill over on the children of many shareholders. It's a dreadful and rather sad situation indeed.
Many claim that Tullow was overvalued etc, but normal people don't have the knowledge to do that calculation. For this same reason I hate the derampers we have around here. Putting out false/misleading information to scare people who don't know better out if their position to earn a point or two. What kind of f*cked up childhood did you have?
I sincerely hope people land on their feet, but history shows that when a mayor company like this goes belly up alot of people lose everything they have.
What a sh*tty day.
"Buy another Magnus"
There's 2 more fields in the UK north sea that contained more than 1bn barrels, Clair and Forties. Enquest will not find another Magnus, atleast not without fronting the cash ($1bn+).
I'm curious if AB will change the "operating within Net Debt/EBITDA 1-1.5x range", since we will hit 1x during spring next year.
Many shareholders have suffered, so hoarding excess cash for no obvious reason is out of the question. Im sure we'll get the game plan and some clarity in a couple of month. There's alot of cash comming at us if oil stays above $60.
Hello Hitman,
Okay, I see! Interesting post on shale, add the natural gas prices and the shale industry is in big trouble.
Regarding my spreadsheet, I stick to that for now. However, my H2 numbers running up to the CMD was way off - so will have to wait for the FY to figure out what went wrong. It could be a rather large leak in the model (I just dont see where), or we had significant front-heavy cash outflows (like Scolty/Crathes pipeline, Malaysia wells) in H2. I hope we get that 78k average and the $800m FCF next year. ;-)
Best, HMH