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It’s a really tasty hat, Stevo. But right now that transformation deal still looks more like a mirage than a menu item.

Funny how fast the ‘$350k a day burn’ story melts when Brent adds $2 and Starmer blinks. Leverage cuts both ways.

Stevo, thought you’d choked on my hat there for a bit since you went suspiciously quiet. :)

Sekforde, Stevo here’s the thing about spreadsheets: they don’t vote, they don’t panic, and they don’t run countries. Real people do. And today gave us a pretty textbook reminder.

On one side, Trump slaps sanctions on Rosneft and Lukoil, instantly nudging Brent up by more than $2. That’s not theory that’s cash flow shifting in real time. On the other, Starmer’s quietly backing away from his 2030 clean power pledge because, surprise, energy bills still win elections. Less renewables, more gas and more fossil demand sticking around.

So we’ve got a macro squeeze forming: tighter supply, stickier demand. Your $350k/day doom calculation isn’t carved in granite — it moves with this stuff. And right now, it’s moving down. Forward curves can’t model political backpedalling, but markets react instantly when it happens.

Bottom line: this is why static scenarios age like milk. Geopolitics doesn’t ask for your model’s permission.

Stevo you’re one truly annoying guy. And I mean that as a compliment. You’ve got a real talent for sidestepping a point while making it sound like you’re addressing it.

Honestly, if we worked together, I’d probably hire you just to keep you on my side of the table. You’re sharp — just slippery.

I’m not disputing the need for board approval once things get serious. That’s basic governance.

But let’s be clear that wasn’t the question. The point was simple: NED share purchases only prove they’re not on the insider list. That’s it. It doesn’t prove there aren’t ongoing or advanced M&A discussions. Under MAR, insider status comes from actual access to inside info, not a seat at every conversation.

Early-stage deals can be kept to a very tight circle. That’s standard practice, not a conspiracy theory.

So no NED buying doesn’t “prove nothing’s happening.” It just proves they’re not in the room where it’s happening. Subtle difference, but an important one.

Stevo, just to be precise: NEDs buying shares only shows they aren’t on the insider list. It doesn’t prove there are no ongoing or advanced M&A talks just that they’re not insiders to them.

Are you asserting that every material M&A transaction at EnQuest must involve all NEDs at preliminary stages? If so, can you point to any formal requirement or EnQuest disclosure that supports that?

Https://www.theguardian.com/money/2025/oct/15/britain-biggest-energy-supplier-octopus-bills-on-track-to-rise-by-fifth-in-next-four-years

What stands out in this hearing isn’t the familiar theatre about gas prices — it’s the quieter line that bills would stay where they are even if wholesale was zero. That’s not a soundbite, but it’s the economic spine of the whole story.

The UK’s energy bill has morphed from a commodity price function into a structural cost machine. Wholesale is now the passenger, not the driver. Network charges, levies and system costs are doing the heavy lifting and they don’t tend to go on holiday when gas prices fall.

Governments have chosen to fund the energy transition through bills rather than broader taxation. It’s politically tidy but economically regressive, and once these costs are embedded they’re about as easy to remove as wet wallpaper.

So a 20% rise over the next four years isn’t really a “forecast” it’s the logical outcome of a system that keeps loading fixed costs onto variable bills. Gas prices may bounce around, but the structural layer is heading in one direction only: up.

It’s fashionable to talk about clean energy bringing bills down in the long run, but without tackling how these costs are allocated, we’re effectively swapping volatile fuel costs for a permanently heavier cost base.

To be honest, this whole debate is starting to drain my energy. My wife’s now convinced I’m having an affair not with a woman, but with a spreadsheet. Every time she walks by, I’m staring at a screen full of numbers or frantically refreshing my phone.

Stevo, credit where it’s due I think your math is almost spot on. But we keep circling back to the same issue.

Let’s start with Malaysia. Yes, I understand perfectly well how PSC works. Royalty and PSC payments are deducted upfront, net revenue flows through, and EnQuest books only what’s left. We’re not discovering new physics here. You can either include PSC as a cost or adjust the barrels to net entitlement. Doing both is double-counting and that’s where this debate keeps getting tangled.

Then there’s Vietnam. I didn’t “forget” to include PSC and tax; I just don’t treat it like a bomb going off in the model. Harbour’s $40 m last year (call it $30 m this year) isn’t going to turn a mid-60s breakeven into a $70+ cliff. Spread over group production, that’s roughly $5–6/bbl — measurable, yes, but not the hill to die on. Vietnam is a low-cost barrel even after PSC. It nudges the breakeven down, not up.

On your final math — $1,065 m + $30 m + $5 m – $20 m = $1,080 m / 15.5 m bbl = $69.7/bbl. Fair. But again, it’s a snapshot, not a law of thermodynamics. Lease costs are already lower, Vietnam’s bringing in cheap production, and EPL isn’t carved into stone tablets. If anything moves that would be EPL, prices, or volumes then that $69.7 shifts.

And comparing that straight to Serica’s $45–50/bbl breakeven isn’t clean. Triton downtime, prior year tax credits, and an unclosed BP deal make their 2025 picture anything but “steady state.” That number’s floating just as much as EnQuest’s.

Bottom line in my opinion — this isn’t about who can shout the lowest or highest breakeven figure. It’s about understanding what drives it. We’re arguing over a buck or two here, which actually shows how tight the modelling is. If I’m wrong on the PSC mechanics after this, I’ll eat my hat for breakfast which means black coffee, no sugar or milk.

Might even print this out and pin it up before the next PSC loop starts.

Roughly 4.9 million barrels are hedged for 2025 it's about 30% of expected output — mostly through puts in the mid-$60s. So no, it’s not a magic parachute, but it does mean EnQuest isn’t taking the full hit of $61 Brent on every barrel.

I think of it as a padded landing rather than a soft one. It won’t make $61 look like $80, but it narrows the pain and buys them time. Anyone claiming hedges “solve everything” or “do nothing” is overselling it either way.

Alright, here’s my base case for 2025 so we can debate real numbers.

Production: 15.4m bbl

Realised price: $63/bbl

OPEX: $450m

Lease: $70m

Interest: $75m

CAPEX: $190m

ABEX: $60m

EPL & tax: $120m

Magnus: $40m

Malaysia PSC/royalty: $60m (already netted in revenue)

Total cash cost: ~$1.0bn

Cash cost per barrel: ~$65–66

FCF @ $63 Brent ≈ breakeven to -$30m

FCF @ $70 Brent ≈ +$120–150m

FCF @ $75 Brent ≈ +$200m+

Malaysia is included in both production and revenue, with PSC and royalty already netted out. EPL is lagging, Vietnam lowers breakeven a bit, Magnus flexes with price, and Kraken lease reset is a real $60m saving. $61 Brent isn’t a death blow — just a weak point in the cycle. If you disagree, post your own numbers and let’s line them up.

Tamovv love your post. You’ve nailed the core issue that’s been driving me nuts in this debate: people keep comparing different timelines and then call it “analysis.”

The “$350k a day burn” headline makes for good drama but ignores how much 2025 is distorted by one off EPL timing, lease savings only kicking in from April, and the Malaysian uplift that doesn’t fully show until 2026. If you’re going to throw stones at EnQuest’s current burn rate, then at least compare the same years on both sides of the table.

And yes Serica isn’t a villain here, but it’s not bulletproof either. They’ve got real exposure to pricing, operational risk (Triton wasn’t a tiny hiccup), and a dividend structure that looks very different if Brent stays stuck in the low 60s.

I’m not arguing ENQ is risk-free — it’s not. But the one-sided doom narrative just doesn’t hold up if you zoom out and actually line the numbers up properly.

Looking forward to seeing your updated model. It’s good to have some actual numbers instead of just daily burn-rate theatrics.

Sekforde, I actually agree with your base point that at $80 Brent, EnQuest mints cash and the tax shield turns into real equity value. But where we part ways is in how we treat the forward curve.

The curve isn’t a crystal ball, it’s a pricing mechanism. It reflects hedging behaviour, storage economics and a hefty dose of pessimism, not some divine prophecy. If we’d taken forward curves at face value in 2020, Brent would still be in the 40s. Markets under- or overshoot reality all the time.

Yes, EnQuest is bleeding at $61. That’s the cycle we’re in. But cycles do turn and in this sector, they tend to turn fast and hard. Capex cuts, decline rates and geopolitical flare-ups tighten supply quicker than forward curves like to admit.

And just to be balanced if we’re going to treat the forward curve as carved in stone, then we have to apply that same lens to Serica. Their Prax and BP acquisitions look smart on paper at $65–70 Brent. But if oil stays stuck in the low 60s, that’s hundreds of millions tied up in deals whose payback stretches and leverage creeps in. Serica’s story has upside, sure but it isn’t risk-free either. And let’s be honest that juicy dividend Serica’s paying today looks great in a strong pricing environment. But if these prices linger, it’s the first thing that bends. Payouts aren’t sacred; cash flow is.

I’m not pretending to have a crystal ball here. All I’m saying is that forward curves are a snapshot, not a destiny. Betting against every upcycle has rarely been a winning strategy in this sector.

Sekforde... Nobody’s denying Serica has no net debt — very good for them. But let’s not pretend they’re printing money at $61 Brent. Triton didn’t “just have production issues”; it cut their guidance. Their FCF at these levels is hardly bulletproof, especially once you stack in opex, capex, and taxes.

Yes sure EnQuest is running slightly negative at this oil price. That’s exactly what happens in the bottom part of the cycle. It’s not a revelation, it’s commodity economics. If you can only imagine a static $61 world forever, of course the math looks grim. But the sector has been here before — many times and somehow it’s still around.

The way you frame it, Serica is untouchable and EnQuest is already in the grave. In reality, both are highly sensitive to price just in different ways. One rallies faster on upside, the other can’t afford to get too comfortable either. $80 Brent changes the entire narrative overnight which you more or less admitted yourself.

Sekforde please, every time Brent ticks down a dollar you make it sound like we should start carving the tombstone. A $350k/day burn at today’s $61 doesn’t mean “no intrinsic value” it plainly means that the oil is having a bad hair day. That’s called a cycle, not the end of civilisation.

Lease costs are down, Vietnam’s bringing cheaper barrels, and EPL isn’t carved into the Ten Commandments. If we declared the sector “worthless” every time Brent dipped, the North Sea would’ve been a museum 15 years ago.

And this “only hope is a 1-to-10 Serica rescue” stuff… let’s be serious. Serica isn’t sitting on some golden throne they’ve got their own production issues and fiscal headaches to deal with.

$61 Brent is a low point not a divine prophecy. Turning a temporary squeeze into a funeral speech might sound dramatic, but it’s not analysis.

Carbon capture is one of those ideas that sounds brilliant on a whiteboard… right up until someone has to pay for it. There’s no real business model it just eats money but doesn’t produce anything. So who covers the tab? Taxpayers. Energy users. Basically, the same people already carrying the load.

And let’s be honest, unless the rest of the world jumps in with the same carbon price, it’s like running a marathon with ankle weights while everyone else gets a lift to the finish line. You don’t get medals for being the only one playing by expensive rules.

CCUS isn’t evil and it has a role. But rolling it out without hard economics behind it isn’t “net zero,” it’s net fantasy. Build the market first, then scale the tech. Otherwise, we’re just paying to feel good while competitors pocket the advantage.

That’s very well said. The breakeven debate only really makes sense inside the bigger reality that oil isn’t just a commodity, it’s the backbone of the entire energy system. Prices can dip, but they can’t stay below sustainable levels forever because producers either stop or the supply crunch forces a rebound. That’s why I don’t treat current price levels as permanent. They’re just pressure points in a cycle.

Appreciate the clarity, Stevo. That’s exactly the distinction I’ve been trying to make a snapshot vs fixed reality. And yes, bond pricing has been a useful signal throughout this. I think we’ve both made our positions pretty clear, so probably a good note to park it here and revisit once the actual numbers are in.

Stevo..

Fair play at least we’ve finally flushed out the numbers properly. But let’s be clear: $70/bbl isn’t some fixed, universal truth. That’s your scenario and it´s based on today’s oil price, full EPL overlay and your own assumptions on Vietnam and Magnus.

In reality, breakeven is fluid in my opinion. Vietnam’s lower breakeven, the Kraken lease reset and any movement on EPL all shift that number down. Magnus isn’t a fixed structural drag either it sure flexes with cash flow from the asset.

If you’re going to use $70/bbl as a hard line, at least acknowledge it’s a snapshot, not a permanent state. That’s the core difference here: you’re treating current stressed conditions like they’re locked in for years and I’m not.

And honestly, this back-and-forth has taken more time and brain power than I probably should’ve spent between work, life and missing a few hours of sleep, I feel like I’ve earned a bonus barrel or two myself. :)

Anyway I hope you shake off that flu quickly and get well soon. Let’s revisit in March.

Stevo — thanks this is clearer.

So we’re now agreed on one key thing: Malaysia PSC and royalty are already baked into the $66.3/bbl reported cash cost. That was the core of the “double counting” point, and I’m glad we can put that to bed.

What’s really left here is EPL and Magnus. EPL is obviously real, but it’s a fiscal overlay, not part of the structural cost base. At today’s price, sure, it’s roughly $100m or around $15/bbl — but it’s also political and can move or disappear. Magnus is oil price dependent — around $3–4/bbl now, but it flexes with revenue.

Vietnam adds 10–11% to volumes, which might not sound massive but in a $60–70/bbl margin band, it meaningfully shifts blended cost per barrel.

And just to be clear — I’ve never said costs would “fall dramatically” in H2. The underlying mid-60s cost base remains steady; it’s just the timing of EPL and Magnus payments that makes H1 look cleaner and H2 look heavier. That doesn’t make $70/bbl some permanent breakeven.

If you want to argue $70/bbl including current EPL, fine — but that’s a tax overlay, not a fixed structural cost. That’s a very different story from “EnQuest structurally needs $70 oil to survive.”

Stevo again you’ve just admitted the core point yourself. Malaysia revenue is reported net of PSC and royalty, which means if you’re using net entitlement barrels in your production figure (which you are), those PSC costs are already baked into the $/bbl. Adding another $60m on top is pure double counting. You either model gross barrels and include PSC separately, or you model net barrels and don’t. You can’t do both.

Magnus is also a revenue-linked profit share, not a fixed base cost. If oil is lower, the Magnus payment falls. Folding that into a fixed “cost per barrel” the same way as OPEX is misleading.

And yes, Vietnam adds barrels. Even if you assume modest FCF, 1m barrels added to the denominator shifts blended cost per barrel materially it’s just math.

H1 cost of $66.3/bbl is real cash cost excluding timing items. Add EPL and Magnus at realistic levels, back out the double count, include Vietnam volumes, and you’re back in the low-to-mid $60s range. Which is exactly where this started.

You’ve now effectively again confirmed this with your own explanation.