Member Info for Hunbah

Stevo thanks for finally laying out your stack clearly, it makes things much easier. The problem is exactly what’s been pointed out all along.

You’ve got $60m of Malaysia costs sitting in there on top of entitlement revenue. That’s double counting the PSC take is already reflected in the net barrels reported, and unless you can point to a separate cash line, it doesn’t belong here.

You’ve also folded $40m of Magnus payments into base cost. That’s a timing issue, not structural OPEX. And then you’ve cut production down to 13.9m by excluding Vietnam entirely — despite earlier talking about it when arguing higher costs. Lower denominator, higher per barrel.

If you strip Malaysia and Magnus out and include Vietnam, your $71.8 magically becomes ~$60/bbl. Which… is exactly the original AA2020 cash stack you were trying to debunk.

The numbers didn’t prove your point. They proved mine.

Stevo

The bet is a sideshow, Stevo. This was never about guessing 2025’s oil price it’s about your numbers, and you still haven’t answered the actual accounting questions. Whether FCF ends slightly positive or slightly negative at $62 Brent doesn’t change the fact that your model is padded with double counting and timing distortions. I hope readers can see that clearly by now. I’ll leave it here.

Regards

Let’s just zoom out for a second and remember where this whole debate started. AA2020 laid out a very straightforward cash stack based on company guidance. Total cash costs were around $907m for the year, which translated to a break-even of roughly $59 per barrel at 15.4 million barrels of production. It wasn’t a complicated model or guesswork — just the company’s own numbers pulled together.

Then came all the noise. Malaysia was double counted, interest was inflated using coupon rather than cash paid, timing items like EPL and Magnus were shifted into H1 to make things look worse, and even Vietnam got thrown in as a guess. And after all that drama, Stevo’s own post just confirmed what was said from the start.

He admitted that in H1 2025 EnQuest realised $71 a barrel, had cash costs of $66.3 a barrel and generated $33 million of positive free cash flow. That’s a mid-60s break-even. Exactly what AA2020’s original post implied once you factor in normal timing differences.

What’s been dressed up as “fact” is just assumption stacking. The reality is much simpler. At Brent in the low to mid $60s the company broadly breaks even. Above that, free cash flow grows fast. And if EPL changes or oil moves up, the leverage is obvious.

This started at $59 breakeven, spun into a doomsday scenario, and ended right back where it began. The numbers haven’t changed only the narrative around them has.

Stevo, let’s strip this back to CASH, not layers of padding and guesswork.

MALAYSIA: Reported Malaysia revenue is AFTER PSC/ROYALTY (entitlement basis). Adding another “$60–80M MALAYSIA PSC/TAX” on top of that is STRAIGHT DOUBLE COUNTING. PSC take FLEXES WITH PRICE AND VOLUME, it’s NOT A FIXED CHEQUE that you can bolt onto 2025.

INTEREST & LEASE: H1 cash flow shows ~$44M INTEREST PAID and ~$35M LEASE PAID. Annualised, that’s ≈$87M INTEREST and ≈$70M LEASE. That’s the REAL CASH OUTFLOW. Your extra “$30M INTEREST” only exists if you ignore the cash flow and use coupon headlines.

MAGNUS & EPL: These are TIMING SHIFTS, not new structural costs. Loading them into base break-even is MISREPRESENTING TIMING AS PERMANENCE.

VIETNAM: Your “$30M PSC/TAX” is an UNVERIFIED ESTIMATE on assets not yet contributing meaningfully. It does NOT BELONG IN A BASE-CASE BREAK-EVEN.

Your “$69.5/Bbl” is nothing mystical. It’s the original cash stack PLUS ~$170M OF DUPLICATES, TIMING ITEMS AND GUESSES layered on top. If we stick to ACTUAL RUN-RATE CASH ITEMS, break-even is in the MID-60s $/BOE RANGE — exactly where management have guided.

If you disagree, then BACK IT UP WITH REAL CASH NUMBERS — NOT NARRATIVE.

To avoid the usual vague detours, here’s exactly what I’d like you to answer point by point:

1. MALAYSIA: Why are you adding $60–80M on top of Malaysian revenue when the reported $55M is already after PSC/royalty? Where is the extra cash payment line in the financials?

2. INTEREST: What is the source for your extra $30M in interest when actual cash interest paid in H1 is ~$44M (≈$87M annualised)? Show the line item.

3. MAGNUS: Do you agree Magnus payments are timing (H2-loaded), not a fixed structural annual cost? Yes or no.

4. VIETNAM: On what basis are you treating Vietnam PSC/tax as a fixed $30M cost in 2025 when the asset has not contributed materially yet?

5. LEASE: Why are you implying an understatement of lease costs when H1 cash flow clearly shows ~$35M paid — in line with ~$70M annualised and company guidance?

6. BREAK-EVEN: If your $69.5/bbl figure is genuinely clean, can you post your FULL LINE-BY-LINE CASH MODEL without assumptions, guesses, or duplicate entries?

Stevo, most of what you’re listing is already baked into the cash stack. H1 cash flow shows interest paid ~$43.6m and lease ~$35.4m. Double that and you’re around ~$87m interest and ~$70m lease for the year — pretty much what everyone serious has been using. So no, no one’s “ignoring” those costs.

The $80m Malaysia number doesn’t make sense. H1 revenue from Malaysia was about $55m. You can’t have $80m+ going out in PSC/royalty/tax at current volumes and still have positive cash from that segment. PSCs recover costs first — the government take scales with profit, not gross barrels. If you’ve actually got a source for a fixed $80m, post it. Otherwise, it’s inflated.

Magnus ($40m) and EPL deferred to H2 are timing issues, not some new permanent cost base. And you’re completely skipping the Kraken lease reset, which saves around $60m a year from April. Using 2024 as your reference point without adjusting for that is just wrong.

Production is still guided at 40–45 kboe/d for 2025 (with Vietnam), and Magnus uptime should help H2 vs H1. Bottom line: break-even sits in the mid-60s including lease, interest, decom, capex, and taxes. At $63–65 Brent they’re roughly flat. At $70+ they’re generating real FCF.

If you really think the breakeven is way higher, post the actual line-by-line cash model — not just a scary headline list. Because right now, it doesn’t stack up.

No one’s disputing your numbers — what’s twisted is how you’re trying to sell your doom scenario as fact. EPL staying exactly as it is until 2029 isn’t guaranteed, it’s just your guess. Governments shift policy all the time, and this levy was sold as temporary. Even Labour have already softened their language on it.

“FCF will be negative in 2026” is a prediction, not reality. If Brent stays nailed to $63 and nothing changes, sure it’s tight — but that’s speculation, not fact. One decent oil rally or a policy shift and the numbers flip. That’s exactly how this company is structured.

Given where sentiment and policy signals are heading, it’s not crazy to say the stock could be undervalued if EPL moves even slightly. The market’s already priced in the pain — not the upside. EnQuest is a leveraged call option on oil and tax reform. You can ignore that if it suits your narrative, but pretending it doesn’t exist won’t make it disappear.

Sekforde:

You’re twisting numbers to fit a doom narrative. Yes, FCF was $32.7m at $71 and yes, the EPL was deferred. Everyone knows that. But pretending that proves the company is screwed is just bad analysis. Real break-even sits mid-60s once you factor in the lease cost cut and proper interest, not some fantasy $55 and definitely not “EnQuest is finished.”

You’re also ignoring the elephant in the room — the tax shield. Billions in carried losses sitting there like a loaded gun. The moment the EPL is eased or ends, the effective tax rate collapses and the cash generation changes overnight. That’s not hope — that’s math.

This isn’t some zombie company limping to the finish line. It’s a high-beta oil play with massive torque to both oil price and tax reform. If you want to short it, fine — but at least base it on facts, not twisted headlines and half-baked takes.

EnQuest really isn’t that complicated. It’s a geared play on two things – the oil price and the UK’s windfall tax. At Brent around 65 dollars they’re roughly cash neutral, but every few dollars higher goes straight to free cash flow. At 75 dollars they could be banking well over 150 million a year, and with the debt that kind of swing hits the equity hard.

The same applies if the EPL is rolled back. EnQuest’s huge tax losses are basically locked away under the current rules, but a change in policy would unlock them and slash their tax bill overnight.

That’s why the share trades like a call option. Most of the downside is already priced in, but if oil climbs or the tax regime shifts, the upside could be explosive. It’s not a steady income stock – it’s a leveraged bet on oil and policy.

Continued:

or refinancing visibility could have a big impact on sentiment. For now, it’s a waiting game, but one where the downside is largely priced in and the upside could come sharply if the macro picture turns.

There’s been quite a bit of debate recently about EnQuest’s financial position, so it’s probably worth taking a step back and looking at the numbers without all the emotion. The company’s latest guidance gives a fairly clear picture of its cash demands for 2025. Opex is around 450 million dollars, lease costs about 57 million after the big reduction from April, cash taxes roughly 100 to 120 million, interest somewhere between 30 and 50 million depending on draw levels, capex about 190 million and abandonment around 60 million. Add that all together and you get total cash outflow in the region of 900 to 930 million dollars.

With full year production expected at roughly 15.4 million barrels of oil equivalent, or just over 42 thousand barrels per day, the maths works out quite neatly. Every one dollar change in realised oil price moves cash flow by around 15 million dollars. That means the free cash flow break-even for this year sits somewhere between 59 and 65 dollars per barrel depending on interest and working capital timing. At current prices in the low sixties EnQuest is roughly cash neutral or slightly positive. If Brent averages 70 to 75 dollars, the company could generate between 70 and 150 million dollars of free cash flow.

There are also several positive factors that shouldn’t be ignored. The reduction in Kraken lease costs only kicked in from April, so next year will see the full year benefit of that. The bonds, which mature in 2027, continue to trade strongly, suggesting that credit investors — who tend to be much more conservative than equity markets — do not see a default risk any time soon. Operationally, uptime at Magnus and Kraken remains high and the company has proven that it can run these mature fields efficiently.

The more cautious voices also have fair points though. Some payments such as EPL tax, Magnus and parts of capex were deferred from the first half into the second, which makes the reported H1 cash flow look slightly better than it really was. True interest expense is probably closer to 50 million than 30. Gas prices are lower than oil, so realised prices per boe can be a few dollars less than Brent. And of course, the 2027 bonds will need to be refinanced by mid 2026, which will only be easy if cash generation is stable.

Put all of this together and the picture becomes clearer. At 60 dollar oil, EnQuest is around break-even or slightly negative but still able to manage its operations. At 65, it generates positive cash flow and starts to reduce debt slowly. Above 70, debt falls quickly and the balance sheet strengthens fast. The company is not finished and it is certainly not on the verge of bankruptcy as some have suggested. What we’re seeing is the effect of a cyclical downturn combined with tax pressure and sentiment fatigue.

In short, EnQuest is walking a tightrope but it hasn’t fallen off it. The share price already reflects distress, so even small improvements in oil price, tax term

I believe Kraken is right that FCF breakeven is around 58-59 USD with current information given from the company.

Couldn’t this be a golden opportunity for Starmer to sideline Rayner, appoint Miliband as Deputy PM, and quietly drop his unpopular Net Zero narrative — all while saving face for himself and the party?

Hi!

Posted here before but from Enquest discord.

Good morning xxxxxx,

I thank you for your email and for your feedback.

As you note, the merger discussions with Serica were ultimately undone by the volatile macro environment, which is, of course, frustrating given the value that each party saw in the proposed combination.

We remain focused on delivering transformative growth in our UK business, and I can reaffirm our previous statements that several discussions to do so are ongoing. Any such deal would be underpinned by our differentiated operating capability and the ability to accelerate the value of our UK tax asset.

Best regards,

Craig

I believe the market was really expecting a deal and since there was none delivered the share price is stuck in this downward/flatline trend until the company delivers something material that either makes the company use its tax losses in a creative way or that the EPL changes.

Hey Kraken,

Only Amjad knows what is really going on, and I understand you're disappointed – just like the rest of us LTHs. We’ve clearly been dealt a bad hand, and while it would be comforting to blame it all on bad luck, that simply wouldn’t be true.

There’s also a chronic lack of information from the company, with very little effort to reassure shareholders – especially potential new investors – that we’re actually in a winning game.

AB is a major shareholder and has probably lost more money than any of us, so in theory, he should be highly motivated to see the share price go up. But that’s not the impression we’re getting. The silent treatment, broken promises, and the lack of follow-through on initiatives promised over a year ago – it's disheartening.

Take the buyback program for example: What happened to the previously announced buybacks that were never executed? Instead of using the program to reduce float and support the share price, it feels like it was used as a bonus pool for the Board of Directors. Seeing Amjad cash out 500,000 shares that should have been cancelled certainly doesn't inspire confidence.

Right now, I’m not happy. I have no clue what major deals (if any) are still in the pipeline. And regarding the Serica deal – if it truly was a great opportunity as we were led to believe – it would’ve been nice to get a real explanation as to why it fell through, rather than the usual vague “fiscal policy” excuse.

I’ll post what Craig responded with in an email on our Discord – hopefully it sheds some light.

"Good morning xxxxxx,

I thank you for your email and for your feedback.

As you note, the merger discussions with Serica were ultimately undone by the volatile macro environment, which is, of course, frustrating given the value that each party saw in the proposed combination.

We remain focused on delivering transformative growth in our UK business, and I can reaffirm our previous statements that several discussions to do so are ongoing. Any such deal would be underpinned by our differentiated operating capability and the ability to accelerate the value of our UK tax asset.

Best regards,

Craig"

Just recently came across Serica — what an incredible opportunity! A perfectly diversified asset base with an ideal gas/oil mix, and the dividend track record speaks for itself. Judging by the latest annual report, I see no reason why those generous payouts wouldn’t continue indefinitely. Feels like one of those rare cases where the market just hasn’t realized the true value yet. The train definitely hasn’t left the station — plenty of room for those paying attention.

Ed Miliband is absolutely right in pointing out that the price of oil is set on the global commodities market. Lowering taxes on local oil companies won’t reduce the price of oil or electricity—that’s simply not how the market works. However, I think the interviewer makes a fair point too: just because something is traded on global markets doesn't automatically justify applying punitive taxes when prices rise.

The original purpose of the windfall tax was to target oil and gas companies that were making extraordinary profits during a crisis—specifically, the war in Ukraine, which was not just any crisis but a direct act of aggression by Russia that continues to this day. The tax was framed as a way of making these companies contribute more in a time of shared hardship.

But the problem now is that the tax regime seems increasingly punitive. Oil prices have dropped to levels even lower than before the war, yet the tax remains. If you're going to charge companies more when they make outsized profits, then shouldn’t you also be prepared to support them when they face losses?

Take gold, for example. Its price has reached $3,500 an ounce, yet there’s no talk of applying a similar windfall tax to companies associated with this. Or look at the banking sector—many banks have reported record profits, but no punitive tax has been applied to them either. And why governments doesnt do this is because its hurting trust and its a slippery slope and ultimately lowers confidence in the economical environment.

Meanwhile, North Sea oil production is no longer delivering meaningful volumes, and many of the big profit-making companies have already left. The companies that remain are often among the cleanest, most transparent, and least corrupt oil producers in the world. They still contribute significantly to jobs and tax revenue in the UK.

So why penalize them? Selling oil and gas on the global market isn’t wrong—it’s necessary. And as a government, wouldn’t it make more sense to support clean, domestic production that supplies oil to other countires rather than said countries becoming increasingly reliant on imports from petrostates and corrupt regimes, some of which openly oppose Western democratic values?

Even if we shut down all production in the North Sea tomorrow, the global demand for those barrels of oil and gas wouldn’t disappear. They’d simply be sourced from somewhere else—likely from countries with far lower environmental and ethical standards.

Https://oilprice.com/Company-News/Indonesia-Awards-Five-Major-Oil-Gas-Blocks-to-Boost-Energy-Security.html

"A consortium of eight companies—including Enquest Petroleum Production Malaysia, BP Exploration Indonesia, and CNOOC Southeast Asia—secured the high-potential Gaea and Gaea II blocks in West Papua. Gaea is estimated to hold 9.6 billion barrels of oil or 71.8 trillion cubic feet of gas, while Gaea II carries potential reserves of 8.5 billion barrels of oil or 35.1 tcf of gas."

Kamrat is certainly not Stevo12. This is a crazy assumption.

So, we find ourselves in a bit of a conundrum.

As an EnQuest owner, I see an opportunity to accelerate our tax losses with the help of your gas. We need each other to unlock synergies that could benefit both companies.

However, I believe you should be cautious in how you evaluate your business. Given your history of paying out dividends, it’s clear that this approach is not sustainable in the long run.

It seems like you now need this deal to maintain your dividends for this year.

You spent your capital, inflated your share price, and now must face the reality of the situation.

I think we can agree that whatever offer comes next will be based on these terms.