Member Info for Krok

Russian gas production is increasing, doesnt help to stop the price hike

Russian gas production up 9.6% YoY in September

On 4 October, Interfax reported Russian gas production for September. Total output of 61.0bcm in September 2021 was up 5.7% MoM and up 9.6% YoY. On a YtD basis, Russian gas production is up 11.9% YoY. Gazprom output of 40.9bcm accounted for 67% of Russian total output and was up 4.6% MoM and up 11.9% YoY. NOVATEK's 5.9bcm was up 14.4% MoM and down 4.6% YoY. Rosneft's 3.9bcm was up 2.7% MoM and up 18.5% YoY. Gazprom Neft's 2.3bcm was down 2.3% MoM and up 42.1% YoY and LUKOIL's 1.5bcm was down 2.0% MoM and down 7.0% YoY.

SR123, you definitely have a point here

On the other hand, if ENW had $100 mn in cash, not $60 mn, what would that have changed for us, minority shareholders?

Not much, I reckon. Still no dividends, still no meaningful increase in production, still too much capex per well

Both have a number of pros and cons. I shared my point of view on both stocks many times

Under the circumstances, I would own both. The trend is good for both

Unless either or both of them pays a divi, cash balance by itself does not mean much

I am seriously concerned by JKX's ability to maintain its Ukrainian production, let alone to grow it. The latest well was a success (contrary to my expectations, I must admit) but before that there were several failures. JKX's assets in Ukraine are severely depleted, you should clearly understand this. The latest well changed nothing in this regard

ENW has better quality of assets, but the reserves are deep in the ground, so it costs a fortune to drill a well. 500-600 boepd initial production which quickly falls is not enough to justify a $12-15 well cost. Plus, it seems that the controlling shareholder may be benefiting from it

Anyway, the major driver for both companies now is gas prices. Seems that it will be a harsh winter for Europe. Share prices should benefit from this further

I made a lot of money on ENW and, to a lesser extent, on JKX back in 2018. Hope to repeat it, at least partially this time

Bad to be a small gas producer in Russia watching how gas prices skyrocket around the globe, while you can hardly cover your production costs))

The Russian asset brings no upside potential. The gas price is still $55-60/mcm, as we speak

Great to be fertilizers producer in Russia these days. Or to be a producer of whatever it is, which can eventually be exported, and which requires a lot of gas to produce

Yes, good performance so dar. Hope we’ll reach 55-60p by year end, at which level I will certainly sell

Need good well result. Any time soon

Hey, re JKX’s Russian asset, it’s long overdue, they should have done it years ago

The plan is to get out of Russia, as there is a real risk the asset is expropriated one way or another

The asset value is $30-40 mn. And it will not be easy to sell

Nothing about Ukraine, I reckon

Good to be in both JKX and ENW. For the record, I hold both for now

I covered key issues ENW if facing in my previous post. Now would like to highlight some brighter areas, which may support the share price going forward

1) Gas prices: 1H - $249/mcm, 3Q so far - $431/mcm, i.e. 73% higher

2) Production: slightly higher production in 3Q as in 1H (+4%)

3) Revenue - 65-70% increase, which translates to $33-35 mn revenue in 3Q alone

4) Additional production from well SV-59 should give a decent boost to revenue and profitability from 4Q forward even if it's only 500-600 boepd initially. Anything above that would be a pleasant surprise

5) Effective subsoil tax rate decreases as "old" production is replaced by production from new wells. Gas tax rate is only 6% for new deep wells

Cash was $67 mn at some point, only $54 mn now

So they’ve spent ALL what they earned for the last couple of years, PLUS $13 mn

To get a small increase in production only

Cash machine, indeed))

Oldholder, dont be so naive when you invest in dodgy stocks

Kickbacks are a common thing in drilling, can be done easily. No auditor will track this, particularly big 4, who “rely on internal controls”))

Hey, Straycat

I would at least wait for new well results. 650-700 boepd will give a decent boost to 4Q revenue and profitability

Gas prices increase every day. There is a chance the stock will get noticed

40-45p should be the price for this stock in the current environment, in my view

1) Whatever this company earns, it spends all of it on capex

2) Capex does not result in a material increase in production, it is value destructive

3) Capex is likely one of the ways to get cash out of the company by the shareholder. Hence, no need for dividend

4) Sales do not increase proportionally to the gas prices. All gas is sold via Smart Energy. Probably, another source to get money outside of the company. Even less need for the divi

5) No income on cash. Should be at least $3-4 mn per annum on $60 mn cash balance. One more way to earn money, possibly. Zero chance for divi, alas

6) Said it many times, cash will decrease in 2021 and, likely, going forward. Those who try to calculate by which date cash will equal to mcap are idiots. Minus $6 mn for 8 months 2021, at a time of record gas prices and increasing production. Wow

That all said, I am still holding for now. Everything has its price and gas prices help a lot here. Have nothing to do with the company, though

Yes, it may well be that Novinskiy earns money either on drilling or on re-selling ENW’s gas. If this is the case, he may not need any dividends

Also, dividends may not be tax efficient for him

He owns UGV directly, this is an asset which is appr. 2/3 the size of ENW. Bigger risk here is that he sells it to ENW at an inflated price and, as a result, gets all cash ENW has. Plus, ENW may need to borrow something for that to happen

That said, the market can initially react positively on this, not understanding the real intention

Not sure I understand what you mean here

They are unable to properly deploy their existing cash, why borrow?

What they’ve spent recently on drilling seems to be value destructive, at least at ENW level

The controlling shareholder is not willing to share company’s cash with poor minorities. Obvious by now

Any debt will be expensive, I reckon around 12% per annum. JKX had 9% convertible bond but that was in a different, pre-2014 world

Also, you should not forget that the SC well they have recently spudded at their new asset is riskier and even more expensive that what they drill at the SV field

Furthermore, even if they are successful with their SC-4 well, once the well is drilled and tested, they will need to shut it down for another 1-2 years until they build a pipeline and a gas plant at the field. So $15 mn or more will be spent this year, revenue will start in 2022 or 2023

Hey. oldholder, $1oo mn revenue and $35 mn net profit are easily achievable in 2021, no doubt

But then there are two wells ($25-30 mn), 3D seismic ($3-5 mn) and plant upgrade (cost unknown)

So free cash flow will be zero or negative, most likely. Cash will decrease or stay around the current $60 mn level

And then the question is what will be initial flow rates from these wells and how quickly they will deteriorate

In Russia, average gas prices are around US$60/mcm in 2021 and you can buy as much as you need))

Gas prices in Europe are US$120 per boe (divide mcm by 5.6). This is almost two times the Brent price - unbelievable, never happened before

Hey, OfficerFigby, spot on. Two latest wells drilled by ENW have been a disaster indeed. Mentioned it a few times here

The worst part is that each did cost US$12-15 mn. Will never pay back in any gas price environment

That said, those are sunk costs, irrelevant now. The wells still added somewhat to the overall production, which is 5 kboepd and which is pure gold these days

Apologies for the previous post

Gazprom is expected to pay a dividend in 2021, which would imply a 12-13% yield on the current share price

ENW and JKX should pay a dividend as well. Never been a better moment. Will they? Still not sure.