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Hello E121 and Modestus,
Thank you for your suggestions of gas related stocks. I am now following them closely. Also on ICD on which I took a punt. Hope Modestus's holidays in Norway go well. I have been enjoying mine, along with work. Have bumped into some Swedish people... They are everywhere, but have yet to hear any of them saying ..."utdelning"... So, I know I have yet to come face to face with Pelle...

E121, Thank you for your very good discussion of hedging. We will now see how many MMbbls ENQ hedged since end of H1 until the results. We know of 2 MMbbls, but let us hope they got to their sense before the price tanked... Hope you enjoyed the Olympics. Some competitions were really interesting this time round.

gkb47, you asked when had the forties pipeline shutdown. I believe that it was the last week of May until the 3rd week of june. I guess you got it right with the Delta variant. In the end it is not the clinical dat that matters, but how politicians react to it. And some of them seem not to understand that the zero covid policy is non-sense given the natural evolution of this virus. so, NZ and Australia seem to got themseleves into a corner. Vaccination or no vaccination they will have cases as soon as they open the borders...

ATB

i hope CNE's board act on behalf of the shatreholders, not on the basis of their own incentives which are not aligned. a settlement at any cost will reward them handsomely.
Time to write to CNE's IR.

I suggest shareholders write to CAIRN IR letting them know the $1B quoted in the FT is not enough.

India needs to pay as per the international court's verdict. $1.2B + interest and expenses.

Receiving $1B is not a good outcome, as the company spent huge amounts og money litigating and also did not have the $1.2B amount at its disposal as it should have had. Imagine the deals and retrn CNE would have done had it had that money.

So, write to IR.

ATB

"the truth is that this stock would be undervalued even at 30p."
If that is the case tell us your calculations. You can read my earlier posts on IOF. They will allow you to see that it is not quite like that. The production level is low, they had unsold stocks of final product at YE, and always need to build new facilities to keep production constant. So, Operational cash flow is meaningless. You have to subtact CAPEX to keep producton stable.
So, 30p? Not quite.
ATB

No, no, and no.
Nothing less than $1.2 in cash. CNE's board should not play games with the shareholders. This is Argentina soveriegn debt situation again... India cannot get out of it, and CNE has the moral obligation to show the world that India cannot get away with highway robbery...

"These new facilities have also already enabled us to offer to redeem the Group's £4 million convertible loan notes, the interest rate on which was set to rise to 10% on 1 July 2021. The Company is pleased to confirm that all bondholders have responded to our offer and that they requested that £3,056,938 of the loan notes to be repaid in cash and £943,062 to be converted into Ordinary Shares in the Company.
As per the original terms of the loan notes, the redemption is subject to a 25% early redemption premium and a total redemption payment of £3,821,172.50 will be made today. The early redemption penalty included of £764,234.50 will be disclosed as an exceptional interest cost in the half year report."

So, a 25% penalty for early redemption. With interest rate at 10% that is 2.5 years of interest. Should have kept the loan. Is the board working for all shareholders or just for the shareholder that lent the money?

More of the gravy train: LTIP...
https://ir.design-portfolio.co.uk/viewer/22/12845

typical of an AIM company when things go wrong for the PIs...

Hi Modestus,
I might bring noise soon... ATB

Hi acchi,
Thank you for the historical perspective on hedging.
I am fully in agreement with you. When they announce their results in September they will report their hedging , I would hope. We will see then what volume they have hedged in light of the RBL conditions.

Hi Pelle, What matters for the SP is that Moody's upped its rating. SP targets by others might be upped as well. The good news is that the POO is c. $75/bbl and that as you write ENQ can stop assuming and just guarantee a floor price for its oil at a small cost in order to keep the upside of what acchi wrote, " their fantasy that oil would reach around $90 or $100/bbl". So, they can keep their fantasy alive for a small cost... I leave it to you to cross check Moody's calculations.

Hi Tigar, Enq has to give a lot more info to Moody's than to us to have its rating re-assessed. But, collectively (i.e., pooling together the knowledge shared in this BB we understand ENQ's moving parts calculations from than Moody's. I can guarantee you that. We even have someone watching the EP... ) I have also learned a lot by going through ENQ's annual report. THere are bits and bobs there, helpful to understand the different moving parts of ENQ.

Enjoy your weekend all. I look forward to the OGA data. Anyway, enough of ENQ for me. I am now going to read up on E121's and Modestus's kind suggestions, which i think can be very useful to diversify risk.

ATB

I am with Therapist. 49228 boepd 2021 including GE in Q4. Moody's will be wrong. We will get OGA data for May tomorrow AM or Monday.

Tigar, I like your numbers. But, there are several interpretations on how they did their calculations, e.g., did they take the realized price of hedged production rather than $55/bbl for the hedged barrels? i assume the answer is yes . Let us wait for H1 figures to get an idea of where ENQ is.

Pelle, thank you. my Swedish is getting better every month...

BTW, Petronordic carrying load #98 left AK in the early hours of the morning...

ATB

Hi TWalbyoff,
Others can add more on hedging. The RBL has rules for hedging, so roughly speaking the strike price of the put has to be no less than 90% of the futures price, as I wrote earlier. As I wrote I would be keen on having 2/3 of net entitlement (i.e., subtracting BP's 37.5% stake in Magnus, and 1/3 of the Malaysia production) in 2021 hedged by the end of August. I have no idea how they are going to layer those hedges. There are lots of strategies.

Hi Tigar, yes, but the fair pricing of options is known under different sets of assumptions. Different assumptions different model. One key input of the models is a measure of volatility... higher volatility implies higher fair price for the option.

Agreed he got one very very wrong and hopefully got another very right. But, I want to know at the end of the year, with hopefully similar production as in 2020 what is the level of debt at that time... We have to remember GE will have 15MMbbls of 2P reserves left at the end of 2021 in the optimistic scenario put forward by the CPR people.

Anyway, Moody's will lift the SP next week, so the day traders can have their day.

Hi Pelle, Yes, I read through Moody's too fast. But they are clearly wrong there is no way ENQ's production w/out GE will average 49Kboepd in 2021. If it is that number or higher then you get to score again ...

Has Londoner7 liquidated his position? He has not even commented on the prospectus...

ATB

Hi Tigar,
that is not quite like that.

Buy put at $65, sell call at $72 (the costs even out), and buy call at $80 (at around $3/bbl), You guarantee $65 - $3 = $62 if Brent is < $65/bbl, will get net of PRICE - $3 up to $72 (when Brent> =$65), $69/bbl for Brent up to $80/bbl, and for Brent> $80 you receive PRICE - $8 -$3 = PRICE - $11.
No hindsight is required... Yes, it is not free, but insurance always has a cost... So, the question is are you comfortble spending $3M now to hedge 1MMbbls of October 2022 production, and stop part of the assuming as Pelle writes, or find yourself selling those barrels at a price of $50/bbl if oil price tanks to that level.

I would be more than happy to hedge 2/3 of October 22 production in this way. But, we do not take such decisions.. AB&CFO do.
And they should read Moody's report with attention:
"Despite the company's adequate liquidity over the next 12-18 months, Moody's notes that the company will face a maturity wall in October 2023 when the existing bonds come due."

They can knock down the top of the wall now by hedging more of the 2022 production...

ATB

Hi Twalbyoff,
Have a look at the futures curve:
https://www.cmegroup.com/markets/energy/crude-oil/brent-crude-oil.quotes.html
It is in "steep" backwardation. E.g., difference b/w Oct 21 and Oct 22 contract is about $6/bbl.
So Oct 22 futures contract at $68.91.
RBL requires the put to be not 10% below this (well, it is a bit more intricate than this, but I will simplify). So, buy a put for Oct 22 w/ a strike price of $65, it would be c. $6.
https://www.barchart.com/futures/quotes/CBV22/options/oct-22?futuresOptionsTime=daily
(use daily not intradaly, and check Column "Last")
So, not cheap, if you buy a put with a strike price of $62 it would cost c. $5.15. You do not save much by lowering your call by $3/bbl. All down to the mechanics of how options are priced.
That is why they go for two-way collars... by sellng a call at a higher price. You can see the price at which they are trading as well. Basically, a call with a strike price of $72 trades c. $6/bbl.
ATB

Hello Acchi,
I fully agree with you.
I suggest you write to IR and tell them that.
ATB

Hi Pelle,
Well, write to AB and tell him to hedge, hedge.
"I see 49k full year, if H1 was 46k H2 should be 52k."
their assumptions are 46K Q1 to Q3 plus 58KQ4 (including GE of 10K in Q4, and improved production in the other assets) gives you 49K full year.

Their calculations: "Taking into account the group's current hedge book and assuming an average Brent price of $55/barrel and opex of $15/boe, Moody's estimates that EnQuest will generate a Moody's Adjusted EBITDA of $730 million and a Free Cash Flow of around $400 million in 2021 after (i) $130 million of capex and principal lease repayments and (ii) approximately $40 million of deferred and contingent consideration paid related to the Magnus acquisition. Our FCF expectation excludes $73 million of interest payments on the bonds." so, FCF of $400+$40-$36.5 (as the other half was paid in kind in Feb and April) = $396.5M full year. Note they use hedges in place, only use $55/bbl for the 4MMbbls not hedged for 2021. So, difference would not be more than another $60M. So, adjusting for that the figure would be $460M...
ATB

Hi E121,
Apologies for not replying back yesterday. I ended up being out and about.
The banks will want their cash back, so heging will have to be in place. So, ENQ now just has to do its part and produce.

Thank you for the references to VET and CPG. I came across VET because PMG partners it in the gas fields in the Netherlands. The latter is a minow, and does not offer enough exposure to gas.
I will have a go at the VET accounts again this weekend and might buy on Monday. I know the upside this year is limited given their hedging of 70% of the production. But, if the current high prices lead them to hedge 2022 production at the current gas price levels, then there is upside...

Thank you for sharing your views on ICD.

In my ways, oil stocks are becoming tobacco stocks that people stay away from (at the moment they have yields and trade on low PERs, because people think the business will disappear. Well, I do not think so. Humans are defined by their behavioural addictions...). But since oil stocks are cyclical, it is even worse.
SUN is trading at a very low price because they cut the dividend and are having issues with their oil sands production. They are also trying to become greener...
An oil/energy stock I like is ENI. I have mentioned it here a couple of times.

Permian: EXXON increasing production in Q3/Q4 and others too. But let us see what happens at the aggregate level.

Hi Modestus, Thank you. I agree, VET did the right thing for its shareholders at that time, mid 2020, by hedging. I was writing from the perspective of someone wanting to buy in now to get as much exposure as possible to the upside of gas prices. But, as I wrote above, if I think about 2022 revenues given hedging being done now, there is still a good case to invest. I am impressed by how much they disclose. Very impressive. They disclose everything. thank you again.

ATB

Modestus, thank you. having looked at the files, they seem to be way too hedged (70%) at low prices to make the most of the increase of the price of natural gas in europe in 2021. what do you think?
ATB

Argentagold,
Spot on. Looney is out of his depth... For an integrated major having a petrochmical business makes sense, but to appreciate that one has to be sensible... Looney is not...

Is this why SP tanked close to 6% today?

https://www.iraqoilreport.com/news/kurdistan-gives-oil-companies-18-month-deadline-to-end-gas-flaring-43931/?utm_source=IOR+Newsletter&utm_campaign=1fed0f0049-Email_Update&utm_medium=email&utm_term=0_f9870911e6-1fed0f0049-192935976

How much flaring is there in GENL's producing assets? Does any one know?

KRG is trying to steal IOCs's assets by stealth.

KRG's is paying down money owed at a pce of $4 per month. So 2.5 years to go...They will never repay that money. It is time IOCs get together and tell KRG that its behaviour has to change.

ATB

Hi E121,
Yes, I also expect Enq's H1 profit to be quite high (Pelle is going to tell us his estimate -:) ) and reverse the write downs related to the assets that did no enter CoP, but that will last as long as the oil price is high. That is why I follow the FCF, not profits, in commodity stocks.
I do not have complaints all the time -:) At the end of 2019, January 2020, my only concern was hedging, as production was going well. Now, I just hope ENQ focuses on pumping those hydrocarbons from under the ground and hedges those bbls.

I am quite content with Brent at current levels. I was expecting a slower ramp up of the vaccines and China to dump its oil stocks, and shale to ramp up production faster. Clearly, was wrong.

I have yet to read suncor's results in detail, as I own some.
But going back to ICD, do you know why their share price is so low?

A question for you and others: which play is good given the level of crazy gas prices in Europe? Is there a medium size UK quoted O&G that is mostly gas? Across the pomd VET would be an option, as they have interest in France and Netherlands.

Hi Hitman1a,
Yes, it is possible Suncor will exit North Sea at some point. They have good assets. But at the moment I doubt ENQ can embark on another acquisition that is profitable. Were ENQ to get Magnus/Kraken/GE to produce 49Kboepd in 2022 that would be enough for me...
On the dilution issue, Pelle is complaining, but he already has way too many ENQ shares, and apparently even AB knows that ... LOL

ATB

hitman1a, please do read suncor 2nd quarter update and transcript from earnings call. They are so keen to complete the deal that I am assigning probability of 99% to it completing. They say it will be in Spetember, and all is on track.

By the way, thank Therapist for finding relevant Malaysia related news. I expect ENQ to announce something there by the end of H2.

ATB