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Hi gkb47, Is UOG still good value given current SP?
Hi Pelle, H1 180M FCF? I hope you are prepared for a surprise. I wrote a few months ago, no more than $120MFCF in H1, and it could be lower...
As far as debt reduction in 2022 bear in mind that production that counts to FCF (i.e., excluding BP's stake in Magnus and Petronas's share of Malaysia production) will be no more than 47.5Kboepd, as there is no drilling this year, and there is natural decline. So that is no more than c. 17Mbbls. They need to maximize revenue from that production. I would want them to hedge more now.

Hi January, What I meant with my quote is that I am not going to keep insisting that average oil price will be $60 or low in 2021, given the facts. If I get it wrong I own up.
Interest rate: Yes, for the initial period 4.25%, as inmdicated by hitman1a a is an excllent outcome. I was expecting 5% or higher. Depending on the benchmark in later periods the interest rate might be 5% or more. But overall, and before I read the prospectus, so I might quality my statement later, it seems the rate negotiated is one that has to be very welcome.

I am afraid any pillow talk is b/w AB and his wife.... But, you have run a business, so you know how it gets tiring to run the parts of the business that make some money, but that at the end of the day cannot make a huge difference to how successful the whole business will be. I imagine that is part of what happened. Pure speculation, but...

ATB

Hi Pelle,
Above $45/bbl these fields were profitable.
Anyway, have you read the prospectus? What do you think about ENQ? Do you think it has made a lot of FCF in H1?...
ATB

And, yes Pelle it was not the correct decision, but AB was also fed up with the stuff happening at these oil fields. He thought it was not worth his time and energy dealing with such oilfields. If he were the CEO in a company he did not control he might have had to put up with the hassle. But since he controld ENQ he does as he wishes. This is not a criticism. This is the way people in general operate.

ATB

HI Pelle,
Who says that I am pessimistic about the oil price? Let me quote John Maynard Keynes — 'When the facts change, I change my mind - what do you do, sir?' This question is for you and everybody who claims in H1 FCF was $30M or more per month... Tigar stated "I take that to mean our FCF has built up since Jan's 25m payment, as a war chest ". I am looking forward to find out where the war chest is...

ATB

Hi gkb47, the explanation revolves around two different factors.
1) ENQ was caught with its trousers down, having not hedged any production for 2020Q2 to Q4 by early Q1. So, money was short, and keeping the production going meant losing money every day given OPEX/bbl. Shutting down still required spending money everyday. Also, they saved some of the decom expenses by bringing CoP forward. But, they were forced by cash constraints to just move to CoP, unless they were going to borrow more.
2) These old oilfields were generating issues very frequently and AB was fed up of being called frequently about issues with them. He had had enough of being woken up with the news that more stuff had happened with them. He thought the FCF that these assets could generate was not worth him being woken up now and then. Actually, I think he is getting tired of being CEO. I doubt he will stay as CEO past 2024.

ATB
p.s: How is UKOG going?

Just for the record I am voting yes on the GE deal, but I do not take Gaffney, Cline & Co's estimates at face value... If their estimates are correct the deal will indeed be very good.

However, at current oil prices the 2P reserves ENQ threw away when it moved Heather/Broom, Thistle/Deveron and the Dons to CoP would generate a lot of FCF at the moment if these oil fields were still producing. It is not hindsight. It was easy to see that the option value of keeping these oil fields going was strictly positive.

ATB

Hi Therapist,

My last post to you started with "no, no, no...". This one starts with "yes, yes, yes..."
The April OGA data do not not look, but we already knew it... kind of. Yet, I was wondering if you could post you lovely graphs and excel Table with visible headers... (I think the Spring jumping jack you had at the bottom of the file you posted back in June pushed the headers of the table out of the page).
Magnus oil production in April came in at c. 10Kbopd. Really poor performance. At this pace BP's contingent consideration will never be repaid no matter how high oil prices go... What is going on with the bould on the pipeline? Has it shut down Magnus?
I enjoyed reading the piece on the heavy oil fields you posted... Krake's production in june was fine. Last load suggests c. 35Kbopd. Happy with that.

The problem is other stuff that happens and we do not know about.

The (C)PR in the prospectus claims that ENQ's WI in GE has 2P oil reserves of 19MM. If so, the $375M price tag implies a $20M/1MM 2P reserves. The problem is the C in (C)PR apears inside parentheses for a reason. Gaffney&Cline's report for Magnus is in stark contrast with reality so far. But hey, if indeed the 2P oil reseves are 19MM then the GE acquisition will be profitable. Tigar and others should go back and look at Londoner7's projected cash adjustment for the sale. I am expecting his projected figures to be spot on, as usual.

Speaking of which I do hope Londoner7 does express his views on the latest title of Enquest's Capital Raises series.

Pelle: keep high hopes for the forbidden word...

ATB

I added to my position earlier today.

basically, this means gazprombank can now object to the sale, and pog gets to keep its stake in IRC... If that is the case, then we shuld be happy. If not, oh well... this a rollercoaster after all.

ATB

HI Therapist,
no, no, no.... the key word is next " ...next 12 months’ production on a rolling annual basis, up to 60% in the following 12-month period and 50% in the subsequent 12-month period." it is always about the future. past hedged volumes do not matter. anyway, this is all irrelevant as ENQ has a terrible track record at hedging. just ask Pelle. they botched it 3 times by not protecting the downside in the last 3 years.

i suggest you redeem yourself by posting the lovely oil production graphs and tables, once the oga data is released tomorrow.

Hi all,
Last tanker left AK on the 17th at 19:00. so, if tanker leaves tomorrow by 19:00 it will be 15 days. thus, 33.5Kbopd for this offload cycle.

There is a lot of talk about FCF/month. I believe Tarmak is projecting FCF in H1 with great detail and care. Increasing production in June (from Malaysia, Kraken or Magnus) is key to keep H1 production withing guidance, given stoppage at GKA ( 21 days at 4Kboepd = 84Kboe lost due to stoppage that ENQ needs to get from elsewhere to keep production above lower limit of guidance, i.e., 46Kboepd.

at the moment oil Price level is quite high, but ENQ is unable to lift production volume to the upper end of the guidance... and that is why FCF cannot increase as much as one would want.

ATB

Hi Londoner7 and Therapist,

Thank you.
If that were to happen, the tanker leaving AK on the 1st would make it 15 days since the last offload. So that would be 33.5Kbopd. You know me: I expect more. I was looking for AK bo be back producing 35Kbopd...

Oil is going to have to be like tobacco... returns will have to come by via Pelle's dreams. I have a small holding in IMB and collect Pelle's dreams every quarter...

Hope you can enjoy the sun ...

ATB

lawry, i was against it.

Aloj,
production decline: see Trading update in May (Kraken> 15%, Magnus > 20%. Hopefully things will improve by end of year)
FCF: Please bear in mind that the 46kboepd does not all contribute to FCF as per ENQ's operationalization of FCF. You need to subtract 1kboepd that goes to Petronas, and 5.5Kboepd to BP (37.5% of Magnus). So, you are left with 39.5kboepd, and a small fraction of it is gas.
I predict H1 accounts will have Malaysia expenditure related to repairing the damage from the fire last October that although insured will not be reimbursed so quickly. I am thinking reimbursement will be made within 1 year of damage, so in H2 that money will come in.
There were expenses in Kraken with repairs, there is ongoing work in magnus, redundacy payments that were provisioned i think. there is the BP vendor loan repayment made in H1 and the interest that it accrues that has to be paid. There is bonds PIK interest in Feb and April at 9%. all this adds up.
Moreover, if the news on net debt by end of April were good ENQ would have published the figures. I do not believe any of the stories being told why net debt figures are not being released.
We shall see how far my figure turns out to be. I would be delighted if my figures are very wrong and net debt reduction comes in at $180M as posted by Pelle! (But to assess my investment the figure above is the one I am using. Yes, it is a very pessimistic assessment. H2 will be a very different story. That it is the time when I think with all hubs producing more (even excluding GE) monthly FCF will be much higher.

Londoner7: Thank you for your remarks. I should have provided some context, as Jan2 likes, so as not upset people like him (he is right!). Just lack of time. I am contributing to the demand of jet fuel next weekend, so very busy to get everything done before then...
I am expecting ABX to stay at $70M, or even go higher next year. There is a lot of decom work that will go on next year. I have no firm idea of ENQ's plans for CAPEX in 2022, but expect at least 4 Magnus wells (production is declining fast. We are very far from the 20Kbopd we were told), and very extensive work in Malaysia, and hopefully a well at Kraken very late in 2022 (they must already have data they can use to drill, even though they will do more seismic 3D work in other areas) . Also expect ENQ to get going with licences around the GKA (before new restrictions are put in place by UK government because of its green agenda) and spend on Bressay/Bentley. Production decline in 2020 and 2021 was so pronounced that ENQ will need to show that it can arrest it. I might be very wrong, and you might well be spot on. But, can we believe what ENQ says when they underestimated spend on ABX by so much? AB is in the driving seat and he will do as he wishes...

Finally, Chilting's first paragraph at 19:45, described ENQ's situation so eloquently and so spot on that I think everyone should read it .

ATB

Hi gkb47,
This is the ENQ bb. There will never be much consensus. We know some people have one-track minds... some dream with... (but we know that won't happen before 2024)... others think ENQ is the best company in the world and write their monikers ... and then occasionally knowledgeable, fair-minded and realistic posters join the crowd (Londoner7, slift, etc..) making this a much better BB.

W/ regard to your question the answer is: the weighted average cost of borrowing will be higher than it has been so far. Of course, if ENQ can repay the new RCF at a fast pace that will not matter so much. But FCF next year will be constrained by the need for ENQ to spend $250M in CAPEX and ABX to arrest the decline of the production of its current assets (Kraken, Magnus, Malaysia, GKA). This year shows what happens when there is no drilling...

ATB

Hello Slift and Tigar,
I agree with both of you. With Slift than the new RCF's rate will be higher than that of the current RCF, and with Tigar on why you would not refinance loans with lower interest rates with new debt with higher rates. if ENQ had been able to fully repay the current RCF by the maturity, they would not be refinancing it now. Simplicity in terms of the lending base makes sense if that lowers the cost of debt. Back in the Autumn and Winter I argued that it does not make sense to refinance the Sculptor loan. It will be repaid by the end of 2021. I am targeting December assuming Kraken can keep its production up. W/ regard to BP's vendor loan, it is under provsions... why would now ENQ move it under debt?

Overall I agree with Slift that net assets for ENQ being negative (perhaps back to positive by end of H1) will make debt more costly ...

The GE deal won't close before H1 ends. We will get financial figures at that time. My bet is that net debt will not come down by more than $135M. This assumes CAPEX and ABX will be half of the yearly spend and no other changes to the balance sheet. I also expecting total OPEX to be higher than in the yearly guidance ($285M). ENQ buys gas, etc. to power its facilities and the prices have gone up.

ATB
p.s..: I am still surprised when I see people posting $40/$50M FCF per month. I have no idea what they need to assume to get such high figures. In H1 there is zero chance than ENQUEST generated 6 months at $50M/month of FCF.

Hello Londoner7,

I have read this article too. It seems to be a coordinated move by a handful of hedge funds. I just hope they all trust each other... The implicit message in your post is that once the RCF is negotiated, the same could happen to ENQ. I thought the same when I read the FT article, but then though they won't, the reason being that they know AB and Co have a large holding, and by the way ENQ's SP never crashed 90% from its early 2020 high. Yet, I hope hedge funds would be willing to invest in ENQ to make a quuick buck. But is 100% return in 8 months enough to satisfy their appetite? Not sure.
I have done a bunch of simple calculations on ENQ but I am hesitant to post them...
ATB
p.s.: hope you can now be reunited with your book...

Hi Pelle,
So give me odds for: you 5% or lower; me above 5%

It is not AB learning anthing aboyt hedging. the new RCF will come with hedging constraints. That is all.

Hi Pelle,

Ok, you say 4% or less and I say above 4%.
Let me know the odds.
ATB
p.s.: Do you think that they won't forget how to edge again? I bet they will. Addiction to gambling does not go away that easy. They almost made your many shares and my fewer shares worthless...

hi pelle, this time it is your turn to offer the odds. i did it last time...
agreed, but we know AB wants a rate as low as possible...

who else?