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Hitman1a,
Thank you for the quote. I thought you were referring to the most recent earnings release, i.e. 2020H1. There, as I wrote, not much is stated.
The most recent two wells targeted gross 2P reserves of 6 MM bbls. As I wrote payback will be longer than the predicted 13 months, but hopefully less than 2 years. I am using marginal cost calculations, and assuming there is no displacement of other Kraken production, given that it is not working at full processing capacity. I know this is not quite right, because there is a displacement of 2 others wells that won't produce so that the new wells can produce. To do a proper analysis, I would need to know the production of the wells being displaced.

Tom8080, I read your earlier post. That would mean another Oz-type loan. Mr. Market really reacted badly to it last time. I would like a clean repayment of the RCF, or at least one that does not extract value from the shareholders. We all might have /= opinions, but mine is as I stated: I would like to see the repayment of the $65M due in April asap. Leverage can be helpful, but with it comes responsibility (no gambling with hedging! Pelle needs the divi...), and ENQ has had to face financial distress costs more than once. last time in 3Q of 2018.

A final thought: with fewer production hubs, going forward, maximum % of production hedged will have to decrease. Why? Because w/ fewer hubs, if stuff happens to one and you have to shut down, you lose a larger % of your overall production than if you had more hubs. This means that hedging could under such shutdowns become speculation, as there is no production that backs the financial derivatives. Could expand on this; but basically this is about probabilities involving independent random variables. AB knows this stuff, I am sure!

GLA

Hi Londoner7,
Thank you for your calculation and valuation exercise. It is informative and comes as a surprise to me that the 3 companies you mention are trading on similar amounts per bbl of 2P reserves.
A bit of a clarification question for you. What do you mean by "make aggressive trades between the oil companies I invest in, while maintaining a position in each."

It is possible that AB did not distinguish 2P from 2C when we gave the interview. And I was not even subtracting BP's share of 2P reserves in Magnus (speaking of which my question for you a few posts ago was: is Magnus now fully sorted, or are the compressor/injection problems still ongoing?). Yet, I am still seeing 150 MM bbls at YE. Hopefully, I am wrong.

I am still going through ENQ's accounts, but a few questions for you. Do you agree the FPSO leasing cost was $56M in H1? Only $5M repaid of the vendor loan for 75% of Magnus (it was supposed to be about $12M per HY; this tells me the cash waterfall takes precedence over repayment of the loan; interest on this loan is 7.5%!) .

POO: my view was different from yours about the increase of the POO getting ahead of where it should be. I was reading different info then... I have not traded ol options since the last trade early in Jan/Feb. Was off for personal reasons. At the moment I am tempted to buy some calls, but no time to follow closely.

RCF: You must have good reasons to think ENQ will not sweat it out to repay it in full. If you were willing to elaborate further, that would be appreciated. As I wrote I see no path for full repayment unless it does an advance sale of oil to Mercury/Vitol, etc. But, the cost of such a deal would be quite high if it got a lot of cash in advance, say $150M...

Thank you.

hitman1a,

Not all 2P reserves are alike. Some have lower OPEX than others, as ENQ Shlds learned the hard way about Heather, Thistle Alma/Galia that make them unprofitable. One can only hope that those c. 150 MMBbls that will be left at YE are profitable... One never knows: as recently as in the CMD in 2019 ENQ was bragging about the number of years it had extended the Thistle and The Dons assets (16 years each they said...). In the end that was nothing but bravado, as we have just learned, with both moving to CoP this year.

ENQ's positive news seem to be coming from Kraken, but I could not find what you wrote i.e.,"water cut at Kraken was lower than expected and supported longer term production." Where did they say that?
What I found in the presentation & HY results was "- Water cut rate evolution remains stable". The word "evolution" in there can confuse things... Is the water cut stable or is its evolution that is stable, (i.e., increasing at a constant rate, which would also fit the sentence)? Anyway, I hope it is the former, as I still hope ENQ will have produced 58.5 MM bbls by end of 2021, which corresponds to the planned production in the first 3.5 years at the FID. I am not giving up on getting 120 MM bbls out of Kraken's initial set of wells (i.e., excluding the Western Flank, etc.). Kraken will have produced around 38 MM bbls by now.

A bit more on the accounts: Impairments of $18M on inventories(?), plus $6M on restructuring costs... All money that would be better used to pay down the RCF. Enq has always had a lot of cash charges on exceptionals. I insist: ENQ needs to use the money that will get from Petronas in H2 to pay down the $65M RCF payment due in April_21. W/ever JS utters about ENQ being comfortable and the banks being supportive is totally meaningless (as he would never say anything else. Banks were/are also supportive of PMO according to its CEO, and we know what happened a few years ago and now...)
Mr. Market is looking at the clock ticking. I expect bondholders to have a say on any new debt facility that is arranged,
because of the seniority of the debt. I know that ENQ's PR people will want to obfuscate reality by claiming that ENQ is good at debt scheduling, and that ENQ has survived many crises, some of which of its own making. We have to expect that. That is what PR people say. But, as shareholders what matters to us is Mr. Market's verdict.

Reality is that w/ average POO below $50 in the last 4 months of 2020, there is no path to repay RCF by 1/10/21, unless
average POO in 21H1 is $60 . ENQ like most indebted oil companies are living on a knife's edge at the moment.

Squif: look at HY presentation. Fn says "Removed c.15 MMboe of net 2C resources from 2019 balance related to Thistle and The Dons;". That is in addition to corresponding 2P reserves that were removed, which we will learn at YE.

Kraken's 2 new wells: Hopefully payback time will be less than 2 years.

GLA

Squif,
Londoner7 and hitman 1a are in agreement: 2P reserves at the end of 2019 were 201 MM bbls. Now let me copy what Ab said to The Times (I came across it last week): "Enquest’s speciality is taking unloved or ageing oilfields no longer wanted by the majors and running them more efficiently, but some are now simply not viable. In March it abandoned plans to restart Heather and Thistle, two smaller fields that it had shut for safety reasons and that had “much higher break-evens than our other fields”, with operating costs of $40 or $50 a barrel. They had been producing up to 10,000 barrels per day. The remaining oil will be left in the ground: “There’s around 30 million barrels we have had to kiss goodbye to.” Another ageing field, Alma, is also due to shut in the coming months and the Dons, a further higher-cost collection of fields, will be reviewed."
Basically that means another 19 MM bbls (to get to AB's figure of 30 MM bbls) to subtract from 201 MM bbls. You also need to subtract the 2P reserves in the Dons (being shut down), Tanjom in Malaysia (another 1 or 2 MM bbls). That must bring you down to 175 MM bbls. Subtract 1H's production and you are down to 163MM bbls. So by the end of the year it will be c. 150 MM bbls. Do you want to bet? Well, you are betting against Mr. Market already. Losing two bets about the same event is probably not desirable... You were right that they never update 2P reserves at HY. I confused Enq with ...

Londoner7: I am slowly going through the accounts. A few items have come to my attention. The low amount of the 75% vendor loan repaid in H1 (less than $5M, if I am right). On the positive side the balance of payables has come down significantly. And more importantly, lease payments were down to $56M (this includes the "interest" part, I presume).

Looking at the CMD in 2013 in the 5th year of production (which would be 2021) Kraken should still be producing c. 40Kbopd. Thus, my optimism. I will look at the payback calculations you mentioned for the Western Flank wells.

I still see no path to full repayment of the RCF in 12 month from now...

Hitman1a: I doubt ENQ will repurchase the bonds. It will have to drill in 2022 to avoid production from declining too much. Like you, I say Malaysia should be the priority.

Pelle: AB has no family silver left. He burned it all buying ENQ shares.

GLA

Hi hitman1a, Thank you . but, we have to remove 2P reserves of Heather / Thistle / Alma&Galia, Tanjoram and the Dons from that figure to get 2020 H1 figure, I think. Not sure what was removed from 2P reserves at end of 2019. So I suspect 2P now are below 150 MM boe in the best of scenarios. No clear if Worcester's production will be high enough to increase 2P reserves.

Hi hitman1a,
The question is: where is the info on 2P reserves for H1 2020? All other oil companies publish such info at HY, and so has Enq in all previous years...

2C Bressay addition = " may be jam some day". We need jam today (1P) and tomorrow (2P)...

I had penned down 2020_3Q avg. poo at $48. Got it wrong. More likely to be $44... if 2020_4Q avg. poo is not $50 I see no path to repaying the RCF by 09/2021... need the April 21 $65M RCF repayment out of the way in the next 45 days...

AB has said many things that have little bearing with reality...Remember that he used to talk about Enq's differential capabilities... What are those? What I read is about fields being decommissioned...

GLA

Can anyone find info on 2P reserves in H12020 results, presentation or earnings call ? (has a transcript of the earning call been published? )

Energyvoice reported that Worcester well are only yielding 3000/Boepd. Is that all? That means that is below expectations. Remember ENQ had stated thse wells were targeting 6+ MM bbls... So, it must not be the case. This production level will lead to a faster decline of overall Kraken's production than I has anticipated. I had expected the Worcester wells to allow Kraken to keep producing 40K boepd until the end of H1 2022.

Oz loan: Londoner7, you are predicting loan to be down by $56M by end of 2020. Could you pls explain how you get that figure. I have not run any numbers, but needles to say, when I do i will assign production below the level in H1, and lower Kraken premium than in H1 (which had 3 solid months of contracted ahead high premiums, I presume). My thinking is that if it were that high ENQ would actually say it is (they have many bad things happening to them like negative equity, so they would put out something like this).
L7, many thanks for posting info on loads. Apologies for not replying sooner, but was traveling over last three weeks. Doing my bit to get jet fuel consumption up...
Licensing round #32: After all, nothing will come out of it, corect? Some awards were in areas Enq has abandoned / is abandoning. Will we ever see Eagle being drilled? Malaysia is a worry. the PSC often come with drilling requirements. so, if that were true ENQ will have to drill next year.
Magnus: I am still in the dark.. Have the problems with the compressor been dealt with?

Pelle: you have been fined a few times while I was away. At this pace the cumulative fines will be worth more than your Enq's shares... Just kidding. Hope the spike matos treating you well. You should gift JS and AB one each.

gkb47: Load #76 is your load #75. What was the date you predicted last year? 9th or 19th of September? One way or another many congratulations.

Given that E121 has given up on posting here you will know rigs really stayed the same, and China is doing its best to withhold demand. They are now a powerful force. They are well aware of their market power, and are playing it to their advantage.

Therapist: When Oct 1st arrives do please post your tables and graphs. Fewer and fewer lined needed, with the Dons to be put out of action.

GLA
Offload them and they will sail away (This is a true one line moniker...)

what TD and his colleagues are doing to the PIs is a complete disgrace. He needs to be shown the door. He has diluted the PIs several times in a row. He just needs to be kicked out asap.

tom8080, no, and that is why he should have not stopped hedging in december to february, anf gamble on higher prices in Q2. all we want is to keep the horizon and volume of future hedging constant. pelle has explained this very well many times. in that case on average things would even out.
anyway, as i written many times, oil companies w/ poo at current levels are not a good investment and will suffer. i think that is also chilting's view.
can poo go up? well if iraq stops cheating, then perhaps.
there won't be generalized lockdowns. people in many countries have had enough and would revel. perhaps not where londoner7 lives, but in the continent there is no chance all countries will shut down. at least that is my view, right or wrong.
more importantly, will we find out if the worcester wells are performing excellently, and can we have an idea of their 1p reserves? any other 2p reserves in the worcester area? what about the maureen sands?
gla

tom8080,
AB should be obsessed about getting the hedging right. he has more of his wealth invested ENQ than me. he should also recognise they are poor at running this part of their business.
january, yes 85 days of production. nom imagine how the engineers and many of the operational staff feel after putting in a good show, only for the sales side resulting in layoffs, which are going to cost $6.1Mto enq in H2, and disrupt many of the households of those made redundant. i feel for them.

still no info on exact kraken premium but oz loan reduction suggests it is indeed helpful.

Magnus: the results say : "The contingent profit sharing arrangement cap of $1 billion is not forecast to be reached in the latest life of field present value calculations."

no news on licensing round or scolty/crathes and eagle.

note net debt only decreased by $13 million b/w 30 April and 30 June. that is great progress, no doubt about that...
At 30 April 2020, net debt including PIK reduced further to $1,364 million (end 2019: $1,413 million), with cash and available facilities amounting to $289 million (end 2019: $289 million).
now, can enq only spend $20M in capex in H2? can it use the repayment from malaysia to reduce the RCF by $30M shortly?

Magnus: are there any positive signs that the compressor/whatever issues have been overcome? production in H1 is below case presented at CMD last year. note difference b/w boep and bopd to see that. base case at CMD assumes bopd of 18K in 2020.

AB can pretend it is all fine and dandy, but it is not:
"Approximately 5.1 MMbbls are hedged at an average price of c.$36/bbl, with a further c.0.4 MMbbls hedged with an average floor price of c.$52/bbl in accordance with the Sculptor Capital facility agreement."
So, higher oil prices would not help much. note is not floor price but average price, so that means that is what you will get for that production. right there it is a loss of revenue even if the poo stayed around $45/bbl of 5.1MMbblx$9/bbl = $45M. wonderful job.
i got the net debt right as well as the oz loan debt reduction. the lender is better at doing enq's hedging than ENQ is.

chance of total repayment of RCF w/out refinancing is minimal, in my view as a result of poor future hedging.

enq would be a great company with AB focused on production and Pelle doing the hedging. it is time they conact him.

GLA, and i will skip a one line moniker...

i meant " let us hope many can survive with shareholders NOT being seriously diluted."

londoner7, thank you for posting the list of the past 10 offloads.
Pelle thank you for your views on hedging which i fully endorse. ENQ could be sailing safe watters had they hedged future production as usual, not being forced to do it when they panicked. i will say it loud and clear: they are casino gamblers, not smart oil traders.
hitman1a and squif thank you for posting your workings.
i do hope that Londoner7's predictions for the current licensing round come true; ditto, all the good things
he mentioned.
therapist: what is going on with Magnus's production, once again?

i am afraid that with oil continuing at current prices (i.e. around $45), no oil company can do well. that is the sad reality. let us hope many can survive with shareholders being seriously diluted.
if you can get comic ali in baghdad stop lying, and start sticking to his country's opec's production quota (which it never has done), that will help the poo change course.

will e121 be back on the bb again? ditto for the matrixobserver and prodopt
... finally i hope any denisovan posting here stops searching for his distant relatives on this bb.

adamsmith, Why cash in at 40p? Is that the value you assign to the share using some DCF model? If not, what else?

TWalbyoff, Apologies for not including you explicitly in my earlier post, as I had meant to refer to some of what you had posted.
While I will not ever try to predict short term SPs, my view is that ENQ needs to signal to the market that the RCF will be repaid. in time to separate itself from the financial distress issues some oil companies are facing everywhere. The SP moving up by a lot is possible, because the marketcap would not move much in the grand scheme of things... and often speculators get involved.

For ENQ to move higher (read Chilting's reasoning) and stay up, you need a POO of at least $55, and Kraken's premium of another $5 on top of that. Will the POO go up? (Now, where is Epiphany121? Oil rigs went up by 10, and he stayed silent... ) The info we are getting is that shalers are relapsing again, bringing production back online and possibly starting to drill again. That is American capitalism for you: There is an infinite supply of people who believe in fairy tales and give their money away. .. Until the elasticity of supply wrt price becomes much smaller, shale will keep a firm ceiling on the POO over long periods.

Squif , I no longer follow Kraken's loads very closely (but will congratulate gkb47 on guessing the date of load #75 (which is actually #76 as there were two small loads early in the year) very accurately last year.). If anyone can post a summary of the last 10 offloads that would be wonderful. My net debt figure is a wild guess (working capital movements might push it one way or the other by large amounts). The issue with ENQ is that they always surprise you: e.g., Tanjoram-Baram: they kept it quiet that revenue was smaller than opex until they announced production was stopping. There was no indication early on that it was not viable.

This leads me to Kraken and Bressay: why would you target Bressay early on if the Western flank and the maureen sands had lots of oil you could recover quickly at low cost. If that was the case then AK would be producing at full capacity (i.e., $40+Kbopd) and there would be no room for Bressay production. I hope next week they shed light on this.

Finally, Pelle has relapsed again while I was away mention the did word again, but gkb47 was keeping an eye on him...so he got fined!

GLA

Hi Londoner7, squit and hitman1a

Back from short break..
KRAKEN VLSFO: Thank you for your workings on the VLSFO prices. Until Enq or CNE gives us more exact figures it is is hard for us to pin down precisely the pricing of Kraken's crude. It needs to be blended w/ other oil to make IMO2020 compliant fuel. Thus, it is not a perfect substitute of the refined compliant stuff. I would like ENQ to be more forthcoming about their sell pricing like PMO was about Catcher's pricing last week. I read that Jetfuel can be converted into IMO2020 fuel, and that might explain some of the weakness of the VLFSO prices. Once jetfuel consumption goes up, prices will increase.
Now, and this relates to Squif and hitman1a posts on debt, etc., I still expect the Oz loan to have come down to c. $90M by the end of H1. This is the only debt I can get my grip on because of the ring fencing of the CF that relates to the Oz loan.

Hi Squif and hitman1a: Thank you for your workings on net debt. Hard to pin down anything, given CAPEX, etc. going on, but I doubt net debt will come under $1350M by end of H1. Only thing I am looking for is the announcement that the $65M RCF payment due in 04/21 was made by the end of August. W/out it expect Mr. Market to think alike PMO (even if that is perceived as wrong) and the SP to go down. ENQ would have the cash to make the payment. Whether it does or not depends on AB's long term strategy... One way or the other, and as I wrote several months ago, I expect shareholders to be diluted in many oil companies if the POO stays below $50 into H1_2021. While I expect the POO to go up to that level before then, I always remind myself economics do not rule this market. Geopolitics trumps economics here... One of such companies is PMO (I am a LTH,i.e., since 2011, i think) , and there will be others. At the current poo there is no path for ENQ RCF to be repaid by 10/21. AB will cook up something: advance sale of oil, etc.. I know many posters here do not like to read views contrarian to their wishes, but reality is what it is. As someone holding a few hundred thousand shares I would like things to be different, but they are not. As Tom0808 wrote reinforcement bias is something real. That is why neglecting scenarios is never a good idea. Like Chilting, i have the view that if the poo stays low the SP will not move higher.

PMO: Lots of posts on PMO. I do not post on that bb, except very rarely. And I do not even follow the events in detail. But, here is my summary as a holder for 9 years: very good execution (virtually all the projects have done well, even the basket case of solan, that led to liquidity issues a few years ao, is coming good), very good hedging (unlike ENQ), decent board which is excellent at looking after itself and very poor on delivering for the shareholders, huge overinvestment in E&P as a result of over ambition. The last item is what in y view is at the root of all the PMO predicaments.

GLA

Hi Londoner7,
A lot of the heavy weights away for some time or a long time. Still waiting to hear from ProdOpt and the Matrixobserver on Bressay. E121 on his line of business: US shale.
Read Bumi Armada's results some time ago:nothing there, except that AK performed well. When it come to the hard numbers I suspect net debt will come in around $1350M, but as some loans will have been repaid and money received from malaysia, it is possible it comes closer to $1320M. Now, Does anyone have any idea of Kraken's premium at the moment? I think it is pretty low. VLFSO sell at the equivalent of less than $50/bbl, as far as I can read:
https://shipandbunker.com/prices

POO: not looking that good. US Shalers are getting back to their ways, by promising to grow production:
https://www.petroleum-economist.com/articles/corporate/finance/2020/pioneer-dividend-proposal-aims-to-attract-fresh-investment
They can always find suckers... to keep the ponzi scheme alive. They have brought back most of the shut-in well to production except in Bakken.
GLA

Not clear why the SP is so low, apart from the level of debt. The company generates plenty of cash. Hopefully they will not focus on repaying debt rather than investing on new generation products that have led to nothing. Not clear that the sale of the cigar business is a good choice. Getting rid of the premium products, is never a good idea. As a holder since 2019 I'll keep on collecting the dividend but I never thought this would be priced below £20.

Kenj, We are already IRC's shareholders via POG. This is another company that needs sorting out. W/ Iron ore prices as they are now. They could be hedging production for the next year or so. With yearly sales of 2.5Mt and given a unit cash cost per tonne of $50/t, even at $110/t, the "operational profit" would be $150M. Subtract all other staff, interest and capex, and they should still be able to repay something like $75M of their debt. I do hope POG does not sell its position in IRC for $10M. I am sure the new board will not go ahead with it.

Today's news, while sad for Pavel (there was no chance he could stay, but he brought it onto himself by not being transparent with the financial affairs), mark a new beginning for POG. UGC might prefer to have a 20+% on a minner valued at $3B listed in London, and giving its shareholder an escape route from Russia, if he needs to, than having it private, in which case, if he leaves the country he gets nothing... That would be what I would do: have an escape route ready, in case things go wrong.