Member Info for L3Trader

Selected few,

NET DEBT figure:(I am assuming the unwinding of "payables" stopped at $50M, and that CAPEX was no more than $135M in H1; I am also ignoring the effect of IFRS16 on the finance lease): My reading is that below $1600M is truly outstanding, b/w $1600M and $1650M is quite good, b/w $1650M and $1675M is as expected, b/w $1675M and $1700M is iffy, Above $1700M is bad.
Expect BP vendor loan of 25% of Magnus to have been fully repaid, Mercuria Prepayment Facility to be history, the Oz Management facility to have been reduced by b/w $10M and $20M. I also expect no finance fees to have been incurred, except for non-cash related ones that arise from discounting future values to the present at rates different than the one used last year. In 2019 they were $8.5M, and as Tesco says every little helps...

HEDGING: I hope ENQ did not panic and hedged anything in August when the POO was in the $50s. I told them when to hedge (at least the downside) in March/April/May. The time to hedge was early Spring!!! Do not want to see any new floor hedges below $63.

PRODUCTION: Hope ENQ tells us the production figures for July, and if possible August in addition to the H1 figure, which we already know apart from the Malaysia contribution. For reasons that I stated in my earlier post guidance has to be narrowed ( 66/67Kboped to 70/71Kboepd).

Kraken: Hope ENQ informs it shareholders about what is going on. Production beating records in June, but down to 27/28Kboepd in July and below 35Kboepd in August. Why the drop again? When is the shutdown? What is the plan for future production? What are the water cuts from the different DCs at the moment?

Magnus: Why was the shutdown extended longer than planned? Are the production figures for July and August better than the June production figure? When will the two new wells enter production?

Smaller fields: what will be done to counter depletion? Is there more worked planned in Alma/Galia, given that production is down where it was before the ESPs were replaced? (I am not sure the added production after replacement has been high enough to pay the money spent on the works done. If that is the case, then take such thing into account in future projects.)

SVT: Future prospects for it and why has part of the work force been let go. What is the SVT contribution to the bottom line. 2019 year report suggests it is less than $5M a year.

Future CAPEX: Please do not start any project with an IRR lower than 20% using $55 as POO (cost of (borrowed) capital is close to 9%, and sometimes projects go wrong). So, err on the side of caution.

Finance Lease: Explain the figures, because CNE treats the lease differently.

I will not post again until CNE's results are out on the 10th, as they will have to refer to Kraken.
Thanks to Pelle, and I hope the traders passing by do their business and move on.
I do not care whether the SP tomorrow will be b/w 17p and 25p.

GLA tomorrow.

Mrd,

You have posted 19 messages today. That is why the price is 19p. If you want it to go up by 1p more you have to post another message.
ça ç'est la Mrd!

Hi Monsterlala,

Many TA for the information on SP movements after the results.
We cannot assess the share movement in isolation of other factors that change share prices. A way to assess how well the market responds to tomorrow results is to compare the SP change tomorrow after subtracting the change of the SP of a basket of similar companies. For similar companies, I suggest the group of companies that the ENQ board selected to award the PSP in 2019, as in the report:
2019 PSP award TSR comparator group
Tullow Oil
Premier Oil
Aker BP ASA
Soco International
Genel Energy
Hurricane Energy
Ophir Energy
Cairn Energy
Rockhopper Exploration
Lundin Petroleum
Africa Oil
Amerisur Resources
Bowleven
Serica

You can either weight them equally, or weigh the different companies by their market cap. I know that gkb47 is going to do the calculations. He goes out more than he should :) , and so it is his turn to get that spreadsheet out.

Therapist: Many thanks for the June production data. If you could please share the files with updated information it would be much appreciated.

Londoner7 (not L7 or L5): Kraken in August according to the offload data should come under 35Kboepd.

I am not expecting any surprises tomorrow one way or the other. I remember that my concern about Enq making the RCF October repayment last year led me to post for the first time then a week before the results were due, stating precisely that. Indeed, I was vindicated as a Oz loan was necessary. This year, I have no concerns about the October RCF repayment as well as about the April 2020 RCF repayment. In fact, I expect that tomorrow ENQ will have nipped the October RCF repayment in the bud by announcing it has already been made. That would be smart!

Production guidance: I expect it to be narrowed tomorrow. ENq has production data for 8 months. Uncertainty only needs to be resolved on 4 months of production data. So confidence interval has to narrow (that is basic statistics). I expect the lower limit to go up to 66/67Kboepd and the upper limit to be 70/71Kboepd.

Mrd, could you please save us from the running commentary of your ENQ trades? It is simply too much. I note that in the three weeks leading up to the PMO results you posted over 400 posts. I am afraid that is a bit too much if you want people to read your posts.

GLA

Hi Londoner,

I have started to read CNE's accounts to see how they deal with the finance lease. They do it differently, and as a result their provisions are different, and do not correspond to 0.295/0.705 of ENQ's finance lease provisions, as they should for the undiscounted payments. They are much smaller than the proportion above.
The main reason can be found here "Following acceptance of the Kraken FPSO in H2 2018, lease payments are separated into variable and fixed components, with the latter being calculated based on minimum charges in the lease agreement and being deducted against the lease liability on the Balance Sheet." CNE only provisions the fixed component. CNE also states that they made a US$7.4m repayment of the Kraken FPSO lease liability that enters the net cashflow from operations.
Separately they mention "finance lease reimbursements of US$4.7m." perhaps this $4.7M is related to the $15M bumi would repay by the end of the year.
Furthermore, CNE in 2018 paid "Variable finance lease costs on the Kraken FPSO of US$22.7m (2017: US$6.0m) that are charged to the Income Statement."
in addition, "During 2017, US$200.8m, the net present value of future minimum lease payments was recorded on the Balance Sheet for the Kraken FPSO, as a right-of-use producing asset (that included the final optional purchase price of US$56.6m; also was inclusive of refunds due after commencement of the lease resulting from delays in delivering the FPSO, which ENQ had given the figure for; was based on minimum lease commitments of 50% from the end of the ‘ramp-up period’ (the period from first oil production to the FPSO operating at contracted performance levels) in the original lease term, with no adjustment for a contingent Interim Production Period agreement; ). Further additions in 2017 of US$4.1m represent the recognition of a decommissioning asset associated with the FPSO. Subsequent to initial recognition, the lease agreement was amended which reduced the finance lease liability by US$36.4m and a corresponding reduction to the leased production asset. In the second half of 2018, the lease agreement was further amended resulting in a reduction of the lease liability and right-of-use asset by US$11.5m. Amortisation of US$18.2m (2017: US$3.4m) was charged against the FPSO in the year." In other words CNE just provisions the fixed components of the lease. And this were reduced to nil until acceptance of the FPSO back in September of last year.

this finance lease is a real mess i would say.

moving on to other topics: rigs down is good news; iran outed as exporting more through different channels than many people believe is good news because it means demand for oil is being underestimated, and spare capacity is lower than thought.

ATB

NeilHammon
I would be careful about being PR for PMG around here. That is not allowed by the rules.

Taverham, You have a very good sense of humor. You have to visit Bellevue Avenue Newport (Rhode Island) to understand how much is shared with the others ...

LTH since many years ago. Had great opinion of TC. No more. Why post when nothing that matters happens... Progress on any of the assets yet to be seen after several years...

Everybody knows. It is going to be taken private by your master...

Ladies and Gents,

Read it for your selves. This is how you engage in a related party transaction to push out small PIs and to take over the company. This is incomprehensible. Until now PMG had never talked about getting into renewable energy. The asset might be worthless as far as the production of renewable energy is concerned (probably wind turbines will never be installed there. who knows? Is there any report of any previous planning application? How do you determine the value?), and this is how you get rid of it while at the same time getting ready to take over the company. A lot of people will be cross with Mr. Cross, and will think his reputation is now in tatters. PMG and anything Mr. Cross is related to is no longer a company you can invest on, because he knows no boundaries when it comes to related party transactions. I thought he was great in what he achieved with Dana. Now I know he was just lucky and was unable to get it all for himself.

Arden Partners plc in its capacity as the Company's nominated adviser obviously just said yes....

What a joke.

"The Acquisition constitutes a related party transaction under Rule 13 of the AIM Rules as Linda Cross, wife of Tom Cross, owns 75% of the shares of Pitreadie and has a director loan of £4.3 million with Pitreadie which will be settled in ordinary shares as part of the Acquisition.
The directors of Parkmead (excluding Tom Cross) consider, having consulted with Arden Partners plc in its capacity as the Company's nominated adviser for the purposes of the AIM Rules, that the terms of the Acquisition are fair and reasonable insofar as the Company's shareholders are concerned."

Hi Londoner7,

PIKs: Yes, no PIK was great news that romaron relayed. Analysts dislike PIKs, and shareholders as you wrote would be paying interest on those PIKs at 9%. I do hope that the POO rises so that there is no PIK in the next cycle. Indeed I bought another call option earlier today! May be I am just too optimistic.

BP: Environmental concerns in the US will push foreign majors away from Alaska and other sensitive areas. Majors apart from Total (a company I like for being French and doing the right things) moving money to shale must mean something makes sense. We know they can issue debt at a spread of 1 or 2 percentage points to Libor (so their cost of capital is lower), they might be better at harvesting economies from scale, and they are integrated thus passing output to their refineries. But is this all that explains what is going on? I have not read enough to say more.

FPSO lease: I will try to listen to the part you mention. But often I have found that what they say cannot easily be found in the accounts. I guess they just try to simplify matters when they speak. Yet, one should be able to trace those details back to the accounts. What I find useful in the details of the provisions is that in 31/12/18 they have an amount due within one year. This has to be the amount to be paid, given that they are not able to predict the downtime of the FPSO in 2019.

You and i agree that the finance cost element of the lease is just an accounting matter, because it is a part of the amount of the lease that is apportioned to finance costs following accounting rules. I do not want to nag you further, but we know that CNE is also a party to this lease. The accounts of both ENQ and CNE on the lease have to be consistent with their WIs in Kraken.

It is good to know that the works on Scolty and Dunlin are CapEx items, as there was doubt whether these were OPEX. As MO pointed out in the past some of the work has been added to OPEX.

EIA data: Adjustment was about 4Mbbls in a week. Otherwise adjustment would have been 15Mbbls for the week Where is all this unaccounted oil coming from? (Production increase by 100Kbopd in the 48 lower states. So at 12.1Mbopd. Could it be that production is actually 12.6Mbopd and not 12.1Mbopd, which would explain the adjustment?

ATB

Hi Londoner7,

As the end of my post got truncated here it is now:
"Finally, any cash payment by BUMI would appear in the cashflow statement. But there is nothing there.
In short, all the above do make me wonder how the lease and deductions for FPSO breakdowns really enters the accounts. There is some clarity about the former (i.e. the lease) in the accounts, but not about the latter."

A few other unrelated thoughts:
- No PIK was very good news. If the cutoff date was 15 July, then the next one will be 15 Jan, not 15 Dec as you wrote, correct? (W/ 45 days at a price averaging $60, you will need 45 days at a price around $70 to avoid interest to be paid as PIK in the current six month cycle. Unfortunately, the poo seems not to react to draws. Let me add that if EIA reports -10mb crude today, 3Q 2019 would be at -40.7mb (2nd largest Q crude draw in records dating to 1983). Also would also be crude draw #6 of the last 9 Qs.
- BP: It is selling its Alaska business for $5.6B (its WI in the fields it is selling having the potential to produce at least another 1bn barrels more , even though they produce only 74Kbopd at the moment, which means 3.5Mbbls a year. To get 1bn barrels at this pace would have to own the fields for a few centuries...) to invest part of the funds developing its shale production. This makes no sense to me, given all the info I have gathered on shale. So, what is the rationale??? An interpretation would be that they want to get out of an environmentally sensitive area, but they could just get out and not invest in shale.

ATB

API ENERGY INVENTORIES (23rd August): Crude -11.1mln (exp. -2.1mln, prev. -3.5mln)

Hi Londoner7,

So, we agree that ENQ made a payment of $144.8M in 2018. That is also clear in the cashflow statement. Because it enters as a separate item I am now inclined to accept what E121 said, i.e., that it does not enter OPEX (as otherwise it would enter the "cost of sales" item.)
What we interpret differently is that you said that the payment of $144.8 is that approximately $59M was due for the FPSO lease in 2017. I cannot find indication of this anywhere in the accounts for 2018. If I missed, could you please let me know where to look for it?
So, I am still thinking the lease is $144.8M per year, although as a shareholder i would prefer that your view is correct. Let me add that the FPSO allows ENQ&CNE to buy it (i hope they do not have to, for obvious reasons). We will see how much will have been paid in 2019H1 as finance lease.

A few other things. I could not find anywhere in the cashflow statement that $10.575M (0.705x$15M) ( A RNS is 2018 stated "Bumi has agreed to pay $15 million to the Kraken partners, which is to be fully settled by 17 December 2018.") was paid by BUMI. This should appear as a separate item in the cashflow statement, if the cost of the lease does not enter production costs. Yet, no where to be seen.

In addition, what appears as BUMI's money owed 'other receivables' note 20 refers to the return of money by BUMI that it had received as prepayment for the lease (see details of the note), as determined in 2016 and established to be $45M (so it has nothing to do with money being paid by BUMI to ENQ for the FPSO breaking down in 2018). This, I assume is going to be returned over the years, and so appears here under 'other receivables', and is decreasing from one year to the next. What appears is the discounted value, and there are 'finance costs/income' related to as a result of the interest rate applied for the purposes of discounting changing from year to the next (this is why $0.2M are mentioned in the note as appearing under finance costs - but this finance cost is actually notional, and thus involve a cash payment).

And by the way, i think this 2016 money to be paid back by BUMI must be what AB refers in the report as ""Net lease charter payment credits arising from the non-availability of the Kraken FPSO in 2018 were approximately $45 million." If it really were money owed from the non-availability of the Kraken FPSO in 2018 and had not been paid it would appear in the accounts. But it does not. And by the way, if it had been deducted from the lease costs due until the end of the lease it would appear as a note under provisions. But it is not there. So, I have to ask why is it that AB mentions this amount but it is not in the accounts??? Is he confusing the money owed from the non-availability of the Kraken FPSO in 2018 w/ the money that was agreed BUMI would return as determined in 2016?
Finally, any cash payment by BUMI would appear in the cashflow statement. But there is nothing th

hi Londoner7

A bit more on the finance lease.
in h1 2018, enq paid half of $144.8M.
i have yet to understand how the credit for poor performance of the fpso enters the accounts.
but, in the report AB writes, "Net lease charter payment credits arising from the non-availability
of the Kraken FPSO in 2018 were approximately $45 million." this suggests that there is a credit that enq receives that might not be immediately paid. it should enter the accounts somewhere, but i have not found it yet.

also, we know from a RNS that "EnQuest PLC ('EnQuest'), an independent oil and gas production and development company listed on the London and Stockholm stock exchanges (ENQ.L and ENQ.ST), is pleased to announce an agreed compensation settlement with Armada Kraken Pte Ltd, a wholly-owned subsidiary of Bumi Armada Berhad ('Bumi'), in relation to historic issues with the FPSO. Bumi has agreed to pay $15 million to the Kraken partners, which is to be fully settled by 17 December 2018."

could not find this in the accounts yet.

offload #44: it seems that if AS only arrives on the 27th the offload cycle will be 16 days, which means production is down to below 35Kbopd ... of well!

MO: much appreciated the update on Magnus ENQ pipeline. also scolty/Crathes

E121: I will be happy with $440M for Zama. had hoped for $600M, i.e., $5 per bbl of reserves, but with poo low, values are down. i just had no idea of how low/high they were.

ATB

Hi MO,

Your response is much appreciated. Those bbls from Scolty/Crathes are most welcome.
Magnus: How can see whether oil is being offloaded from there? It goes to SVT, and then is it exported via tanker or pipeline?
If the former how to identify which tanker is loading Magnus's oil? Not possible, I would expect.

E121: So, having first bought into ENQ late in 2016 do I qualify as a LTH?

Hi MO,

TA.
Any idea of the progress of any of the works you describe?
"Scolty/Crathes pipeline replacement and Magnus, NPR and Thistle pipeline works related to Dunlin Decomm".
I am eager to know when all starts increasing production.

Londoner7,

Many thanks.
I just sample the notes in the report. Had not read those ones. Accounting is an interesting subject (add, then subtract, then add back part of it, then subtract some more, than add it all back... all fine if at the end of the day if debits and credits are equal but opposite entries in your books... )

I agree that $55.8M should appear in note 6 under finance costs.

As far as note 28, i t is a long table full of additions and subtractions, but here it is what I believe is going on.

ENq is assessing the changes to its liabilities from 1st Jan 2018 to 31st Dec 2018.
Their initial liabilities were $3000.6M. They made payments in cash of $357.0M related to loans and borrowing, and paid $144.8M in cash for the finance lease. But, the finance lease liability didnot decrease by $144.8M, because $55.8M was interest. So it needs to be added back. So, I think that it is all clear, at least to me.

Not sure the marginal interest rate used in the finance lease should be the one mentioned. It should be 9%, as per the interest rate that any addition round of PIK (including the next one this year as the POO stays at its current levels) earns the creditors. That is the rate you have to pay for extra borrowing. Or at least it was at the time of renegotiating the bonds. Now, to be more precise, the Oz loan rate is the correct one, as it is the most recent borrowing.

ATB

Hi Londoner7,

Hope you enjoy the Summer temperatures in the next few days.

FPSO figures. I do not mind being wrong. I am always happy to be corrected if wrong.
My view that the payment was $144.8M last year (not the $115M mentioned) is supported by that amount appearing in the Cash Flow Statement. That means that amount of cash was paid. That is the amount of cash that will also be paid this year.
I have just read E121's post that we are both wrong. And here was I decreasing the overall spend by putting part of the lease costs under OPEX, only to find out that what I was suggesting is pure ramping according to E121.

E121: But if you add $144M (or perhaps just $93M if you leave out the amount , i.e., c. $50+M that corresponds to the interest) to $600M, then the overall cost of running these operations per bbl is higher than I want it to be. I understand that the FPSO might not be OPEX after all, but you are paying BUMI to run the ship to produce oil!

PMO: As a LTH (I believe I can label myself as a LTH since I bought shares there in the early years of the decade) I was impressed by the results. And Catcher might eventually make-up for Solan's failure. But, the SP reacted much less than expected, and the IC article about them is only lukewarm. How much do you think PMO can get for 25% of Zama?

Pelle: Things running smoothly is always a big if. Let us first see how AK perform s in H2. Magnus has a very long and good past track record. I write this as a LTH (if buying late in 2016 fits the criterion).

ATB

Hi Londoner7,

Hope you are enjoying you walks around varied Lochs. I went to see some Fjords in Norway over the Summer.

I am sorry I have not had time to get back to you, as I am facing a bunch of deadlines at work, but before it is too late, here is what my brief reading of the 2019 accounts is.

I agree and I believe understood the meaning of all that you wrote, but w/out having time to read the 2018 and 2017 yearly and half yearly reports, here is what my thinking is. Let me start with the punchline: I Believe that the $600M OPEX includes the part of the lease that does not correspond to interest.
First of all the circa $115M that you quote is ENQ's share of the yearly lease is a figure that makes some sense to me. Why? $115M/0.705 = $163.1M (FPSO lease including CNE's share). Thus daily rate is $163.1M/365= $446.000. i remember reading this number somewhere in earnings calls. So far so good.
So, let us suppose that ENQ's yearly lease is $115M. A lease includes interest and what is left is seen as an operating expense, if I remember this correctly.
Now, if we look at the 2018 report, note 24 (iii), you can see that 2019's interest payment is going to be $144.188M-$93.169M=$51.018M. Also, that is supposed to pay $93.169M in addition to the c. $51.M. But, this leads to $144.188M payment this year (which is also the amount of money paid for the finance lease last year, see page 24 of the 2018 report, left column, under cash flow and liquidity you can find this figure as finance lease payments, which is higher than the $115M you quote and which squares with the daily rate I have seen here and there. So, these numbers do not add up!
However, I am now more certain that the lease payment every year is $144.8M, part of which is interest, which will decline as years pass, and the rest goes towards the "payment" of the principal, which also attracts a depreciation on the balance sheet.
In short, whenever I will scribble my notes in the future I will use this figure, $144.188M as cash payment for the lease (of course there are credits for the period when the FPSO breaks down, but I treat those separately, as I cannot predict then in advance! I cannot even predict when offload #44 will happen, as 12 days have now passed since the last hook-up!) and will not be bothered, which part is interest, which part is paying down the principal, unless I have insomnia, and will play around with a spreadsheet and the effective borrowing rate of the lease, advertised as 8.12% (ouch!), in which case I will post some numbers.
Of course, if the above is wrong, please do correct me.

Pelle: I questioned your numbers due to you suggesting 80K bopd in 2020 and 2021. POO might be closer to $60 than to $70, as things stand. I sold my call options yesterday before the US manufacturing figures came out. Only lost 30% of the investment! Now, I am planning to make money here, having first bought at the end of 2016, but most of the purchases were in 2017. I a

Hi Pelle,

Thank you for always being civil.

I say I am LTH holder because I am.

I have provided my projections for net debt H1 and year end several times. Also, for H1 production.
You would like me to say what my prediction for the oil price is. I have no idea, as there is much else besides demand&supply going on. I mean more than the usual. Can anyone predict what Trump is going to do tomorrow? No, not even Trump himself can do that... Who would think that he would come up with the idea of buying Greenland?

But, I would not be invested if different oil companies (the bulk of it on the European majors apart from Equinor) if I expected the POO to be below $60. As others, e.g., e121, have written multiple times, special attention needs to be placed on the US shalers. I am hoping for the price to be b/w $60 and $70 in 2020 and 2021. Whether it is going to be closer to $60 or $70, I do not know. My Call options mature in a few days. I have yet to decide whether I will rollover them.

Production for 2020 and 2021. I am counting on 70Kboepd (including the 6.5Kboepd that accrues to BP as a result of 75% of Magnus).

CAPEX: I doubt it will be possible to go below $175M because in year T you need to invest to produce from different areas in year T+1. So, like Londoner7 wrote I see further investment in Kraken. Also in Magnus, as there is some gas area in the licence.

Hope the above answers you questions.

Hopefully AS is headed to AK and everybody will be happy!

ATB

E121,

I know very well that whenever I criticize ENQ's hedging you just come out very very strongly defending the people at ENQ doing the hedging and defending ENQ's hedging policy.

It really hits a nerve on you (it should only hit the nerve of the ENQ employees who do the hedging or of any PR person who works for ENQ - you are neither, as otherwise you could not post here according to the laws that govern these BBs) when I write that ENQ's hedging since early 2018 has been poor. There must be some reason why that is the case. Perhaps, you could disclose what is at stake for you...

I do not engage in deception. Although I write anonymously, I always do so as if I were telling my opinions to people's faces.
So, I would be happy to tell them to ENQ's hedgers in charge or to you in person.

I have always written in a way that shows respect for your opinions, even if I do not always agree with them.

You should show the same courtesy towards me, instead of condoning or inciting others to call me names.

I have no problem that you correct my numbers or disagree with them, but I expect you to be civil.

That is all.