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Weny,

You have lost your bet. I am neither from Sweden (have been there only once!) and I have never shorted ENQ.
It might come a surprise to you, but there are people how do not post lies on these anonymous boards.
I post as if others knew my identity.
I would be betraying the way I was brought up if I were here to deceive others.

Hi Londoner7,

Many thanks for the info.
A couple of questions for you: So, at 70K boepd, you get yearly production of circa 25.5Mbbls. If total operating costs are as you describe ($600M+$100M), that gives OPEX per bll of circa $27.45/bbl. This is high! I must have a mistake somewhere! Why? because OPEX has been lower in previous years, and production, ie., the denominator is going up!

I thought that when the average POO was below the trigger point you could pay interest in cash unless you wanted to PIK. Apparently not.

Given what you wrote, I am now at a loss in terms of the annual report in relation to the FPSO lease.
Why the statement there?
"The FPSO finance lease liability is carried at $709.0 million as at 31 December 2018 (2017: $797.9 million), of which $93.2 million is classified as a current liability. Finance lease interest of $55.8 million (2017: $31.3 million) has been recognised within finance costs. The finance leases have an effective borrowing rate of 8.12%."
The report also says: Minimum payment Present value of payments
Due in less than one year 144,188 93,169

The $93.2M is indeed circa $100M because it is the present value of the $100M at 31/12/18. But, where does the difference b/w $144.2M and $93.2M come from? What else, if not the present value of the interest?
Any thoughts?

Pelle, You keep on harping on hedging not having been good enough. That is my role here :) Anyway, expect the hedger in chief at ENQ to have panicked from June until now and having hedged lots and lots of production with a floor price in the $50s. The question I have is: if she/he did not want to miss the upside when the POO was above $70, why do you want to miss it now when the POO is below $60? Answer: because the benefits of hedging are asymmetric, and she/he clearly does not understand this when the POO is high. Had hedging been done much better, and I would give you my FCF for next year, because we would know the minimum price at which production would be sold for. Anyway, I have lost hope on ENQ's hedging team. They are out of their depth. Fortunately, execution on production is much better. That is what is delivering the cash! Looking forward to offload#44.

Therapist, It is a pity others did not join in your contest to predict OGA's June production. BTW from my number remove 9Kbopd for Malaysia.

ATB
May Kraken fill up your pockets.

hi E121,

Many thanks for your quick reply about the info about the offloads I asked about. Much appreciated. The time stamps do suggest that there might have been still a few days at the start of May when AK was still changing gears to get to cruise control speed. For the most recent offload (#43) with 14.5 days, and Chilting's load info I get about 37Kbopd. Hopefully offload #44 will show an improvement to 40+Kbopd.

Hi Pelle,
My friend, you have relapsed twice in recent days mentioning the forbidden word ("dividend"). It ain't any dividend this year, next year of the year after with POO below $65 (you need POO at $70 or higher..). A lot of debt has to be cleared. Also, I have no idea how you get 70+Kbopd in the next two years. Could you please detail how the production would be split b/w Kraken. Magnus, Malaysia, and the rest, given depletion rates of at least 6%? And what CAPEX per field would be needed to keep production at such levels?
And by the way, you already faced a dividend in 2018, albeit a negative one! A rights issue in which shareholders have the right of first refusal can be interpreted as a negative dividend. Why? because for you to keep your position in the company constant (i.e., to avoid dilution) you have to cough out the money, thus the terminology "negative dividend." So, no complaining about the dividend. Now, I also have to warn you not to complain about why not more production was hedged at a higher price. That is my role here!!!
Finally, what is up with you posting production numbers before they have been released, w/out a warning that it is just your prediction. If you are that clairvoyant could you please post the numbers for Euromillions tonight?
I will give you my predictions for 2019H1 numbers: Production 67.800 Kboepd, Net debt: $1665M (I have increased it by $15M because Magnus stopped longer than I had anticipated. This change is based on a crude calculation, because as gkb47 had warned me, I was going to run out of paper/file space to model everything! And furthermore, Like mavrk_10 I am trying to reduce use of my keyboard. Have you bought your 400K shares? In a single purchase you trade way more shares than my whole holding!

Finally, I am at a loss to understand the EIA production/consumption data and OPEC's forecasts. One thing I know, the only way for the POO is up! Why? Because the Texas RRC will eventually impose constraints on flaring, Iran will stop selling oil on the side to China and Russia, Iraq will eventually produce/export within its quota, Russia will not smuggle oil under the radar to Turkey... And finally, my call options must not lose me money!

May Kraken fill up your pockets (eventually)!

ATB

Hi Chilting,

Many thanks.
So, based on my notes Petro Atlantic (offload #42) had left AK at 23:50 on 28/07. Given that offload #43 ended at 12: 30 12/08, that makes the offload cycle 14.5 days, correct?

does anyone have the notes for offloads #38, #39 , and the two partial #36 offloads? The reason I ask is that I am baffled that May's OGA numbers were so high given that we know that the full cycle between offloads #35 and #36 lasted close to 20 days, if I recall correctly. Yet, the OGA's May production figures were quite good. This leads me to believe that it is likely that some days in May saw production close to 50K bopd? any comments?

Today's event (the Guyana's oil discovery that propped up the value of my 2500+ Tullow shares!) to me show why it is so difficult to compare E&P oil companies, as many have attempted here. I see ENQ closer to DGOC or others similar to it than to Tullow or PMO, because these two have a lot of E on the go (and they can get lucky from time to time), even though their net debt situation is worse than ENQ's net debt. In short, I just do not see how one can objectively compare ENQ with companies that have a lot at stake on E.

Safe assets: I have been thinking of buying some Rufiyaa...

gkb47: I agree with you aboyt the Chinese and the Russians selling oil on the side. In fact, I bet both are involved with selling Iranian oil that does not enter the OPEC data. Most likely Iranian oil production is higher by a few hundred thousand bbls a day, and it is finding its way on to the market, but not accounted for on both the demand and supply sides. This actually means that OPEC's spare production capacity is lower than thought. I see this as good news, since if the sanction on Iran were lifted the actual oil on the market would not increase by as much as thought!

POO: I know others have different views but I am still long with my call options expiring later this month. A week or two of huge negative values of unaccounted for oil in EIA's weekly releases and the speculators will increase their long positions. I feel that the high proportion of unaccounted for oil (a few years ago the proportion was much lower) every week is showing that there is something not quite right with the EIA's estimates. And the revisions of the production data go on for 24 months, as usual. I still have to check if the sum of the revisions of a particular monthly production figure are getting higher or lower. Some people out there have created models to predict exact current oil production on the basis of the initial monthly production estimate and the average change of each revision. More on shale oil production at some other time.
It has not gone unnoticed that the Texas Railroad commission for the first time had some internal dissent about allowing gas flaring in the Permian. I foresee serious constraints on flaring being imposed in Colorado, Wyoming and New Mexico.

ATB

Hi E121,

There is no obsession. I just like to keep a tab (and that is why I post my calculations bearing in mind that the details of the loan, e.g. what kind of Capex enter the calculation of cash flow for quarterly/monthly cash sweeping purposes) on how much progress is made on paying that loan down, because analysts whose views are important for IIs to become shareholders, have in the past pointed out the structure of ENQ's debt (from the Mercuria loan (now repaid) to the Oz loan). I also understand that if the POO were to be too low in the future whatever was left at the end would be repaid with other money. My hope is that ENQ can refinance all its debt in a couple of years time, at a much lower spread from 1 year Libor.

I agree on the focus on the POO, along with execution as being key to ENQ rewarding its shareholders in the future.
(ENQ is much better prepared for a period of low oil prices this year than in the last 3 years. 24K bopd in 2019H2 are hedged at a floor price of $66. That is not far from 40% of its net entitlement (I exclude about 6.5K bopd that indirectly belongs to BP in H2 via the 50/50 share of the 75%).

Speaking of POO have you looked at how EIA arrives at its weekly production figures?
Look at this week's EIA US production data:
Week 02/08 earlier week
Alaska ............................................ 453 444
Lower 48 States 11,800 11,800
Sum (i.e. Domestic Production) 12,300 12,200

Why does the EIA presents the se sums? Because they round the number to the nearest 100.
So, in fact production increased 6K bopd from one week to the next. Yet the media is saying that production moved up by 100K bopd.

Another observation: the EIA figures this week are not that bad as they came across. From the above data, production did not increase, but Exports decreased and Imports increased (from the week before). Crude stocks went up by 341K bopd a day, only because unaccounted for oil was 535K bopd (in other words, 3.7M bbls in a week). The shocking thing is that unaccounted for in the week before was -512K bopd (in other words - 3.6M bbls in week). So unaccounted oil changed by 7 M bbls!!!
As unaccounted for oil is the number you need to use to get the calculation right! A positive number might mean that indeed net imports were higher, or that production was higher or both. Well nowadays, it is easy to get the net imports figure right (using satellite images to track tankers), apart from any imports from Canada via pipelines. So, is production bouncing 1Mbopd from one week to the next as the unaccounted oil swing suggests? I do not think so. Could it be that the imports exports data is so bad? Exports are estimated from US census bureau data, and import data comes from a survey.
A

Hi both,

I have updated My Oz loan calculations. See below.
-Revenue is the same. I am using OPEX at $10/bbl as suggested per Londoner7 (i found a file with my notes that mentions a low OPEX for the AK FPSO, under the expected efficiency. Not sure that was the case in Jan-Marc 2019. But hey, why not?)
- I had mistake in the lease and interest of the lease (I know it is strange for the two to be separate but this is who they appear in the accounts. HMHn Please see provisions under one 1 in the yearly report, and you will what is there. The mistake was that I needed to multiply this year's value of the lease paid by Enquest by (0.15/0.705) to reflect the correct proportions.

I use transportation costs as the value of of transportation cost and tariffs across all the portfolio as in 2018. If they are lower with the offloads and then STS transfers, the better. Since I do not know I will let it at $4//bbl).

Total Revenue 58.442
Oz loan interest (8.8%) (3/4 year) -11.55
OPEX ($10/bbl) -8.81
Lease (FPSO) ($100M per year) -10.64
Kraken FPSO leasing. Interest -6.11
Capex (spent since 28/09/18, 2 wells and infrastructure $40M) -6
Oil transportation cost ($4 bbl) -3.53

Revenue - Expenses, i.e., Net $11.81M

Good news: a higher level of repayment in 2019H1! (Gkb47, you suggested I use a large sheet of paper. All you need is a good spreadsheet!)

Pelle, not a good time to sell part of Kraken. POO is low, but first and foremost, it has been very volatile in Q2 and Q3. So, no good amounts will be put on the table for 10/15/20% of Kraken . Also, there is a need to have track record of good performance of AK. That requires a few more months of regular loads. In the meantime ENQ will collect that cash!

I will write about the data we get often from major institutions. I am afraid a bit of it is not very accurate. Hopefully the POO will go up even though OECD crude inventories in June went up (I am still long on the POO with my call option). There seems to be the possibility of shortages in the future, but as E121 has written many times a recession at the door will push the 2020 prices of the the term structure of the POO lower, and downplay any tightness at the moment.
Anyway, I am not worried about the POO at the moment. It will bounce back to the mid $60s.

BTW, Iran has been exporting a lot more than the figures it provides to OPEC. It exports to China, and those imports are for sure not being recorded in the Chinese customs data!

ATB

Hi Londoner7,

This information is very helpful, and puts things in perspective. Unfortunately it also confirms that the 23rd May trading update could have been better worded, in relation to Magnus. The OGA production data says that throughout May Magnus produced circa 34Kbbls total. That is about 2 days of production. Thus on the 23rd May it was not up and running yet after the shutdown. I had interpreted the two following statements in the TU, "The facility's water handling capabilities have been further improved through the successful return to service of the second deaeration tower in May, with the planned shutdown also completed." and "The planned maintenance shutdown at Magnus was completed in May, with the remaining programmes at the Group's other fields expected to be executed by around the end of the third quarter." as indicating that it was back online producing. But, the statements actually do not confirm this. So, we know the shutdown was 4 weeks, instead of 3. As you say the production numbers for June will tell us more.

The good news is that Kraken seems to be cracking on and is back to its 40+Kbopd. I believe that 43/44Kboepd is doable. That would do wonders to net debt reduction.

Going back to your earlier questions: OPEX in FPSO can low , e.g. $10. But I used the OPEX averaged across the portfolio. I do not think that Karken's OPEX last year was anything close to $10. But with increased production it might get close to the value. Let us hope those calculations of yours are correct. Close to $20M net debt decrease would be wonderful. But that would surprise me. Assume that were to be true, then ENQ would get cash flow from Kraken before servicing is loans of around ($20M/3)x11=$73M. That money more than services the interest of all the other loans in H1. That has to be good news.

Your other question on how BUMI is paid? Many thanks for the CNE information. Their IR department is very proactive. I looked at the transcript of the earning call and here is what AB stated then; "The lease had moved from linear 0 to 100% to b/w 50 and 100. But we do have a provision if downtime is excessive that is goes back down to 0." Your info tells us that excessive downtime is 72 hours. But you have to wonder why would anyone write a contract paying 50% of the daily rate if production efficiency is stuck at 10/20/30% for days and days. In other words, this is hard to believe and the lease must have
other conditions attached to it.

Do you as wish but like I said it is better to ignore the noise of people whose ratio of # of words / pieces of information is close to zero. I no longer read them!

This is a funny world: I have held GENL since 2018. It is not going anywhere. It has a net cash position. It started paying a dividend in H1, and today introduced an interim dividend (Pls read that Pelle!), and the market just shrugs it off. To be honest they are finding it hard to increase production from their December level.
ATB

Hi Londoner7,

You are right. I should have used $93M for the lease as it appears in the accounts in 2018 (in Finance lease commitments).
I should have also used $51M for interest on the finance lease (the effective borrowing rate is 8.12%). I actually just worked on the basis of an old file Fernan10 (he used to post here, and his forensic accounting was absolutely brilliant and very valuable, like yours to LTHs who believe that investment decisions should be informed by sound analysis of businesses; of course, not everyone posting here agrees with this view...) had posted. So, my figures should be the ones you quote, but bear in mind that the $93M that you quote and is in the report is the present value of payments, so it was discounted to 31/12/2018. W/out discounting you get the roughly the values for the lease and interest that I used.

Kraken Opex at $19 is an assumption. Given increased production it will be lower. But I expect it to he at this level in H1, and lower in H2 assuming AK continues delivering more than 35K bopd (including shutdown) in H2.

Yes it was 2018Q4 interest, and the $3.5 M you refer to, I had aso assumed it was interest. However, I have also read that it was indeed a fee, see 19. Loans and borrowings in the report, where $3.2M appears as a fee.

CAPEX: I assumed that DC4 Capex yet to be spent at the end of September 2018 was $100 M (including CNE's share of it). Thus, my multiplication by 0.15.

I also did not take into account that periods of efficiency below 50% of AK would have meant that BUMI were not being paid, and for sure there were days/weeks in H1 where BUMI was not paid.

When the accounts are released I hope the repayment is closer to your figure rather than mine :).
One way or the other Oz loan progress will have been made.

The part that was truncated about the share awards was only meant to say that such adjustments are sometimes made, but they would appear in the report.

ATB

p.s.: As you will have noticed some people think this BB is the ENQ's fan club, rather than an investment board about ENQ. They try to silence, and push out from the BB anyone who discusses ENQ's financial figures, even when they show good things about the company. Ignorance is bliss for some people. I have learned to only read posters who have a track record of posting meaningful information. The rest I treat as noise coming from a reduced number of people who post under multiple aliases...

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