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Hi Londoner7,

As you are modeling general field decline of Enq's portfolio, let me add some info, in case you have not seen it.
MOL partners ENQ in Scolty and Crathes. They have just published their H1 results.
Here is what they say about these fields:
"Scolty & Crathes (MOL 50% WI, non-operated): production was maintained at constrained rates through the existing pipeline, while the replacement insulated pipeline was installed and is on schedule for first oil in late-Q3 2019."
So the increase in production will most likely first show up in the 15/09-15/10 production report.

If you read the most recent trading update that refers to natural decline, which is 5 February, you will find the following statement "2019 production is expected to grow by around 20% to between 63,000 and 70,000 Boepd. Production from DC4 at Kraken and improved performance at Scolty/Crathes, following the pipeline replacement project scheduled for the third quarter of 2019, is expected to offset natural declines across the portfolio."
I believe that DC4 has surprised on the upside. Thus, production will be higher.

I would like to thank Therapist again whose file helps one think about natural decline rates in the portfolio.

ATB

Hi Londoner7,

Many thanks for your comments. I share your views. On the parcel sizes, I would go with the number/figures that others like MO and Chilting posts. Often they are above 500K.

Here is what I what said I would provide, and since I keep my word, here it is.
Kraken's Oz loan figures (2019 H1)
BOEPD Price Revenue (15%) ($M)
January 23651 59.27 6.308
February 21757 64.13 6.279
March 32288 66.41 9.649
April 34366 71.2 11.011
May 40791 70.53 12.946
June 43000 63.3 12.249
Total Revenue 58.442

(Notes: I took June production to be 43Kbopd. I assume all months have 30 days for simplification purposes. Price is the Brent average price for the month which I collect from the US EIA, via a vendor website. I assume that in H1 there was no premium or discount for Kraken crude. I suppose that at the start of the year Kraken oil was selling at a $1 discount which was compensated by the $1 premium in Q2. These are assumptions!)

Expenses ($M):
Oz loan interest (8.8%) (3/4 year) -11.55
OPEX at Kraken ($19/bbl) -16.75
Lease (FPSO) ($100M per year) -7.5
Kraken FPSO leasing. Interest($57M in 2019) -4.275
Capex (spent since 28/09/18, 2 wells and infrastructure $40M) -6
Oil transportation cost ($4/bbl) -3.53

Net repayment 8.846

(Notes: I assume the interest of Oz loan in 4Q2019 will be disbursed now, so the interest is for 3 quarters;
Capex: I believe DC4 was supposed to cost $100M. However, ENQ wrote "At DC4, the subsea infrastructure was installed in line with plans. Drilling commenced in November after the delayed arrival of the Transocean Leader drilling rig, with first production from the wells being rephased to the end of the first quarter 2019. As a result of improved reservoir understanding, the Group gained approval for developing DC4 with three wells instead of the four originally planned, saving approximately $23 million with no material impact on oil production rates or recovery anticipated." So, net expenditure is $77 million. I assume $40 million goes into H1 Cash Flow calculations.)

I assume no G&A for Kraken. The assumptions obviously have a material impact on the figures above. But, the details of the Oz loan agreement are not all public. Others will get different figures. At best, it is a guess.

Share options: You commented on them. The yearly share awards are based on targets not all made public because they are sensitive, as they say. The targets for the 3-year plan share options tend to change only if a big transact

Hi all,

Many thanks to Therapist and gkb47 for your data. Therapist's files are much appreciated. A quick question for you Therapist: why is it that some months for the aggregate production data are missing in your tables? Just in case you have the number if you could post them it would be much appreciated.

Unfortunately, there has not been much commentary on the production data, but I would like to hear others' views. I will add to what I wrote yesterday, but start by thanking Chilting&MO and others for their excellent work on the AK offloads. Production for May cam bang on at 42K bopd. I expect it to be higher in the next reporting period 15 May to 15 June. What are people's best guesses for this period's Kraken production? The drop will happen in the one after (15 June to 15 July, as the last week of this period had the breakdown).

As I wrote yesterday, most of the other fields's figures are uninspiring. But as we know there is work under way in the NNS and the CNS. Does any one know how much the work being done in Heather, Thistle, the Dons, Scotly/Crather and the Dunlin bypass would add to the production going forward?

Now to Magnus: I have read all I could find but saw no mention that the the planned shutdown was 28 days, which the production data we got b/w 15 April/15May, implies. As HMHn pointed out the passage in the OU in May was very badly worded. They could have at least said how long the shutdown had lasted. One can only hope that by the time of the OU (May23rd) it was already up and running. But the statement is not clear on that either. I keep my fingers crossed. The lesson I learned is that ENQ will produce above 70Kbopd when both Kraken and Magnus are in full swing. However, any downtime on either of them and the drop to the monthly production is huge. I still hope the next figure to show monthly production above 75Kboepd, but that is assuming Magnus got into the full production mood right away.

Now, to E121 (given the content of most of your posts I think you would have liked to be a professional macro-economist; it is never too late!). Why did you write yesterday "and a scenario where the likes of ENQ may even go bankrupt shouldn't be discounted. "? It makes no sense. You know that 24Kbopd for the rest of 2019 is hedged at a floor of $65. And that the debt that needs to be repaid in 2020 is not that large, i.e., $155M, and push comes to shove CAPX in 2020 could be reduced to $100M (minimal maintenance and a well or two drilled), plus some juggling of "Trade and other payables". So, until 2021 when the debt to be repaid is $471M, you know that you wrote was an exaggeration.

Relax: US crude stocks are being drawn at a rate of close to 1Mbbls per day, and I expect them to do so until Labour day! Now, you will agree with me that the hedger in charge should have followed my advice to hedge the quantities I indicated
when the poo was in the $70s.

May Kraken fill up your pockets (because Magnus was o

Hi Pelle,

I do not know all that AB wants. But I suspect he wants to be invited to the 60p party and pay for it! And he also wants to pay you a dividend!

BTW, I am not in any way suggesting to anyone to sell their ENQ shares. If anything, the time to buy at low prices might not be over yet. As I wrote in the past, I have LT holding and a trading holding (which I have not traded yet since buying it). Before the latest AK breakdown I was thinking of converting half of the trading holding to my LT holding. I hope to still do that, but want to see how AK is doing after the recent hiccup. All we know at the moment, and based on what Krakie posted (and I have no reason to doubt what he posted), is that AK had a breakdown, and by the time he posted the info that he had was that AK was up and running. We also know how many days elapsed b/w offload #41 and #42. But, we do not know how long the breakdown was (a few days or more days), and at which rate is now producing (if the former it is producing at a lower rate, if the latter then it is producing at the rate it was before the breakdown). The next offload will tell us that! My expectation is that it is producing at the same rate as before the breakdown. It is also possible that some of the down time was used to do some of the work planned for the 3-week shutdown. If that is the case, then the shutdown would be shorter than 3 weeks. Questions and more questions. I still want to see offload #50 before year end!

We also know that the current SP is above the RI price and close to 25p, a barrier could be reached any day.

I read CNE's interview in Petroleum Economist and I liked what I read. Basically, he felt it was prudent to write down the reserves, but that if production met some targets, the write down would be reversed. That is a balanced view of matters . Also, he would not state that the production was 50K boepd if he felt it was a one off. He must be convinced that the production at that level can be sustained for some time. That is what I call music to my ears.

Hedging: I wrote plenty in April/May about taking advantage of poo in the $70s. Had that taken place revenue would be higher. It is two months now with a poo below $65. I have bought a Brent call option that is showing a profit at the moment. But, I believe that if I hold it for longer I will make a larger profit.

Have you learned the local language in Brazil ?

p.s: His LTIP for 2018-2020 requires net debt at the end of 2020 to be below $1493 for him to get 25% of the options related to net debt. He would get 100% of such options if net debt at the end of 2020 comes down to $1294 million.

May Kraken fill up your pockets.

Hi E121,

As you know the data on shale production is all over the place, with some sources talking about major increases projected until the end of 2019. The weekly adjustment is also all over the place changing from a large positive value one week to a large negative value the following week. The people doing that job defend their work that in percentage terms is no larger than in the past. The problem is that since US production is now much higher the same adjustment in percentage terms represents a higher percentage of worldwide production. This is the new reality. What the market needs to see is a continued decrease of shale production. All it sees now is a decrease in the rate of growth. But we need negative growth! And the sooner the better!

OZ loan: I wrote to londoner7 about it as i believe he had mentioned the interest rate of that loan in a previous post. What I knew about the loan was the same londoner7 wrote about it which was in the RI file. But, in fact the idea that the cash sweep is monthly must not be what is going on, because it is clear that there was no cash sweep until the end of 2019. Since the loan was made in October, monthly cash sweeps would have led to a different balance than the one reported at year end, which was principal+interest accumulated since loan was made. where did you get the idea that the focus is on the Oz loan? Who wrote today/last week that it was not been repaid? It will be repaid according to the terms of the loan which have not made public. I trust that what they told you at the AGM is correct, and that they can repay it earlier (W/OUT PENALTIES!). If AK roars then repayment can happen earlier than the bonds mature. BTW the oz loan represents about 9% of net debt, but its share of the interest bill is higher because the interest paid on the loan is a few percentage points higher than the interest of the other borrowings. Now, let us give this a rest!!!

I am surprised you have never been to Brazil yet! Their main way of communicating is not English, but football!

Hi londoner7.
The October RCF hurdle is no hurdle at all. I suspect that the 2019H1 report will say it is in the bag. Since you are one of the best experts this bb, and in case you have the time, have a look at how EIA's adjustment is computed... You will find it quite uninspiring. Thinking that the market reacts so strongly so what in reality is a bit of a guess makes me wonder...

Hi chilting, We await good news from you!

Osaka-san/ Krakenoil, since your writing is very similar my advice to you is to give it a rest on the ramping labeling of people and instead do some analysis so that we can learn from you. Let me say it aloud and clear. I have never ever shorted ENQ or any other oil company! As far as the other option, that only the most idiotic investor would not state facts when the sp is moving up, my answer is that if my posts here could move the ENQ's SP, it would be much higher!

May Kraken fill up

Hi E121,

I hope your holidays were enjoyable and in somewhere warm!
I read your words on encouraging conflict as a way to get a higher POO. I am afraid that bar major conflict that is not going to pus the POO higher. All signs are that the market is well supplied. To my dismay shale continues to power ahead. I was betting on it seeing declining production rates when I bought a few Brent call options, and I losing money on those at the moment!
We have now seen close to two months of oil prices in the low mid $60s. Not good! had the hedger in charge done her job, the games being played in the gulf would be irrelevant.
Your comment on the water cut at Kraken needs to be qualified. The chart shows production up to the end of April, i.e., shortly after DC4 was brought online. At the end of April 15MMbbls had been extracted from Kraken.
ENQ's SP performance is still much more tied to Kraken than to anything else, because that is what the analysts look at more closely. How many days did the breakdown last? Any idea? A week? (I am still hopeful that load #50 will happen before year end.)

What is your prediction for net debt at the end of H1? I am sticking to $1650M!

There is some talk on this BB about a takeover. My hope is that does not happen soon. I felt robbed when Ithaca and Faroe Petroleum were taken over, even though I made a good profit on both. But, had it not been taken private I would have tripled my money at some point. I am now facing having to sell my AMER holding at a minor profit. I have now to decide how to redeploy the capital from AMER...

Hi Londoner7,
When ENQ announced the OZ loan they stated that the interest rate attached to the loan was lower than RCF's interest rate. I did not interpret literally, but thought of it as the interest they would have to pay the banks that provided the RCF if they were to renegotiate the repayment terms. Indeed, this seems to be a better interpretation. At the moment the 12 month USB Libor being 2.15%, the loan is costing 8.45%. But that rate was already been 3% in recent times. So, the loan can easily have an interest rate above 9%. This is why Kraken's performance is so important. One will see how much had been repaid by H12019, but I am confident that less than $10M was repaid, and possibly as little as $5M was repaid. (assuming ir of 9% and constant repayment, $45M per year of free-cash flow of 15% of Kraken would be needed every year to pay interest and repay the principal. )
Many thanks for your contributions on the discussion of oil/gas use at AK and the gas production of Kraken. The piece of info I am mostly keen to find out is Magnus' production in June!

May Kraken fill up your pockets!

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