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retiredbanker,
yes hambro and pavel should be shown the door. what they have done today is beyond the pale.
8.5% is just too good of a deal for their friends...

retiredbanker,

How bad to the PIs are the conditions of this new bond offering?
would it not have been better to wait until 2020, w/ conversion then?
does it suggest POG has cashflow problems and that it needs another $25M and is just kicking the can down the road again?

was not the case they got $50M plus from their IRC loan in March?

TA

Anas Alhajji,a few months ago wrote an op-ed for the Financial Times arguing that "demand is growing substantially for heavy crude while supply is growing substantially for light crude from U.S. shale, creating a mismatch of supply and demand. The imbalance will choke off the growth of shale and the broader market, leading to an "energy crisis."

For him there are two problems: i) where will all this light, sweet crude go? Not enough refining capacity.
ii) there is a mismatch between the quality of oil produced and the products we get out of it. The demand for heavy crude is coming from diesel, Alhajji argues, as emerging countries grow their economies and need more fuel for trucks and heavy machinery. That demand will continue to grow. Further, he says, refiners in these countries (and in the U.S.) have invested heavily in refineries that use heavy crude.

so, according to him: Price differentials will skyrocket as international prices jump while shale oil prices fall below break even.

anyone has any thoughts on how sound this reasoning is?

many thanks again to the best BB hosted by LSE.CO.UK.
Special compliments to Londoner7, Therapist, Chilting, MO (who does not reply to my queries..), Pelle, E121, Squif and many others.

GLA

my yesterday's post is getting outdated quite quickly, IRC is up 7% today, its market cap is rising fast, Now HK$1.6B, POG's stake is now worth $65M. any thought anybody?

TA

-----------------
Fellow Pavlovskers,

Does any of you have any idea how much the market value of IRC will rise to in one year's time?

Iron ore's price (62% Fe and 65% Fe seaborne) is climbing rapidly, now above $110 and $125.

Could IRC's market value increase to $500M quickly? (It is now around $200M. So, POG's stake is worth around $60M.)

Insights from posters much appreciated.
TA
p.s: I added to my POG position at 8.34p a few weeks ago...

Fellow Pavlovskers,

Does any of you have any idea how much the market value of IRC will rise to in one year's time?

Iron ore's price (62% Fe and 65% Fe seaborne) is climbing rapidly, now above $110 and $125.

Could IRC's market value increase to $500M quickly? (It is now around $200M. So, POG's stake is worth around $60M.)

Insights from posters much appreciated.
TA
p.s: I added to my POG position at 8.34p a few weeks ago...

Hi Londoner7, E121 and Pelle,

E121: Let me start by saying that the view that I am king/queen of pessimism and the epitome of a 'glass half empty' person, as you label me, misses a lot of what I wrote, and that i got right in the past. If you read what i wrote about Kraken's production, it is very upbeat. I am delighted with how AK/K is being turned around, and my production forecast is not pessimistic at all. W/ regard to FCF, I never said that the ring-fenced cash flow from the Oz loan does not reduce overall net debt. All, I did using Londoner7's figures was to highlight that the CFO will have to thread carefully with managing cash to meet October's RCF repayment, w/out having to resort to legitimate, but not liked by brokers (see WSJ article June 7 on the ways shale companies have to resort to manage their cash flow: "U.S. fracking boom are turning to asset sales, drilling partnerships and other alternative financing to supplement their cash flow. These forms of funding often come with higher interest rates or carry other downsides, such as giving outside investors a hefty share of future oil and gas production"; these are extreme and by no means what ENQ does, but ENQ has done two deals Mercury and the Oz Loan which are a very soft version of giving future production in exchange for cash now). That is all. Note that the figures provides by Londoner7 still bring net debt down to $1570M. So not bad at all. Indeed, that is on top of the repayment of close to $70M of BP vendor loans, the unwinding of the favorable working capital position, and a bit more of the $600M BP will eventually collect out of its 50/50 sharing deal. not bad!!!

Pelle: I was not pessimistic, but alluding to the sequence of cash flow calls. I forgot your Dividends :)

Londoner7: Many thanks again for all your great work. In the past Fernan10 use to marvel us with his detailed analysis. Since he left this board, it is wonderful to have people like you, who present a balanced view of the company's financials.
A few comments on your analysis/questions by others:
- ENQ's guidance for OPEX was $600M (the OPEX that you have is slghtly below that as you noted). This means it is like a fixed cost, so any revenue from extra production squeezed from the producing fields goes all to FCF apart from $5/bbl for transportation costs. So, squeezing another 1Mbbls would add $60M to FCF, using your $65 POO.
Hopefully the production for 2019 will surpass 70K boepd. I am hopeful Magnus will overdeliver (it is also possible that the drilling of the two wells gets delayed to conserve cash).
- Kraken offloads are on average above 500K bopd. Note that the first 35 offlloads amounted to 17Mbbls extracted, and there were a couple of light loads among those (MO or Chilting could tell you more). This means the average offload is above 500K. With 12-day cycles AK can be producing 43K bopd.
- Oz loan: cash sweep occurs every 3 months: 1st payment of interest/capital was in January.
B

Hello MO, Chilting, Londoner7

MO: I am glad you are back posting regularly. Have you seen any relevant ships working around Magnus or other fields worth mentioning, as per the 2019 CAPEX works?

Chilting, could you please let me know the approximate times and dates of the two most recent offloads, #38 and #39?
I understand that offload #39 started on 12/06 around noon(?) and ended yesterday around 2/3pm(?), and that the tanker of offload #38 had left AK on 01/06 at (what time, please?).
A 12-day offload cycle (I remember reading messages posted by MO longing for such short offload cycles; I hope he is now smiling...). Several weeks ago, I posted a message saying that an execution driven re-rate of the SP would happen if #40 took place before the end of H1 (this will for sure happen, hopefully with 3 to 5 days to spare), and load #50 before the end of 2019. Assuming downtime of 21 days in H2, it should be very easy for AK to offload another 10 times (in fact with offload cycles of 14 days, seeing 11 offloads is feasible).
The first 35 offloads delivered 17 Mbbls, so another 15/16 offloads before year end would bring 25 Mbbls extracted out of Kraken. Recent offloads have shown that AK can now produce above 40K boepd. Now we hope that this spurt in production can be kept and is not driven by DC4's initial production. So, let us hope the water cut can be kept at a level to keep producing above 40K boepd, consistently.

With the 3 weeks shutdown and assuming production can be kept at 42K bopd from 5 May to 31 Dec., I see production of around 35K bopd for K in 2019. But Londoner7's 33.8K bopd target is very reasonable because as he says stuff happens. The financial spreadsheet modelers, need to bear in mind that 15% of this production's FCF goes to pay Oz capital's loan, so is FCF with a recipient, and cannot be used to repay the RCF.

This brings me to compliment and thank londoner7 for all his efforts and outstanding work in providing a very objective figure for debt reduction in 2019.
Let me say that Lodoner7's prediction of around $200M of FCF net of paying the vendor loans and unwinding some of the working capital, is too close for comfort.

Why? Because out of that $200M you need to remove the part of the FCF that corresponds to the Mercury loan (that will have been paid now) and the FCF that is linked to 15% of Kraken, that is ring-fenced to repay the Oz loan (that is, FCF corresponding to 5K bopd is tied to this loan). So, effectively what is left to repay the RCF is not $200M but an amount around the $150M RCF repayment dues this year, of which $50M has been repaid. This means that if the POO drops further or if execution in terms of production were to fall below londoner7's forecast production ENQ will have to do another deal with Mercury, postpone payments to suppliers to meet its RCF obligation.

I am not concerned, but I fully believe that such deals would postpone a re-rating of the SP by the brokers.

GLA

Runner,

many thanks. anything else you remember about other things based on your notes on other issues related to ENQ?

i believe that the dividend issue is settled given what you wrote. enq will not pay a dividend in the near future, which is the right thing to do when it is paying interest on borrowing over 7.5%.

need a tanker by Saturday...

Runner2018,

Look forward to reading your notes.

I have just been updating my perception of ENQ's way forward based on the TU and E121's an Romaron's notes.

i) Kraken. If we assume that Kraken produces an average of 40K boepd per day from may 1st until the end of the year and shuts down 3 weeks, average daily production in 2019 will be 34K boepd, so within the guidance. That means extracting 12MMbbls from Kraken this year. Tanker watching will tell us if this is possible: basically it requires offloads to have a cycle of 13 days, from the time one tanker leaves AK until the next one leaves AK with its full load.
Given what we know about Kraken oil selling at a small premium, the modelers need to adjust the percentage of Brent price that ENQ gets for its production. This is all positive.

2) Net debt: if working capital went down by $50M as a result of paying suppliers,. This means that the concerns about "current trade and other payables" having grown by a lot, should now be put to rest. Unfortunately, there is no information of how much of the BP vendor loan repayment due this year has already been paid. That is about a $69M question? Suppose that not much has been paid. I still expect ENQ to be able to pay it all by the end of Q3 plus find the $100M of the RCF due by 1/10/19. And I would then expect ENQ to pay down another $125M of debt by 31/12. Of course, for this to happen the poo was to stay at least at $70. This means end of year net debt around $1500M.

Enq's plans to drill are very welcome. Eagle might have 6M bbls of 1P reserves. ENQ a few years ago stated it would be similar to Gladwall' reserves. So, at CAPEX of $5 per bbl (as Romaron wrote), they need to make sure they can bring into production within that budget.

E121: Many thanks for your reply and notes. I do not dislike ENQ's people. I can only hope they find a better team to do do the hedging. I am really discouraged by their performance over the last 2 years. As a PI I expect better from them.

Krakie: I am going to point out to you that my production for production posted the night before the TU was 69,900 bopd. You can read that post. So, I was very close, as the actual number was 69,973 bopd. Sometime ago I also predicted the December's TU production level very close. So, it is time for you to congratulate me on my prediction and stop labeling me de-ramper!

GLA

Hello Romaron and E121,

Many thanks for sharing your "notes" and views of the AGM. All that you write makes sense to me (I will write my interpretation of the numbers that Romaron wrote as part of his posts). Good to know that the SVT issue was lack of news, rather than a done deal. We have to expect BP to bargain hard on lowering the rates given that ENQ has been shouting aloud that they have reduced the running costs of SVT by $50M a year...

I got some answers to some of my questions by reading your AGM related posts. However, I wonder if by any chance any of the issues raised in my questions below were discussed. Anything you could write, even if little, would be much appreciated.

1) What is the current water cut of Kraken's first three DCs?
2) Magnus: is it producing over 21k boepd? (the trading update does not give hard data on Magnus, even though in the past we were told it was producing above 21K boepd. What is going on?
3) Alma/Galia: what is going on? (the update does not tell us much. Is there any hope it will ever deliver 12K bopd gross?

Net debt:
1) How much of the payables has been paid in the first 4 months?
2) How much of the outstanding BP vendor loans were paid in the first 4 months? (remember that ENQ has to pay about $69M this year to BP -vendor loans and interest.)

Romaron: The "Climate Action Group" have been attending all Oil companies' AGMs this year (they are there by proxy of some shareholder). Often you can spot them by their dress code.

Kraken production: If they produce 40K bopd b/w 1 may and 31 December and shut down for 3 weeks, basic arithmetic tells us that the average production will be close to 36K bopd.

Romaron: I am an actual investor but: i) I do not own a million shares, not even close to half of that (I am a diversified investor); ii) I would have had to travel to London on purpose, unless I happen to be there on a business trip, which was not the case. Assuming I am still invested I hope to attend their AGM in the future. Your side of the bargain when we meet, will be you saying: "build it and they will come".

Finally, today I might buy a Brent call option with a late June settlement with a strike price in the low 60s. Its settlement is financial, so I do not have have to have bbls delivered at my doorstep... lol

Many thanks again.
ATB

H E121,
As you know better than I do you can also ask questions after the public questions are asked by approaching him. I hear he is quite easy going.
I also often tend to reach out and chat with the CFOs and COOs at the AGMs I attend.
Best of luck.

The update answered some of my questions, but many were left unanswered:

questions:
1) What is the current water cut of Kraken's first three DCs?
2) Magnus: is it producing over 21k boepd? (the trading update does not give hard data on Magnus, even though in the past we were told it was producing above 21K boepd. What is going on?
3) Alma/Galia: what is going on? (the update does not tell us much. Is there any hope it will ever deliver 12K bopd gross?

Net debt: down $50M. But this is not the important figure.

We need to know:
1) How much of the payables has been paid in the first 4 months?
2) How much of the outsanding BP vendor loans were paid in the first 4 months? (remember that ENQ has to pay about $69M this year to BP -vendor loans and interest.)
not clear how much progress will have been made. ENQ might have had to pay down "payables" by a lot, and had Capex from Kraken, so, that might have constrained net debt reduction in the first 4 months. if enq were to provide a figure in the $1600sM, then it will have done surprisingly well.
3) hedging: why only about 26K bopd is hedged until the end of the year at a floor price of $66? (I bet they missed the chance to hedge more when the spot price reached $75. $66 as floor price instead of $69 means less $45M cash coming through the door , if the poo drifts down to $66...)
4) guidance on net debt reduction.
5) by when will the waterfall arrangement for Magnus will have fully repaid $100M to ENQ? Is ENQ already receiving some of this $100M

I am with londoner7 in asking questions about Kraken production. How often do they hit 45K bopd? Once a week? Once a fortnight? Why the OGA data differs from ENQ's data for Jan/Feb?

the interesting thing with AGMs is that you can guess whether there will be useful answers or not by the ceo, cfo and coo, at the start of the meeting.

GLA at the AGM. Enjoy the food and drinks.

Pelle,

Production estimate: no clue, but if you want a number i will say 69.9K bopd. i would want to know what happened in the last 4 weeks with Armada Kraken / Kraken. we know it can produce 45K on a good day, but in the last month it was not producing at this rate day in day out.

questions:
1) What is the water cut on kraken from the first three DCs?
2) Magnus: is it producing over 21k boepd?
3) Alma/Galia: what is going on?

Net debt: not clear how much progress will have been made. ENQ might have had to pay down "payables" by a lot, and had Capex from Kraken, so, that might have constrained net debt reduction in the first 4 months. if enq were to provide a figure in the $1600sM, then it will have done surprisingly well.

this was last year's update in May:
"At 30 April 2018, cash and available bank facilities amounted to $204.8 million.
The Group's improving cash flow generation capacity is enabling the early cancellation of $50 million
of the Group's credit facility by the end of May, with the term facility reducing from $1,125 million to $1,075 million. Upon cancellation, the Group's cash and available bank facilities will therefore reduce
by $50 million.
The Group has hedged c.7.5 MMbbls of oil for 2018 at an average price of c.$62/bbl."

questions:
1) how many MMbbls are hedged in the Q2, Q3, Q4? At what floor price?
2) guidance on net debt reduction.
3) by when does the waterfall arrangement for Magnus will have fully repapid $100M?

SP tomorrow: irrelevant. as long as production s up and net debt is being paid down the SP will at some point move up. irrelevant if that happens tomorrow.

the interesting thing with AGMs is that you can guess whether there will be useful answers or not by the ceo, cfo and coo, at the start of the meeting.

GLA

I agree with hitman and E121 that one might want express in very strong terms at the AGM that looking after PIs requires ENQ to follow options 1 and 2 described by hitman and partially endorsed by E121.

1) pay down RCF;
2) reverse OZ loan.

Once these are concluded, then it will be time to refinance the bonds at lower interest rates (could surely get to 5% if the risk is much less as a result of deleveraging), and pay a token dividend so that Pelle can smile.

Next is to develop lots of bits and bobs of current licenses (lots of CAPEX will be required to get some never explored areas of Magnus and Kraken to produce oil, Eagle field, etc.)

So, no news deals for a while. Sometimes you have to control your emotions and walk away from a deal, as Chevron did recently. That is often the best way to preserve shareholder value.

Cash is king. As E121 writes just search info on shale companies. A lot of them on the edge at the moment, or having gone under, because of their high leverage.

GLA

Hi Therapist,

Please ignore the following passage of my message "note 2 of the table does nor square with what is stated in the top row. So, I would have to read the report in detail to see if I could reconcile the notation."
It is all fine, it is about the totals, so all makes sense. Note 3 in there: "Gas Sales refers to the total gas export stream that has been forecast, including both gas that is indigenous to Magnus and that which is composed of recirculated imported injection gas. The Reserve of Sales Gas attributable to Magnus is 27.7 Bscf. " helps but does not solve the riddle as we do not know the part of the gas used as Fuel that is produced by Magnus.
Hope that somehow this will help...

Hi Therapist,

I suggest you read the rights issues prospectus, namely the GCA's report in there:

https://www.enquest.com/fileadmin/content/Corporate_actionsPDFs/Rights_Issue/RIProspectus.pdf

In there you can find on page 203 of the file (not of the report) a table with projected production and sale of oil and NGL and gas for the lifetime of the field (given the assumptions made at the time the report was written) for the mid-case scenario.

As you will find there is a bit more of boepd besides oil. For 2019 NGL bdp would be 659. There is also the other gas but note 2 of the table does nor square with what is stated in the top row. So, I would have to read the report in detail to see if I could reconcile the notation. But I bet that the gas figure in there amount to b/w 1,000 and 2000 boepd...

Btw, given the production data you retrieved from the OGA and that you shared, oil production is above the projected figure of 16.789 bopd.

Btw, can you access Kraken's production for March?
You posted February's net production as 20390. So that makes it 28922 gross.

Chilting, many thanks for your data on the partial offloads #36. I hope AB can confirm production b/w 40K to 45K bopd day after day, week after week.

GLAll

hi E121 and Chilting,

If HK left on the 19th April at 8 PM after load #35 then to measure the length of the offload cycles we need to use the time when AS will leave AK, not when it arrives to AK.
Suppose it is tomorrow, the 20th at 8 am.
that would give 30.5 days for 2 offloads. we cannot subtract the amount of time the offloads last, because the DCs continue producing.during that time.

the question is: how much oil did the 2 #36 partial offloads lift from AK? how long did they last? did anyone measure the load of the tanker that went to the US with offload #36?

i would still want to see load #40 taking place before end of June to be reassured that production will stay high for an extended period of time.

hope so.

GLA

Auson,

Yes, production was lower due to three factors: weather, FPSO and reservoir,
I suggest you read Cairn's statement on it. If I say something that Krakie does not like then he calls me this and that, and there is no need for that.
ATB

Krakie,

What you write is not objective:
"You always focus on any minuet bit of bad news and escalate that into a focus point to deramp this stock, you never focus on the small bits of good news other than the blatantly obvious that you tend to skip over quickly."
This is pure attribution by you about others' views that bears no resemblance with reality.
In fact, for the most part I am silent, unlike you that ramp so much, that perhaps should make us thinking that ramping is the new rapping...Perhaps your ramping lyrics could find success outside this BB.
Wish you well.

Krakie,
I am not trying to wind anyone up.
But it is difficult when people spin others' words the way you do.
CNE is posite as chilting stated in terms of improving (production/FPSO) performance, and that does not close the possibility of an upgrade of reserves later on. But that is different from saying that their downgrade of reserves was just an estimate, which is what you wrote.
They have downgrade the reserves, and that is it. If they ever upgrade them they will let us know. But, at the moment the reserves are what they are...
I am more keen in following the offloads (objective data) than thinking how I would like reality to be...
As far as your wish that I miss out on the re-rate, my reply to you is that I wish you well.