Member Info for L3Trader

As pointed out by others below:
- net debt has only dropped from $568m at 31/12/18 to $550m at 31/3/19 even though we have been told POG received back $57m of debt repayment + plus the $6m in fees.
So, what is going on? Where did the missing $45m go?

Nothing like a couple of days away for something to happen. The mini-spike in the oil price (i say spike because DT cannot be trusted, and in the end he might issue waivers, and/or Cina and India might ignore him and import more; my reading is that he is trying the same trick he used in the Autumn to crash the oil price; thus it is a MUST to hedge the downside now) has also lifted the futures market. All oil futures until the end of 2019 are now above $71 (see below). I think that ENQ should now buy more puts for another 6.5 Mbbls in addition to the other 6.5M bbls it already has hedged (plus the 1.5M bbls that corresponds to the OZ loan), and keep the upside open until it can get a good price for the calls it would sell, creating a collar with a ceiling of no less than $80USD.
https://www.theice.com/products/219/Brent-Crude-Futures/data?marketId=220842

A few other things:
- First of all, my many thanks to Chilting for his work as tanker watch supremo. Hopefull #36 will be hooking up with AK by May 1st. Also, great to know load #35 is headed to the US. They are desperate for heavy oil, and so they will be paying top dollar for it. I expect no discount, or even a tiny premium. I hope for a sustained run of load until #40, which I hope will happen by June 30! Does anyone have the data from any subset of the first 30 loads to make comparisons? MO used to post them...
- Second, if Kraken starts to perform it would be a mistake to farm out part of it unless for top dollar. The farming out was needed before ENQ had 100% (i.e., 62.5%...) ownership of Magnus. If Kraken starts to deliver, then selling a 20% WI should not be done for an amount smaller than $600M. We know that production quantity matters to make th company visible, and if Kraken starts to deliver then the deleveraging can be done faster anyway. And the important issue here, is that even if ENQ sells a 20% WI in Kraken, as the operator will still have to keep its focus on the asset, so not clear that a sale will create much mental space to think about other projects...
- Third, I would be curious to see the details of E121 nubers for a production of circa 70Kbopd at $70 poo. I am still getting net debt reduction of circa $300 with poo of $72 and 70kbopd, but I have not double checked my numbers...
GLA

Auson, This is "his" company, so he will be paid as much as he wants...As PIs we only want an amount of crumbs equal to 60p a share.
Over the Easter weekend Enq will produce 300K bbls which will sell for $21M. (Not even Krakenoil culd think of this ramping!) Have a great weekend

Amjad Bseisu saw his take-home pay increase by more than a third in 2018 to £1,352,000.
The total pay package is up by 35% from 2017, which totalled £998,000. AB received a base salary of £461,000, boosted by long-term incentives of £386,000 which accounted for the main differences between 2018 and 2017.
The company has taken various measures to improve efficiency in recent months, implementing a new rota system offshore and taking on 146 staff from Petrofac.

Hi Pelle,

As PIs we have to be patient. If production from Kraken is solid going forward, net debt will go down faster, and at some point in 2019 H2 the SP will go up, if the poo stays at current levels. So, tanker watching, and getting oil production data is all we can do...

Hi Pelle,

Operations update on the day of the AGM, May 23rd. Time for at least 2 more offloads.
I do not expect Institutional Investors to add ENQ to their holdings until SP targets change. Time will tell if I am wrong.

Cairn will not write up the value until next year. That is for sure. They would want to see water cut levels down for a long time before reversing their downgrade of the reserves.

ATB

kk, enough of accusations from you, not just on this bb. as i wrote many times if i were to trade i would announce. i have not changed my holdings since i added to my trading position.
what i wrote is about people expecting that one offload to do miracles to the sp. having patience is all i wrote. you seem to have none.

As we can see from today's SP (and by comparing it with the sp in previous days) anyone who thinks that a single Kraken short cycle offload will prop up the sp, might want to think again. Only a decent run of offloads on short cycles will convince the market in general and the analysts that everything is on the right track. Thus, LTHs have to be patient, and not get exasperated that the SP is not reacting. It will take time.
Of course, changes of the poo will move the SP, but that is something ENQ does not control.

The Group is exposed to the impact of changes in Brent oil prices on its revenues and profits generated from sales of crude oil.
The Group’s policy is to have the ability to hedge oil prices up to a maximum of 75% of the next 12 months’ production on a rolling annual basis, up to 60% in the following 12-month period and 50% in the subsequent 12-month period.
Details of the commodity derivative contracts entered into during and on hand at the end of 2018 are disclosed in note 20.

"The Group uses put and call options and swap contracts to manage its exposure to the oil price.
Commodity derivative contracts are designated as at FVPL, and gains and losses on these contracts are recognised as a component of revenue. These contracts typically include bought and sold call options, bought put options and commodity swap contracts.
For the year ended 31 December 2018, gains totalling $4.4 million (2017: losses of $28.3 million) were recognised in respect of commodity contracts designated as FVPL. This included losses totalling $93.0 million (2017: losses of $20.6 million) realised on contracts that matured during the year, and mark-to-market unrealised gains totalling $97.4 million (2017: losses of $7.7 million). Of the realised amounts recognised during the year, a loss of $17.2 million (2017: loss of $10.4 million) was realised in ‘Business performance’ revenue in respect of the amortisation of premium income received on sale of these options. The premiums received are amortised into ‘Business
performance’ revenue over the life of the option.
In October 2017, the Group entered into an 18-month collar structure for $80 million (see note 19). The collar includes 18 separate call options and 18 separate put options, subject to a floor of $45/bbl and a cap of approximately $64/bbl. Included in the total gains for the year ended 31 December 2018, a loss of $8.0 million was recognised in ’Business performance’ revenue (2017: loss of $5.2 million).
The mark-to-market of the Group’s open contracts as at 31 December 2018 was an asset of $54.7 million (2017: liability of $42.0 million). The position includes a loss of $0.1 million in respect of fixed price swap contracts for 200,000 barrels of 2019 production at a weighted average price of $54.6/bbl (2017: loss of $29.2 million in respect of fixed price swap contracts for 4,150,000 barrels of 2018 production at a weighted average price of $59.1/bbl). "

Hi E121,
if the last tanker left AK on the 7th (I do not remember the time), and if the tanker you mention were to leave on the 19th, it would be 12 days.
With a load of 540K bbls, it would mean 45k bopd. I know I am dreaming...
As Chilting wrote this load is the acid test. If it were to stay like this up to and including load #40, then net debt will improve in H1.

if the POG POX is not a very useful processing plant as stated by others here, why did they build it?

this, the breaching of the covenants, was discussed back in October/november (fernan10 and i dismissed the breaching of the covenants. if romaron did not filter out info he does not like, he would know the truth...). instead, this covenants is like a zombie, keeps coming back to the bb. let us agree that there is never going to be a breach of the covenants, because the magnus deal nipped this issue in the bud...

yes, indeed, that i the acid test. if offload #35 finishes by the end of the 20th, it would be 13 days as E121 and Chilting wrote, if i remember correctly, and that would mean DC4 is a great success.
i hope the people attending the agm can get info on current water cut at kraken. has it keep on decreasing? that would be much welcome news.

poo: all we can do is speculate: SA, Russia and Trump will do whatever is best for them. we all have different opinions.. i do not believe that Russia has an interest in allowing the poo to go above $75, to prevent shale production from growing too much. so, any spike of the poo due to Libya, Algeria, etc., will be temporary. and won't move the futures prices for 2020 H2 or 2021 by much. but this is just me speculating, in the absence of a crystal ball...

sure, as E121 wrote, the whole curve would move up when, but by little in the long distant futures contracts.

gd morning E121,

Brent is up and you should be happy. time will tell whether the long distant futures will rise by a lot or not.
atb

anyway, relax all. the 2018 report will be published soon, offload #35 might take place by friday, and a confirmation of a draw tomorrow, will surely make it cheaper for the hedging specialist at ENQ

whiteace (andyp),

i am trying to avoid negatives from happening. i am simply saying that hedging now some serious amount of production would be a good decision, and would guarantee some serious net debt repayment this year. if ENQ's risks it again by not hedging, it might end up not reducing its net debt much, in case the poo reverts to $60...
that is all.

E121,

Just because enq hedged in 2015 does not give them a pass to have failed to do it in 2018, as you are writing.

your statement that i what wrote about backwardation is plain wrong. the futures prices give you an indication of where at the moment the market expects the price to be in the future, and backwardation simply tells us that at the moment we expect prices in the future to be lower than prices now. whether that actually will happen is another story. no one knows. but inversions from backwardation to contango at distant horizons do not happen overnight...

your suggestion about prices of $75 or $80 is pure speculation on your side. the people who are putting the money where their mouth is by trading future contracts are saying that at this moment they expect prices to be lower in 2020 than now. if you think they are wrong then this is the opportunity for you to make a lot of money...

personally, i doubt that you have inside info on what SA and Russia are going to do... you can speculate, but so can everyone else, and that is precisely what enq did in the summer of 2018.. speculated that oil would go up...

whether ENQ has anyone in place to do hedging is irrelevant to whether they understand the intricacies of the job.

hi Pelle,
romaron's argument makes no sense whatsoever. he is trying to rationalize poor decision-making by ENQ, i.e., not hedging the extra production with a collar at a cost of at most $5M is just a non-starter. enq's decision not to hedge was a failure of judgment by ENQ's management and that is the end of the story...

As many have written there was a chance to hedge a lot of production for the rest of 2018 and at least H1 2019 at prices in the lows $70s, when the poo was in the high $70s September/October 1018, by buying put options at a minimal cost of perhaps just $1, thus keeping the upside, as perhaps they were dreaming about poo of $100.

But, AB and his team failed badly, and the result was a loss of revenue b/w November and March of at least $40M. This money could have been directed to pay "trade payables".

at the moment the brent futures curve is showing backwardation. this means a decrease of the poo is expected.

thus, hedging the downside now is what any prudent CFO would do. ENQ should, in my view hedge the part of the Kraken production associated with the OZ loan for the next year, say 1.5M bbls. It should also hedge the equivalent of the production of 25% of Magnus, (say another 1.5M bbls) for the next year. And it should hedge at least another 20k bopd, i.e. close to 5M bbls, of its other 2019 production. I would use a suitably wide collar, with puts at $68 and calls at $75. if the poo goes higher than $75, no need to moan about it. Selling oil at $75 will reduce debt by a lot.

rustybucket,
and how much gold from others are they processing? and what would be a reasonable margin per oz?
TA