Member Info for L3Trader

MO and E21,

My understanding is slightly different from yours:
ENQ will pay $300M for the 75% of Magnus, 100$ in cash, the other $200M out of cash flow dated back to 1/1/2017. As you suggested by now the cash flow accrued since 1/1/2017 is roughly $100M. Thus, when the deal is done, effectively, only $100M out of cash flow is owed to BP (plus the $100M in cash).

What is puzzling is that it seems that ENQ does not have to repay the $100M owed before it starts banking some of the cash flow for itself. Apparently, can do it over 5 years at $20M per year (plus interest) (this is good if the cost of the other debt is lower than the interest rate BP charges), and split of the rest of the cash flow that accrues to the 75% of Magnus it is buying 50/50 with BP. All that is paid to BP will keep on being added. If at some point BP has collected $1B, from then onward the ownership is all ENQ's.

Does this sound right to you?

Best,
M
p.s.: SPV, I understand E121's explanation, but whenever I have dealt with SPVs, they stay off the B/S, so debt is not consolidated.

E121,
Agreed. Let us bring the Scolty fix forward assuming it is not too CAPEX intensive. Any estimates, MO?

W/ regard to "The revenues and production from 15% ring-fenced 'stake' will still accrue to ENQ, even though the net cash flow will go towards paying back OZ's debt. We don't need to reduce any of that in ENQ's P&L and production estimates." I will wait until I see how they do the accounting, e.g., off B/S. I know everything suggests that it will be in the B/S. My thinking/hope was that the uplift of the Kraken production, would make 55.5% of the production equal to 70.5% of the H1 level. In this case, I was looking at net debt reduction under these assumptions.
But, probably hard to disentangle everything, if kept on B/S. I wonder if there is a seprate hedging program for Oz's 15% of Kraken?

best,

MO and some other older news:

http://www.shetnews.co.uk/news/16427-terminal-operators-aim-for-longevity-through-efficiency

TA

HI MO and E121,

MO, Many thanks for the passage from Cairn's earning release / call "Thinking about AK's production for remainder of 2018 (pre DC4), Cairn stated...Not sure if will significantly impact production levels, as will be extensively testing each well, possibly through test separator, so may be slight hit on overall levels, CNE suggest 35-40k for remainder of 2018."

This would keep ENQ's production where it is now, 54K, assuming no progress on other oilfields. As I wrote on Sunday, and using others' calculations on reduced hedging losses, net debt could still come down by $180M in H2, assuming CAPEX stays at the same level, and provisions are paid out at the same rate in H1. POO will do its job. It will not be below $73 on average this semester.

I have not looked at the AK lease, and the extent the sign off is going to lead to increase outlays. Do you two have any idea?

As MO writes, ideal that Enquest Producer offloads before 2/10 to give private SH a better idea of production in H2.

Can ENQ provide another update immediately after the RI takes place? Yes, it can. But what about before the ex-date? Only if there is material information, suppose.

It is no coincidence that Barclays only revised target price for ENQ after Cairn's release. They waited to see if there was something more in there. Have you listened/read to the Cairn's earnings call?

Best,
L3

ENQuers,

I am afraid that the truth is out! until free cash flow improves and debt is paid down this SP will be volatile.AB get the pumps working...

discodave,

fascinating story. should go to the next agm.

DD,

yes, there is value ahead, if enq's management do their job. squif's contributions to the forum are important, because we need to not forget the past, if we want to predict the future better.

i got a letter from my broker about the RI and am returning it saying i am in! give more shares at 21p...

Hi MO,

Many thanks for this. I was unaware that Jefferies had a stake on the outcome, and was disappointed that it did not collect the fees it had in mind collecting.

POO will play its role. What ENQuers need is for the ENQ management to do its job, and not waste resources on grandstanding, i.e., buying more assets at this stage.

Best,

Hi MO,

Almost back to last Thursday's closing price. Bounce is almost complete -:)

Thanks for the link. Was wise decision not to sell 15% for a low price. 15% of CAPEX would be $345M, so twice as much as borrowed from Oz. Such wizardry from AB/JS!

There is a reuters piece on this matter ends with the following sentence:
“The concern with Enquest’s equity value remains its sensitivity to $1.97 billion of net debt ... we cannot rule out future approaches to the market,” Jefferies said in a note on Monday.
Have you seen the Jefferies note?
TA
L3

Chilting,
It won't reverse gains. Please read about turmoil in Basrah and Lybia. Saudi Arabia and Russia and Iran's incentives are aligned in stirring the pot. I am afraid John Bolton's is being outplayed. touche'

Hi MO,

Many thanks for the link to the relevant page of the earnings release. I see grey (old) and plenty of blue (new).
but at the end of the day what we need to know is the cost of all that blue. For ENQ's skill in running mature assets to be that special we need to know how much money has been spent to get all that "blue". This is something I am trying to understand. It might be that ENQ is really special in running mature assets but the claims have to made in a way that joe 6 pack understands.
I say this because other poster asked if ENQ's advantage in running mature assets is the tax losses it holds. It rings true given the evidence so far. The danger is that the competitive advantage disappears with other players appearing on the scene?

Many thanks.
Best,
L3
p.s.: Oilman1984 states that any success seen is due to others (BUMi and Petrofac) and Squif states that 2bn of debt has been turned into 700m of equity (numbers the B/S gives away) . Do not they have a point?

Hi E121,

Great idea. Do e-mail IR letting them know the long term shareholders would like that to happen -:) You can run the hedging strategy on behalf of JS.
ENQ should be seen a play on its capabilities (value creation) as oil producing company. There are better ways to play POO movements, for anyone willing to deal with derivatives. Sometimes, we confound the two (value creation & POO) in a oil company.
Best,

Hi E121,
Let poo continue rising from these levels...

I have read many posts saying that ENQ is good at running old oilfields, and better than others. ENQ IR also milks this message repeatedly. I ask where is the hard evidence?
Many thanks.
L3
p.s.: Last Friday a posted a message saying ENQ would bounce by the end of day, not "today". It has indeed bounced back 2/3 all the way where it was the day before the earnings release/ RI by the end of today... -:)

Hi Fernan,

Ouch!!!
So at $80 ENQ's share is even lower. I have not had time to distill the formula, but it seems Malaysia got a good deal.

Herr MO,

Is the spare slot related to 3 instead of 4 wells? Could they use the spare to crack on with the Western Flank?

vielen Dank

Kraken

Average gross production in the six months to June 2018, which includes the impact of the planned maintenance shutdown in March, was slightly below expectations at ~30,700 bopd. The production level in H1 was impacted by both planned and unplanned production downtime, watercut development slightly higher than expectations and not fully maintaining reservoir voidage due to restricted availability of water injection in the period.

Following completion of the required filter maintenance, water injection rates increased significantly and gross production has improved, reaching levels of 35,000 - 40,000 bopd in August and FPSO performance has stabilised.

Since first production, more than ten million barrels of oil have been produced and 20 cargoes lifted, with 16 in 2018, of which five were for Cairn. Demand for cargoes continues to be strong and pricing relative to Brent is in line with expectations.
The DC4 manifold is in position and flowlines have been installed in Q3. The drilling programme is now expected to commence in late September, following a rig contract re-negotiation the Transocean Leader drilling rig is scheduled to relocate from a third-party exploration well.
First production from DC4 is expected in early 2019. Additional potential in the Kraken area is being reviewed for further possible drilling options in 2019 - 2020.

E121,

Many thanks for the crystal clear explanation. So if all those 80M bopd were extracted, recovery would increase to 54%. And BP spent £300M. All I can say is that my left-hand side pocket (my BP holding) is felling robbed by my right-hand side pocket (my ENQ holding) -:)

In a day when none of the oil companies moved much, a 4% increase by ENQ can only be interpreted as Mr. Market feeling positive about the RI.

Best,
L3
p.s.:No worries about grammar. As you might have already concluded, I never review what I write.

Hi MO,

Many thanks for the comprehensive info Re Enquest Producer & Alma/Galia. Yep. sunk costs should not matter in our minds, but they often do. I do hope Alma/Galia can be brought back to a good production level.

The CPR, and as quoted by romaron, states "2.0 MMBbl suggests an incremental recovery factor of approximately 2%. This is viewed by GCA as a reasonable target." I also read that the recovery so far had been 50%. So, are they only upping the recovery by 2%? That would be just 40M boepd. How do we get to 80M boepd total left in Magnus?

Also, thanks for bringing to our attention the work BP was going to do in Magnus. Did they ever go ahead?
Or is it something that ENQ will have to do because BP never did it?

TA

E121 and MO,

Many thanks for the info on loads #22 and prediction for #23. Your info is very complete and I understand why you say AK is now pumping around 40k per day. Great news.

MO,
Very grateful for the info on Alma/Galia production since production started. So, if it had 40M 2P reserves and it cost $800M to bring back to life an old oil field. Assuming OPEX at $25, the break-even POO for this project to be worthwhile would have had to be above $75 for sure, given the cost of the debt. It is disappointing that such project was sanctioned ( i know POO was high, but everybody knows there are commodity cycles), because with such a high break-even, if anything goes wrong (as it did within the last 1 1/2 years based on the production figures), then it becomes a massive loss making project.

Will Alma/Galia ever deliver to the shareholders? What is your take on it?

Best,

KK,
Some shareholders just prefer the truth, good or bad.
TA