Member Info for L3Trader

Squif
As you suggest it will be tight...once again...but they can always kick the can down the road by getting another loan to be repaid in kind at a later date. But all this costs money (interest, fees, and oil delivered at a price in an interval that might have its upper limit below the oil's spot price, and so results in lower revenue.

Squif,
I think it is 55% (70%-15%) of Kraken (rather than 85% of 70% of Kraken). But, if production goes up at Kraken goes up by circa 30% of 2018H1, ENQ's entitlement will not decrease. That is why, more than ever we need MO's superb tanker tracking skills. The frequency of the tanker visits will make or break this company...

Hi MO,

Many thanks, for quick response. Do empty those rose' bottles!

E121, MO, and Fernan

E121, thanks for reminding of that (provisions). The current BP vendor loan balance is in the provisions, and the $200M BP vendor loan balance will be as well. I just have no idea of how large it will be for the 75% of Magnus over a period of 20 months (it cannot be that by today only $100M would be left; that would be too good to be true, correct? (MO, you have the production figures...)
The good news is that all this creative accounting will reduced debt on the balance sheet by a lot. The $220M due in the 1st of October will reduce debt by that amount (the SPV that will be created for the OZ deal means that the $175M will not add to the debt on the balance sheet). In addition the balance on the Mercuria loan to be repaid in kind is going to bring another reduction of circa $25M by the end of the month. So, net debt will be down by $250M by 1st of October. All good, and it will reduce finance charges by at least $6M in H2 2018. However, it is not clear how much the ArmadaK finance lease is cost in finance charges. This could be an issue.

MO: Next stop is the repayment of $175M of the RCF in April 2019. But, the cash will have to be paid out of a smaller asset base as Magnus's cash flow has to be used to repay BP's vendor loans, 15% of Kraken cash flow is going to OZ's hands. So, in reality, which is the production out of which ENQ has to find the cash flow to repay those $175M?

TA

heardy, I meant that they stayed behind to enter the numbers based on the closing price. In a smallish cap like this, they could not have predicted the closing price a few days in advance. I doubt there were leaks. We have to bear in mind that all oil companies share prices came down this week, and that is why ENQ's sp also came down during the week.

heardy, yes, that is how it works.

that has been in the public domain for a while. so, no news there.

Fernan10,

Yes, it is generating positive cash flow in 2018H2. It is that they needed to repay $270M with the first 9 months of the year. They are borrowing $175M to repay those $270M, and have repaid in kind the end of 2017 loan. But, it is not as much as anticipated because of the large hedging losses, that they could have in part avoided, if they had hedged and liquidated derivative positions differently.

BTW, I need to correct what I stated earlier. It is "We have to bear in mind that ENQ is not buying 75% of Magnus, but 75% of something else, i.e., 100% of the net cash flow of 75% of Magnus until it has repaid its $200M loan, and 50% of the net cash flow of 75% of Magnus until BP was received $1B, ... So, we need those calculators out to Figure out how much net cash flow 75% of Margnus has generated since 1 Jan 2017, which is the start date for the deal...

Fernan10,

No, they could not. They need the OZ money to pay down the RCF, as the banks are playing though. As I wrote when I started posting, it is clear the banks would defer repayment but wanted better terms, fees etc. in return (they really wanted the whole cake). They for sure wanted a return above 10% on the extra they were lending. As a shareholder, I would rather being asked for more cash, and pocket that 10% every year...

Why OZ? Well, they are a hedge fund. They do unconventional deals, like other hedge funds...

We have to bear in mind that ENQ is not buying 75% of Magnus, but 75% of something else, i.e., of 50% of the net cash flow that corresponds to ownership of 75% of Magnus, if I remember correctly...

MO,
What is going on with Kraken?
Why is the production not ramping up? It does not seem to just an AK issue, as otherwise Bumi would be paying out more than $15M. The 2018H1 report does not mention anything about the reduction in the lease rates.
Keep those tankers coming...

romaron,
many thanks for all the info, in particular:
Future large repayments after October are April 19 £175m and Oct 19 £100m. First one might not be tight if POO stays high until Feb. Oct 19 repayment is easy.
Any hints that the Kraken oil field is not as productive as advertised over the last few years?

lse2000,
your £2 billion figure is wrong. first, debt is always reported in USD. Second is going to go down by $45M by the end of this month. A simple arithmetic calculation:
" In August, an additional $25 million was voluntarily cancelled early, with a further reduction of $195 million due in
October.The Group has agreed $175 million of financing with funds managed by Oz Management."
Larger reduction, because PIK for end of 2017 loan has probably been reduced by another $20M, since June 30.

Squif,
That was a loan to be repaid in kind. It is being repaid at predicted, and given the POO is high it will be repaid just fine. on June 30 they owed $48.9M. So, all fine.

Squif,
On production, I wait to hear from MO and others. Though, I am worried about Kraken's output rates. I still have to read the RNS/report in detail which I will do tonight, but the tone of what they right about Kraken has changed... The hype is gone. I worry... at it should be producing above 40K per day already. I do hope they were battered with questions in the earnings call.
Finance matters, E121 and Fernan10 are the top dogs here. I have limited time to delve into the details. They need to streamline the financing of the business. At the moment they have too many little deals here and there (Pikind for a loan, payment via cash flow with BP, now the new SPV for OZ capital). All these attract fee charges (each require's due diligence before it is agreed, etc.). So, far from ideal (just look at how much of the cash flow from operations is being sucked up by the borrowing). Until they start tiding up the house, they cannot deliver to the shareholders, despite having good assets. In the end we will do fine. We just need to be patient.

Auson,
not poor at operating the assets. but very poor on managing the finances. finance charges of over $120M is eating into the shreholders pockets big time. ENQ needs to start cleaning the balance sheet.

your broker will/should send you a notice for you to exercise them.

All, and MO in particular,

This is a good transaction. See that " The economic date of the Magnus Transaction is 1 January
2017 (the "Economic Date"). Therefore, on completion of the Magnus Transaction, cash flows from the 75%
Interests since the Economic Date will be reclassified as accruing to EnQuest’s account and reduce the
base consideration and accordingly the amount of the BP vendor loan." So, by completion ENQ will owe much less than the $200M is theoretically borrowing from BP. Anyone has any idea of the net cash flow of Magnus over two years. Half of it will reduce Enq's BP loan. Figures anybody?

All, and MO in particular,

This is a good transaction. See that " The economic date of the Magnus Transaction is 1 January
2017 (the "Economic Date"). Therefore, on completion of the Magnus Transaction, cash flows from the 75%
Interests since the Economic Date will be reclassified as accruing to EnQuest’s account and reduce the
base consideration and accordingly the amount of the BP vendor loan." So, by completion ENQ will owe much less than the $200M is theoretically borrowing from BP. Anyone has any idea of the net cash flow of Magnus over two years. Half of it will reduce Enq's BP loan. Figures anybody?

TWalbyoff,

Expected timetable of principal events (All UK time unless otherwise noted)
Latest time and date for transfers of Ordinary Shares
between CREST and the VPC system prior to the Record
Date
6.00 p.m. on 24 September 2018
Announcement of the Swedish Krona Issue Price 7.00 a.m. on 25 September 2018
Ex entitlement date for the Swedish Rights Issue 25 September 2018
Record Date for entitlements under the Rights Issue 6.00 p.m. on 26 September 2018
Latest time and date for receipt of General Meeting Forms of
Proxy or submission of proxy votes electronically
9 a.m. on 27 September 2018

Squif,
Overall, I think this is very good news. If Magnus is a good asset (they claim it has a net value of $500M, but do not give us the assumptions to support that valuation exercise; w/out knowing them little I can say), then exercise the option. I do not think it is a good idea for ENQ to have 70.5% of Kraken in the long term. They need to diversify the risk, and have done so, by buying Magnus. So, I am happy with that. But they need to stop doing deals now. (I worry that AB is addicted to deals. He needs to spend less time in Mayfair!) . I am going to take part in the rights issue.

I would like to see them knowing how to hedge revenue better. They are not very good at it. Apart from that if MO continues to keep track of the tankers arriving both at Kraken and Magnus, and reports shorter intervals between them, everything will be fine. I am expecting a spike in the POO of at least $10 from the current price in the next two months, and that will earn ENQ much needed extra cash!