Member Info for Lochnagary

VOR - I agree with your thinking that this is not a good time to be trumpeting how much money we are making, even though the market would love to see the impact on our debt. It wouldn’t surprise me if AB had to change the text of this update yesterday, after the chancellor increased the tax on O&G companies again. A strategic silence on how we are benefitting from an increased oil price is probably appropriate.

Front page headline from Scotland on Sunday (courtesy of the BBC).

Just shows that leopards can change their spots, although some people may call it rank hypocrisy given how negative the Scottish Numptie Party have been for many years on oil & gas production from the North Sea.

An excellent update. What a pleasure to listen to our CEO explain the strength of our company, backed up by solid production and financial numbers. She has delivered handsomely on her strategy to reduce her exposure to the UKCS and is actively managing the portfolio to grow shareholder returns. Well done Linda.

But remember our Labour government seem to be in hawk to the majority of their MPs, and Starmer has the backbone of a decomposing worm. If we have fuel rationing of some description and the left wing press and the Liberals / Greens start agitating for a proper windfall tax, Starmer might just oblige them. I sincerely hope not, but it is a risk.

Nothing would surprise me with this bunch of incompetent, self serving muppets in charge, but I hope they they think before opening their mouth, and doing something that would further damage the UKCS and UK PLC.

The Guardian is leading with the above headline today. I wouldn’t be surprised if the government decides to implement a windfall tax on uk oil companies worldwide profits made during the conflict. So, even though our revenue is increasing substantially at the moment, a retrospective windfall tax could damage us later on. The risk of this happening may be contributing to the markets muted reaction to our increased revenues, and the suppression of our share price.

I had a quick skim through it, and my impression is that Enquest have either been asleep at the wheel of have decided to try and fob off the NSTA, which seems extremely irresponsible of them, given the size of the sanctions they were exposed to. Enquest may have some reasonable explanations to justify their position, or partially mitigate the sanction, but they should not have let issue get to the stage where the NSTA has to take action. They seem to have ignored opportunities to defer some of the dates they are now being sanctioned for not meeting. Not Enquest’s finest hour.

The NSTA should be ashamed of themselves - what a disgraceful decision and punitive fine. The NSTA clearly don’t understand the basic principals of risk based assessment in a drilling and subsurface environment, and are out of their depth. We shouldn’t be surprised though, it is just another revenue raising scam for the government. I wonder if the fine would have been so high if the price of oil had not increased so much in the last couple of months. A windfall tax by another name.

Voice…absolutely. I think AB will struggle to find an acceptable deal at a price we can afford. Which may mean we are taken over by someone else, otherwise we are in a suboptimal position for a long time. I hope this is not the case. My hope is that Harbour want to divest an assett at a reasonable price, because the need cash for other strategic purposes.

Does anyone else think that the UK government and the media (particularly the BBC) are being unnecessarily alarmist about the oil price being $100 / bbl? You would think it was the end of the world!

What they don’t tell people is that the oil price was higher for FOUR years, from 2011 to 2014, as per the following average price data for Brent shows:

2011 - $111.26 / bbl

2012 - $111.63 / bbl

2013 - $108.56 / bbl

2014 - $98.97 / bbl

If you adjust these values to 2026, they would be a lot higher, e.g. $111 in 2011 is equivalent to c. $161 in 2026 because of inflation. So the oil price now is nowhere near as high as it was from 2011 to 2014 in real terms.

People seemed to manage fine during these years, and the government didn’t need to help people en masse with their energy bills, in the way that is expected nowadays. We seem to have a culture of state dependency now, where people expect the government to help with their energy costs, even when the price of oil has only risen modestly, compared to the historical prices.

I think most people should just tighten their belts a bit, like they obviously had to do between 2011 and 2014. Apologies if people think these words are offensive, but I think it would help the entire population if they had a proper sense of perspective on the oil price, and it might make some people think they could actually manage their energy costs without government help, if they followed the examples of those who lived through high oil prices in the 2010’s. It’s obviously important that the government provides some targeted support for the very poorest families, but that doesn’t warrant scaring the entire population about the recent increase in the oil price.

Surprised that 28 Scottish Labour MPs voted against the motion. I think Scottish voters will remember that, and show their disgust at the Scottish elections. If 300+ Labour MPs can’t see the folly of Milliband’s policy in the current geopolitical climate, there should be a general election, as this government is not capable of governing in the national interest.

The government has a tax mechanism ready to deploy, ie. The OGPM, which would kick-in at oil prices > $90 bbl.

It would be disappointing if the government applied this tax now, but it would be better for us the long term as it would be less punitive than the EPL.

A partial extract in case link doesn’t work..

A temporary profit cap should be imposed on energy companies and petrol retailers to stop them benefiting excessively from the conflict in the Middle East, the government’s cost of living tsar has said.

Lord Walker of Broxton, who is executive chairman of Iceland supermarkets, has asked the government to examine limiting company profits during crises.

A profit cap, which would directly limit the earnings companies can make during exceptional market conditions, would go further than existing windfall taxes. Supporters argue such measures deter profiteering, while critics say they risk discouraging investment and distorting markets.

“I have asked the government to consider a temporary profit cap … to stop producers and retailers exploiting the crisis to make windfall profits at the expense of consumers,” Walker, 45, writes in The Sunday Times.

“As executive chairman of a retailer, I have no problem with profit. It’s what allows businesses to invest, employ people and pay tax. But I do have a big problem with profiteering, especially when families are under real pressure.”

Https://www.thetimes.com/article/93b02d7b-f09e-40c9-8749-e1315994076b?shareToken=e1ad79e693937b799e11f6c8c129f374

Just when you thought this government couldn’t get any worse. Hopefully Labour don’t take this advisor seriously.

I think any favourable changes to the EPL in the short term will be largely due to the polling projections for the Scottish elections, where the recent mega-pole showed Labour getting only 15 MSPs, there lowest number in the history of the Scottish parliament. Apparently potential Labour voters are going to vote for the SNP, because they don’t like Starmer, and they won’t vote for Reform because they don’t like Farage. If the above projection materialises, it will give the SNP a majority, with 67 MSPs, which will doubtless lead to more calls for a referendum, and the possible breakup of the UK. In case anyone in the rest of the UK is in any doubt, the SNP are even less competent than Labour, when it comes to management of the economy.

A softening of the EPL would give Scottish Labour something positive to say on the doorsteps, but it’s probably too little too late now.

Having thought about this some more, I think the suspect number in the story is the date of 2037, which apparently drives the remaining liability of $780m.

The Magnus jacket was installed in 1982 and commenced production in 1984. It is the most northerly fixed platform in the UKCS (only 300 miles south of the Arctic Circle) and stands in some of the roughest waters on the planet. Despite enormous investment by BP over the years (EOR) + gas import from Schiehallion / Foinaven / SVT, and Enquest’s operating magic… production is declining. Operating and maintenance costs will continue to rise as the weather and marine conditions take their toll and equipment and system obsolescence issues become more pressing.

Asset maintenance is always a casualty when money os tight, so I suspect Magnus will be in a poorer condition than would otherwise be the case due to the EPL.

BP and Enquest will both have a good understanding of;

1) field economics under a variety of oil price and tax scenarios;

2) the obsolescence issues / dates / costs for the production critical systems;

3) any pipeline and reception terminal constraints;

4) any critical fabric maintenance or asset integrity issues / dates / costs;

and know when they think COP (Cessation of Production) should be.

I would guess that it’s the early 2030’s, rather than 2037, which suggests that Enquest’s remaining liability would be significantly less than $780m. So BP may not be being quite as generous as the initial numbers suggest, however…..it still looks like a good piece of business for Enquest, and the market seems to like it.

If it sounds to good to be true…it usually is.

The deal that Enquest have done with BP seems to be extraordinarily generous to Enquest. BP isn’t a distressed seller, so why would they allow Enquest to crystallise a long term liability of $780m for a paltry $60m?

Do the numbers not suggest that Enquest will be on the hook for further liabilities, which have not yet been made public. I hope the deal is as good as they say, but I wouldn’t be surprised if Enquest will now be responsible for further costs and / or exposed to further commercial risk on Magnus. Time will tell.

Https://uk.advfn.com/stock-market/london/enquest-ENQ/share-news/EnQuest-PLC-February-Operations-Update/97886991

LSE seem be developing a habit of not showing RNS in a timely manner. ADVFN is much more reliable on that point.

Https://uk.advfn.com/stock-market/london/enquest-ENQ/share-news/EnQuest-PLC-EnQuest-awarded-PSC-interest-in-Malays/97806923