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Hi Strictly, thanks for your comments and the invitation to join your blog. I understand your point about 'reinventing the wheel' - I'm familiar with that feeling on these boards, but I thought I'd try my luck.
I'd like to take a rain cheque on your blog invitation - I might follow up later. I've a small holding in the house building sector - Vistry, as a legacy of my holding in GFRD - but given the current economic climate I'm looking to increase my weighting in the sector over the coming months. Hence my current interest. Given previous cycles, getting into the sector anywhere near the bottom should prove a good investment, and I suspect getting the timing right, rather than the specific company will be key - at least in the early stage of any recovery.
In the meantime, you've given me good insight into your ROE metric. I plan to develop my own ROE database using Bellway as a benchmark against Vistry alongside a valuation metric, probably around Mkt Cap and Enterprise value (to capture debt effects). My interest in Vistry is based around their focus on partnerships. I want to explore that aspect further.
Best, londoner7
(Born and raised in the home counties and currently living in Scotland. But I had a wild and memorable year living in the West End - 200m from Bond Street Tube Station - which is my link to London)
Trencherpilot, good to hear you're busy in concrete, but I suspect that might be a local (East Midlands) effect. Across GB mineral product sales have been in decline for the last 5 years (MPA link below). The fact is that in spite of the political noise we don't build much in the UK.
Your post prompted me to lookback to the 2017 results presentation because I remembered it included a breakdown of Breedon's internal supply chain. In 2017 41% of Breedon's cement production went into their concrete production of 3.3M m3. This cement would have come from their Hope plant, with the balance going to other concrete producers and other uses, bagged, mortar, etc.
But I noticed that in 2021 GB concrete production was 3M m3, down 10% on 2017. Clearly, Breedon's business wouldn't have grown on those numbers - the shortfall has been made up with c. 60% growth in asphalt and aggregate. In acquisitions Breedon has been required to sell or shut-down RXC plant to satisfy the CMA's competition concerns.
The lower demand for concrete is largely due to the reduced building of commercial office space, although in areas like the East Midlands that may be offset by the growth private industrial buildings, e.g., logistical centres, which has been growing at over 50% p.a. for the last 5 months.
I'd be interested to know what mix you see and any recent change in your concrete supply to infrastructure, house builders and industrial or commercial buildings.
On fuel increases, roughly 50% of the increase over the last year is due to the change in the rules on red diesel (47p/Lt), which was at least known about by Breedon.
Going back to mineral volumes I was surprised by Breedon's comment that H1 volumes were down by 6% compared to last year. I guess it highlights the bounce back from Covid early 2021, which subsequently tailed off into this year. However, in spite of the decline in the recent Q3 volumes, the decline is much less than it was in 2021 Q3. I might be over reading it but given the 2021 H2 improvement in financial terms in 2021 H2 if not in volumes, then we might see something similar in the current half, 2022 H2.
The trading update on the 25th should answer some of these queries.
https://mineralproducts.org/News-CEO-Blog/2022/release35.aspx
Hi Strictly, thanks for the detail of your ROE calculation. I'd have struggled without the reference to the cladding reserve.
I thought the easiest place for me to start would be with the 1/1/21 BVPS baseline. I worked it by multiplying it by weighted average shares in 2020(220.9m), which results in £1,456m and went looking for that number in the balance sheet.
The closest I could get was Net equity minus goodwill minus intangibles = 2,195-547-144 = £1,504m. Although this is only 3.3% higher than your number, I know it matters when we're essentially considering the difference between two large numbers.
I was good on the BVPS 2021 number, and I see you've used £50m from the guided range of £35-£50m for cladding, (I note this was revised to £71m at the recent interims, but I've stayed with £50m here).
Your 60p dividend number is declared dividends for 2021. I've used 40p for dividends actually paid out in 2021.
My numbers lead to (771.61-22.49+40-680.85)/680.85 = 108.27/680.85 = 15.9% ROE
The main difference with your 22.7% is my starting number for 1/1/21.
Your reference to Bellway 2020 and Covid threw me until I realised Bellway has a different accounting year.
Given the recent release of Bellways FY to July 2022 and Vistry's interims to Jun 2022, I ran ROE for both. In this instance the cladding reserve has been incorporated, as I said earlier, Vistry increased theirs to £71m.
I guess you've worked the Bellway number. I have 7.2% ROE to July 2022. (We can compare detail if yours is very different).
For Vistry June 2021 to June 2022 (interim to interim) I have 14.3%.
The difference between Bellway and Vistry seem to me to be largely due to Bellway's higher new cladding provisions. If I back these out the ROEs are similar, so Bellway is holding its ROE average while Vistry is currently punching above the old Bovis ROE average.
Looking at Countryside numbers I suspect the acquisition will have an adverse impact on Vistry's ROE, and any synergy from the deal would have to be significant to make up the difference. On this basis I doubt Vistry will be joining your 'splendid' list anytime soon. But even quality companies can be over priced.
The next question is having established your quality list of Bellway, Redrow and Persimmon, how do you assess market valuations, and what is the criterion for switching between these companies shares?
Extending your ROE metric, I assume you compare the change in equity to the market capitalisation or enterprise value, to determine a valuation. I recall from our earlier conversations you maintain a database over several years. I'd be interested to know what valuations for, say Bellway, flagged highs and lows and the degree to which the valuations of your list of quality companies varies to a point you would switch - staying invested in the market. (As you said, Covid being the exception)
Hi Strictly, a few years back we exchanged posts on GFRD before Bovis acquired their building business and renamed themselves Visty.
I recall your focus on the house builders and your preferred measure of ROE on tangible assets. At the time your metrics put you in Bellway, although I have Redrow also in mind. M&A can cause hic-ups in metrics and perhaps that's behind the wobble you noted in 2021 between Bellway and Vistry.
But I've three questions following your recent post:
I don't see the ROE of 22.7% for Vistry. Could you simply list the numerator and denominator of your sum. That should be sufficient to get me on track.
Was there any specific reason for Bellways drop to 6,7% ROE in 2021?
And thirdly, what do you see as the impact of Vitry's greater focus on the 'partnerships' model, both before and after the recent acquisition of Countryside, on your comparative assessments of the housebuilders? I guess this question is around the 'partnerships' impact on your ROE metric.
My initial attraction to the 'partnerships' model was that it should offer some protection during the cyclic downturns' housebuilding follows - something that might be tested soon. But the public buildings response to Covid restrictions and their slower recovery than the private sector isn't a good sign, which leaves me wondering if the model would offer much protection in the current downturn.
Your thoughts would be appreciated.
Best,
londoner7
Da_Gee, JB and AC are the founders of Mosman. Without them Mosman wouldn’t exist. Some early investors made good gains but fair to say most investors since c.2016 probably wished Mosman didn’t exist, but nobody forced them to invest in Mosman.
If you are investing in individual stocks then you should be able to analysis the business and risks, and invest accordingly, or not as the case may be. If you can’t make that assessment then you are gambling, and no doubt there are a few of those on Mosman’s shareholder register.
I’m a casual poster here, so for the record I am not currently invested.
JB and AC are employed by ‘Mosman’ under contracts which are described in the annual reports. Basically, they are paid a fixed fee for a set number of days (I think per month). Since I started following Mosman in Feb 2017 I don’t think JB or AC have been paid a bonus, and in recent years I don’t think they have worked more than the defined hours, which limits fees to the basic levels.
About 5 years ago options were awarded to JB and AC (and others) at a 2p price, which expire Feb 2023. At the time of the award, they were well out of the money and needless to say they haven’t been exercised. It seems reasonable to me for these options to be replaced, which will be put before the AGM, and I think it’s a given that they will be approved.
If I was a shareholder, I’d approve the options on the basis that key management should have an opportunity to participate in any surprise development in Mosman’s fortunes, much like any passing trader. My read is that the options represent c2% of total shares and are priced at c0.15p (in Aus$) like the 0.15p warrants in the recent placing – this seems a reasonable size and price.
The likelihood of a surprise development is for investors to assess. Though, IMO, it is weighted too highly, and focus should be on the producing assets in the US. Perhaps a JV on EP145 is a possibility, reversing the basis for last year’s placing – see RNS 19th Mar 2021. There is a potential (again) for drilling in the region, but there is also no shortage of licences in the basin. If Mosman fails to complete seismic by Aug 2023 then they will not have met the terms of the licence – I think seismic has been due on EP145 for the last 7 years.
However, if 2023 is ‘the year’, then it seems fair for JB and AC to have a piece of the action via the options.
Therapist, a brilliant post.
It captures the supply chain issues facing any oil/gas operator looking to spend capex in the next couple of years.
Any serious investor here wanting to understand the current issues should listen to the call, or just take note of the key message Therapist has highlighted:
“We (Transocean) are seeing longer-term opportunities that have not been typical in the U.K. in recent years, including programs longer than one year in duration for Ithaca, Equinor, and EnQuest”
We await news on the program Enquest has entered but given my earlier comment that Kraken activity pencilled in for 2023 wasn’t mentioned in a recent update, it suggests that Enquest, along with other companies, missed the boat for 2023, and Enquest are now looking at Kraken drilling activity in 2024, or at best late 2023, and perhaps have options extending further out. I’m not critical of Enquest on this position, given the clear need to focus on reconstructing their debt position, but emphasising the point Therapist makes in highlighting the real-world position – you can’t turn on Cap Ex at the press of a button, there is a tight supply chain. (Something Sunak should consider in his timelines for the EPL and associated allowances. The allowance doesn’t count for much is you can’t spend CapEx.)
Note that Harbour wasn’t included in the list. In a separate comment Transocean said that Harbour already has a rig with options out to June 2024.
Other comments:
“An increasing propensity towards multiple year programs”
>100% increases in drill rig rates over the last year.
Something Enquest will be factoring into the Bressay FDP..
In Enquests favour, they have ‘on rig drilling’ capability on Magnus and PM8, and the partners are looking to add ‘on rig drilling’ to Golden Eagle.
Dumbly, in note 14 to the interims ENQ provided provisional guidance on the current and deferred impact of the EPL. ENQ could have provided a layman’s prediction for the 2022 EPL charge based on expectations, but that isn’t their MO. HBR did provide a layman’s prediction for their EPL charge in 2022, subject to oil/gas price expectations, but HBR had narrowed their production guidance significantly. EMQ left their production guidance at 44K-51K, which makes an EPL prediction more challenging.
In their recent update Enquest gave good indications of CapEx expectations for 2023. It sounded to me like same again drilling on Magnus and in Malaysia. No drilling on Kraken, and drilling on Golden Eagle in 2022 Q4 completing in 2023 Q1. That gives me a basis for a reasonable estimate of CapEx for this year and next. It would be great if Enquest provide guidance for 2024. In its absence my expectation is a step up in CapEx for 2024 with Kraken drilling and PM409 Malaysia. The Bressay licence requires an FDP by end 2024, but I’m hopeful for it next year. My crystal ball turns cloudy further out.
The UK government might like the NS taps turned on in an instant, but in the real-world CapEx plans need to take account of cash flows and supply chains.
I have no interest in Shell’s tax position.
Consider Enquest’s position prior to the EPL.
In 2021 Enquest paid c$18m tax on its Malaysian assets, and nil or negligible on its UK assets.
2021 ended with c$700m of deferred tax assets, which will protect Enquest from UK income and production taxes over the medium term.
Continuing allowable capital investments attract 46.25% tax allowances, which adds to the deferred tax assets. Profits declared will reduce the deferred tax asset.
In May 2022 an EPL was introduced. In the public discourse, the EPL transfers windfall gains made because of exception events from the fossil fuel producers to the government purse.
To avoid perceived ‘loopholes’ to paying the tax, the EPL was constructed to circumvent the existing tax structure which allows companies like Enquest to not pay tax on declared profits made in the North Sea. To achieve this deferred tax assets built up under the current tax scheme can’t be offset against the new tax and the tax applies before the deduction of decom and finance costs.
To alleviate a possible negative impact on future investment in the North Sea an ADDITIONAL tax allowance was introduced which is allowed BEFORE the EPL 25% tax is applied.
The additional tax allowance is 45%, which can be claimed in the year of investment expenditure.
Any allowable capital investment made after May 2022 attracts a combined tax allowance of 91.25%. But it is important to understand that in Enquest’s current tax position the CASH IMPACT is an allowance of 45% until the deferred tax asset is exhausted. For a company without a deferred tax asset investing in the North Sea any new investment attracts the 91.25% headline allowance.
In assessing the impact of the EPL on Enquest a good starting point is the ‘Operating profits before tax & finance‘ component.
Deduct the non-UK component.
Add back the decom component
Deduct the EPL investment component - the tax relief under the EPL is 45%.
Apply the EPL tax (25%) – might be 30% for 2023.
This should give you a good ‘ballpark’ figure for the EPL impact on Enquest.
First EPL payment for 2022 is due in Dec 2022, with balance due in Jan 2023 (I base this on HBR guidance)
Sipp10, an interesting idea. I don't know the sum of all the profits generated in the UK, but I do know the quantity of oil and gas produced (NST Authority data - other sources are available).
Over the last 12 months 526.5 million boe (oil and gas) was produced on the UK continental shelf.
For 2022 the government was looking for £5B (starting 25th May 2022) and for 2023 £12m - those are the numbers I've seen but stand to be corrected.
So, let's apply £12b to the last 12 months of production:
£12b/526.5m = £22.8/boe, or US$26/boe
At the interims ENQ had 43,422 boe UK production, or 15.8m boe.
Therefore, if the £12b was solely due to production Enquest's share of contributions to the UK tax coffers is 15.8m x $26 = $410m. Ouch!
Of course, the £12b due to the EPL in 2023 will come from production, refining and other value-added components, but I thought it would be interesting to compute it back to the produced barrel.
(This was a 10min exercise so apologies for any obvious or gross errors)
* For the record I do not agree with the common view expressed on this board that the EPL charge to Enquest will be, nil, negligible, or not a major issue. IMO it will be substantial, though, thankfully, well below $410m.
e121, great work all round. It isn’t about right or wrong. You introduced the topic and within a couple of hours we had good input from other posters. That’s the power of the board.
Back to the RBL detail. Do you know the interest rate? Probably expressed as US Libor plus a margin. Perhaps with other conditionalities.
This would represent Enquest’s marginal interest rate.
Thanks, e121. That’s exactly the level of detail I was looking for.
And yes, hedging obligations are less onerous than under the old RBL.
I guess the hedging obligation is from today – utilisation of the RBL – but there might be some phasing allowed rather than a rigid implementation. Either way Enquest would know ahead of time and have a remit to pursue hedging ahead of any RBL obligation if they wished. So, largely detail I can ignore.
I see ups and downs in production from the various assets through 2023, but rather than get into the detail I ran two very different processes to get to my hedging expectation for 2023. One resulted in a 6.4m hedging requirement for 2023 and the other 6.5m, so I’ve confidence in my numbers.
Subtracting 3.5m ($57-$77) already in place for 2023 H1 leaves 3.0m for 2023 H2.
In a recent call HBR stated that in the oil futures market they saw straightforward swaps as a better option than costless collars. However, Enquest has shown a preference for the latter so I’m going to assume they stick to costless collars.
Today, I see an Oct 2023 (midpoint 2023 H2) strike at $83, so I’m going with a costless spread of $73 floor and $93 ceiling. (Pricing isn’t this simplistic but a balance around strike is a good working assumption).
In the Feb update we should get guidance on 2023. Assuming 48K boepd midpoint on production I expect hedging as follows:
2023 H1 – c.3.5 MMbbls $57 floor and $77 ceiling
2023 H2 – c.3.0 MMbbls $73 floor and $93 ceiling
2023 total – c6.5 MMbbls $66 floor and $86 ceiling (This is now my spreadsheet number)
* This assumes current oil pricing, costless collars, and Enquest don’t go above RBL hedging obligations.
Hi e121,
Interesting detail on the covenants.
I assume it is the Bonds prospectus you're reading. Anything on hedging? I'd assume that is one for the RBL. Do you have access to the detail of the new 'revised and amended' RBL?
Reading the Moody's report reminded me of my end of term school reports.
I particularly liked this bit, "Moody's acknowledges that EnQuest's financial performance will continue to be influenced by industry cycles as well as by consequences arising from global initiatives to limit adverse effects from climate change, such as the gradual constraint in the use of hydrocarbons and the acceleration in the shift to less environmentally damaging energy sources. Once these initiatives begin to change the trajectory of future oil and gas demand, Moody's expects EnQuest's future profitability and cash flow to be lower at future cyclical peaks and worse at future cyclical troughs. Nevertheless, the rating agency also expects this shift to occur over a period of decades and that global oil demand will continue to grow through at least the latter half of the 2030's, thus limiting to some extent the impact of these risks to EnQuest's credit profile in the short to medium term."
Moody's, in the long term I'm dead, in the medium term of outa here!
* The numbers around gross debt looked odd against my normal metrics but I'm guessing Moody's include non-current liabilities such as Decom expenses within their gross debt figures.
smidtol,
Mosman is one of several stocks I follow out of interest rather than for any expectation of an investment case developing, though I don’t exclude the possibility. In some cases, I have small holding for ‘skin in the game’ as I had in Mosman a few years back.
Other examples include PMG which I follow to see if Tom Cross can replicate his early oil success in Dana – was it luck or skill, the jury’s out, and BAY where UK aggregate legends Peter Tom and David Williams have initiated a cash shell looking for acquisitions. I don’t doubt their skill and experience, I’m interested in how they proceed, particularly as I’m invested in one of their early creations. BAY is a good example of early enthusiasm, which I worked in my favour resulting in ‘skin in the game’ on a free carry.
I log my thoughts on each, but rarely post them.
On the specifics of your question, what would get me to invest in Mosman again? I don’t know, but any investment would be small. The small scale of Mosman and the high risk doesn’t align with my usual investment criteria. Twenty years ago, I had a different approach.
But expanding on my ‘better entry point’ comment. I’ll describe what I see as the likely extremes of the next steps.
A cautious route would be to allow cash to build so a 2nd Cinnabar well can be drilled 2023 Q3, or earlier if farmed out. IMO this follows the model that has largely been pursued to date. It pays the bills keeping Mosman solvent but does little for LTHs.
At the other extreme, assuming C1 flows at c120bopd (gross), funds are raised to pursue a more aggressive build out of Cinnabar (2+ wells) (though other high impact opportunities might be available). If successful, this could get Mosman to more critical scale, which would benefit LTHs. Of course, this comes at higher risk.
Botham raises the possibility of funding another well via warrants (I'll pass on commenting on GE). The nearest warrants are those released last May @ 0.16p. I don’t see it. Those warrants are a long way out of the money. If I was an investor in last May’s placing, as an example, I might be holding 10m shares purchased at 0.08p, albeit at a discount to the 0.11p price before the placing, with 5m warrants @ 0.16p. Today, I can only sell those shares for 0.06p. If my assessment of cash balance, cash flows and the path forward are correct then if the price rose towards 0.1p I’d be selling into it on an expectation that either I have an opportunity of another placing at discount, with more warrants on top, or my existing 0.16p warrants come into the money.
I don’t believe 120bopd (gross) confirmed from Cinnabar is a catalyst for such a pop in the SP. Double that might be, so anything is possible.
Dec 31st 2021 cash AU$948K equivalent US$665K
May 2022 £1.1m placing equivalent US$1,375K
Jun 30th cash AU$2,400K equivalent US$1,680K
Implies 6 months to 310th Jun 2022 spend: 665+1,375-1,680 = US$360k (cash flow out)
I’d guess the Aussi spend in the 6 months to 30th Jun isn’t repeated in the 2nd calendar half year. Overall production is down, with lower sales price, but oil volumes have been maintained at c2,900 bo for each of this year’s calendar quarters. Hard to judge the weighting of work over cash costs. There is a deferred cash payment (US$100K) (2nd July?) to be made for the Nadsoilco acquisition. All considered, I assume cash flow out (pre-Cinnabar) will be similar to first calendar half year, say US$300k.
I think Mosman are responsible for c85% of Cinnabar drilling and build out, 85% x 1,600K = US$1,360K.
End year cash position (pre-Cinnabar production) = 1,680-1,360-300 = US$20K.
I can easily see my numbers out by US$100K, so let’s go to the positive side and say, US$120K net cash year end.
If Cinnabar flows at 120 bopd through Dec and a net-back of $75, then cash flow = 120 x 75% (net) x 75% (after royalties) x $75 x 31 = US$157K. (I don't know the royalties due on Cinnabar but followed on from another poster's comment. Clearly, this is an important consideration. A bonus if 25% royalties are not due and would impact my closing remarks.)
Therefore, with Cinnabar production Mosman cash flows into 2023 are (157-(300/6)) = US$107K / month.
This would be the best cash flow position in Mosman’s history, but within the oil sector FCF yields of 30% are standard, At a $4m Mkt Cap that requires a FCF of US$1.2m p.a. (US$100K / month)
On those assumptions Mosman is fairly valued.
What next?
Cinnabar needs to produce at c120 bopd (that’s oil, not gas).
Another drill is required. If it’s another 85% x 1,000 = US$850K, this isn’t supported by cash flows till late 2023, so I expect a placing within 3 months. As I said in an earlier post, I think that could be a better entry point for longer term holders.
(A follow up I'd missed)
Smidtol, your $2.1m calculation assumes the quarter to Jun 2022 sales prices applies for the full year. They don’t. The reported revenue from projects come out significantly below what could be expected from the sales price. I’m at a loss to explain this. One possibility is that the difference is due to royalties, but I can’t make that fit. Besides, I think royalties are included in the ‘Lease operating expenses’- I can make that fit more easily.
I have been invested here but not currently. A few years back I contacted JB with a query on the application of royalty costs. He instructed his accountant to reply but it was still unclear to me. I subsequently sold out so didn’t pursue my query. However, I enjoy following the Mosman story. I’ve noticed that in the last couple of years the detail and quality of Mosman reporting has improved significantly. This msg board is useful for following production activities and given the low liquidity in the stock can help the day traders in their bets. But if you consider yourself a long-term investor then the accounts would be a better reference than this board. Between the RNSs and accounts (albeit very delayed) it’s possible to get a good grasp of Mosman’s activities.
We’ll see the accounts to Jun 2022 later this year, but a key number has already been reported:
“Mosman further advises that at its financial year end, 30 June 2022, it had circa AUD2.4 million in cash.” (c. US$1,680K)
Production in the quarter to 30th June 2022 was 8,815 boe (net). The production numbers for the quarter to 30th Sept are due anytime. Largely, they will reflect the loss of Falcon and the result of work over activities on Stanley. I can only guess, but I think it’s reasonable to assume current cash flows do not cover the normal operating costs – a positive cash flow position was reported 10th May 2022.
Cinnabar drilling costs are US1,000K and on a successful drill and completion costs are US$600K. I think Mosman are in for 85% of these costs.
I expect some level of success on Cinnabar. I’d bet Cinnabar will be producing oil and gas in Q4. But the unknowns are the volumes and the oil/gas mix. I think Mosman has been unlucky with recent wells, F1, S5 and W2, so due a break with Cinnabar.
One for the day traders.
If Cinnabar is close to estimates - 100 bopd and 200 Mcfd (gross), I’d be looking for an acceleration on C2 before mid-2023 (one well per year isn’t enough), but that would require another placing, at which point Mosman could offer something to the longer-term investor.
GLA
smidtol, I’ll focus on your first paragraph which concludes with “Total annual sales $2.1m.”
6 months ending 31st Dec 2021.
“The average sale prices achieved during the period was US$71.07 per barrel for oil, and US$3.74 per MMBtu for gas (in each case after transport and processing costs and prior to royalties).”
The average market prices during the period were WTI $74.2 and HH Gas $4.55 per MMBtu ($26/boe).
Page 19 of report
(i) Project performance Stanley $ Falcon $ Winters $ Livingston $ Arkoma $ Other Projects $ Total $ Half-Year Ended 31 December 2021 Revenue Oil and gas project related revenue 321,220 322,803 6,390 7,455 41,386 46,536 745,790 Producing assets revenue 321,220 322,803 6,390 7,455 41,386 46,536 745,790 Project-related expenses - Cost of sales (15,008) (22,307) (294) (344) (2,980) - (40,933) - Lease operating expenses (223,615) (138,701) (3,956) (6,483) (8,133) (135,482) (516,370) Project cost of sales (238,623) (161,008) (4,250) (6,827) (11,113) (135,482) (557,303) Project gross profit Gross profit 82,597 161,795 2,140 628 30,273 (88,946) 188,487.
Formatting is poor so I’ll extract the revenue for each project and using the net production volume (boe) from each project I’ll also present average US$/boe for each project:
Falcon AU$321,220 US$20.4 Mainly gas
Stanley AU$322,803 US$54.3 Mainly oil
Livingston AU$7,455 US$52.2 Mainly oil.
Winters AU$6,390 US$44.3 Mainly oil. Post period Winters 2 (W2) on stream producing mainly gas at volumes >> W1.
Arkoma AU$41,386 US$15.2 Mainly gas.
In the report Mosman said, “The average sale prices achieved during the period was US$71.07 per barrel for oil, and US$3.74 per MMBtu for gas (in each case after transport and processing costs and prior to royalties).”
US$3.74 per MMBtu for gas, equates to US$21.7/boe.
The total reported revenue for the period was AU$745,790 (c. US$520K)
The gross profit from projects was AU$188,487 (c. US$132K)
The last two lines represent the first 6 months of the year to end June 2022. Total net production in the period was 17,344 boe, which is 46% of the 37,915 boe reported for the full 12 months (H2 19% higher than H1). I estimate that Mosman’s average sales prices in the 6 months to June was US$100 oil and US$5.0 (US$29/boe) gas. This is an increase of 41% on oil and 34% on gas. Production volumes are weighted towards gas, largely due to Falcon, but I’ll use a mid-way price increase of 37.5%.
Applying these numbers to the US$520K revenue number in the first 6 month, for the final 6 months I get:
520x1.19x1.375 = US$851K, for a 12-month total of US$1,371K. This is my expectation for total project revenues.
The full year report will be published 31st Dec 2022 latest.
Da_Gee, yesterday you asked a very relevant question, "Any guesses to how much we have left in the kitty?"
I'll post my assessment shortly. A while back I wrote a couple of entries to my log, which I didn't post, but I think provide a detailed backdrop to how cash flows might be determined, given the long delays between ARs.
Here's the first:
Be nice! (8/8/22 not posted)
I note several deleted posts.
Concerns over Falcon being off-line seem warranted, given Falcon accounted for nearly 60% of net production in the FY. But talk of another placing is probably 6-9 months early.
The timing of the Cinnabar Development Drilling might not seem important – late August or early September – but it is important. Production from Cinnabar and any Stanley workovers are needed to put a positive handle on the Sept quarter production update. A c.10K boe net number in 2021 Sept quarter (Mosman’s Q1 quarter) will be hard to beat given current production, particularly with the loss of Falcon, unless the new Cinnabar well steps up.
Initial flow rates from Stanley workovers frequently get a headline, as S4 did today, but the rates decline fast. The gross Stanley numbers provide a clearer picture, 26,212 boe for the latest FY against 45,309 boe the previous year – a significant decline.
The case for Cinnabar is it is a larger reservoir than the Stanleys and therefore subject to a lower rate of decline. Mosman shareholders must be hoping that is the outcome. They deserve a break.
Dunbly, in your post (09:50) it was your apparent belief that Enquest WOULDN’T attract the attention of the Labour party that got my attention. I’ll come back to this shortly.
I see the current political focus on ‘energy tax’, as on the pursuit of the gains renewable energy companies are making on the ‘marginal cost’ of supply structure around the current high price of gas. It appears that the UK government is taking a ‘windfall’ revenue approach rather than a windfall tax approach, largely it seems to me, for ideological reasons. Either way, not of much interest to me as that isn’t an area I’m invested.
I was pleased with the change in approach on UK energy price subsidies from 2 years to just next April, subject to a review of the market. It was IMO a hugely expensive energy subsidy for those that can pay, with little incentive to cut UK consumer energy demand. I know that’s a political point, but it’s mine.
I struggle to see how Europe, or the UK will influence the local price of gas, given the global connections, but I can envisage a new pricing structure on renewables currently piggybacking the high gas price. Though I also see risks in short term politics interfering in the market, which prior to the Russian invasion had worked in the interests of consumers if not energy supply security.
Back to the Labour party.
When a windfall tax was discussed last May, many, including Enquest, thought the existing tax structure would leave them in the clear. When the detail was released, I knew that assessment was wrong and largely sold down my position in Enquest. I’ve since rebuilt it.
Last week I presented my assessment of the windfall tax (EPL) due on Enquest. My numbers were challenged by one poster who didn’t substantiate his $10m estimate for 2022. I subsequently detailed my numbers but didn’t need to post them. It should be plain to anyone, that if the impact on Enquest of the EPL was only $10m in 2022 the SP wouldn’t have crashed last May.
One of the biggest challenges to an investment in Enquest is political risk. If Labour gets Enquest might get hammered. This week the SNP released their ‘vision’ for an independent Scotland. A key element is a socialist ‘wet dream’ of a £20b investment in dubious infrastructure plans which will be largely funded by NS oil and gas.
Going back to my previous post. If having assessed the pollical risk, Equinor proceed with a buy of CNNOC NS assets and subsequently proceed beyond the Bressay FDP, I’ll feel considerably more comfortable with my investment in Enquest.