Member Info for londoner7

MSM and Therapist, thanks for your replies. I hadn't seen the Foinaven to Magnus link. However, I think any acquisition interest in Foinaven is independent of any link to Magnus, The Foinaven field shut down in March so not currently supplying 3rd party gas to Magnus anyway.

Therapist, while looking at the OGA (now NSTA) site for Foinaven production I saw Jan 2022 production numbers. Maybe I'm getting confused but I didn't expect to see them till April 1st.

MSM, I was just looking at the same news. But I'm unclear what the relevance of the supply gas for Magnus is to Foinaven. Can you elaborate?

During today's call I though AB made a big thing about ENQ's history of late life assets and their decom activities, and seemed keen to look at another acquisition at little or no cost. Foinaven seems to fit the bill. I suspect, like Magnus, it's Opex is high, but it was producing 12K boepd last March (93% oil).

https://www.msn.com/en-gb/money/other/bp-seeks-to-sell-shut-down-north-sea-oilfield-riding-wave-of-demand-sources/ar-AAVoYUD?ocid=uxbndlbing

I guess JS is staying on for 'some months' to close out the debt restructuring.

Hi Tarmak,

I wouldn’t read too much into a single offload. Typically, ENQ quote an 88% production efficiency for Kraken. I’ve never been near an oil platform so I speak with little authority but based on the knowledge I have I suspect those periods of ‘in-efficiency’ will include planned and unplanned impacts, and could run for minutes, hours or even days. One way of looking at it, over a 100-day period, given an 88% efficiency, down time could amount to a total of 12 days.

A few years ago, I saw a daily production chart for a North Sea field, and I was struck by the noise in the daily production numbers.

At the last update ENQ guided Kraken (gross) for 2022 of 22K – 26K, including a major shutdown. While the shutdown may be completed in 2 weeks, I assign a 3-week impact due to water injection recovery, so to achieve 26K would require an average of 27.6K for the ‘active’ 49 weeks.

Taking account of field decline I’d be looking for production close to 30K in Jan, falling towards 24K by Dec.

In my measure of offloads, I use running average based on the last 4 offloads. To the end of Feb, I have 29,374 bopd (gross). Including the latest Petroatlantic offload, my last 4 load average is now 28,252 bopd.

In summary, almost 3 months into 2022 I have Kraken production running slightly below top-end guidance.

But stuff happens!

If it hasn’t already happened and we hear about it on Thursday, it will happen before the end of 2022. I just hope it’s minor league ‘stuff’ and 2022 production is closer to 26K than 22K.

In Q1, Enquest has shipped 5 loads of Kraken crude at very good prices. Let’s hope the other fields have been performing as well.

Thanks Tarmak,

Not the first time they've done a late switch. Petroatlantic looks like an earlier arrival.

Altera Wave on her way.

Correction:
this gap closed significantly in the final two months of 2021 (not 2020)

Hi romaron, you say, “Why are we all accepting that spot or Dated Brent is at this moment c. $95.00 when we know that it has traded at over a $100 last week. Which price is more accurate?”

I guess you understand the difference, but as you ask the question I'll add clarity for anyone who doesn't.

The Brent oil price that is normally quoted in media is the ‘Brent Crude Front Month’ futures contract, which is currently ‘April 2022’. Futures are the prices of most interest to the traders. As I write this April is $96.12, with the May priced at $93.75. A difference of $2.37.

The term "Dated Brent" refers to physical cargoes of crude oil in the North Sea that have been assigned specific delivery dates.

You mentioned backwardation in the futures curve, and earlier posted a good example of a period in 2020 when Brent was in contango. I think it was the 2019 finals call in March 2020 when AB referred to Dated Brent - the price Enquest was receiving for its cargos – as being some $10 below the front month futures contract. Ouch!

Today, we are seeing the reverse. Given the $2.41 difference in the April and May futures contract I wouldn’t be surprised if Dated Brent is currently >$3 above the quoted April contract, so priced at >$99.

The premium on the dated Brent price over futures might also explain how Enquest reported a realised oil price (including hedges) in 2021 of $69, not far short of the average Brent price based on front month and the basis of your competition last year, which was $70.6. This gap closed significantly in the final two months of 2020. At the Nov update (to end Oct) Enquest quoted a realised oil price of $66 against the then year to date Brent average of $69.1.

Given the short period, to have moved the average so much Enquest must have got very good prices for their cargos in Nov and Dec, and this has probably continued into 2022. Those late GE cargos will also have helped.

The cash position to end of Feb will be interesting, but there could be some noise given the timing of Enquest’s Golden Eagle and Magnus cargos.

I think the FCF/EV yield is a more appropriate metric.

A post this morning prompted me to look again at how this metric might play out over the next couple of years. I decided to look back to a time when Enquest had a net cash position and ended up at the 2011 results 10 years ago.

For FCF I chose the change in net cash between 2011 and 2010 (379-41)= $338m. EV was ((805*1.1)+379) = $1,264.5m. The resultant FCF/EV yield is 27%. There might be other factors which mean the change in net cash isn't a fair reflection of FCF and the year before or after may have given a very different result, so not one of my more rigorous examinations but that's how I left it.

Turning to the latest 2021 update I have FCF = $395m, and EV = ((1,186*0.21)+1,222), leading to a FCF/EV yield of 24% - not very different to 10 years ago.

Leads to the question, how might it look in a year. Using FCF of $400m (choose your own number) for 2022, reducing net debt from $1,222m to $822m. then assuming the same again 24% yield, results in an EV = $1,638m. Subtracting the net debt leaves a market cap of $816m, which equates to an SP of 43p. Wouldn't that be nice!

Of course, there are other moving parts. Reduction in 2P, perhaps compensated by effective allocation of CapEx. Continuing support of high oil price. Control of OpEx, etc. Let's call them headwinds, but I see a good margin for error. For the next 2-3 years I see Enquest at a good point of debt leverage. That's my current holding period.

It all seems so easy. Someone (L3?) tell me what I'm doing wrong.

Beyond 3 years, Enquest will need another big play, and that's introduces a more significant level of risk. 409 in Malaysia could be a low risk development but I wonder about its scale. Bressay, as an extension to the Kraken FPSO might also be acceptable. But, at the back of my mind I will always have Enquest's A/G and the Kraken developments urging me to caution.

I'm a LTH, not a lifer.

Botham, you are getting confused with the airborne gravity survey #1 on the EP145 list of 2021 works.

This from 2nd June 2021 RNS: "The cA$300,000 gravity survey will provide valuable data regarding the subsurface geology across the entire 818 sq km permit area."

The processing and interpretation of the gravity data was #2 on the list. 21st July RNS showed a cost of Au$82K for this work.

The acquisition of seismic is #3 on the list is outstanding. I expect that to cost considerably more than A$300K. Hence my post.

26 August 2014
John W Barr, Executive Chairman of Mosman commented: "The grant of EP145 is a major step forward in the Takeover process of Trident, and satisfied an important Condition to the Offer.

The Trident acquisition complements Mosman's existing Petroleum Creek and Officer Basin projects, ensuring that Mosman has a diversified asset portfolio in five prospective hydrocarbon regions.

Exploration of the 5 permits is fully funded and we believe the enlarged portfolio will deliver operational activity and exploration milestones in the coming months and years."

For the last 7 years the licence requirement to acquire EP145 seismic has been extended. This is the typical wording, "company has applied for and received a 12 month Suspension and Extension approval". That was Dec 2015.

Same again 2 days ago - RNS 14th Feb 2022.

I don't share your optimism that seismic will be completed by June.

Yes, lots buzz around Helium. HE1 timed their launch well with 'meme themes' exciting retail investors a year ago. I've said before that I thought JB played a blinder in piggybacking the Helium buzz last March - I suspect with Monecor at their back - and then spending the bulk of the placing in Texas. They never said the funds were ringfenced for EP145.

Botham, you've posted a helpful calendar of events, and Sweatysock has added a few more.

You'll have a better idea than most on the GE timelines, and the Texas stuff looks in line with recent guidance, but it's #7 that jumps out at me.

7. Seismic study EP145 Apr - June

I wonder where you got this timeframe, given recent news on licence extensions and talk of JVs on EP145.

Now you question your own timeframe with your post on the 19th March 2021 RNS. I would urge any investor unfamiliar with the placing to read the detail of the RNS and consider AC's recent interview when he talked about JVs.

I always thought that the seismic work was the most expensive component of the EP145 schedule. The interims to Dec 2021, due next month, should reveal what has been spent to date in Australia. I don't expect it to come close to the c. US$2m raised in March.

But note the accompanying warrants, 500m @ 0.25p, which would add a further US$1.7m if exercised. Was the EP145 program for 2021 based on an expectation that c. US$3.7m would be raised?

On 17th Jan 2022 Mosman had c. US$700K in the bank, so I don't expect seismic on EP 145 to be acquired any time soon, and certainly not by June. I think the best chance Mosman has of getting those 0.25p warrants away is on a sentiment boost from a significant discovery by HE1 in Tanzania. It could happen, but it needs to happen soon.

If money doesn't come from the warrants then it will need to come from somewhere else. After a Cinnabar drill, even with a JV, US$700K will not last long.

Lenin, I agree with your post, but you are referring to 'sudden good news', i.e. news not currently known to the market.

Given the low liquidity in MSMN stock the share price could react fast and hard to news.

I enjoy following the MSMN story - 5 years and counting - learning much along the way, and I wish investors here the best. But as an investment MSMN doesn't match my risk/reward profile. I held a small investment (skin in the game) when MSMN first tied up with Baja. I thought Baja might take over management of MSMN, but when it became clear to me that was unlikely I exited.

I follow both the Mosman operations in Texas and their story in Australia.

Helium is the theme of the moment in exploration. This week I learnt of Peak Helium, with their farm in to Central Petroleum and Santos permits. Peak Helium was incorporated just over a year ago and appear to be building their back story ahead of a funding round which might give them the cash to fund wells on Magee and Mt Kitty, at c. $20m a pop, where they now hold a majority stake. The tone of the CP news release suggest to me that CP's interest is still in Dukas, but that will be driven by Santos. Last summer Santos declined a further option on the Dukas prospect so my take is that a drill on Dukas in 2023 is far from a done deal.

If anyone has a different read I'd be interested to hear it.

I couldn't find anything on the costs on Peak Helium's farm ins, but farm ins are cheap. Georgina Energy bought their farm in to Mosman's P155 licence for $15K, with a further $15K payment contingent on further work ahead of acquiring an 85% stake if drilling goes ahead. That's their back story, ahead of funding. But according to GE's plan progressing the E155 drill doesn't start till at least 18 months after a listing. Initial focus is on their other licence. Lots of bridges to cross before that happens.

Of course the challenge for PH, GE and MSMN in Australia, and for HE1 in Tanzania is finding a commercial source of Helium. We know the Helium is there but don't know if it can be found in sufficient volumes for commercial extraction. There has been success in North America/Canada. Perhaps Australia and Tanzania will follow.

Read any of the companies prospectus and we are left in no doubt as to the value of a big Helium find to society in general as well as the exploration companies, so I hope the explorations are successful. Given the risks the investors will deserve their returns.

But I will not be one of those investors.

Following the Mosman story I can enjoy the occasional (free) roller-coater ride, without buying the fun fair.

The WTB process provides good insight into how the CNE tender process might be implemented. If CNE follow the same process I have a clear idea how I would react to the tender offer. However, I believe there is one key difference.

WTB completed their buyback phase before launching the tender offer. My reading of the update from CNE is that they will conduct the tender offer first, then complete the buy back. When CNE provide detail on the process I'll look again and hopefully make the right decisions.

But in the meantime, there is more to an investment in CNE than just the Indian award. I've managed a trading position in CNE for 5 years. At the outset I didn't expect the award to be paid, so a it's a bonus that it is now close. Like many, I was surprised by the decision to sell Kraken and Catcher, but whether it was a good decision or not, here we are.

Given the likely market cap after the return of $700m, the follow up contingency payments from the NS sale are not to be sniffed at. Also, the Sangomar Field Development Phase 1 remains on track for targeted first oil in 2023. If that happens and oil averages $65 in the following 6 months then that's $100m payable to CNE. A decent cash flow on top of the Egypt asset.

The result of the IFX led drilling with Shell is a lottery - we could have news this quarter. Given the current oil price, the exploration success in the GOM should provide useful cash or options from planned farm ins. Finally, there is the buy in to Delt's licences in the north sea - gas plays - which is where CNE will direct substantial funds if the initial drilling is successful.

Even without any new acquisition there is plenty on the plate.

I think it is worth putting Rule #2, (Do not chase losses. That means if the prices slide you must resist all temptation to “average down.”), into context. The author is referring to “young companies with great stories”.

I don’t think the rule necessarily applies to established companies with a trading record, except for requests for additional funding by those companies. An investor might buy into the story behind the investment, but if it goes wrong, I think rule #2 does then apply.

In my view the market has the valuation of companies about right, given the known information. Of course, as investors we will sometimes convince ourselves that we have spotted something the market has missed, but through my investment career I’ve come to believe that it more often a case that the investor has missed something.

The fund manager, Lee Freeman-Shor , tested this idea and published his results in, “The Art of Execution: How the world's best investors get it wrong and still make millions in the markets”

The book provides clues to when it can pay to average down. The authors test involved 45 of the world's top investors and it was interesting to note that their initial call was wrong 50% of the time. It was what they did next that marked out the best investors.

Possibly the best investment book I’ve read and certainly the most enjoyable.

With a sensible warning at the end:

"Check carefully because I recognize that young companies with great stories can carry a significant amount of risk… that risk ranges from being under-funded to having a small number of shares available to the public.

So, I’ll also never shy away from alerting you about the risks associated with investing in young companies, new to the stock market. That’s why I urge you always observe my three rules for accepting microcap investing risk:

Risk Reduction Rule #1: Never invest more than you can afford to lose.

Risk Reduction Rule #2: Do not chase losses. That means if the prices slide you must resist all temptation to “average down.”

Risk Reduction Rule #3: Don’t put all your dreams on one microcap. Allocate your risk capital among a handful of stocks "

Hi Tigar, your post 15:07.

I also use a 37.5% deduction on the gross FCF for BP profit share.

I guess we all know by now FCF is after deductions for field OpEx and CapEx. I'm going with $30/bbl Magnus Opex and $50m for the 3 Magnus drills. (As I recall the 2 drills in 2020 cost c$30m total - for 2022 I've gone 3x $15m and added $5m extra). Note, these are cheaper drills than, say on Kraken, because the Magnus rig has it's own drilling capability. Ditto the Malaysian rig, which I guess means there's a quicker return on investment with the Magnus and Malaysian drills, compared to Kraken. But I have to confess I'm not sure how the repayment of the BP vendor loan affects the profit share calculation. I thought I understood it, until the recent Enquest comment 'no BP profit share expected in 2022 Q1. Anyone?

I recall commentary at the time of the Magnus transaction, which implied that BP had a tax benefit from the structure of the Magnus transaction. Besides, whether BP are taxed on Magnus cash flows or not, it isn't Enquest's job to act for the tax man.

Hope that helps, assuming I've understood your query.

I can understand some disappointment with the headline production numbers- I still think it's down to Magnus. I see Kraken and GEAD on previous guidance.

But I thought the level of detail in the update was superb. There was disappointment at the November update about ongoing issues with Magnus and Malaysia but IMO they presented the current view. In the event I suspect Magnus was largely online end Nov, beginning Dec. I'm not quibbling a week or two. It takes a while for water injection to be effective. On Malaysia they have beaten end Q2 guidance with a Jan completion.

2022 Capex as expected given additional drills. Decom up $5m on previous guidance but I only see this cost moving in one direction.

Big jump in Opex, largely due to carbon and diesel- diesel not a surprise to some. Extra expense on Magnus, not a surprise to me. Saw some remarkable digging posted here which had c. $7m for the Malaysia workovers. I agree with L3 that Magnus is now c.$30 / bbl. Upside, it lowers the BP profit.

Very interesting commentary on Bressay and partner involvement. I see FDP submission early 2023, ahead of licence requirement for 2024. Hopefully ahead of UK elections. I see current government supportive of NS development. They just can't shout about it. Enq holds c.40% with $15m payment to equinor on OGA acceptance of FDP. Additional $15m for equinor c. 40% share if they pull. HBR hold c.20%. Hopefully all partners remain interested.

Development overlap with Kraken will be interesting. Still good WF potential at Kraken.

Hi Therapist, thanks for the OGA numbers.

It was your comment on a Magnus Dec number that piqued my interest. I have 8,755 boepd.

Question then is, what are the constituents of the increase to c. 51k in Jan.

Given Malaysian was fully on line end of Jan, I'd add a bit there. Tanker dates imply a full recovery in Kraken to 22k (net). Hopefully, given today's Orkney update (thks steelwatch1) , the year has started on target to hit top end Kraken guidance (I expect 18% decline over year based on 2015? CMD). GEAD I have at 8,900 boepd between 23/10 and YE, so 9k for Jan. Drills required for 2022 9k boepd, as per guidance. Others c.4k, leaving 10-12 k boepd for Magnus in Jan.

Hi L3, my working assumption on Magnus for BP profit is 12k bopd, not boepd, so that translates to 14k boepd. I expect periodic issues so I don't expect 20k other than via a Tiger tie in,but that now seems off the cards.

I suspect Eagle is the subject of confidential negotiations

Hi Therapist, I'm on the road frustrated by a lack of tools.

Appreciate it if you would post the boepd number for Magnus in November.

Hi Tigar, l'll be reviewing the details of the update and amending my own forecasts this weekend but want to respond to a couple of points I've raised recently.

HY and RB bonds - my read on update is all options still open. Priority is pay down RCF ahead of Oct. Refinance HY. Options on dealing with the RB $250m are at the margin. My working assumption hasn't changed.

Good to have Magnus top sides operating, but as I inferred earlier it's the swing producer in the portfolio and I see it now on the low side of my target. Though there may be scope for improvement which might lead to their top end estimates.

My workings will be based on mid point overall production guidance and c. 12Kbopd Magnus for my BP profit calculation.