Member Info for londoner7

Jan2, I have the same expectations on timing.

I'd be surprised if the prospectus isn't released by the end Q2.

I'm expecting an RNS: "Prospectus and CPR publication" to drop any day.

Enquest wants to increase its lending facility and it seems reasonable to me that the Bond holders would expect equity to contribute their share of any risk. That is my interpretation of AB’s comments at the AGM. Expect a $50m equity offering – it has nothing to do with whether or not Enquest ‘needs’ it.

Bond holders care about two things: repayment of the bonds in Oct 2023 and a Brent price above $65 which means they receive a 3.5% cash coupon twice a year rather than the less favourable PIK.

Short of catastrophe the operational fluctuations we as equity holders monitor are now of little consequence to bond holders and I’d go so far as to include the GE acquisition save for the fact it secures interim funding to Oct 2023.

That was reflected in the 4th Feb improvement in bond price, which I’d guess had more to do with refinancing than the operational detail or price of GE, and the bond price improvement last month on the realisation that a 3.5% cash coupon is now more likely than PIK for the period to 15th Aug.

There is a D&A component which reduces the tax liability and given the ‘transaction date’ I assume this too accrues to Enquest.

I posted a calculation last Feb using Cairn D&A numbers as a guide, as I don’t know Suncor, with closure end August. Revising it with what I now consider an achievable 10K, $65 oil and an $8 cost number mentioned by AB recently, I get:

Suncor
8 months operating cash ((65-8)*10,000*365)*(8/12)= $139m
D&A = Cairn (217/533) x GE 8 months Rev , 10,000 bopd, $65 ($168m) = $68m
Tax = (139 - 68) x 40% = $28m
Post Jan 1st cash (Economic benefit to Enquest) = 139 - 28 = $111m

Closing deal initial cash payment to Suncor = 325-111 = $214m

For me, an unknown is how the costs of the 4 new wells are accounted.

Hi L3Trader, thanks for your comments.

I think this is the book:
The Art of Execution: How the world's best investors get it wrong and still make millions in the markets
By Lee Freeman-Shor

It's a quick and easy read and I liked the fact that it captured many on my own trading experiences, and helped me correct some of them.

Therapist, I agree with your assessment.

I’ve put away the pom poms. It wasn’t a good look anyway.

How do you account for CapEx to date in your net debt and RCF repayment projections?

As for tomorrow.

Give me an ‘M’, give me an ‘a’, …………….

Jan2, Forties work postponed from last year is scheduled to begin May27th for three weeks. It will impact the GKA hub including S/C so I'd guess Enquest will complete their maintenance on the hub during this period.

https://uk.finance.yahoo.com/news/uk-forties-oil-loadings-drop-085042683.html

The drill ship has left GE.

Da_Gee, I have long thought that the Aus plays were yesterday's news. Over the years the licenses have been dropped but I get their desire to hang onto EP145 while Santos still show interest in Dukas. The current market interest in Helium gave Mosman a chance to get an additional £1.5m in funding, albeit their broker is still clearing 500m odd of the placement shares - they should have got them away at the current SP.

I'm sure your right that the license extension will be a formality. Is anyone else interested? If Santos show interest in progressing Dukas then the Aus game will play on.

But I think Mosman's best (only) future is in development of their US assets. At the turn of the year the prospects looked good - I could make a valuation case for Mosman - until the poor performance at falcon came to light. Subsequent delays to the plan outlined in Jan and now this distraction with Aus (again), seems to have put paid to that valuation. Particularly, when the dilution with warrants is taken into account. Any FCF that does come from the US assets are now spread thin.

I have never rated the management, but I do rate Baja. I thought that they might have maneuvered themselves into managing the Mosman listing, which has some value. That moment may have passed.

Mosman will never go bust as long as they don't take on debt. JB knows how to play the funding game. Trouble is, the projects don't make money. Some here thought Welch did, but the accounts show that large sums were spent on US assets, which was subsequently written off, ahead of the sale, 'priced above current assets value'.

I wish investors here well, whether in for 5 minutes or 5 years. I enjoy following the story and think I understand it well. I wish I could be more upbeat in my infrequent updates.

I know the Helium plays cited are not commercial, but I hadn’t realised My Kitty was drilled by Santos through a farm-in on Central Petroleum EP125 license. Mt Kitty was spudded in Sept 2013 and there’s good coverage on developments in CP annual reports between 2013 and 2016. There’s a brief reference to Mt Kitty 2018/19 in support of the Dukas development. The current position on Dukas and Santos involvement is reported in the latest report. Last year a return to Dukas was pencilled in for 2022 H1. Latest update is that Santos is reviewing their options on Dukas.

Much like 2018/19 I think Mosman will ride the Santos decision. While Santos considers their continued involvement – 8 years to date – I doubt there’ll be any serious expenditure on Mosman’s EP145 license. Today’s update supports that view.

Reading the detail of the 19th March placement to fund activity on EP 145 I can understand the disappointment in today’s news that the August deadline will not be met. That’s putting it mildly. Mosman has a record of requesting funds for activities that don’t come to fruition.

Last October Mosman raised £900k for the following:
“The primary use of proceeds will be the proposed drilling of the large Galaxie prospect …….. Preparation work will commence immediately and drilling of the well could be later this year.”
As Wolfiewolf points out, we’re still waiting.

“The proceeds will also fund production facilities at the Falcon location”
We know from the latest interim report that AU$1.6m was spent on assets, “primarily for the Falcon project.” Falcon now requires further work. “If the JV supports the recommendation the Operator expects to undertake the workover in the near future.”

“In addition to development work in the US, a proportion of the funding will be allocated to progress EP145 “. The report didn’t show any additional spending on EP145 to 31st Dec. An indication of Mosman’s true commitment to EP145?

I suspect a significant part of the recent £1.5m EP145 funding will leak to other spending.

DYOR

I just noticed an entire thread from Monday has been deleted, which included a post from me. Clearly, the target doesn’t like debate on his questionable assertions. I’ll repost my closing comment:

At the weekend, the Berkshire Hathaway 'boys' addressed this type of pump activity. Charlie Munger summed it up best:
"I don't mind the poor fish that gamble. I don't like the professionals that take the suckers."

(continued)

On Thistle, COP, etc, it’s history and in the price. I’ve nothing to add.

I agree with your observations on the reserves movement and technical adjustments. If you want me to comment on the numbers, I’d just say that given 6MM (gross) guidance on Kraken WF and c0.55MM production in 2020, that nets to 3.85MM, leaving 1.15MM 2P addition on Magnus. Doesn’t seem out of whack. Good news on 5MM technical gain on UK 2P – maybe price related. The 2MM negative technical adjustment in Malaysia may be related to the fire/shutdown and rectification program.

On the same subject, GE reserves may have a positive reappraisal on the new well production. Something for us geeks to look out for next year.

Hi L3Trader,

I’m unclear on your closing remark. If you’re referring to communications I don’t want to engage via email. I prefer the openness of this board which allows other posters to contribute. I put a lot of stock in my postings because they often form the basis of my investment decisions, and I want my wittering’s to be challenged.

Please continue to hold me to account.

On Parkmead. I don’t remember my comments, but I think I referenced Tom Cross. The only reason for my small investment in Parkmead several years ago was to tag Tom to see if he could repeat his ‘midas touch’ at Dana, or if, as is often the case, right place, right time. I look in on Parkmead only a couple of times a year, so I’ve little to say on them.

I can’t fault your numbers on Kraken. I corrected my comments on the impact of injection when I saw the OGA had revised the published Dec numbers – at least that’s my recall. We’ve discussed the issue of decline rates on Kraken when we took, as I recall, a different interpretation of the earlier CMD guidance. As I write this, I have a sense of déjà vu that you’ve challenged that recall previously. But I’m sure you picked up I was pleased with Enquests 2021 guidance of 30K-35K (gross), as I had anticipated a greater decline rate. The rate may have been slowed by last year’s new wells. I don’t have a particular number for Kraken. I just look to the mid-range 49K guidance, the ‘V’ alongside my ‘P’ of $64.4 (just keeping it out there).

When I look back on the correlation of water injection at Magus with reported production volumes, I see an engineering correction if not a mathematical one. Some background here. A day or two before my comment on water injection I watched a presentation by Ithaca which included a piece on polymer flooding at Captain in which they stated a one-year response to polymer rather than the typical 1-2 month response seen with water injection. I stole those comments for my post.

Generally speaking, water (and gas) is injected to maintain production rates. If it fails or is turned off during a maintenance period, then there will be a lag in production volume recovery. If there’s a production hitch I look to the WI and WP numbers because the OGA put them out there, and I’m a numbers guy. Enquest has been tackling the water processes alongside their pull back from gas injection for the best part of two years. In 2020 Q4 it appeared to be sorted so I was hopeful of more stable production. I see Magnus as offering the best chance of an uplift to the 49K number but stuff happens, and it did. Extrapolating from the trading update told us the Feb number, and I took commentary on Magnus as positive so I’m expecting a ‘respectable’ number for March and April, even better than Therapist’s ‘plug-in’ number. There, I’ve said it. Beat me up on the 12th!

TBC

You ask for ‘a whiff of helium”.

JB has already produced it in the placing RNS dated 19th Mar, and given it top billing in the latest report:
“In March 2021, the Company raised GBP1,500,000 to be used for Helium, Hydrogen and Hydrocarbon exploration on EP 145 in Central Australia.”

In the seven years since licence EP145 was purchased with the Trident acquisition in 2014 Helium hasn’t been mentioned in any report, so that’s your whiff. Enjoy!

As for getting the stuff out of the ground I wouldn’t hold your breath. The placing RNS put great stock in the presence of Helium at Magee 1 and Mount Kitty 1 but failed to mention they were not commercial.

“Despite being technically successful, both wells suffered from poor reservoir quality. Magee 1 produced gas from a very thin (4.5 m) fine-grained sandstone (inferred as Heavitree Formation by Wakelin King, 1994) overlying crystalline basement, while Mount Kitty 1 lacked any subsalt sandstone, producing gas from fractured and weathered crystalline basement. Drilling of a third subsalt exploration well, Dukas 1, was suspended at the time of writing.” (PW Haines and HJ Allen – GSWA 2020)

Central Petrolium hasn’t given up on Dukas but are awaiting a decision from their 70% farm in partner Santos who paid for exploration to date. This is the latest CP update as of Friday:
“Elsewhere, Santos have not yet concluded their work on a return to the Dukas-1 well. We will continue to work constructively with them to progress a forward plan for this prospect. However, as a minority non-operator, we cannot dictate the pace at this time.”

The Amadeus Basin, Northern Territory, is a proven hydrocarbon basin with 30+ years of oil and gas production. No commercial Helium, but the bet now is that JB and £1.5m will change that.

I believe Mosman’s best hope is in its US assets. I don’t blame JB for taking advantage of the market opportunity last March, but I bet his broker didn’t expect to be left holding c550m shares placed at 0.0015. Looks like HE1 has saved their bacon.

The accounts and 31st March cash position of AS$3.5m provides a clear picture of the current position. Deducting £1.5m for EP145 leaves c£450K for the US and working capital. During Q1 I calculated an average monthly burn rate of £150K, which included workovers on S1 &S2 and an assessment of the rework to Falcon 1. If Q2 burn is the same as Q1, which seems likely, then more cash is required.

Earlier cash flow predictions anticipated the execution of the Feb 0.0023p warrants and this July’s 0.0015p warrants. The Feb ones expired, but the current SP might get the July ones away which adds c£400K. Is that enough for the two ‘fully funded’ wells planned for Q2? I can see a Stanley 5 drill if Baja give the go ahead but not much else, unless the EP145 pot is accessed – otherwise my bet is on a placing before 30th June 2021, FY end, to help the cash position.

The current ‘meme’ theme could get it away.

Oh, the decades fly by! ;-)

Of course I was referring to 2007 and 2008, but thought I should add the correction for the youngsters on board.

romaron, you say, "I see little to be gained by mocking Goldman's when they get it right".

Which forecast are you referring to, I loose track?

I just googled them for their latest, "Oil is seen rising to $80/bbl by this summer".

Entirely possible, given the historic volatility of the oil price, but I'm more interested in the average for this year and next year, roughly my investment horizon. If I was a trader, like Goldman, I might be interesting it hitting the peak for an exit, but I'm not. I've other things I prefer to do than watch the daily oil price movements and trade oil stocks or anything else.

I'm sure you remember the famous $200 oil forecast Goldman made in 2018. Oil peaked around $140 June 2018, and I recall some months later a Goldman representative defending the call on the basis they hadn't anticipated the 'financial crisis'. I guess credit, debt and the bigger picture were monitored by a different department within Goldman.

I saw newspaper reports as early as summer 2017 heralding the financial risks, and as we now know from Hollywood that insiders were playing the possible outcome a year or more earlier. I'd guess Goldman were all over those trades - a different department.

I understand some retail investors will find comfort in Goldman forecasts, but this retail investor prefers a wider view.

When the oil price is less reflective of OPEC decisions I'll take a greater account of the normal supply demand mechanisms that operate in most other commodities. I might also put greater trust in analysts ability to forecast, but 'stuff' still happens.

I see much talk here about the world's reliance on oil products for decades to come. Much of this discussion is centered around the 'knowns', but the lessons of history suggest change and resulting 'unknowns'.

If 18 months ago you had told me the extent to which freedoms would be sacrificed to 'Save the NHS', I would never have believed it. If a case is made for stronger actions on climate change, then transition costs will be secondary and life could become more centered on policy decisions rather than market decisions. Politicians now know how pliable the public response can be.

Try putting that into an oil supply/demand forecast.

I suspect Therapist is enjoying the release of lockdown, but as I’m in Scotland - say no more - I have the time to review and post the latest output from the OGA.

We had the Feb production numbers within Enquest’s March update, so not much to add there, but I want to go back to comments I made on Kraken last month. I won’t repeat them but for anyone who follows, they were based on OGA water injection/ production numbers for Dec 2020 which have now been revised. Bottom line, the new numbers show no problems with water injection at Kraken up to end Feb so my speculation at the time was wrong. I can only interpret the data provided.

But there is new information around the Golden Eagle field, which all being well will join the ENQ fold soon.

Boom!

We saw a nice jump in Jan oil production to 10,240 bopd (net 26.7%), which I put down to new wells coming online. Seems there was more to come, with 12,850 bopd reported to the OGA for Feb. Following a comment by AB at the March update when he said something along the lines, ‘expect just below 10K from GE in 2021’, I find the 12.8K bopd number surprisingly good. Perhaps AB didn’t know the Feb number at the time or has been guided to expect early surge numbers, or neither and he’s simply repeating expectations on contract.

Whatever, I’m encouraged, and the drill rig is still on site, so there is at least one more new well to add production volume on GE.

$$ = Volume x Price.

Enquest don’t control the price, but it seems Goldman Sachs has insightful guidance, on which you can invest. Yeah, right!

Trust the Squid or watch OPEC?

The same CI posting includes news on a new road south of Carlisle.

Morgan Sindall signs for Carlisle Southern Link Road (theconstructionindex.co.uk)

I wondered what Breedon had in the area that could support the works.

Low Plains Quarry, is 10-15 miles south of the new road. Breedon acquired the quarry as part of the Tarmac exchange in 2018, and said at the time, “Low Plains, between Carlisle and Penrith, is a major producer of sand and gravel for supply to the construction markets of the north of England.
Alan Mackenzie, managing director of Breedon Northern, said the construction materials group which operates across the UK and Ireland, was delighted to welcome Low Plains and its staff.
He said: “Low Plains is a strategically valuable quarry with significant sand and gravel reserves which will supply both the local market and our own ready-mixed concrete plants in the region.
"We look forward to working together for a successful and profitable future.”

Looks like, right place right time. “The works are due to start on site in spring 2022 and it is anticipated the construction of the road will take approximately two years to complete.”

I picture a scene from the Battle of Britain where the RAF WAAFs position and develop their resource in response to incoming German bombers.

In Breedons case, similar hard hats but less urgency. The Carlisle Southern Link Road is flashing amber, and Breedon are reviewing their local resource with adjustments to capital spend.

A scene played out across the land!

It's a quiet day in Linlithgow. ;-)

An article in today's Construction Index supports comments made by a poster a couple of weeks ago, 'Issues'.

I'd guess it's good news if you are in the business of supplying materials. It will be interesting to hear Breedon's commentary at the half year. They usually highlight key projects and areas of activity. I'm even more optimistic on a revenue boost above current broker consensus.

https://www.theconstructionindex.co.uk/news/view/hs2-blamed-for-materials-shortages

Thanks to the contributors from the industry.

I understand some of the replies querying the comments but I think it's important to also understand that the contributions are made from personal perspectives. Putting these together I get the sense that demand for Breedon's products generally should be good. On material shortages there's a fundamental difference between the quarrying of aggregates and the production of cement. Breedon has the largest cement plant in the UK and a second in Ireland that together produce c2mT. For maximum efficiency these plants will run flat out, only being shutdown a couple of times a year for kiln maintenance etc. Variations from one year to the next are probably within =/-10%. In addition Breedon operates 4 cement import/export terminals. The latest in Lieth Scotland which may be behind the reference to shipping cement from Scotland to England.

But looking at the production numbers it's interesting to note that Breedon produce more than twice the cement they require for their own concrete plant, though as spogbat points out regional issues might mean the Breedon's cement isn't necessarily in the right place. I know that some plant uses non Breedon cement for logistical reasons. But all in all Breedon has a good supply of cement. I noted cement was called out positively in the latest update.

Key to margins is the ability to increase price over cost. Lafargholcim, the international materials supplier reported numbers this morning that pointed to good price increases over cost.

Only a few comments on Europe, but they sound positive:
Excellent month of March with strong volumes in all
business segments
? Strong pricing trends overall
? Improving activities in the UK, continued strong demand
in France
? Over-proportional recurring EBIT growth vs Net Sales

I thought it was a good update, but I seem to be in a camp of one.

Hard to know if the price action reflects the update or simply a position change happening in the background. What ever it is, I gave up on interpreting day trading a long time ago. The guidance, "Based on the Group's performance in the year to date, the Board's expectations for the full year are unchanged." might have deflated". The update was given at the time the board is guiding the remuneration committee on targets for their bonus, and it's too soon to start raising those numbers now. That might appear cynical but I've seen the pattern time and time again.

The £264m and LfL detail offers a lot of information, albeit based around a typically quiet period number, but when I allow for ROI and extrapolate I come to a full year revenue number well ahead of current broker consensus. It will be interesting to see how it compares to the final outcome.