Member Info for londoner7

she was waiting for someone to notice?

"If the total value of your pension pots goes above this amount, then "bad things" happen... Others can add, if they wish"

I agree, but if you find yourself in that fortunate position then one answer (I'm providing no advise here) is to drawdown a yearly amount just below the higher rate tax level. There is then the question of which form of drawdown to implement to minimise the impact at 75. I've a spreadsheet for that.

Two good problems to have:
A substantial sum in your SIPP and reaching the old age of 75.
Lookout for Covid 39. You heard it here first.

Sorry, another lockdown moment. Sturgeon is less than 60 minutes away.

Does anyone know the mol% numbers for the following components in Kraken crude?

N-pentanen-C5H12

Iso-pentane (2-Methylbutane)i-C5H12

I know what makes it go ‘bang’, Methane CH4 ,
But the smelly residue is proving more of a challenge.

I'm trying to figure out if I'll have Gretta on my back if I slip the gunge scrapped off the Wartsila 50DF's air filter over the side.

Well done Therapist, your theory 2 panned out.

The big girl BD is on her way to Rotterdam with half a belly full, c500K.. I don't know how you figured that out from pricing by kudos anyway.

The key question on load 87 was whether IK came away with a full load. It now looks like that was the case. Now I await your spot on load 88. No rest for the wicked.

Correction to the year

The Magnus and PM8 rigs have drilling capability on board, which means drilling costs for a well on each is c$15m, so could be a late 2021 option.

* riskingit, thanks for the detail.

Tarmak,

The 'long good friday quotes' link didn't work but google the comment and you'll find them.

One of my favourites,

Pool Attendant:
They kept it all incognito. They're gonna collect the body in an ice cream van.

Harold:
There's a lot of dignity in that, isn't there? Going out like a raspberry ripple.

If you don't get that, forget I raised it.

Hi Tarmak,

My favourite phrase of the day was ‘is i magen’. It was used by your man, Anders Tegnell referring to the Brits, and others, approach to Covid, in a UK ‘The Times’ newspaper article.

Your recent usage of British common phases was good, but more correctly phrased as:
‘the penny has dropped’.
‘Elementary, my Dear Watson’. This modification avoids a reference to pipes and illegal substances.
And I’d add, ‘went down like a lead balloon’, to your repertoire. (Kidney??) ;-)

On your CapEx question:

$120m for 2021, does it include ‘borrning’?

I hope so but I fear not. I’d guess it will be confirmed at the finals next month. To date the official line is that drilling is expected to resume in 2022. But much has changed since that statement was made, late 2020. A new RCF and a higher oil price are in prospect.

The Magnus and PM8 rigs have drilling capability on board, which means drilling costs for a well on each is c$15m, so could be a late 2020 option.

Tell your mate Anders that Brits today might lack grit, but it wasn’t always so. Forty years ago, we all looked like Bob Hoskins and had birds on our arm like Helen Mirren.

Long Good Friday Quotes

Check out the quotes and if you want to observe British humour up close get the DVD – a British film classic.

I doubt the 70s romaron in his flares and Cuban heels quite captured the ‘Hoskins’ look, but he probably got the girl.

Jan,

Given a good oil price outlook I'd guess a good part of those impairments can be returned to the balance sheet but obviously not that part that was produced at c$42 during 2020.

The discounting applied to future cash flows means it is the near term cash flows that matter most.

the_beef, thanks for the cnbc link.

Listening to the clip and in particular reading the text, I'm not convinced about this appeal against the arbitration award.

The award was final and binding. Is there now something that India wants to present that wasn't presented earlier? The normal appeal process is that the case passes to a higher court for consideration. If so, who would that be?

The court action that CNE has initiated to enforce the award through the confiscation of assets has to be defended by India. I'd guess the best defense they can offer is to claim that the arbitration is going to appeal so judgement should be deferred. It should be easy for the court to decide if an appeal process exists.
The other defense on sovereign tax rights was examined by the arbitration court. Each jurisdiction will consider the primacy of the award but I'd have thought the 'New York Convention' would be the key factor.

Time will tell, but I'll now wait on the award rather playing a he says she says game, and leave penny traders to argue the toss.

I'm invested here on fundamentals, and that's my main focus. I hear CNE have applied with a JV on a block in Trinidad. I'm hopeful of news on an acquisition in Egypt through a JV. CNE is sitting on a lot of cash and I'm keen to hear how it is to be deployed. If it isn't to be spent then return it to shareholders. Current production at Kraken and Catcher is throwing off a lot of cash. Anything that comes out of the award is a bonus.

Hi Therapist,

Thanks for the link. I don’t know how you find this stuff but I’m glad you do.

It took me a while to figure out where the Finders license is in relation to the GKA hub. Between OGA maps and slide 10 of the 2015 CMD presentation, appropriately labelled ‘Significant Prospectivity Around GKA’, I managed to pin it down.

The license area sits immediately to the north of the GKA hub and the two ‘islands’ within the license are Enquest fields, Crathes and Goosander.

In the 32nd round Enquest was awarded 21/18c, which is a rectangular block to the SE of the hub.

These awards were made in Sept 2020, so curious that Finders should now announce theirs though, as far as I know Enquest hasn’t said anything on theirs.

We can speculate on the significance but in my overall assessment it adds some assurance to the continued viability of the GKA hub, which I’d guess is Enquest’s highest cost asset.

Both licenses are ‘drill or drop’ but got to think Enquest would develop Eagle before any other activities in the area.

Finders look to be a small privately run outfit, that has had success in Australia. In house seismic capability but typically requires farm-in for the drill.

Enquest's medium to long term opportunities are coming into view.

HmH,

No offence taken, though I think I’ve had my bottom smacked.

And nobody has ever accused me of ‘having a massive bias’, I’m looking up the Swedish translation now ;-)

But you should know I don’t do personal. I just stick to the numbers as I see them and don’t mind if someone else see them differently.

God damm it, those Swedish lads have gone to the pub! It is Friday night after all.

Freedom!!! Cried Wallace, he’d be very disappointed with Scotland today.

My memories of the bars in Stockholm Old Town are of the of beer classes, which might date me. As I recall the higher the class the better the beer, but ‘class’ is still a dull name for a beer.

Give me Young Boys every time! Though one at a time rather than the entire class.

At every update BHP issues their outlook for the various commodities they supply. I take particular interest in what they say because unlike Shell and other oil plays who might talk their book, BHP is free to invest their capital across a broad range of commodities - they favour different ones at different times and have a decades long outlook. Today their headline focus is on investment in the clean energy sector, copper and nickel - keeps the ESG crowd happy, but on the quiet they still pick up oil assets, c$0.5B last Nov, in an additional 28 per cent working interest in Shenzi, US GOM, drilling tie ins as we speak.

Here's their outlook:

Crude oil prices have recovered to around US$60 per barrel range. Our base case is that prices should build upon their
recent recovery, but the pace of gains is likely going to be modest initially given potential headwinds from currently
curtailed supply returning. However, if we look beyond this phase, our bottom-up analysis of demand, allied to systematic
field decline rates, points to a long run structural demand-supply gap. Considerable investment in conventional oil is
going to be required to fill that gap. The medium to long term supply deficit has been amplified by the global retreat from
capital spending across the industry in response to the pandemic. Deepwater assets are the most likely major supply
segment to balance the market in the longer term. The price expectation required to trigger investment in deepwater
projects is expected to be significantly higher than the prices we face today.

Guys, I get the bull case for oil. Links to it are posted here ad-nauseum.

I am neither an economist or an accountant, I’m an engineer, which means that I try to view the bigger picture and expect the unexpected. It’s one thing for an economist to get his year-end forecast wrong but it’s a different level of embarrassment for an engineer if his/her bridge falls down.

You guys may have studied the supply/demand numbers more than I, quite probable. I look to organisations like the EIA who in their latest forecast predict average 97.7 b/d in 2021 up 5.7b/d from 2020, and up by 3.5m b/d to 101.2 in 2022, the same as the average for 2019. Interesting to note however, that their Dec 2022 forecast is 1m b/d up on the 2019 Dec number, so some catch up in play.

In 2019 H2 oil prices were coming under pressure compared to 2019 H1 and those pressures were being reflected in lower US shale drilling ahead of Covid. Those movements will be reflective of the supply/demand balance seen at the time. Now has Covid changed that? We'll see.

One/two years on, a big chunk of oil consumption has been lost forever. A big chunk of future oil production has been lost too, probably for ever – near end-of-life fields shut in forever (bet you could name a couple) and some prospective projects have been delayed or cancelled. The supply/demand dynamic will create a lot of speculation later this year and volatility in the price – we’ve probably seen nothing yet.

But there is still some life in the conventional oil sector. I’m invested in BHP who has a 2021CY forecast of 95-102 MM bo, increasing to 106MM bo in the medium term.
July 2020 (now operational) – Atlantis Phase 3, net to BHP 6MM boe.
Mid 2021 – Ruby, net to BHP 4MM oil and 3MM gas.
In 2022 – Mad Dog, 12MM b oil.

They anticipate increasing oil production based on a higher marginal cost of supply, funded internally by their cash flows from iron ore, copper and nickel. The ESG crowd raise the costs for new entrants, and the barriers to entry for the incumbents like BHP. The day BHP buys a wind farm, I’m out. I have ENQ in a similar camp but with a particular focus on oil.

But I digress. I hope the gas guzzlers hit the road this summer, but I expect OPEC to be capable of meeting demand. Summer 2022 is another matter; but a holiday or two away and several pints in my local, i.e. a long way beyond my current thinking.

Back to the original point I was making. Higher prices will impact demand. The UK doesn’t really see it because of the high duty levels but motorists in the US and in countries like India will be more responsive to a higher oil price.

The Saudis will be looking at the bigger picture hoping their fiefdom doesn't collapse - at least not before they've retired to Mayfair.

Here's the complete link:

https://www.hellenicshippingnews.com/dont-regulate-crude-oil-production-and-raise-prices-pradhan-urges-opec/

HMHn, you say, “Gonna be interesting to see if OPEC going full out can cover the global shortfall as summer arrives.”

I’m sure you know that OPEC is a long way from going full out. Your comment might have more relevance in the summer 2022.

Producers, consumers and investors will have their own hopes and desires for the oil price profile in the near term and the long term.

There are many influences on near-term demand, but I think it’s fair to say global recovery from Covid is key. I think it’s also fair to say that the key near-term influence on supply is the decision taken by OPEC to regulate supply below their production capacity. The recent decision by the Saudis to cut back their own production by c1MM bopd during Feb and March, seems to be behind the recent pop in oil prices. We can speculate on why they took that action, but if the reasoning was that their resultant volume x price would be higher then they should be applauded for their bet.

I have no doubt that the Saudis act in their own interest, to be precise, in the personal interests of the princes, ministers and other influencers within Saudi Arabia. The politics within the region and the security of their own positions will be important factors, which may weigh the near to medium term above the longer term. Which is it? I don’t know.

But looking from the side of a key consuming nation is interesting. India is the 3rd largest consumer of oil at c5MM bopd, which is expected to grow over the next few years. They produce about 1MMbopd, so are clearly a large net oil importer. The argument we hear for the continued rise in oil demand over the next decade, is the increased consumption in developing economies like India, in spite of falling demand in developed economies. BP anticipate Indian consumption rising to 6MMbopd by 2025. Beyond 2025 BP’s assessment depends on which climate change scenario plays out.

Recently, [Indian] “Petroleum Minister Dharmendra Pradhan urged the Organization of the Petroleum Exporting Countries (OPEC) members to stop regulating crude oil production and ease prices.”

His argument is clear and obvious: higher oil prices in India today, hinder growth and potentially higher oil demand in the future. He is appealing to the Saudis to consider the volume x price calculation over the longer term. Will India’s appeal have any bearing on the Saudis during the upcoming OPEC decisions? I don’t know.

If you wish to read the detail of Mr Pradhan’s appeal to OPEC, it’s here:

Don’t regulate crude oil production and raise prices, Pradhan urges OPEC | Hellenic Shipping News Worldwide

The arbitration is settled - there is no appeal.

It is now about repayment and/or enforcement.

It appears India doesn't want to settle without a fight, so they are challenging the new cases that CNE are bringing in various jurisdictions to allow them the seizure of Indian assets. I think that's an easier issue for the courts to resolve than the arbitration which took >3 years, and is even more likely to go in CNE's favour.

Tarmak (not sure I had your handle right in my last post), you say, "Eagle will be drilled for a cost of around 120m "

How do you come to that figure?

Hi Kamrat,

Thanks for sharing your calculations.

My methods are different (and less detailed) so I don’t want to target your methods because I can see that on one side, say revenue, you have a higher number than me, but then on the other side you’ll have something than compensates.

For example, calculating the BP profit share is important and while we calculate it in quite different ways we come up with similar results. Using your oil price and production volumes you get $74m, I get $77m. Close enough in my book.

But there are a couple of areas I disagree with.

You have 2020 YE cash $284m, but this is actually, ‘cash and available facilities of $284 million’.
The ‘available facility’ is tranche B of the RCF = $75m, so actual cash is $209m.
This number also includes ring fenced cash owing to other accounts, BP, Sculptor, etc, but that’s okay as once paid over there’ll be a corresponding reduction in debt.

You have the BP vendor loan and a capital repayment component of the Sculptor loan as Utgifter (expenditure). I don’t think that is valid,

If you consider a repayment of the Sculptor loan an expenditure, then why not repayments on the RCF. Interest yes, capital repayments no.

I’m less clear on the handling of the BP vendor loan. Now, the vendor loan is recorded as a contingent liability on the balance sheet rather than a debt item. When a repayment is made there is a corresponding reduction in the contingent liability. But the headline net debt number is unaffected, so there may be a case for deducting this component from the FCF, which is what you’ve done. The BP vendor loan will be transferred into the new RCF, so in future the correct handling is clear.

Incidentally, in a recent posting to the Swedish board a quote from IR stated, “Magnus vendor loan repayment (averaging $30m per annum until 2023)”. So $30m is the number to use, however you use it.

My Swedish is improving and favourite word this time is Borrning (Drilling). Thanks for your post.

Hi e121, thanks for your detailed reply, in particular your reworking of the CapEx numbers for Devon and translation to Enquest. In 2019 the question of sustaining CapEx was raised during the interim presentation and $150m was indicated. Later I was guided to a range $150m-$250m. Of course, those were different times with c70K of production and 3 more hubs, though I don’t think any of the lost hubs offered options for expansion. I believe the range largely excluded any decomm.

Yes, a key point in spite of the demise of the shale industry last year was that the oil was still in the ground and the infrastructure was still in place – simply different owners. Though bondholders are likely to be more cautious for the reasons you give. I’d guess the real destruction occurred in the services and support infrastructure, which have lost some potential to ramp back up when needed. Another element to the shale model is hedging which I understand is more applicable to shale because a larger proportion of oil recovery occurs in the first year. I’d guess the conventional players, and here I’m thinking of the likes of Saudi Arabia would not want too much volatility in the oil price thus offering the shalers hedging opportunities. A likely factor in OPEC’s considerations at their next meeting.