Member Info for londoner7

hitman1a, thanks for the link.

This section seems to confirm Golden Eagle cash flows between Jan 1st and closing accrue to Enquest.

"EnQuest can deduct money earned between January and the closing of the deal, expected by the end of the third quarter pending EnQuest reaching a refinancing package with its banks, from the purchase price."

Perhaps I've misunderstood e121's point, but I've pinged IR anyway.

e121, you say, "The $13mill/month that'll accrue to us after us utilising our carry-forward losses would only be from the closing date, and not from the economic date (1/1/21)"

You'll see from my post that I disagree. That's a big difference on FCF, unless I've misunderstood your point. Worth an email to IR.

Hi Hitman1a, a good post 13:48. I've a few points.

I think your comparison between ENQ existing asset costs and Golden Eagle is unfair. The Kraken FPSO lease c$116 should be added to your calculation resulting in $26 / boe. As volumes decline this number is only going one way over the life of the fields. Forecast for GE is $5 for 2021 and $20 over the life of the field.

I think too much focus is put on a Kraken premium. Look at the back pages of the annual reports and you'll see the achieved crude price (excluding hedges) is at or below the average Brent price. Any Kraken premium appears to be lost to discounts on other production. CNE has two premium products, Kraken and Catcher, but, take 2019, the achieved crude price was only $1-2 above Brent in 2019. If I'm looking at the OZ payments I'll add a couple of $$ premium for Kraken but overall it does not add up to much. (If anyone disagrees, please point me to something in the Annual Report to substantiate your claim).

ENQ didn't present a BE for 2021. I highlighted this guidance was absent from the Nov update because I didn't expect $27 BE for 2021. Too many factors have gone against them, lower production volumes, foreign currency movements and the higher than I expected $120m CapEx and abandonment . (???????) Based on 49K production and a $55 oil I have $32 BE, same as achieved last year, which I thought was a great achievement. Putting in the revised numbers my simple Dec 12th FCF calculation worked for 2020.

Do you have a reference for the JS comment on $13m/month from GE. I'd be interested to see the context. In a post I'm writing off line to my log I have the same number ($155m/12 = $12.92m / month). Are you sure JS said $13 and not $12.92 ;-)

Since the update I've tried to post a couple of notes which failed the 3000 limit - I don't have the patience to edit them.

I'll see if the latest one fits through the post box. If it doesn't, in summary its speculation on the GE contingent consideration and the opportunity now available to ENQ to spend the new facility on assets which should make a return ahead of Oct 2023.

$5/boe OpEx in 2021, but $15/boe OpEx over the life of the field. (As production declines OpEx per barrel can climb rapidly)

CapEx is estimated at $5/boe over the life of the field, assuming 5MM 2C converted to 2P. Hence combined OpEx and CapEx over life of field is $20/boe.

I'm using a $5/ boe costs for 2021, and applying $20 / boe costs 2022 onwards.

Hi hitman1a, I don't necessarily see it as a change in strategy. I'd still be happy to pick up BP's cast offs. Magnus might not be performing as expected but its still very profitable to ENQ.

I think ENQ had to find something to support a restructure of the RCF. and given the 46K-52K production forecast today's update would have been gruel without it. It's come down to this deal with Suncor - AB might have knocked on their door. We'll never know.

* of course I meant a war chest of $450m.
$450 wouldn't get onto the battle field.

hitman1a, I think the game has moved on from debt repayment. Last night I was reflecting on the dire Nov production numbers and thinking ENQ are in danger of stalling if they rely on organic funding for Cap Ex spending from 2022.

I was relieved to see this mornings news.

I've run some FCF calculations and RCF repayment profiles, given the guidance from JS and I think that upon the release of the new RCF - I expect c$750m, - Enquest will have a 'war chest' of $450 to pursue growth opportunities..

This could be Magnus, Malaysian tie ins, Eagle or producing acquisitions, which could come this year. AB may still have other irons in the acquisition fire. I think Bressay is years away.

I see the Golden Eagle acquisition primarily as a facilitator to an earlier and accelerated growth path. GE has value but Suncor didn't give it away. Why would they?

I think the $50 equity raise is a requirement of the banks. The prospects for cash flows look good at current prices, but the balance sheet is shocking.

I don't remember where I saw it but I've a recollection of recent mention of a dividend at the 2021 interim results, which was always the timeline.

I wonder if a move to the main market is back in the frame. Additional corporate broker (HSBC), CFO moving up to CEO position this year may hold a different view on main market merits, and the new acting CFO was CFO when Tyman joined the main market in 2013.

Interesting. Thanks!

hitman1a, you know the ops update is tomorrow!

How?

correction:

The consensus broker forecasts indicate that there will be a significant reversal of the obvious 2020H2 (not 2021H2) progress, so my focus will be on the 2021 guidance.

To clarify. Breedon has guided to £75m EBIT for 2020. That is £75.6m for 2020 H2, after a small H1 loss. I think this is a great result. I have ideas on some factors which have contributed, but I want to hear why, and to what degree, this result will not be carried into 2021. Clearly, the brokers have low expectations for 2021, so I'm keen to find out what Breedon say on the 10th March.

Current broker consensus (FT) is 2021 revenue £1.06B and 4.7p EPS.

Using an interest charge of £15m, the EBIT formulae is:

0.047 = ((EBIT -£15m) * 0.81) / 1696m

If I back out those numbers for EBIT I get £113m for 2021, which is way off the 2020H2 run rate.

I guess I'm missing something. I just haven't figured out what it is.

Hi L3Trader, you ask yourself the question and don't appear to like the answers. That's what makes a market.

Ade1234, raises good points about the nature of the business. I used a similar comparison when considering the impact of the 'Beast from the East' in 2018. If you can't get to the restaurant for your normal Friday eat out, you're not likely to go twice the following week to make up for it. The restaurant has permanently lost the revenue, while Tesco has probably gained.

Breedon's business has a greater degree of bounce back. The demand is put in place via government and private sector contracts. The supply can be weather dependent, but unless the weather is impacting demand (unlikely), supply will bounce back. The challenge for Breedon management is to manage 'issues' better than the competition. If they can do that they could actually benefit from disruptions.

I think your concerns are more relevant to demand (projects) going into 2021 that may have been delayed by Covid - I guess that is your focus - but this could provide opportunity to Breedon.

I would be very surprised if Covid hasn't delayed construction projects. It's probably a given, and largely, perhaps excessively priced into share prices. The question then is how do these construction delays play out over time?

Without Covid there would be a steady stream of projects reaching a shovel in the ground stage. (I started to examine the detail of factors involved but decided it's the end result that matters).

It's likely that Covid has disrupted that steady flow and there will be a lumpier demand for shovel activity, and hence the supply of Breedon materials.

I rate Breedon's management to be a good player in a disrupted game.

Pre Covid, based on government spending plans already in place to 2025, the medium to longer term outlook for construction activity was looking good. I doubt plans will change much, unless say H2 is pulled, which I doubt. Key to the longer term investment in Breedon will be capital spending plans beyond 2025, but that's for another post.

I know you're a numbers guy. I like the numbers Breedon has presented over recent months. The 2020 EBIT number shouldn't come as a surprise on the 10th March, and we've had good guidance on revenue. The headline EBIT number excludes exceptional costs, which will be reflected in the debt number. The consensus broker forecasts indicate that there will be a significant reversal of the obvious 2021H2 progress, so my focus will be on the 2021 guidance.

Have the brokers called it correctly? Either way, we'll all get an answer to our questions on 10th March.

While Covid restrictions will have an impact across all Breedon’s regions of activity, only ROI is subject to a full lock down. The restrictions on construction in ROI were introduced 7th Jan as part of tier 5, with an end date of 31st Jan. Tier 5 has since been extended to 5th Mar, but I’ve seen reports that elements such as schools and construction may see restrictions eased sooner, with a target of <1,000 cases per day ahead of easing on construction.

This suggests ROI construction could be back before mid Feb, if current trends continue.

L3Trader, here's my record for the last 4 Kraken detachments:

Date Time
31/01/2021 15:30
18/01/2021 14:00
04/01/2021 10:00
23/12/2020 07:30

Therapist, thanks for the heads up on the OGA data. I missed it again.

I'm disappointed in the Magnus number, oil at 11,750 bopd is up from October's 7,620 bopd, but a long way down on the 18K-19K bopd produced earlier in the year.

But I notice water injection has barely changed from the low level seen during the Q4 maintenance activity, so scope for further improvement. I look forward to the Magnus commentary in the next update. Fingers still crossed!

Your comment "GKA barren at Mallard and Gadwall" caught my eye. While reviewing Enquest's dirty, dirty, dirty practice of spewing pollutants into the atmosphere I took at look at Enquests operations page. It's had a revamp, but a reference to the potential Eagle development has survived the revamp, which suggests Eagle is still in the frame.

Going back to your "barren at Mallard and Gadwall" comment, this except from the Eagle development ES is interesting:

There will be no change in fuel use or produced water discharges at the Kittiwake platform as
a result of Eagle coming online, as existing producing fields (namely Gadwall and Mallard) will
be backed out to free up space in the Kittiwake production systems to accommodate the Eagle
field;

Coincidence?

Pelle, I think the GS note from Sunday has been mangled in the retelling. If fact, GS has reduced their demand expectations for 2021 H1.

GS has a bullish stance on oil prices, largely due to their higher than market expectation on the oil deficit - difference between ongoing supply and demand. In their note they increased their deficit forecast for 2021 H1 but reduced their demand forecast for the same period. I don't have access to the original note, but this coverage and excerpts are a good pointer:

The bank said in a note on Sunday data indicated a deficit of 2.3 million barrels per day (bpd) in the fourth quarter of 2020 driven by higher demand and lower supplies from producers outside the OPEC+ group.

It forecast a deficit of 900,000 bpd in the first half of 2021, a higher level than its previous prediction of 500,000 bpd.

This could help push benchmark Brent crude to $65 a barrel by July, with less industry investment in supply skewing risks to the upside in 2022, the bank said. Brent was above $55 on Monday.

“We are moderating the demand rebound to account for a slower start of vaccination and a cautious pace of reopening, leading in particular to a slower recovery in jet demand,” Goldman said.

The bank expected demand to rise by 5.3 million bpd in six months to July, down from its previous forecast of 6.8 million bpd.

Hi sweatysock, I had listened to the interview before posting.

I responded to your post because you are one of a few posters here who’s been around long enough to grasp the fuller picture. I doubt if the commentator/ramper on the Youtube video, who also appeared on another last week, had even have heard of Mosman before Christmas. He didn’t have a good handle on his brief.

Take the ‘expectation’ of a 700% increase in production this year. Given that one might expect a similar rate of increase in revenue, refer to SP Angel report page 14 which shows 2020A revenue of AU$1,794,842. The numbers for 2021E, 2022E and 2023E are each less than twice (<100% increase) the 2020A number.

I believe these revenue numbers don’t include anticipated drilling, but if they did the CapEx would need to be reflected in the balance sheet forecasts, which in turn would require additional funding. Hence the ‘after CAPEX adjustments’ qualification to the YE cash expectation in the SP report. You can try for a 700% expansion in production or you can hang on to your £900K placement cash. You can’t have it both ways.

Mosman has the funds to drill two wells in the first half of this year, but they appear to be delaying and hoping for additional funds through the exercise of warrants (0.023p Feb), to cover their $1m p.a. overheads through the rest of the year, hence the current ramping, when they should be drilling.

I know that the Stanley wells go through rapid decline, but I was shocked by this morning’s update, which is why I drew comparison with the prediction made just last Aug. I sense from the commentary that Mosman are not happy with the Stanley project hence their continuing reference to a new drill ‘S5’ AFTER the completion of works on S1.

sweatysock, you say, “Glad we seem to have increased by 50% what we were getting last year from Stanley's in RNS, get Stanley-1 back on to help this more, then onto Stanley-5.”

My reading on Stanley is this:
Referring to a report August 2020 (still on the website, under presentations), the chart on slide 12, “Medium term projection includes current production plus Stanley-4, Greater Stanley and Falcon-1 based on best estimates at this time”, shows total >150 boepd net, including 90 boepd net for Stanley.

Today MSMN say c35 boepd net, for Stanley.
What happened?
Stanley 1 might add 5 bopd tops.

How confident are you in, “expecting a 700% increase in Production this year “, and how do you get there?

romaron, Enquest 'sole risking development' would mean Enquest picking up Equinor's interest, taking their stake to 81.6% and paying Equinor an additional $15m in compensation.

That was the clarification I received from IR at the time.

Based on further reading of NS license requirements I believe the current phase of this license requires the submission of an FDP by a certain date, though my understanding is that the OGA are more flexible in current circumstances. Chysaor still retain their 18% interest and are free to act in their own interest.

As presented by Enquest the development is likely to be a tie in, possibly to Kraken. If that was the case I suspect CNE (29.5% partner in Kraken) might take the same 29.5% interest in Bressay - I would see that as a positive endorsement of the project. In that case Chrysaor would withdraw perhaps with a similar level of compensation to Equinor.

I expect the FDP to be submitted this year, but don't anticipate development until Kraken has largely played out. The Kraken field has moved into a phase where the demands on the FSPO's water handling is becoming a limiting factor. The economics of any Bressay development will be a factor in switching FPSO capacity from Kraken towards Bressay, so I don't see this as a near term story. There are better near term drill options on other fields.

Cheapskater, although you don't explicitly say so, I assume you agree with my findings on SP errors.

The DCF tables are interesting. I assume the author has been supplied production expectations on Stanley and F1 so we can get a read on that. But it looks like some errors here too.

The Stanley DCF shows increasing production through to 2024, which is reasonable given the expectation that further Stanley wells will be drilled but doesn't include the associated CapEx, which would impact the final DCF number.

The F1 DCF has a 2020A column showing 1,906 oil production. Mosman year end is 30th June 2020, F1 didn't start producing till late 2020 (Nov/Dec?). If I assume the column dates are calendar years then the 2021E and 2022E don't make sense to me. Something to look closer at later.

The report has some useful detail on forecast production and costs so I've downloaded a copy just incase it's pulled.

Good to see this level of detail, but I think you guys might be focusing on the wrong area. Eventual cash flows from F1 are important but the cash flow from warrants is more important to near term cash flow.

Page 5 of the note has 311m warrants @ 0.0023p (Feb 2021) and 360m warrants @ 0.0015p (Jul 2021), which they assume will be exercised for £1,255K. But these numbers don’t agree with the Company Structure page on the MSMN web site.

It has 200m @ 0.0023p and 311m @ 0.0015p, which looks right to me. I looked back at the issued RNSs to confirm. If these are exercised, they generate £926K.

That is £329K less than SP Angel has calculated.

I accept I could have messed up. Could someone else check this? This is Mosman ‘paid for research’ so I hope JB is also checking - I know he follows this board.