Member Info for londoner7

andsoforth, as someone who is invested here in the believe that Headlam will soon (2022) return to 2018 profit levels, namely c£35m earnings, 40p EPS and 25p dividend, I agree with your comment that the guidance represents a reduction in the dividend, but I would modify this with ‘headline dividend’.

The stock might trade in a narrow bad in the next 18 months, but I’m not a trader so that doesn’t bother me. If my expectations on the company’s earnings is correct then I’d expect that narrow band to be upwards and showing a decent gain 18 months from now. There are lots of other companies which offer the potential for greater growth, but I like the ‘low’ risk to reward on offer here.

But I want to go back to that dividend, and the capital rules outlined today (incidentally, many company’s outline this sort of discipline at times like these but it invariably loses traction over time).

Let’s assume that with Covid abating, economic stimulus and Brexit behind us, the UK market will enter a recovery phase over the next 2-3 years and with Headland’s specific growth measures, such as the new Ipswich distribution centre and transport initiatives, Headland will be a part of that UK recovery.

Capital rules:
1) In a growth phase continued balance sheet strength is a given
2) Organic investment runs at £3-4m p.a. It has been higher over recent years because of the £26m investment in the Ipswich centre, which will benefit the business from this year.
3) X2 cover dividend pay-out.
4) Acquisitions
5) Surplus returned to shareholders in the form of a special dividend or share buyback.

Consider that £35m earnings target I have for 2022. After £3.5m organic spending and £17.5m dividends (c20p), £14m is left to cover 4) Acquisitions and 5) surplus returned and given no acquisitions could equate to additional shareholder returns of 16p.

It is at this point that the management demonstrates whether they are worth what they are being paid and whether shareholders should remain for the longer term. It is effective capital investment made by the company’s management, which marks out the good stock investments from the bad ones.

Domus was a bad acquisition by this management. Let’s hope they have learnt their lesson.

correction

'S1 or C more likely.' should read 'S5 or C more likely'

And F1 68boepd net, at best including 10 bopd (oil).

RG100, you echo my thoughts exactly.

With Admin costs at c$30m, what do they do all day?

I suspect talks are ongoing with the Shell Egypt assets, and until they are concluded one way or the other I wouldn't expect CNE to divulge anything, so an RNS could come out anytime. But I believe the scale of that asset makes it only a bit player going forward, as does any development of a successful outcome on Jaws . There must be something more substantial in play. Hopefully, we'll get some guidance at the finals in March.

I think we all agree that shutdowns have a detrimental impact on construction activities, but it is the scale of that impact and anticipation of changes that interest me.

Today, the UK construction industry dodged a bullet. Sturgeon has made it clear over recent days that she was going to introduce additional lockdown measures. There was some speculation that construction would be included. Today’s announcement didn’t include construction. There appears to be some decline in the rate of infections in Scotland, if this continues then even Sturgeon would find it tough to argue for further significant restrictions.

Further, I think she would have included construction if she thought Boris was going to follow, which is what happened last March. This suggests to me that unless the situation worsens in England, construction across the UK will continue as is.

* I comment as someone who lives in Scotland and catches most of Sturgeon’s daily briefings.

"Ireland is to enter the most stringent period of lockdown since March last year with the government agreeing late last night that schools and all but essential construction should shut down until January 31."

I missed this news from yesterday, so it's good to see the reason behind the recent/current weakness in SP. It's the unknown that bothers me more.

This will be a temporary impact and coming at this time of the year (weather) leaves time for catch up. I don't see Boris following this lead but Sturgeon might.

romaron, I agree.

I put forward a similar comment last month, and said I might follow up with IR if speculation on Harbut panned out. I'm not going to, probably commercially sensitive anyway.

Just something for the tanker watchers.

chilting, I know you like to track the delivery points for the Kraken loads, so you might be interesting in my observations mixed with some speculation.

On Mon you said, "The last load that was transferred to the tanker Habrut just before Christmas was actually delivered to a bunkering dock in Rotterdam - the original notification was that she would sail to Gibraltar with a probable destination of Singapore."

I wonder if that is what happened.

We agree that Habrut went to Rotterdam with 500K of Kraken oil (load #83). Like you I assumed it was to be offloaded. Can you confirm it was?

A few days ago I noticed that Habrut was in Rotterdam with a draft of 19m, which equates to approx. 1,500K (my worksheet). I wondered what she was doing loading up in Rotterdam, but thought nothing else off it. Till now.

Today' I see she has left SF with a max draft of 21.9m, just updated from 19m, which equates to approx. 2,000K, heading to Singapore. She had just collected 500K from Stena Natalita (load#84).

Those are my observations. Now the speculation.
Habrut arrived in Rotterdam with load #84, loaded a further 1000K, and returned to SF to collect load#84. She is carrying at least 1000K of Kraken oil to Singapore. I now wonder if the 1000K collected in Rotterdam were earlier loads from Kraken.

The logistics fit. Prior to load#83 Harbut was listed on the Orkney shipping page as FROM from Gibralter - I never saw a destination listed at the time. If you want to minimise the Harbut's idle time in UK waters you'd put 1000K into storage, ahead of Harbut's arrival. She collects load# 83, and has 12 days to collect 1000K from storage in Rotterdam and return for load#84. Then off to Singapore with a full load, c2,000K.

We can further speculate how the load is marketed and priced. But that would be pure speculation, without foundation.

Good point. They used to fly the stuff in from Fiji in one liter bottles. But with the bars in Scotland now shut they've got a good deal on Islay whisky. A side benefit is that it keeps the crew happy.

gkb47, as a self certified spreadsh**ter I feel duty bound to highlight your half term water injection efficiency number 91%. In Nov this had dropped to 84%. ENQ would exclude the maintenance period and strictly, I should exclude that period from my calculation but as I can only guess at the length of the period I'm going to ignore it, so my lazy spreadsh**ter calculation has a water injection efficiency of 73% for the last 4 months to end Oct. That's a big drop from 91%.

The good news is that following repairs Enquest now has a 2nd water (DA) tower on standby, something they haven't had for at least 18 months.

I'm guessing ENQ pump water in to get oil out, and if they pump more water in they get more oil out. If this theory holds true then we might see a recovery in Magnus production. Unfortunately the response isn't like turning on a tap. There's a lag - something to do with reservoir voidage - so we might need to wait a month or two before the OGA data reflects any improvement.

I'm hopeful of something closer to 18K bopd in the near term rather than 14-16K bopd, but frankly I'm guessing, and probably being far too optimistic on reliability. You know the score, when your kit's old, bits drop off - stuff happens!

There is an expectation to return to drilling in 2022. At the 2019 CMD we were presented with an up trending production curve for Magnus based on a yearly drill - I'd guess the oil is still in place. And with an extra 2 years studying the seismic the swots might have a better Idea where to drill for it.

PYUECK, an interesting perspective. Thanks for your post.

I don’t hold the bonds but as an ENQ equity holder I think bond performance has relevance to the how I should view the equity.

I think the two instruments offer a quite different route into ENQ, attracting investors with vastly different strategies, though I know a few posters here have chosen to invest in both instruments.

I thought HeavyMallard raised an interesting question last night in his 22:24 post, “Still don't understand why the SP is lagging relative to the RB”. I recall an earlier point, possibly by the same poster, asking why the RB was reaching new (post-crash) highs while the SP is still well short of the 15.7p achieved in June.

PRDaynes, another bond holder, offered an answer to HM’s 22:24 post (“RB risk is reduced by increase in oil before the risk to Equity”), but I think the question is worth further consideration.

Do others with some understanding of how bonds fit into the picture have a view on the apparent discrepancy between the RB and equity SP?

romaron, I’d guess you have something to offer.

(A bit of noise on the board today. I see the puppet masters (the Saudis) are reiterating their influence over our oil investments - short term and long term.)

flundra, you say, "There's basically no real point in buying CNE shares for the special divi."

Fundamentally, you are correct. But a consideration is the fact that the cash flow yield from the NS production assets increases because the denominator (enterprise value) has dropped. A 16% drop isn't big but it is significant. From memory I estimated about $390m of cash (after the $250m SD) for the year end - a trading update is due in a couple of weeks. CNE were part of a consortium bidding for Shell's Egyptian assets. If CNE isn't successful and there are no other opportunities in the pipeline then a case could be made for the return of that cash to shareholders - it serves no purpose sitting in the bank. Credit facilities were in place which would support activities expected this year, namely Neptune, completion of the stalled Catcher extension and drilling in Mexico - though my estimation is that the operating cash flows should cover these anyway.

None of this is big stuff but any potential rewards are magnified by a smaller capital base.

That's the theory, but in practice we have a management team who will be focused on their bonus which may drive greater ambition than the projects I've highlighted.

With the sale of Senegal complete it's time the CNE team outlined their medium and longer term plans. It's my understanding that the payment of any award from India shouldn't be a factor in those plans because previously CNE stated that the bulk of any award would be returned to shareholders.

I'd hope these plans are presented over the coming months - perhaps a Capital Markets Day is in the offing.

There is not a buy back.

There is a 32p special dividend. It operates just like a normal dividend. It's special because it reflects the return of cash to shareholders following a one off event - the sale of the Senegal asset - and because it is larger than what might be considered a normal dividend.

There is a share consolidation - read the RNS for reasons. This is not a share buyback - no shares are purchased. This is a personal pain in the butt because of the way I record my portfolio transactions, but I understand their reason for doing it. There are other ways to maintain their bonus benchmarks etc. but I guess this removes a significant dip in the share price graph due to the special dividend payment, but begs the question why or how they adjust for the arbitration award bounce. That might be something they'll adjust when, or if, arbitration cash is paid.

chilting, by my unofficial measure based on draught I have 500,351 bbls. Let's call it 500K. ;-

Incidentally, I have a net hookup time for 30 hours, which sound about right for the messing around involved in an additional hookup. Let's watch what the Habrut does.

* On the CNE $1.2B award, I love the matter of fact way CNE closes the RNS, "which now becomes payable."

After the last update I wrote this note to myself:

"Breedon guided analyst’s EBIT estimates up from £57m, and it appears they landed at £67m prior to this update. Guidance is now upped to £70m, and I think it’s significant that it hasn’t come with the usual caveat on weather, “Assuming no materially adverse weather conditions for the remainder of the year”. That points to full year EPS of 2.6p, well short of the pre Covid expectations of 5.5p – 6p.
Year end, the expected debt number below £400m is interesting. I had £320m Pre IFRS 16. £400m equates to approx. £333m, so again, I’m happy with that.

H2 EBIT margin running high 12s but could get a 13 handle. Probably shy of the 2019 H2 margin 13.9%, but still looking good.

Bottom line, I see Breedon going into 2021 with good momentum and a stronger financial position than they entered 2020, with the Cemex assets being integrated. A 100p SP could be back in sight early next year but it might take the results in March to give a final push."

Today's update could be that final push.

EBIT now £75m and net debt well below £400m. I've got 2020H2 12% up on 2019 H2.

Referring back to the Rights prospectus AKA The Enquest Bible. Enquest said this on 'Sales and Customers'

The Company’s entitlement to Brent Blend oil (from Thistle, the Dons, Heather/Broom and Magnus) is
made available for sale at SVT. The Company’s entitlement to Forties Blend crude oil (from GKA and
Scolty/Crathes) is made available for sale at the Kinneil Oil Terminal and the Group’s Malaysian production is made available for sale at the Terengganu Crude Oil Terminal. Production from Kraken,
Alma/Galia and Alba is lifted by tanker and delivered to the relevant buyer.
The Group’s oil sales for its UKCS assets are primarily priced using the Platts Dated Brent crude oil
benchmark. Brent (including Magnus) and Forties crude are priced on a month average basis, while
Kraken, Alma/Galia and Alba are generally prices five days after the bill of lading date or completion of
discharge date. Differentials to the benchmark price are negotiated with customers. Prices for the Group’s
Malaysian oil sales are set by the Malaysian OSP, which is generally a significant premium to the Platts
Dated Brent benchmark. A Tapis differential is then applied to the Malaysian OSP and further differentials
are negotiated with customers.
As of 31 December 2017, the Group had four customers accounting for 84 per cent. of outstanding trade
and other receivables (2016: three customers, 90 per cent.; 2015: three customers, 65 per cent.) and three
joint venture partners accounting for 97 per cent. of joint venture receivables (2016, five joint venture
partners, 90 per cent.; 2015: five joint venture partners, 77 per cent.). Substantially all of the Group’s oil
sales during 2018 were to three counterparties: Mercuria Energy Trading SA (41 per cent.), Valero Energy
Limited (22 per cent.) and BP (11 per cent.). Following Alma/Galia and Kraken coming onstream, the
Group has diversified its customer base by selling its production lifted by tanker and delivering to buyers
to ports in Northwestern Europe, the United States, the Mediterranean and/or the Far East.

Hi Pelle,

This is my record.
Number Date Time Date Time Between loads Hookup duration Name Tonnage From Draught
24 10/10/2020 14:00 13/10/2020 22:00 6.23 80 Front Endurance 162706 1,547,608

Do you follow SVT?

I mentioned earlier "it's a long story", but briefly I wanted to see if I could get an insight into Magnus performance. For reasons you probably know about, it was a longshot. I knew that the Clare pipe offload is held in 4x separate storage tanks. There are at least two operating jetties. In the next two observations I saw a 'northern jetty' offload and a 'southern jetty' offload. It got my hopes up that I might be on to something - a differentiator. But alas the next five offloads were 'northern jetty' and I knew that didn't fit expectations so I stopped noting this element.

I went back to train spotting.

chilting, thanks for the clarification.

I suspect the Habrut 11m draft is ballast. She a very big girl for these parts, similar in size to Front Endurance which visited SVT recently. All recent offloads from SVT appear c500K - a long story but I've been looking in recently. The Front Endurance entered the area with a draft of 11.3m, updated to 11.9m after a vessel pulled along side (refuel?) - I treat the AIS draft numbers with caution, but. She subsequently left SVT after an 80 hour hookup (24hr is normal) with a 19m draft. My rough calculation was a load of 1,547K bbls.

I'll follow the Habrut's involvement with interest but just a qualification on my earlier speculations on marketing Kraken crude. Let's suppose a 2nd, and a 3rd (?) offload goes to Habrut and she sets off for Singapore. I don't know whether ENQ marketing is involved in the entire transaction to delivery in Singapore or ENQ involvement ends at the offload from Kraken. Depends how it progresses but I might follow up with IR, just out of interest.

chilting, thanks for you reply.

This bit confuses me.
"The smaller Cairn loads seem to go direct via the shuttle tanker to European ports for refining"

I've always assumed that Enquest as the operator also marketed the load, that is coordinating offloads through shuttle tankers to local ports or crude tankers for shipments further afield, USA or F.E. I don't know the scheduling of cash distributions to Cairn but I'd assumed it occurs on a load sold basis or periodic (month?) basis, after the receipt of money from the buyer.

I've seen no evidence of regular smaller loads. Nearly all are 500K loads, although there may be weather affected factors.

We see a period of say Rotterdam shipments, USA (for a period last year), Singapore shipments and so on. I'd guess Enquest market/sell the product to which ever market results in the best price, taking all cost factors into account. I recall Enquest previously stated that their ability to provide a reliable regular supply to the market attracted better pricing. I imagine a refiner as being like say Tesco, wanting supplies delivered as required to a schedule, and they'll favour suppliers that can perform.

Separating out specific Cairn marketed loads seems an unnecessary complication, hence my query.

chilting, thanks for the updates. Habrut is a big girl so F.E bound looks likely - I don't see a destination - but I also wonder if she'll take on additional cargos before she sails. Possibly a 2nd from Kraken in 12 days. Enquest has doubled up before.

You've referred to a 'Cairn load' a few times, once you said "smaller load for Cairn". What's your thinking here?

I thought Navion Osla had been the smallest ship to service Kraken, but I now see Petroatlantic did #59 and has taken many offloads from the larger Glen Lyon FPSO, as has her sister ship Petronordic. I have Petronordic as capable of taking a 500K offload. Do you have data that suggests otherwise?

"Otherwise why would they want investigation on first place"

Trust me, Dignity did not want this CMA investigation. They are concerned about the free-for-all in the pre-paid market and would like financial regulatory control in that market. Once the wider investigation began they then chose to make a case for regulation more generally , in the belief it would raise standards and curtail competition. Of course they want to give the impression they want to support the CMA investigation, in the hope it might blunt the remedies.

A call for regulation, on your terms, is the oldest move in markets. Develop a market lead, then call for regulation to raise entry costs, putting up barriers to entry for the new and more nimble players.

* I do see a difference between this CMA update and the last. The previous update was interpreted as effectively marking a closure to the investigation, but waiting the final report. Today, the CMA has made it very clear that the investigation could be restarted within a short time frame.