Member Info for londoner7

Frac, I misunderstood your post.

You opened with a comment on the premium building on low sulphur and I missed your switch to a share price prediction.

I was interested in the basis of your comment on the premium building. Source?

"ABs prompt and decisive action stopping production at the marginal fields"

Rust played a decisive part.

But whimsy aside, Frac, where do you get the 12/13 number?

Senior came onto my radar in 2008 and in early 2009 I built up a position between 25p and 35p - much like today I do not remember my investment decision being a ‘no-brainer’. Later in 2019, thinking I’d done well, I sold a third of my position @60p. However, 5 years later, still with 50% invested, SNR had developed into a ten bagger. In hindsight, holding a significant portion of my investment over those 5-6 years was a more important decision than whether I had bought at 25p or 35p. Selling a third in late 2009, albeit for a double, was a bad call.

Can we expect a similar level of share price recovery this time around? Circumstances are vastly different, but if a level of normality returns and they achieve the current low-level expectations for this year and next, the investment case comes down to the level of recovery in 2022 and beyond.

A key concern for me is the political trends away from global trade, but trade patterns currently in use will not disappear overnight. Besides, SNR has its production assets in the key centers of the US and Asia, with about a third in the UK and Europe, so these will remain valuable assets, even if they can’t connect with each other as they can today.

Today, Investors Chronical reiterated their Sell recommendation: “Looking beyond that, much like Rolls-Royce (RR.), Senior is staring down difficult conditions for potentially years to come. Sell at 59p.”

Unlike Rolls-Royce, Senior isn’t directly reliant on the number of aircraft in the air – Senior don’t supply spares. What matters is the number of new aircraft being built and sold, and the return of the 737 Max. A while back I referenced a piece which argued the case for new over old.

Coming into the pandemic Boeing and Airbus had eight year waiting lists for their key narrow body aircraft and were implementing increased build rates.

If, as expected, airlines cut back on their orders for new aircraft it seems to me a reasonable expectation that the manufacturers would maintain their pre-pandemic (and 737 Max issues) build rates with the consequence that the waiting lists would fall to say 5-6 years. If this pattern plays out, perhaps a recovery of sorts could come sooner, at least in aerospace (75%), than the likes of IC expect.

It makes sense when you realise that the cash isn't available for distribution to shareholders, but required to conduct business, i.e. it is not excess cash. I commented on this in a post on 4th July.

Can somebody please explain what is meant by pro forma net cash?

The transaction with Bovis (Vistry) closed on 3rd Jan, 3 days after the interim result. The pro-forma result simply reflects the cash position if the transaction had closed on the 31st Dec.

The end of month guidance reflects the cash demands on conducting business. After incoming and outgoing cash movements GFRD expect the closing month end balance to be >£100m. Next week (15th) GFRD will issue a trading update on the full year - ends 30th June. It should include the end year cash position, which is typically as good as it gets. The questions will be, will the end year cash position still be over £200m, and what do they expect month end cash position to be for the coming year. This matters because if they don't stay cash positive 365 days of the year then they start to accrue interest charges, which is a big deal when you operate on tiny margins.

I am hearing an increased amount of chatter offshore that ‘PrettyLittleThing’ and ‘Nasty Gal’ aren’t a great look right now - has anyone else heard these rumblings?

Hi Tom8080, you say, "I find PV10 based on the 2P reserves more accurate than net assets."

I'm not going to argue. Your 'NS price mark' comment got my interest so I made a simple assessment based on latest net asset values. I felt it should provide a ballpark guide.

RockRose
Net assets Dec 2019 = $154m
Value of offer = £248m. @ $1.25/£ = $310.
Premium to net assets = 310/154 = 2

Enquest
Net assets Dec 19 = $560m.
Applying offer premium, $560m x 2 = $1,120m. @ $1.25/£ = £896m.
Current Mkt Cap = £249.
(896/240) x 14p = 52p.

I'm trying very hard not to get into Rockrose details but looking again at your comments, is PV10 alone a sufficient metric? Do you take account of sunk costs to develop 2P resource? All of Enquest 2P is in production. I don't think the same is true for RockRose 2P.

Tom8080, you say, "I sincerely hope that is not a price mark in NS"

I'm not familiar with Rockrose assets or prospects, but just taking raw numbers I calculate that a similar multiple applied to Enquest net assets would equate to a SP of 52p. (I hope I haven't dropped a decimal place ;-)

That's a quick and dirty estimate and I'm sure there are lots of other considerations but apples for apples that's the relative value of the 'balance sheet'. I'd say net asset value is more applicable than year end cash in the bank.

romaron, an interesting observation on the secondary impacts of a large infrastructure project – the largest in Europe – extending way beyond the 20m wide track. A 5-mile pipe to provide water for tunnelling works. I’d have never guessed. I’m sure there will be a variety of ‘oddities’ along the route.

I come out as a fan of HS2, but I will also leave aside the cost, benefits, of the HS2 argument. However, you use your local example to point to a conclusion.

You say, “I suggest there is less environmental damage using existing forms of energy because the true cost is often hidden. I was for HS2, now I'm not so sure.
There's a lot to be said for the dense energy and multiple applications of oil. It'll be around for many decades yet.”

The true cost is hidden from whom? Rest assured there will have been a detailed assessment of the ‘carbon costs’ of the HS2 construction – jobs must be found for all of those environment scientists leaving our universities. Green jobs to use the parlance. (Parasites are a cost but can have a benefit. I just hope the likes of Nicola Sturgeon doesn’t lose sight of the need for a ‘host’.)

A move to a lower carbon future will incur a capital cost and an additional environmental cost in the short term. Hidden or not, that should not come as a surprise to anyone. But when you consider the ‘current carbon cost’ assessment of the alternatives to HS2, car 7x and domestic flights 17x, I find it hard to support the status quo.

Yes, oil is a dense energy, but so too is coal. The environmental cost of burning it is too high.

Oil has multiple applications. Yes, and it is a finite resource. For a hundred years or so most of it has been burned. Perhaps it should be reserved for its other properties, some unique to oil. There are multiple ways of achieving proposition.

Talking of burning through a finite resource. Enquest has <10 years of 2P resource. This year it is being extracted and sold at only a little above current cost. Below cost if we include capital, but those costs were borne by previous holders of Enquest equity. AB will be giving some consideration to resource replacement before any dreams he may have of selling up. At least I hope he is!

Talking of dreams.

The legacy of HS2 will be an uninterrupted land route running the effective length of the country. Today we envisage rolling stock travelling at 200 mph. I can only image what might be ferrying passengers in 30-, 50- or 100-years’ time.

On a par with the thanks we give to our Victorian ancestor’s legacy of rail, water and sewage networks, future generation may be offing thanks to today’s decision on HS2. Sod the NIMBYs.

NikkookkiN, you've asked a couple of good questions (adding your previous post) which I'll try and answer.

The year end for GFRD is Jun 2020. GFRD has withdrawn financial guidance for the current year, like most companies, so anyone's forecast of a P/L would at best be a guess. But the brokers have estimated a c£8m loss. At the half way point pro-forma cash was £225m, so perhaps £10m off this, but it's year end and typically is the time when balance sheets look their best, so working capital could make this up leaving the cash balance c£225m+. If they report a number say, below £200m I'd be concerned as a shareholder (I'm not currently).

But it is next year and beyond that counts. You point out a target margin of 2% - an industry standard - for 2022. (I recognise the comment but don't recall the source). Will it be achieved in 2021? My communication with the company suggests it is a medium target, and not next year,2021.

The sums for GFRD are fairly simple. Rev (c£1,300m) x margin (2022 target 2%) = operating cash, then deduct central costs (c£13m). This gives you a good guide to FCF. Divide it by the Mkt Cap and you have the FCF yield. Play around with your own expectations for 2021.

But carefully consider two areas which I think are overplayed on this board, the cash balance and new contracts.

Cash balance £225m
An industrial company needs a product, a factory and a skilled workforce to meet a demand for its product. Those costs are recorded on the balance sheet as non-current assets, essentially the capital required to generate a return.
A construction company is different. It wins a contract to build, goes on site, constructs, then moves to the next contract. It has relatively little need for non-current assets, but it does need cash to cover the working capital required to buy materials and pay workers. There may be staged payments from the customer but typically payment is weighted to the completion of the contract. This is why construction companies with a solid balance sheet (cash) are attractive to customers - a current strength for GFRD.
GFRD has stated that they expect month end cash balances to remain above £100m, and to remain positive on a daily basis. This is a strong position for a construction company but it highlights that the £225m isn't excess cash but the cash required to conduct business. Equate it to the non-current assets of the industrial company.

New contracts
With revenue expected to be c£1,300m, GFRD need c£110m of new contracts per month. I don't know what the reported contract wins add up to, but I should add that there will be many smaller contracts won, which are not reported - until the results update.
GFRD will go after new contracts within the constraints of their balance sheet and the likelihood of achieving a good margin from the contract. Making a loss on a contract is 'one step forward, two steps back'. - not sustainable.

Correction

CNE (and partners) will need to fund FAR’s share

Yes, an interesting move by Far Ltd (15% stake in Sangomar). From memory FAR has c$120m invested to-date.

This is their statement:
https://far.live.irmau.com/irm/PDF/c05a8fce-45f9-4c11-8f74-d2494e5ee7c9/SangomarProjectUpdate

Essentially, FAR supports the project but can’t get their share of the funding due to fallout from the pandemic. But as RH says, CNE will need to fund FAR’s share for up to six months. FAR has 6 months to sell their interest, make the payments with interest, or forfeit their interest.

Following media reports on delays in Senegal, Woodside, operator for Sangomar confirmed:
SANGOMAR ON TRACK FOR FIRST OIL IN 2023
https://files.woodside/docs/default-source/media-releases/sangomar-on-track-for-first-oil-in-2023.pdf?sfvrsn=1d39cb28_2

About a year ago I had an interesting discussion here with a well-informed poster on challenges the additional two wells would make on the FPSO infrastructure. As I recall it was based on a view that it would be difficult to accommodate the additional heated water injection required but another option was using specialised ESPs(?) at the well head. Enquest has never made any comment on this issue, then why should they. But it highlights the real-world challenge of adding these two wells into an infrastructure operating in full production mode.

I’d guess those ‘works’ will impact production at some point, assuming it hasn’t already (Feb-Mar?), unless it’s completed during the scheduled maintenance window expected this quarter.

Therapist, I also noted the change in the oil/gas ratio. I see two factors, one, the deliberate reduction in gas injection to reduce costs, and two, a higher oil ratio from the new wells (there has been a decline in the gas ratio over recent months and a small but definite additional decline in April).

On the numbers, Therapist recently posted a link to the detailed data which is typically updated 1st of the month. A day or so later this data is plugged into the OGA dashboard.

https://data-ogauthority.opendata.arcgis.com/pages/production

Companies record daily production numbers, which are reported to the OGA, so the monthly numbers released by the OGA are accurate. The daily data is confidential, as it provides information on the operating performance of the field. The OGA only release this daily data after Cease Of Production (COP). Companies have full control of the daily data. I’ve occasionally seen it published in presentations and as the saying goes, a picture paints a thousand words - quite revealing.
Kraken
The production dip was in March (34,448 gross) from Feb (41,721) and recovered slightly in April (37,409). I record the numbers from chilting’s tanker updates but didn’t detect the wobble in the production number, – I recorded c40K across the 4-month period. (Close enough for my needs) However, ENQ did flag an issue in their commentary. At the turn of the year they were reporting 90% production efficiency. For the period end of April this had dropped to 80%. This is implying a facilities issue rather than a field issue, which is confirmed by the OGA dashboard that shows corresponding water injection rates.
Considering the early issues with the production facilities, Kraken has had a great run since last summer. LTHs might recall that a scheduled 3-week maintenance period last summer was cancelled following unscheduled repairs to problematic pipework, so I guess other planned activities were put off. These ‘items’ can only be put off for so long so perhaps the Kraken FPSO is limping into this summer’s maintenance period which is scheduled for this quarter. Chilting reported a postponement of the current Scapa transfer, which suggests an unexpected hic-up. The shuttle tanker will have been booked for an order, typically 500Kbbls, and I guess would not hook up until those volumes are aboard the FPSO.
Throughout, ENQ has reported good Kraken field performance.
Magnus
As Therapist posted, the Magnus April oil production number (19,137 bopd) is a record under Enquest’s operatorship. This is c6Kbopd higher than the Feb and Mar numbers. We know that the two replacement wells came online late Mar, so this increase will reflect those wells including an element of surge. ENQ has reported problems with the gas compressor, which I know had not been repaired before end April, but they also said there had been some improvement in production efficacy. Extrapolating, I take this to mean that some of the 6K improvement is due to recovery in the ‘old’ wells. I saw a tender from ENQ for a compressor overhaul. Once this is sorted and the 2nd water tower comes online it bodes well for production numbers later in the year.

Squif, thanks for clarification.

Hi Squif, an interesting comparison but I'm not sure I follow your logic or the point you are making.

You say, 'That means that at $43 Enquest is as profitable now as it was at $50 last year'

Do you mean that the cash free break even point this year is $7 lower than last year?

I don't know what numbers you're using but two differences from last year come to mind.
CapEx this year is expected to be $117.5m lower than 2019, which equates to $5.5 (based on 60Kboeps production.
PIK payments, i.e. a reduction in interest of $68m equates to $3. Combined this accounts for $8.5.

I guess I'm missing something related to your definition of 'corresponding figures'.

Appreciate clarification.

RS2002, thanks for your references, but I don't think terms from 2018 address the current position. Cineworld never anticipated a full closure across the chain.

HeresHopin's comment looks right and supports my view that memberships will be suspended in states until they open. Therefore, there is no additional revenue from closed states. That said, without knowing what those memberships amount to ($$) we're probably splitting hairs. But I'm guessing you could figure that out ;-)

RS2002, a good breakdown (assuming your source is valid), and 80% is a decent level of opening. However, how the CV plays out in the US over the coming weeks will be key.

But you say, "California, Texas and Arizona also part of the Unlimited card membership scheme, they will still bring in revenue whilst their cinemas remain closed." Memberships have been suspended while the cinemas have been closed. I doubt that memberships in those 3 states will be restarted until they reopen. Or do you have information that suggests otherwise?

Today, £400K placing @ 0.08p, plus 500m warrants @ 0.15p.
The net proceeds raised from the Placing will be used towards the drilling of the Falcon well at the Champion Project in Texas.

May 2019 £750K placing @ 0.3p.
The major proposed use of proceeds for the Fundraising will be to fund Mosman's share of drilling costs for the proposed drilling of the Champion Project, containing the Falcon prospect ("Falcon") and the Galaxie prospect ("Galaxie").

One year on, neither well has been drilled, and today MSMN is only targeting the Falcon well.

The Mosman story continues and I now follow from a distance.

I’ve been following this company since Feb 2016, when I was asked for an opinion on an investment here. The investor had put in a substantial sum and was well down – I never had the precise figures – but the MSMN price at the time was 0.8p. I said, the price could easily double from here (it did) but that ultimately the MNMS would be bust within two years (it isn’t). Last I heard he was still invested, now 90% down from Feb 2016. He couldn’t accept his initial lose, and I’d guess isn’t feeling much happier about it 3.5 years on. When, in 2018, I noticed MSMN was still in business I took another look and saw that they had moved into the US oil sector. I enjoyed following their progress and with the connection to Baja was tempted to put ‘skin in the game’ – I was out 18 months later with a large loss on a tiny investment.

Over the years I’ve followed and contributed to this BB. In 2014 the MSMN SP rose from 7p to 40p. I’d guess some posters here are from that time, others have joined along the way to 0.08p today – I note a low of 0.03p. I recognise the long-term contributors with various degrees of positivity and negativity. I can understand the positive spin – why else would you be invested - but wonder about the negative stuff. If as I did, you have revised your investment decision, why beef about it on a BB? If you don’t believe in the investment, then sell. The lowest of the low will seek out a placing to ‘poke the pig’ when it’s down and probably hadn’t heard of MSMN till the 7am RNS. These BBs attract all sorts.

Why am I posting? I hope my stance is neutral. There could be a good trade here – I guess someone bought in @ 0.03p – but I’m aware that recent circumstances have attracted a lot of new punters. I would urge them to consider carefully any views they may have on MSMN as an investment. Many posters here will make a good case, but IMO it is hinged on a speculative outcome in OZ (hence the warrants) rather than more US investment. If you’re here as a trade fine but I suggest you treat it as a slots machine.