Member Info for londoner7

Hi Therapist, a good summary of the key operational elements. I'll add a few comments on my assessment and view.

Magnus - the two new wells came on stream Q1 so we should see that reflected in the OGA numbers soon. I'm looking for a return to the 18Kbopd levels achieved last year. There weren't any free slots so bear in mind these two wells replace two other wells, presumably the lowest producing wells. Enquest are very quiet on the 2nd water injection facility - there was a plan to have both towers back up in H1. As of Jan water injection rates were back to normal levels achieved last year, with recovery in voidage continuing. Perhaps they've chosen to settle for this.

Kraken - the two new wells are additional but I'm not clear on volumes. My gut says around 3Kbopd extra. However, Kraken is at plateau moving into decline this year (already clear in Kraken North numbers), hence the same again guidance 30K-35Kbopd (gross). Based on an earlier published profile I'd expect a c25% decline next year on the base number, so guidance of 25K-30Kbopd in 2021.

Tanjong Baram - yes, $50m to take off debt, but $37.1m will directed to repayment of the Tanjong Baram loan.

On financials: for me the release of the breakeven cash flow numbers takes away the fun. A question I have in my mind is how these breakeven numbers take account of the $50 form Tanjong Baram, and the $70m interest converted to PIK. One I might direct to IR.

One of the few new items revealed in an annual report is the remuneration section. This can provide useful insight into 2020 guidance. In hindsight the 2019 production target 63-70, which formed a large part of the exec bonus, was not a challenging target when fixed early 2019. Two hubs went down in Oct and Magnus performed well below expectations. The recovery in Kraken performance for mid year was excellent and is continuing, and performance at S/C may be ahead of expectations, but it still seems to me that achieving 68.3Kbopd in spite of these factors suggests 70K for full bonus reward was a low bar to achieve. Extending this into this year leads me to believe that barring hub closures or significant operational failures this years 60K top end should be achieved.

This leads me to another frustration I have with the awards, in that the structure of bonus arrangements basically amounts to a reward for executives doing the job they are already highly paid to do, i.e. showing leadership and competence. I'd have though those skill sets were basic asks for the job. (I don't single Enquest out for this practice, but it still grates on me as a shareholder)

Yes.

Dr T has a habit of timing offloads with his presentations. One is due based on the 20Kbopd production number and the typical c400K offload.

I see Amundsen Spirit is at anchor off Southwold offloading to another tanker. Orkney is expecting her via Lancaster. These schedules can change, and it's a push, but she could be at Lancaster as Dr T gets up to speak on Monday.

Hi e121, no, they didn't mention a 700kbopd drop. And the 700Kbopd difference between 13 and 12.3 is a coincidence with my metric - I don't know what goes into the makeup of that change.

I'm just highlighting that EIA forecast a legacy production drop of 700kbopd over one month (that's my sum adding for the fields in the latest update). This includes the initial surge from recent drilling, so absolutely, it is not a sustainable number. If for arguments sake new drilling was zero then the legacy number has to drop off. Once EIA forecasts take account of the current reality we'll that number decreasing in their forecasts. Currently, those shale fields are producing c9mbopd, so 700kbopd represents an 8% drop, and demonstrates the level of drilling required to maintain current production levels.

My point is that shale production can drop off very quickly in the near term if drilling effectively disappears. The CNBC report points to the level of shock in the industry to recent movements in the oil price. I doubt that current EIA forecasts reflect those changes.

I’ve just seen a report on CNBC which pointed to a dramatic drop in new well activity in the shale basins. No surprise there but with new well activity approaching zero (<20%) the EIA drilling reports (forecasts) provide good clues to the level of the possible drop off in shale oil production.

Most here will be familiar with the legacy production metric – the ‘headwind’ that new drilling meets to maintain production levels.

Across the six main shale fields legacy production is currently c700K bopd over one month. Of course, some drilling will continue, but this shows the scale of the potential drop in production per month. And that doesn’t include any well shut-ins, although these are likely to be modest in comparison.

As oil gets back towards $50 the crews will return but through each cycle more of the kit (rigs and frac) is scrapped. There’s an oil price to maintain production, there’s a higher price for new drilling and an even higher price required to justify building new kit.

hitman1a, you say, 'At the moment in Q2 we aren't at free cash flow, we are making losses'.

We don't know. In the recent Q&A AB indicated that Enquest has used futures to hedge Q2 production. It was a confusing exchange, but that was my take. At the interims we'll know if the pricing was advantageous.

An informed wildebeest that understands the demand, supply and politics of the oil market.

Something to ponder on a sunny day in lockdown.

The forward month contract for WTI rolled over last night. Brent futures roll over month end. There isn't much demand for oil delivered today.

In theory, if you can take physical delivery today and store it for 6 months, while opening the appropriate futures contract, you can make $10 bbl. Of course you need a suitable tanker to store it.

https://www.forbes.com/sites/gauravsharma/2020/03/29/oil-futures-in-record-contango-of-over-10-for-first-time-since-2009/#192fea3b32fd

Trump's Phase One looks encouraging:
'Large venues like theaters and sporting events can operate but only under strict physical distancing. Bars, the White House says, should remain closed.'

convb posted last night
https://www.cnbc.com/2020/04/15/cinemark-offers-a-look-at-movie-going-post-coronavirus.html

It offers a great insight into how Cinemark are looking at routes to reopening and the possible roll out of new releases in July.

Cineworld will be doing something similar. They operate in 10 countries – US 73%, UK & Ireland 15% and ROW 12% - and will have assessed each market in terms of likely policy response to a reopening, timing, and the current and future levels of financial support from both landlords and government.

I would expect each market, perhaps down to US state level, to have its own post crisis operating guidelines, which will have been communicated to individual cinema managers to put in place site specific plans.

In addition, Cineworld will be lobbying local politicians to permit the reopening of cinemas supported by their local operating guidelines – a bit like presenting a business plan to the bank. They will also be communicating with the movie production companies on release dates.

The workers may be on furlough, but I’d expect the managers to be working their socks off.

I still expect to be watching the new James Bond movie in a cinema in Nov, but if there’s a theatre showing of Gladiator before then, I’ll be there!

"Anyone with genuine knowledge to improve on these thoughts/calculations?"

Dr T, CMD, 27th April.

Orangetree, found this in latest results, ' approximately half of the Group’s funeral properties and some of its crematoria are leased.

Most are held as security against the bonds - all but about 70 homes and 6 crematorium.

Hi romaron, I'd seen these charts before, as you say Modestus post, but where did you get the April 2015 date?

Much has happened in shale and deepwater since then so I wouldn't draw too many conclusions. Useful, but.

I question it's relevance to today's situation wrt Enquest. The issue isn't the development of projects, although that interests me in other oil opportunities, but the viability of existing production in the current oil price environment. The break even price for the development of Kraken or Magnus is history and already reflected in the ENQ share price.

There's an interesting piece in today's Times (you may have seen it) on the impact of current events on North Sea operations and development. It highlights the situation we have seen with Enquest. Production will continue while there's positive free cash flow at the operating level , and indeed a period of negative free cash flow will be allowed over a short term, due to the costs of stopping and restarting a field, but a field stoppage may be terminal in the current price environment. As we've seen with Thistle/Deveron and Heather/Broom. The upside for the longer term improvement in the oil price is dependant on similar responses taken across the industry rather than any political (OPEC/US) fixes which can only be temporary in nature. The timing of CV doesn't help but the OPEC cutbacks of recent years were already unravelling.

I think the chart showing 'shut in prices for existing wells' is more relevant but that is dated 2017 so I'm not sure how much can be read into the absolute numbers.

I was very surprised by the additional reduction in costs Enquest announced recently (subject to achieving certain objectives) while maintaining the previously reported production number for 2020, but it left me wondering where do these saving come from compared to the cutback announced only a month earlier. Perhaps they are now factoring in areas of government support. In the update, both GKA and The Dons still had AB's support, although Dons is the more marginal - one to watch - both would support future growth prospects in a $60 plus environment.

Your comment on EV and alternative energy reminded me of an article I read recently which describes a new world, post CV, when certain countries, forced by the harsh economic reality, will be putting their workforce back into drilling and digging for energy, rather than buying solar panels from China.

There's an interesting piece in today's Times on the impact of current events on North Sea projects. In particular I noted the recent delay to the Cambo FID which was due this year. Reviewing the numbers it made me wonder about the Senegal development which has already had the starting gun fired on the FID.

Cairn provide a high level of detail of projected costs but I wanted to compare the high level numbers between Cambo and Senegal. Both developments have a 'phase1' component and it's that element I want to consider.

Cambo is reported at a development cost of $2.56B with 90m bbls of oil, which is $28 per bbl.
Senegal numbers are $4.1B and 230 bbls of oil, which is $18 per bbl.

I don't know how the $18 number aligns with the $41 break even cost Cairn has projected but the comparison I'm looking at is with the headline Cambo number to gauge the viability of the Sengal FID decision in light of current events and the hurdle of expanding RCF finance.

For a moment I thought about raising a query with Investor Relations but then thought better of it. Of course the Senegal project is going ahead (which is what IR will tell me), until it isn't, which will be reported in an RNS or leak to the market.

Therefore, the takeaway from the Cambo news is that Senegal appears a better prospect and at the moment has a decent prospect of continuing. To repeat my previous post here that's the basis of my investment in CNE - Senegal first oil in 2023 when, hopefully, the current issues are behind us.

The key warnings from Dignity are that operating costs are higher due to some operating staff being unable to work, with some branches closed and the fact that the current rise in the number of deaths due to CV will result in a lower overall number of deaths in future years.

From an investors viewpoint this isn’t good news in the longer term. The question is, to what extent current cash flows might compensate for lower future cash flows – if at all.

Most of Dignity costs are fixed (from memory c70%). Many services are not available – limos, memorials etc., so I’d guess that funeral margins are significantly impacted and crematorium margins are largely intact, based on normal volumes.

Today’s ONS data release to 3rd April is the first that gives some insight into the total number of deaths because of the CV crisis.

I won’t bore you with the detail but it’s my estimate that the total number of deaths is 2.13 x the daily CV reports. Apply that to current numbers suggests a peak weekly number of 21K-22K. Assuming this is the plateau then something over 20K can be expected through April into May. To put this in context the sector deals with 14K-15K during a peak flu season.
The interims will be an interesting read but there are too many moving parts, and unknowns, for me to assess and make an investment decision. I’d guess the hedge funds have better spreadsheets.

*In posting these comments I don’t mean to belittle the tragic consequences of the CV crisis. I’m assessing the investment case which surly is the purpose of these boards. But of course, the board also attract those with a beef that predates CV and others who will claim ‘sensitivity’ which makes me wonder what they are doing on this board it the first place.

Stay safe!

doubleup, you've confirmed that you were referring to the P&L account, so my post holds.

Any investor should take time out to understand all the key element of the accounts, P&L, assets and cash flow, otherwise you are investing blind.

Traders should understand charts and many pick a specialisation, RSI, support levels etc.

Others only follow BBs which is fine if you're playing with 'pin money'.

doubleup, you say, 'Biggest problem here is the debt payment, company had £150 mill in cash in December, their debt payments are £50mill per month,'

I'm guessing you have based your comment on debt payments on the $568m finance charge in the P&L for 2019. Please correct me if I'm wrong.

If so, you are looking at the wrong numbers.

This finance charge includes the interest element ($304m) of 'lease liabilities'. Rent to you and me but accounted for over the length of the contract.

The bank loan interest was $167m in 2019, or $14m per month.

As stated in a recent RNS Cineworld are in negotiations with landlords on the rent. We'll have some insight into their success or otherwise at the interims.

Regardless of how things will play out over the coming months I’m confident I’ll be watching the new James Bond movie in a cinema this November.

That is certainly Mooky’s expectation, so how might he achieve his wish?

A see three key factors:
• Financial support through to re-opening
• The impact of restrictions on normal operations and revenues on opening
• The outcome of the Cineplex deal

Financial support – Beyond the government payments to support the furlough of employees I don’t know the detail of other support packages. But my reading of today’s additional support from the Fed sounds like it fills many gaps and Powell’s comments suggest he wants to support all the viable business’ going into this crisis through to the other end.

Impact on opening – I doubt that when the cinemas re-open they will have normal operation. I’d guess there will be changes to seating. There are several options: alternate rows closed and empty seats between families or booking groups, etc. No full houses, but during my 4-5 visits per year, usually on a weekday evening, I’ve rarely experienced more than a 20% house anyway. The question is, to what extent will the customers who fill the house on the Friday and Saturday showings be willing to accept delays to their cinematic experience. Those most exposed to the more damaging symptoms of the virus will not be rushing back to the cinema, but they don’t represent a significant % of the cinema going public. During the first few months after opening, revenues will be impacted, cash flows will be reduced, but then the share price is currently sitting at about 35% its pre-crisis level.

Cineplex deal – no doubt this is a focus of the serious players here (I mean in the stock not this board). I think this link covers the various views https://www.cantechletter.com/2020/04/cineplex-sale-is-on-shaky-ground-sources-say/
I’d add that Mooky is unlikely to walk away but would return looking for a better deal. My take on the Canadian regulator factor is that Cineworld wouldn’t get the go ahead if the regulator didn’t think the business couldn’t financially support the Cineplex operation.

I’ve seen the J.B. trailers online and now looking forward to the full theatre experience. It will happen!

On the 3rd Jan with oil at $68.6 I posted the following comment, “If Enquest want to report any hedging for 2020 now would be a good time to act. Let’s not be too greedy on price.”

Pelle responded, “Agree L7
Hedge 3-4 months 50% now.
If oil goes up to 80 in 1 month, continue hedge further
If oil goes down , we atleast got some hedge good on these levels”

Another poster responded, “Approaching $70, but Iran will plan some sort of revenge ( as they have said already )..
So I would avoid hedging today, and wait for the response , given the US have told their citizens to leave. Apart from the risk of kidnappings, and murder../ ransoms.. the market will panic much more next week.. Brent $75.. and then layer on some hedging for 1H. I would expect $80 if they block the sea routes for a month or 2 until the US blow them out of the water.”

We don’t know the timing but Enquest subsequently reported, “EnQuest has hedged c.2.9 MMbbls of oil in the first quarter with an average floor price of c.$65/bbl. Also, in accordance with the Oz Management Facility agreement, the Group has a further c.1.1 MMbbls hedged across 2020 with an average floor price of c.$52/bbl” That’s pretty much bang on 50% of Q1 oil production – Pelle, I guess they heard you.

I raise this in response to this mornings update from Ithaca on their hedging program, which unless I have misinterpreted (always a possibility) is remarkable against listed North Sea companies. (Some posters will be familiar with Ithaca. It was taken private about 3 years ago. It has publicly listed bonds so still updates the market via RNS. As a listed company -I was a shareholder- it drew criticism on the LSE board for its hedging program at $102, when the oil price subsequently rose to $108. A month of so later the 2014 oil price crash began. It was the hedging program that saw Ithaca come through the next two years better than most.

This morning Ithaca announced:
• Average first quarter 2020 production of ~75,000 boepd leading to strong cash flow generation of approximately $150 million
• 2020 capital expenditure has been cut by 50% to approximately $120 million
• 2020 operating expenditure has been cut and is forecast to reduce unit costs from $17/boe to approximately $15/boe
• 32 MMboe (67% oil) hedged from the start of January 2020 into 2022 at an average price floor of $62/bbl oil and 51p/therm gas

(My comment - Two thirds of the 75K boepd is oil (50K bopd), so the hedging covers 58% of oil production for the next two years, which leads to their final bullet point:)

• Hedging position means over $450 million of free cash flow generation forecast in 2020, even if Brent drops to $1/bbl for the balance of the year.

A private company like Ithaca can manage its finances more conservatively than public listed companies like Enquest, who face share holder criticism if the prospect (real or imagined) of near term $80-$100 oil is lost due to conservative hedging.

"someone wanted it to spread before taking action"

Rumour is (I can't reveal my cabinet source) that incoming flights from China, Iran and Italy were increasing during early March in support of policy 'Herd Immunity'. The policy document was stamped "Cummings - my eyes only!"

A few days later the policy circulation was relaxed to "Cabinet eyes only".

Well we know what happened next.