Member Info for londoner7

heardy, you can't compare the two prices. They are totally different instruments, The only thing they have in common is market sentiment towards ENQ.

As share holders our return in 2022 is somewhere between a 'slap in the face' and HUGE dividends. If we get a slap in the face so too do the bond holders - they don't get repaid. If ENQ is still solvent in 2022 the bond holders get a 16% pa return. Our future is less certain. Enjoy the ride!

Pelle, current price is 80p. Repayment price is 100p. Over the remaining 2.5 years on the bond that's worth 9% pa. Add on 7% pa interest and you get to 16%.

However, I don't see how a credit rating helps EQU wrt to the retail bonds. It would help the bond holders in that the current holders would see the price go up, but ENQ are still paying the fixed 7% coupon (9% on PIK), unless I'm missing something.

wellwell, I take your point about variations due to ballast etc. Particularly, 'What it’s at entering port may be for transit efficiency or to avoid grounding on any raised/shallow seabed.'

After posting the same considerations occurred to me. There is also an inconsistency with an earlier offload. I guess I was keen to see a match between my data and that reported as 'facts' by others - after all I'm invested here and like to see the higher numbers.

To date I've been using draught calculations as confirmation of my expectations of parcel size on a different investment. These have fitted verified numbers and I believe it's because these are relatively full loads, when ballast is unlikely to be a factor. The first offload from Lancaster was confirmed at 'around 350K', a relatively light load and ballast may be confusing my data in this instance.

On offloads #2 and #3 I'm back to awaiting OAG or HUR confirmation. But at the end of the day this exercise is just a bit of fun.

Amaja, thanks very much for the draught numbers. You've raised something I hadn't appreciated, that is the significant difference between aft and forward draught in an unloaded state. On AIS the draught is entered manually and of course it makes sense to enter the 'max' draught number. If I now use the mean unloaded draught in my figures I get 457K bbls. Close enough to your 470K number to relieve any doubts I had.

Best, Londonder7

F22, jeez, I can't believe you're dragging my maths into this argument.

Tough crowd in today!

;-)

A hook up by 7am Fri 23rd would be 12 days.

Just on this produced water idea. The shuttle tankers have multiple tanks for cargo and their own slop tanks of approx. 15K bbls capacity so I don't understand why a tanker couldn't offload slops on the same visit as a oil offload.

Does anyone have any real world experience on these matters rather that this poster's speculation?

Not to soon at all. I'd lost track of time. But the Catcher field is also due an offload.

F22, you might have called it right.

The timing/ numbers do support the possibility of a produced water offload from the slop tanks.

If we go with 1,050,000 bbls offload to date. One well at 50% duty of 8% cut would produce approx. 42K bbls of produced water. The capacity of the slops is 48K bbls.

The FSPO has facilities to treat up 20K bbls of water per day, but perhaps it wasn't considered worth running this equipment for <1K bbls per day and a shuttle tanker is a more cost effective solution. Or perhaps there are environmental restrictions. Either way this looks like the worst case scenario and I don't think it's significant.

A 'due diligence test' is not routine. Petroatlantic, offload #2, didn't require it.

It's a shuttle tanker, so my first assumption is that she's there to offload oil. Then I'd review what we know as facts about previous offloads.

She's due at 10am (UTC+1).

Hi romaron, no offence taken. If I thought you were being offensive I wouldn't trouble myself with replying.

Of course you're right about black swan events, but IMO many events fall into that category in terms of consequences. The outcome of Brexit. The impact of shale oil and geopolitical tensions on the oil price. But if the smart guys at the 'squid' are predicting $20 oil one day and $200 oil a short time later with neither level being achieved, what chance do I have on predicting outcomes. I don't fuss with such things. Since my last post I've walked around a large and beautiful loch next to my home (2.3 miles) and snatched a pint in my local. The sun still sets late in these parts. Oh dear, did I miss our PM's latest utterances on Brexit.

I limit myself to dealing with the outcomes.

Entrails! The figures are refreshed every month with data from the OAG and you may not be a believer but the tanker watchers keep me updated with hot off the press Kraken numbers - no, it isn't a black art to calculate them. That said, I've no doubt that all the latest production data including the keenly awaited Magnus June number are already in the market - no calculations required. Contacts, dear boy, contacts.

Hi romaron, I like to think that in attempting to analysis Enquest's finances I'm doing something more beneficial to my investment decision than polishing the handrail of the Titanic.

IR is a good source of information. I've approached them several times and always got a reply, but as I learnt with the query on Opex one has to be careful in interpreting the response. In hindsight I would have asked the question differently, but with the help of a couple of posters here I believe I've reached the right conclusion. But as you say IR aren't inclined to address commercially sensitive information. The trouble is that's the useful stuff - I had a recent reply to a query which was a polite no! I reviewed my question and in similar circumstance will present it differently in the future. Live and learn!

However the point to this query and analysis is to make good investment decisions. For several years I've steered clear of debt laden North Sea oil producers but earlier this year I took a closer look at Kraken following Cairn's write down of their interest. Indirectly this put a value on the Kraken asset which prompted me to look at Enquest. Given a following wind wrt oil price I see value here. The problems with Kraken added to the attraction because I felt they are fixable, but I see the upcoming maintenance window as key to raising the PE above 85%. That said, plateau production is short and I expect capex in 2020 to add the Western Flank with production by 2020/21. I trust that the 2018 accounts are true but in the absence of guidance from Enquest I need to estimate the numbers for 2020 and 2021 - that's roughly my investment window. A few months back I made a stab at 2019 cash flows. At the time I posted them I said they would have errors but I like to put a stake in the ground and build on it. I've learnt a lot since - today I've learnt that I can remove a $56m cash expense I had in for a finance lease. When the interims are presented on 5th Sept I like to think I will have a very good understanding of them and will react accordingly. In the meantime I've set myself an exercise in assessing the near to medium term benefits of the Magnus transaction - AB sees value in it so hopefully I will too, but I don't take it as a given. I've still a more handrail polishing ahead of me. ;-)

Hi Squif, I think that splitting out the interest and principle elements of the lease payment is key. With this in mind and looking again at the responses I got from IR I now suspect that in providing Opex guidance of $600m for 2019 Enquest are attempting to provide a simple number for investors to use, which covers all operating costs including an element for the FSPO lease. It may be that we (or at least I) are trying to be too clever in unravelling it. I think we will get clarity on the 5th September and it will be positive for investors.

Just to be clear. When I say, 'At the interims Enquest will introduce IFRS 16. The impact on operating leases will result in an increase of approx. $82m in net debt.'

I mean the impact of IFRS 16 is to add $82m to the net debt number some of us have in mind for the current year.

Just a quick point on the addition of the FSPO lease costs to the guided Opex of $600m.

Expanding on my comment about the split between lease interest payments and lease principle payments it would seem that it is inaccurate to simple add the full cash cost for the lease to the Opex number, because part of the cash payment is also paying down principle on the asset - roughly 50%.

L3, this goes part way to addressing your query on the 'high' average production costs.

Hi L3,
I'll come back to you on the average production costs because I want to look into those in more detail. But on the PIK and FSPO lease costs I've drawn a line under these, in my mind at least.

I'm not an accountant so I'll try and offer my understanding of the finance lease costs in a way that makes sense to me.

Enquest , has entered into a contract with BUMI to lease the Kraken FPSO. There is a yearly cash payment and my understanding is that after several years there will be a terminal cash payment after which Enquest and its partner Cairn will own the asset. This defines the transaction as a financial lease rather than an operating lease. This obligation to make future payments is assessed as a present value liability of $709m (Dec 2018), note it was $798m in Dec 2017. However, accountants assign an interest charge to these obligations and treat the principle and interest as debt. In Dec 2018 this (lease) debt was $946.36m. In Dec 2017 this lease debt was $1,091.18m. The difference is $144.82m. You'll see this number in the cash flow statement listed as 'Repayment of obligations under finance leases'. IR confirmed to me that 'the total lease cash payment in a given year is c$115 m net to EnQuest'. This is reduced by credits due as a result of performance issues. In the accounts this payment to BUMI reduces lease obligations and is split, roughly 50/50 as a repayment of principle and a repayment of interest. The $144.82m is an accounting repayment towards debt, not a cash payment.

To clarify this consider why the IFRS 16 change, which treats operating and financial leases the same, has been introduced. Previously, company A may have purchased its office accommodation incurring a debt to do so. Company B might be contracted to rent office accommodation over several years, but the rent it pays is treated as an operating expense on a year by year basis. There's no debt or obligation associated with further year payments so it appears to be in a better financial position than company A. But that may not be the case. IFRS 16 has been introduced to bring the future rent obligations of company B onto the balance sheet so that it is easier to compare finances between the two companies. The change under IFRS 16 does not change the cash rent that company B pays to its landlord, but it does change the 'rent cost' assigned in the accounts.

At the interims Enquest will introduce IFRS 16. The impact on operating leases will result in an increase of approx. $82m in net debt. Interest and cash movements are not affected.

Amaja, she was given a draught of 11m. Can you verify?

Some points were raised at the weekend that prompted me to contact IR.

Squif is correct in his assessment that total operating costs is the sum of the guided operating costs ($600m) plus the lease costs for the Kraken FSPO. I agree with Squif that the average operating costs per bbl are not clearly presented in publications.

On PIK - whether the threshold (Brent < $65) will be triggered in the current period is in balance, but if it is the PIK is enacted automatically.

I had a discussion with L3 on the FSPO lease interest charge. In cash terms the net cost to Enquest of the FSPO lease is about $100m in 2019, subject to any credits from the FSPO operator as a consequence of performance issues. The $57m (approx) shown under financial costs is an element of this cost reflected in the P&L account. This $57m is not an additional cash cost.

I wish I'd left PIK alone. Now it's bugging me. The period is key and my Sept date is imprecise. I don't know where I came up with this date. A search of the RI document doesn't reveal it. But a more important point is whether Enquest can pay the interest regardless of the threshold, after all I guess it was put in place as an option for Enquest's benefit. Does anyone know?

While looking at the RI document I found this which is also relevant to the retail bond.

' At any time on or after 15 April 2019 but before 15 April 2020, EnQuest may redeem all or part of the High Yield Notes by paying the redemption price equal to 101.750 per cent. of the principal amount of such High Yield Notes, plus accrued and unpaid interest. At any time on or after 15 April 2020, EnQuest may redeem all or part of the High Yield Notes by paying the redemption price equal to 100.000 per cent. of the principal amount of such High Yield Notes, plus accrued and unpaid interest. '

I'd guess this isn't relevant until AB buys Exxon's North Sea assets and renegotiates the RCF ;-)

squif, I've just looked at average prices for the April - Jun 3 month period and come up with $68.3. If prices stay around current levels then your call on the PIK looks the right one for the Mar-Sept 2019 period.