Member Info for londoner7

I should start with a caution statement - gkb47, please look away now!

squif, I always enjoy a post with numbers. I query two points in your post.

I agree that the Kraken FSPO cost ($93m) is assessed as a financial lease. However, what is less clear is Enquest's definition of operating costs. I believe that in this case Enquest are including the cost of the FSPO lease within their operating cost of $600m. I can't point to anything that confirms this. It's just my interpretation from reading other company reports where their definition of operating costs include financial leases - HUR being one example. Also, the $600m number points to a cost per barrel of about $24, similar to 2018. An additional $93m would add another $3-4 to cost per barrel. This year sees the addition of more Magnus barrels, which according to the rights document are about $17 cost - below the 2018 average. Kraken should come in with perhaps 10% higher production this year, again taking pressure off the average. While the remaining North Sea fields are in decline, which puts pressure on average costs. Putting it all together I think Enquest are guiding to a similar average cost per barrel this year but will probably come slightly under - we'll know 5th Sept.

I looked at the PIK threshold a while back so I'm going on memory. As you say, this is assessed at a $65 threshold. I believe the end of the current 6 month period is Sept. When I looked at this I felt confident that the PIK would not be triggered because of the relatively high prices early in the 6 month window. I appreciate the recent drop in the price now puts it in balance, but at the moment activation of the PIK for the period to Sept isn't a given. What happens after Sept is another matter.

OAG publish North Sea production numbers for June on 1st Sept.

I noticed it too. Odd!

Hi L3,

I agree CNE is a very different beast from ENQ (I'm in each for different reasons) - PMO less clear, other than debt.

I updated on Chimera. The drill ship is still West Shetlands on another job so Chimera results are some way off. I think a positive or negative result here will move the 'needle' one way or the other. More so than the Norway drills.

Yes, I'll be disappointed if Mexico doesn't deliver something.

This indicates that the only automated AIS status update is speed and direction.

Looks like engine status is a manual entry. Hopefully, we'll get the draught soon.

Status, moored and doing 13Knts. Hope she isn't towing the FPSO off field!

Cebo-456, you say, "Looking at draught now, before or after offload and coming up with production numbers is as useful as believing all the rumours that will appear on this forum towards the end of the month regarding the LC drill. All IMO "

If you mean, not useful at all, then I would disagree with you.

Making an assumption that the shuttle tanker is empty prior to loading, ballast is full prior to loading and ballast is empty on loading a large cargo (>400K bbls), can produce a good guide to oil load taken on if you have a data file for the tanker - dimensions, cargo capacity and ballast capacity being the most important.

I've run these calculations on several fields and it has produced numbers very similar to the published numbers several months later. It may work for Lancaster too - I don't have good data on the Petroatlantic, but will over time if she becomes a regular shuttle. It doesn't give me any great insight or advantage, it's just a bit of fun. Like train spotting, stamp collecting or expressing yourself with the qualification IMO. ;-)

Jiffybag, I'm afraid you're wrong on two counts.

You're scaling the cargo from a zero draught to a max 14.2m. Obviously if there's no cargo in the hold the draught would not be zero.

The draught is a manual input to the AIS data. The vessel isn't going anywhere so draught isn't updated. It has probably been 9.4m since she hooked up to the buoy. See if it's any different tomorrow or next week.

Hi romaron, I have made the point in a recent comment on Magnus that I'm not worried over the longer term, just curious what happened in May. The tone of the comment on Magnus in the last update came across as positive. I had a suspicion that the Magnus number for June would be good and it was in the market. The only issue in light of the May 'news' is whether June is a clean number. I also agree that if there was a serious problem affecting guidance then we'd see an RNS, but as guidance is between 63K-70K and I estimate they are close to the 70K at H1 they have some leeway.

On the macro level and the point gkb47 is making I'm well aware of the greater significance of say $1 on oil against 1Kbopd on production. My expectations investing in Enquest are on $65 average for the year, swinging generally between $60 and $70. If it spikes above or below from time to time, fine. When I decide the average is very different I'll make an investment decision. But I don't follow the macro events governing oil and how they might impact the oil price. That's way above my pay grade, but if others on the board want a crack at it, fine.

My mood is not affected by the daily movements in the price of oil. I have other investments that benefit from a falling oil price. But I do enjoy understanding the detail of my investments. Otherwise I might as well invest in a fund.

In the last sentence I said ' long term', I should have said 'short term'.

It could happen over the long term but that would be very bad news for investors and for BUMI.

L3, this is interesting, 'The lease had moved from linear 0 to 100% to b/w 50 and 100.' There will be a time frame and that's important to how we consider production efficiency. A while back I pointed to a daily chart for production at the Catcher FSPO. I suspect that PE is assessed on a daily basis for the lease. Here are examples:
Day PE Lease charge
1 0 50% FSPO down
2 0 50%
3 0 50%
4 0 0% 72hr breakdown clause cuts in
5 90% 90% Ramped up
6 100% 100% Full FSPO operation
7 50% 50% Single train operation
8 60% 60% Single train operation with best performing wells connected

The point I'm trying to get across is that the FSPO is generally an on and working or failed operation, be it one train or both trains. I don't think say, 20% operation is a likely scenario, in the sense that the FSPO is producing a steady state 20%*50K=10bopd. If it is at the 20% level it's more likely that the FSPO is operational for one day and down for four days.

What is 100%? There'll be an agreement with BUMI on the 'boiler plate capacity' and I'd guess it's around 50Kboepd

In practice we are currently seeing approx. 85% PE with gas flared (2.5% boepd) on a 12 day 500K bbls tanker cycle, which points to a 1.5-2 day off period each cycle. I suspect that this represents a single train off line perhaps for periodic maintenance and pigging, rather than a full FSPO shutdown. On long term single train operation BUMI has an incentive to squeeze every drop out - I saw a gross oil capacity of 80Kboepd so perhaps theoretically a single train can get towards 40 bopd. We know that the FSPO broke down in early July with a tanker cycle of 21 days. This could represent a 9 day FSPO shutdown with a 50% lease payment for 3 days and zero payment for 6 days. @$93m year, $255K / day, that could be a $2m credit, approx. 10% of the lost production value.

I think I've got a bit carried away with this post but the point I'm trying to get across is that I think your concerns about long term 10%, 20% or 30% operation is unfounded.

Pelle, I work off the detach date and time. Assuming the usual 27 hour hookup duration I'd expect a hook up by Thurs 9pm to hit a 12 day tanker cycle.

The OAG has confirmed to me that the production data labelled 15th May is for the full month of May.

I always thought that it was full month data, released not less than 2 months after the last day of the month, but recent comments and the latest Magnus numbers and maintenance timing put it in question.

It also fits my Kraken calculations based on tanker offloads - I couldn't fit it to a mid month tally.

However, it does leave me wondering what happened at Magnus following the completion of maintenance prior to the 23rd May update. For the record, last year ENQ stated Magnus maintenance completion ahead of schedule, which they didn't this year, so I suspect it went over the 3 weeks but perhaps not by much. The effective 8 days of lost nominal production beyond the maintenance period still applies, but this is probably a consequence of a slower restart. The 'successful return to service of the second deaeration tower' may have been a factor. We'll get the June production number before the interims.

I know this level of examination irritates some posters here but the fact is the market already has this information, be it through contacts in ENQ, OAG or other authorities. Eventually I sell all of my investments, whether taking a profit or cutting a loss, and I prefer to do it with up to date information.

At least thanks to the tanker watchers, private investors on this board have an opportunity to be up to date on the Kraken production numbers.

Thanks MO. You anticipated my next question. But I have another.

I have a gap between Navion Oslo leaving on the 2nd July and Amundsen Spirit arriving on the 17th July. I though that was a maintenance window but now wonder if I missed another offload?

There's a reference to FPSO performance issues in Cairn's annual report

'The second amendment agreement provided additional compensation to the joint venture partners for ongoing performance issues with the FPSO and also introduced a zero hire rate effective after 72 hours of a period of shutdown.'

Hi, are there any shuttle tanker watchers here?

I've been watching shuttle tanker movements at various fields, but been offline for a few days. Has anyone noted a tanker offload from Catcher in the last few days?

Hi L3,

Thanks for the clarifications but it still isn't clear to me what the Kraken FSPO lease interest item is. If I back your numbers out I get $628m. This is around the level for FSPO lease provisions on the balance sheet (non current liabilities). I don't understand why this should be an interest item applied to expenses on the OZ loan.

I've also had 2nd thoughts on the $19 / bbl of Opex you ascribe to Kraken. I've seen similar FSPO developments where there is an FSPO payment amounting to approx. $10 / bbl for charter and a further $10 of Opex - I'm thinking Hurricane's Lancaster FSPO. Would Kraken be very different. I suspect the actual Opex cost item may be closer to $10/bbl. This would reduce expenses by about $8m and bring repayment closer to $20m (my number) at the H1 stage.

All will be clearer on 5th Sept but I've enjoyed looking into the numbers.

But you've introduced a new item, credits from BUMI for poor efficiency. I commented on the lost cash due to the Kraken delay earlier this month and I think it was e123 who pointed out that there is a return component - credits from BUMI. I looked into this but couldn't find any detail. Where do you get the 50% efficiency threshold?

Osaka, I rarely respond to personal comment, preferring to stick to the facts, as I see them, about the company. I for one appreciate L3's comment as they prompt me to consider or reassess my position in Enquest. I wish there were more critical posts, but that said I don't see L3 in anything like the same light as you seem to.

This is an open chat . Feel free as I do to ignore a post that I consider doesn't add to my knowledge. Some posters here are long term and find it interesting to understand the detail of the business. Clearly, there are other posters here who are only invested for the short term who may know nothing of Enquest's business and don't particularly care because they are using Enquest as a proxy on a rising oil price. That's fine. But some of these posters seem prone to jump on the slightest negative comment, I'd guess because as they see it, it is having a negative impact on their trade.

Trust me. Nothing said here has any impact on the share price. The market is better informed than you might imagine.

Hi L3, thanks for your workings on the OZ loan.

This discussion started a while ago so I think it's worth a recap. As I recall you claimed that there would be a negligible (my wording) payment towards the OZ loan and I responded why, when 15% of Kraken cash flows would exceed the OZ interest payment. Another poster introduced the term 'net' cash flows, which had me looking at it in a different way, with DC4 capex payments being deducted amongst other expenses. I made this point earlier an commented that this arrangement helped Enquest's management of cash flows. All cash flows accrue to Enquest and this arrangement eases any repayment hurdle, until ultimately it has to be paid off or refinanced after 5 years.

In brief I had come round to understanding your original point. Based on these numbers and the assumptions about the terms of the loan, the Oz loan will be $178m less a $9 repayment at the H1 stage, and that number should be clearly identified in the report. I understand the other point you make that this repayment rate is well short of the rate required to pay off the loan by the end of the 5 year period - from memory I recall you mentioned around $45m pa, which seems about right.

All that said I think it's worth looking at the detail of the expenses, which raises some questions in my mind, but doesn't change the bigger picture.

2019Q4 interest - this confused me but then I wondered if you meant 2018Q4. If you did I'd assumed this was capitalised with the original $175m loan ending 2018 at $178m.

Kraken Opex $19/bbl - In 2018 ENQ stated that their average production costs had dropped because of the Kraken volumes. I assume this means that Kraken Opex is below the average. Your working number is fine but this prompts me to have a closer look.

Is the FSPO lease $100m charge a round up of the the $93m number mentioned for 2018 in the latest report or are you expecting a higher number in 2019?

I don't recognise a $57m Kraken FSPO leasing interest charge. Could you clarify this item?

On lease and capex it seems you've take 15% of Enquests charge, but if these charges apply to Enquest's 70.5% holding then I think a small adjustment of (15%/70.5%) should be made for the Oz share.

My adjustments add and subtract from yours and at a net repayment of $11.9m is in the same ball park as your number.

But I'm interested in the detail you've highlighted because it will play a greater part an assessment of the whole of Enquest cash flows for the year.

Your post was truncated, could you complete your comment on '3-year plan share options tend to change ... '

I know I'm late to the party but my thoughts anyway.

Magnus - The number represents about 2 days production so I'd guess maintenance was (effectively) at least 29 days. I wasn't particularly surprised by this. The plan was for 3 weeks, as I recall the 23rd May update was that it had been 'completed'. I smiled to myself when a poster here suggested it might have been completed ahead of time. If it had been then oil companies invariable say so in the update- ENQ didn't. I did wonder if the maintenance window had impacted the previous production period and we might see a better than expectation in May but the delay killed off any prospect of that. I'm not particularly worried on Magnus from here but I was hoping to see a clean Magnus prod number in June. That might not now be the case. The H1 impact of say an additional 8 days of lost production (oil and gas) on H1 is (23000*8)/181= 1,016 boepd.

Kraken - the May number beat my expectations by 7%. Reviewing the data I see two possible causes for my error or a combination of the two. My parcel size is only 500K, when many posters report higher values and I took the two partial offtakes on load #36 as a single 500K parcel when an extra 86K bbls would account for my error. For June I'm staying on 500K parcel and a resultant 42.4Kbopd. If it's close to 45Kbopd then I'd revise the parcel size higher into H2. I'll leave others to justify their 50Kbopd expectations.

Other UK fields - all my numbers anticipate unchanged Malaysian production but I monitor other UK fields down 1.5Kboepd in May on the average for the first four months. Is it a blip or a trend? Time will tell but it's too late to have a significant impact on H1.

H1 number - I still expect around 80Kboepd for June, assuming Magnus does come in around 18K bopd. leading to an H1 number now just under 70Kboepd mainly because of the Magnus maintenance delay. I still expect H2 to be tougher than H1 because of maintenance windows and general field decline, but hold out for possible upside with better PE on Kraken, extra Magnus wells, and the SC pipework. However the impact from these will be greater in 2020 than 2019 H2.