Member Info for londoner7

Hi L3, thanks for the link. I now see the detail you're referring too, but I think your assessment needs refinement.

A lot can happen in the 3 years between the award of the PSP (LTIPS) and their determination, so adjustments are made to the qualifying number. Take for example the 2016 awards which vested this year. An adjustment was made to the production number because of the acquisition of the Magnus assets.

Similarly, next year an adjustment will be made to the 2017 awards net debt number for the beneficial impact of the $130m raised in the rights issue. I suspect there may be other adjusments around the nature of the Magnus acquisition but the calculation is above my pay grade.

In my previous post I pointed to the 2018 annual awards. I agree with your comment about managements ability to play around with 'trade and payables', but only to point. In the longer term working capital has to normalise - you can't continually acrue a $50m working capital gain every year unless there is a real change in the business. In 2018 (before my time here) it sounds like their was a $50m WC benefit (was it just the delayed CapEx?). In spite of taking the benefit of this management still missed their bonus award by $9m.

I'd guess that the 2019 the annual bonus again has a 15% threshold target on net debt. The question is, does this apply before or after the WC unwinding refered to in the AGM update, "the anticipated unwind of the c.$50 million favourable working capital position at the end of 2018".

Based on this the target net debt for the 2019 annual bonus could be either $1,508m or 1,550m.

Management can target various internal measures to achieve net debt targets but that may be at the detriment of other targets such as net production numbers.

Hi L3, an interesting observation - right up my street!

But your dates looked odd and prompted me to look at the report. On pg68-69 the 2018 annual bonus on net debt shows a threshold of $1,765m on net debt. The outcome was $1,774m so the threshold wasn't achieved and no bonus for net debt targets was awarded for 2018.

Which page has the debt target numbers for 2019?

You can't trust that characters left field. This is the ending to my previous post.

A nice Texan buy to let if you don't have the corporate overhead.

Sweatysock, you make a characteristically reasonable response to my previous post. But I think that some of the posters here are looking for new and possibly ill informed investors to bail out their position. They have been since MSMN was a penny and some perhaps from 5p, 20p or even 40p. Sermonising on the strengths of Mosman all the way down to here 0.23p bid - is that a new low? If it isn't it's very close.

What struck me yesterday about the <£1K of trading was that while it included a couple of new buyers or perhaps an average down, in the hope of a Santos pop - good luck to them - one trade stood out. It looked to me like a 26,738 sell for a return of £61.76. I can only speculate, but that investor may have been one that bought into MSMN 5 years ago on the Oz prospects at say 20p with a £5K investment. They may have seen an early loss and been unwilling to accept the loss, holding in hope of a turnaround. Yesterday they called it a day. Perhaps over concerns about the Oz licence, or perhaps deciding to take the missus out for a meal, draw a red line under Mosman, and banish Mosman from their memory. Pure speculation on my part but feasible. I've never been in that position, but if I was I'd probably hold now till news of Santos and sell on a pop - at worst he'll get £40 if Santos fails. I know a place near me that does a decent meal for £20 a head. But in this scenario he's seen 100% pops several times over the years so why would he take the next one!

This board has good posters, reasonable posters and the rest - like most boards. But there is very little comment on numbers or dodgy messaging.

I'll take one example, the sale of Strawn. It's been described as 'loss making' and another poster claimed Mosman had made a profit, saying it had been bought for $50K.

In April 2017, by Texan terms, Strawn was the equivalent of a run down buy to let in a down at heel market. Mosman bought a 50% stake on a $150K purchase price, plus a $30K transaction cost. A net cost to Mosman of $90K. This is how it was sold to investors: 27 wells, 6 currently producing, field had produced at 600bopd, current sellers reported 30bopd in 2016 on this and other assets. Note, other assets. No mention of what Strawn had produced in 2016.

July 2017 update - 11 wells producing. Last two days 11-15 bopd gross.

Nov 2017 update - a 2nd phase of workovers was required, but this marked the production high point with 6.6bopd net to Mosman. We know that several $100Ks was spent on US operations but this was never split out across assets. I'd guess a significant sum went towards Strawn.

Throughout 2018 Mosman reported that investemnt in Strawn was constrained but it remained profitable at an operational level, i.e. before the corporate overhead.

July 2019 - Stawn stake sold for $75K. Loss making 6 month to Dec 2018 $27 per day (I've worked the numbers for you). That's on 2.3 bopd net (cash flow $100/day). In Q1 4.5 bopd cash flow is $200/day. Nice Texan bu

On a day when there are less than £1K of trades I don't understand why there is so much whining from posters here.

If the stock is such great value then why aren't you adding to your position?

This is a small cap, off the radar stock, that spends more than it earns. Perhaps that will change, perhaps not, but why do you expect other investors to bale out your positions?

Hi HMNn, I can assure you your model is wrong, as is mine, but IMO it's good discipline to construct them anyway, rather than rely on broker research. Brokers usually put out an end number, say net debt, but not their workings.

I posted my estimates for 2019 and 2020 free cash flow with workings on 13th June 2019. I followed up with a couple of corrections, ending with 2019 FCF $194m and 2020 FCF $381m.

The basis for my calculation was 68Kboep and $65 oil. I didn't change these numbers for 2020 because I had no basis for expecting anything different and I still don't. However, due to an error in my revenue calculations when adjusting for gas my calculations actually assume a production number closer to 70Kboepd. Having spotted the error I decided that on balance I was happy with the higher number and I still am. The monthly numbers will be erratic, as I expect May and June to be, but as another poster queried 'If Enquest forecast 63K-70K or 2019 why should we expect anything different'. It was a good point and I agree with it. From my posts you might note I enjoy following tanker movements etc, but it's just noise and a bit of fun, while giving me confidence that ENQ are closer to the top of their forecast range than the bottom. In making their forecast last Feb I expect the 70K number is based on everything going to plan and Kraken hitting the 30-35K target. At the H1 point I have Kraken on 32K and given no more outages like the one we've just seen, closing out 2019 around 33K. (I know we disagree on these nunbers. We'll just have to wait for updates.) For me a potential upside on Kraken is the upcoming maintenance window. I wonder if they have identified anything to get PE from their near term target of 85% towards 90%. That would help 2020 numbers but would not make much difference to the 2019 number.

I invited comments at the time . While I have learnt more about the detail of Enquest's business since that post I'm not inclined to tinker with the numbers until I see the interims. Nor am I inclined to argue the detail until after my corrections following the interims. But if you see anything dodgy please say so and I'll take it into account. I have other investments, only a small part of my time is spent on Enquest.

However, I can always find time to discuss the monthly production numbers. :-)

On Magnus I said, "assuming they completed in the 3 week period"

I should add that this also assumes it wasn't started before the end of April. The April number was below expectations so it's possible the maintenance did start in April and therefore the May Magnus oil number may be higher than I've stated but not by much, maybe 2-3K.

Hi HMNn, maybe a picture would help.
In the their latest annual report Premier Oil has a chart on page 6 showing the daily production numbers for the Catcher FSPO over a 14 month period. Their gross plateau number for the FSPO is 66Kbopd fed by 3 fields, Catcher, Burgman and Varadero. Over the last few months PMO claim that the FSPO has been achieving 99% production efficiency. The 1% loss is represented by the dips below 66K. Over the first 4 months of 2019 the OAG has reported average oil production at 65,359bopd, which is 99% of 66K so supports PMO claims. Note the zero flat spot end Q3 2018. I suspect that represents a one week maintenance period. (As an aside I believe a similar maintenance period occurred early this month, but I haven't seen reports - PMO don't tend to give notice of these events)

At Kraken the gross plateau production target is 50Kbopd. I believe the Cairn updates were statements that the fields were supporting the plateau target. At the update in March ENQ said that their (near term?) target for FSPO production efficiency is mid 80s up from the low 60s it had been in 2018 (30K/50K=60%). I don't think anyone at ENQ is expecting 99% efficiency. Kraken is a totally different field from Catcher due to heaver oil and the processes required to extract it. There was a 2 month period which began 8th May and ended 7th July when the tanker watchers reported 12 day offloads. There's some disagreement about parcel size. I'm on 500K and going with that leads to 42 bopd and equates to a mid 80s PE for the FSPO. That's my estimate for June production but a problem in early May leads me to 38K. The OAG will report this number later this week.

On Magnus my number yesterday was based on a 2 week shutdown. I don't know why I had 2 weeks in my head but I've since seen a 3 week planned period mentioned. I now think the OAG number this week for Magnus will be around 6Kbopd (10-11Kbopd down from April), assuming they completed in the 3 week period. The OAG gas number is less meaningful because of the gas fuel element but I think there is an additional 3Kboepd loss in May from ENQ reported numbers for April.

HMHn, I asked, "What's the other $100m?"

On reflection I'm guessing the FSPO lease.

Thanks chilting. Compared to previous hookups I'd say that was a slick one. The Petroatlantic made good speed up the North Sea and with only a few hours of close maneuvering I'd guess the Kraken FSPO was loaded and ready to dump.

Hi HMHn. thanks for your numbers.

In terms of unknows the two key ones are production numbers for May and June. But we have some insight into the two key fields, Kraken (tanker movements) and Magnus (2 week maintenance in May). I don't think your May number takes the Magnus maintenance into account.

For May I have halved the April Magnus number, used my estimate of Kraken, and assumed same again Mar-Apr production for the other fields. None of the other fields had planned maintenance in H1. My May number is 67.1Kboepd, about 8K below your number. The OAG releases May numbers next week so not long to wait for clarification.

I'm only slightly below your June 80K - I assumed Magnus returning to 18Kbopd in June. For H1 I have 71Kbopd.

On H2 I think a same again number will be a challenge but ENQ will hit the top of their range around 70K for the full year, barring more than a couple of Kraken outages similar to this month's. Incidentally, you don't seem to have included the recent outage in your July number. I estimate an 8-9Kbopd hit (net to ENQ) versus the June Kraken production number. The June 80Kboepd (estimate) may be the high for the year. There's upside from an improvement in PE following Kraken maintenance, Q4 wells at Magnus and the new SC pipework, but I'm not counting those chickens yet!

On oil price you average $67.7. I eyeballed a 6 month chart and estimate $67 so no quibble on that. But on revenue you have simply multiplied the production number by the oil price. It's more complicated than that. Some of the production is gas, which sells at a lower boe price, and there is a shrinkage component. Combined, I estimate the 2018H1 impact at 6%. If I apply all these factors I come to an H1 revenue number of $811m, but I can see this year's greater gas contribution for Magnus knocking up to $20 of this number. This is roughly $90m below your revenue number. My revenue number represents all factors except hedging.

Your Opex/Capex number for the full year is $975m. ENQ guided $600m Opex and $275m Capex. What's the other $100m?

There are a number of expenditures which will reduce FCF. You've reduced these to two headings, which may be fine, but I'd just point out that with debt being paid down I'd expect interest payments to be weighted to H1.

I don't have a FCF forecast for H1 because of the timing of expenditures so my focus will be on a combination of cash from ops, net debt, CapEx (spent and planned) and working capital movements.

Best, londoner7

Staying on thread if not on header subject.

I want it all! I want growth related CapEx, dividends and reduction in debt. If I didn't think I'd get it in the medium term I wouldn't be invested here...….. assuming sustaining oil price and operational success.

I fully agree with Moffa's comment on CapEx. If ENQ wasn't able to hold CapEx below $200m over the last two years I don't see a change in 2010. Development at Kraken isn't a luxury it's a requirement if peak gross levels are to be maintained at or above 50Kbopd into 2021 - on a 85% PE that's low 40s production.

On debt, the restriction on distributions are put in to satisfy the debt holders. If the RCF is below $500m and the debt ratio below 2 for 4 quarters (hopefully starting with the next interim), why not start distributions. After the last few years AB has managed he wouldn't go ahead with a dividend payment unless he was relaxed about the final RCF payment. Although I can see the RCF being replaced rather than paid off. Remember debt target is 1-2, not zero.

Dividends of $100m? Pelle, I know it's a Friday afternoon but what are your drinking? ;-)

$20m would do me. At current Mkt Cap ($500m) that's a 4% yield.

To put this in perspective consider the recent 'breakdown' at Kraken. I see this as a 9 day outage which will never be recovered - the only upside is a 2P number 0.1% higher at the end of the year. I don't think the market will attach much value the that. But it's a cashflow loss of 500K*(9/12)*70.5%*$60 = $16m. I doubt it will be the last outage against an 85% PE, but my estimates cover it so I'm cool.

My point is this $16m is lost, and if that amount had been paid out as a one off special dividend it would equate to a 3% yield.

I'd hope that AB does consider a $20m dividend late 2020, and I'd be very happy if it then equated to <2% yield.

thorpyuk, I agree with your post up to this point."they were +4% in H1".

Pre-exceptional profits were up +4% in H1, but pre-exceptional earnings (EPS) were down (-14%) due to the higher weighting of shares in issue following the rights issue, and it is pre-exceptional EPS which I expect to be used in determining the final dividend - taking account of a 2x cover, and 23p interim.

Miss on Revenue. Q2 only marginally better than Q1 - 'Our performance in the second quarter was adversely impacted by lower volumes in GB due to a flat construction market, ongoing project delays and competitive trading conditions'

On these revenues I'm surprised they held up margins, which was my biggest concern.

What should we look out for?
Thanks to philanderer on the advfn website for posting a link to a Breedon update (21/7/19) in Investor Magazine

https://ukinvestormagazine.co.uk/lagan-boost-for-breedon/

Peel Hunt forecast ‘up to a fifth’ increase in revenue and underlying pre-tax profit, mainly as a result of Lagan in for the full 6 months (Lagan were in for 10 weeks in 2018 H1), and a better Irish construction market.
20% gains equate to revenue £454m and underlying pre-tax profit £44.9m.

I’d guess these are rough translations for the benefit of an easy read - there is a greater interest charge this year compared to last which should be considered. I estimate >£6.6m against £4.6m last time, an increase of £2m, so the corresponding EBIT number would need to be (44.9+6.6) = £51.5m, up 23% to compensate, which means margins improving from 11.1% to 11.3%. On EPS, applying same again tax (17.3%) and higher weighting of shares in issue (+9.2%) results in an EPS of 2.2p for H1.

Therefore, my summary of the Peel Hunt guidance ‘up to one fifth higher’ is:
Revenue £454m, EBIT £51.5m, margin 11.3% and EPS 2.2p.

Net debt is another interesting metric. Peel Hunt have only given a full year estimate, and rightly so because the interim debt number is heavily influenced by greater H1 working capital variations and the timing of capital spending, but it will still be interesting to compare to last year’s £383m interim debt number (not forgetting the impact of IFRS 16 applying this year).

My end numbers are similar but arrived at differently. Lagan adds significantly to revenue, but the small print in the accounts revealed that the full year impact of acquisitions last year would have reduced EBIT by £1.3m. Last year Breedon escaped the costs of the Lagan cement kiln maintenance and profit impacts due to the different fiscal year in Ireland – a factor I don’t fully understand but exists. I estimate this as a 0.3% headwind on EBIT margin.

In summary, I’m expecting a higher revenue £460m-£470m but would be happy if margins were maintained at 11.1%, for EBIT £51.6 and EPS 2.2p.

For me, the margins number is the most difficult to estimate and the biggest concern/opportunity. I think a key factor in the presentation will be outlook on costs and selling prices. If there isn’t any news on acquisitions, then a question on dividends would be appropriate in Q&A.

chitling, you say, "Petroatlantic only services BP's Foinhaven field, west of Shetland."

I'd guess this is the same Petroatlantic which has just taken an offload from the Lancaster field and has the HUR board understandably excited. But BP are contracted by HUR to manage offloads from Lancaster so your key point on BP's potential involvement in the Sullom Voe STC facility is valid, and ,yes, good news.

I've expressed my doubts here about Sapphira's involvement in #41 offload from Kraken, but I've learnt not to preempt tanker movements. To another poster's point, there are a few tankers drifting around the North Sea, apparently due to delayed hook-ups, so Kraken isn't alone on this score. I suspected the Kraken 'breakdown' occurred at load #40 for reasons I've given previously. Sapphira's timing and potential involvement in #41 contradicted this view, so in a way I'm pleased to see this contradiction is now question. That said, I'd guess she didn't end up drifting around the North Sea to save on mooring charges - so the Jury's out on that one.

Keep up the good work. You're miles ahead of anyone else on these tanker movements.

e121 - Based on discussion here I wrote detailed note to myself of what might be the terms of the Oz loan and if correct it points to a cash flow management benefit that accrues to Enquest. A main element is that I think the DC4 CapEx DOES impact the 15% ring-fence cash flows. We may never learn the facts but I look forward to L3's workings on his $5-$10m repayment forecast.

L3, before we leave it I am interested to see the workings that get you to a $5-$10m repayment on the Oz loan in H1.

Following the earlier comments from e121 and you I think I now have an insight into a repayment structure that might apply, so I'm interested to know if your numbers fit.

e121, you say, 'If Brent does go to $100 due to any unforeseen reason, then this loan could be repaid in just over a couple of years - this was discussed in this year's AGM when I brought up this topic. '

Thanks for the clarification. That's good to know.

This is the wording from the RI doc which prompted my assessment, 'monthly cash sweeps up to pre-agreed monthly amounts.'

Hi L3Trader, in looking at the debt I think your focus on the Oz loan is the right one. The ENQ wording around relative interest rates was odd but bottom line your numbers of up to 9% interest and repayment around $45m pa in interest and capital look right to me. But I don't understand why you think ENQ will come up short on repayment in H1. Perhaps you have more insight into the detail of the monthly cash sweeps than me, but 15% of Kraken cash flows look more than enough. The cash will be there so if the repayment structure doesn't direct it to OZ then it remains with ENQ. Or am I missing something? I suspect the monthly sweeps are limited to ensure that OZ get maximum interest benefit from the 5 year repayment cycle. i.e. I assume ENQ don't have the opportunity to repay earlier if they were willing and able. No doubt Oz are comfortable with the 15% of Kraken as security.

In the round, this OZ facility is one of a number of debt burdens being managed by ENQ. For me the liquidity hurdle in Oct was key but I sense that the current outperformance in the SP may be due to a sense in the market that it will be cleared, and it would take a lot to derail recent progress, be it the oil price or Kraken worries. I too think the Magnus June number is important, but of course many in the market will already know it - perhaps they liked it.

I'm looking forward to the interim update. As you know I have my a cash flow expectation for the year, but I'm not inclined to tinker with it until I have hard facts from the interims. Yours is one of a number of net debt forecasts I've seen but I wouldn't take this number in isolation. There are other numbers which impact the significance of any net debt number such as CapEx spent todate and due in H2, and changes in working capital.