Member Info for londoner7

Hi acchi, I take it you mean my Opex is higher than the $600m. If so I don't think it is. Using my $17 on Magnus and $23 on the rest I come to $550m. Now it might be that Enquest's definition of OpEx is different to mine.

I chose to use 2018 numbers but perhaps Enquest are guiding higher in 2019.

In my first valuation exercise I used guidance numbers at a headline level and came out with a FCF number closer to $300, but to my mind it seemed to be missing some significant components so I made a more detailed assessment. I prefer to take a conservative approach and hope ENQ beat. At the end of the year I'll review it taking account of actual realised prices, Cap Ex and production numbers and make adjustments for 2020 or bin it.

Best, londoner7

Pelle, good spot.

"I see it more like cashflow was 50+50 million first 4 months" I agree.

"May / June looks like around 40k." I hope so, but don't think so. I'm not convinced by the 12 day offload schdule equals 40K+ argument A far as I can tell it didn't apply in April.

Without knowing the CapEx schedule we can't extrapolate the first 4 month numbers. There was a maintenance period on Magus during May - we don't know the impact of that. There are maintenace activities on the other assets in H2.

If my projections are correct and Brent can hold the $60-$70 range then Enquest will be siiting nicely going into 2020. If your slightly higher FCF projection is correct then even better.

ENQ wouldn't normally report production numbers between now and the interims early Sept. We'll see OGA numbers before then, but if things are looking very good or the market is spooked for some reason maybe we'll get something before them

L3, thanks for your comments and highlighting the debt obligations. You point out three, OZ, Mercurial and the RCF.

OZ - I don't know if FCF is the right term here, I need a lot more detail to calculate that, or if operating cash is a more appropriate metric but I'm with e121 in the sense that cash flows from the 15% accrue to ENQ and they are required to make repayments from this, so essentially it is a fixed loan repayment to OZ. I note interest on this loan was capitalised in 2018 so presumably cash flows didn't reach some threshold (anyone?). More to the point, the OZ repayment wasn't shown in the slide graphic on the repayment schedule, so will be an extra outgoing payment this year.

Mecurial - this repayment is shown on the slide under the $25m 'other loans' and accounts for almost the entire amount. As you say this should have been repaid - I believe during April.

RCF - the facility dropped to $680m with a $105m repayment during March and April. A further repayment of $100m is due in Oct. The question you raise is on the headroom for that payment.

Here's my take:
At the start of the year headroom (cash and facilities) was $309m. Mecurial and RCF repayments will be $230m, with a $205m drop in the facility. Using my $194m FCF number I make end of year cash and facilities
309+194-230-205 = $68m, with my estimate of a $36m Oz repayment to come out of this. And the final RCF $100m repayment is due in Oct, so scheduling is something to consider.

We had an update at the end of April. Cash and credit facilities of $231m. Working the numbers, 309 (2018)-105 (RCF reduction)-231 (April)+25 (other loans) = $52m FCF.

This is corroborated by the debt reduction 1774-1725 = $50m, as it should be. Perhaps there are $2m of other loans still due.

The big unknown here is the scheduling of CapEx but I guess this is largely under ENQ's control as they are operators with majority share holding across all assets except Alba.

If FCF comes through at the same rate then in Oct after payement and reduction in RCF cash and credit facilities would be 231+75-100-100= $106m.

No doubt ENQ are focused on the same thing you've (L3) highlighted, but they do have options. Of course, as e121 points out, if the oil price cracks then it's a whole new ball game, but we all understand that.

romaron, your comment on the longer term reminded me of an article I saw a week or so back on a vision Jeff Bezos has for his lunar expeditions. He sees exploitation of the moon as the saviour on mother Earth. His vision is that heavy manufacture would be performed on the moon with the Earth rezoned residential and light industry.

I think its industrial visionaries like Bezos and Musk who will solve the bigger issues.

https://www.businessinsider.com/amazon-ceo-jeff-bezos-colonize-moon-2019-6?r=US&IR=T

Hi Pelle, the one thing I can say about my numbers is that they are wrong.

In translating from page to post I made some typos, e.g. the Magnus oil calc (65-23), should have been (65-17). The sum is correct. In my rush to correct for the gas error I made a silly subtraction error 18-10=8, I put 20??? all I can say is it was late. This morning I realise I hadn't correctly accounted for CapEx in BP's share of profit, which reduces it in 2019 but increases it in 2019. I run the detail past you now in case you see an error.

Magnus Op Cash Flow = $330m, less $100m loan, less $30m vendor loan, less CapEx $32m = $168m. BP share $84m.

These have small impacts, here's where my FCF numbers now stand:

2019 FCF $194m
2020 FCF $381m

The one thing I can say about this lateset revison is that it is wrong. I just don't know where.

My point is that we put this stuff together as part of our valuation exercise, but there are variables (oil price!!!!) and stuff happens. Also, in my case, I'm only looking two years out. Another poster comments on production profiles and CapEx expectations - all important stuff in putting togather a valuation. However, in Enquest's current position if our cash flow projections come close, which of course requires the oil price to hold, then we can expect to have ENQ in a better position going into 2021.

I don't plan to look at these numbers again before the interims unless anyone points out a significant error. The key updates at the interims will be production numbers and realised oil price. I'll also review the larger cost components such as interest and lease payments.

On a more general point, in my experience when I believe an investment looks too good to be true, it bites.

Best, londoner7

Thanks MO, it looks like you've found what I've been looking for - the displacement tables for the ship.

I know that the 12 day cycle is almost meaningless. My view is that these transfers have to be scheduled. If the Kraken facility goes down in the next few days then the next tanker can be scheduled for a later date, but I guess if the facility goes down just as the tanker has left port with a 2-3 day voyage then volumes could be down by 25% by the time it arrives. If the facility comes back up before the offload then perhaps it sits off while 45Kbopd is being added to the tank. This could be highlighted by slow steaming of slow hook ups. I noticed that the SN came up the North Sea towards Kraken at 6-7 knots, but is now doing 12 knots towards Scapa Flow.

I guess another clue is between the shuttle tanker and the tanker in Scapa Flow. They are the same size, so if the US bound tanker takes on extra cargo then the Kraken has come up short.

If the oil to first oil wasn't unloaded by the 'commissioning' tanker then those numbers look good for a tanker before the 11th July.

Another factor, as a earlier poster indicated, is that during the ramp up phase a tanker is brought in sooner rather than later, because production flows are less predictable. The 45% uptime is only a guide. My understanding is that the flow rate isn't sitting at a constant 9Kbopd, rather it is flowing at 20Kbopd when the facility is up, but for commissioning, pigging etc, the facility is down or maybe at 50% if a single line is getting poked, pigged or whatever the term is.

However, I think the strongest reason for thinking there will be a tanker before the 11th is that HUR know what is in the tank and have a good idea what will be added over the next few weeks. The date for CMD was chosen post first oil. I don't think it was a coincidence that the tanker arrived the day before the AGM. I think Dr T is enjoying his moment in the spot light, and why shouldn't he.

As I write this I'm now convinced there will be a tanker before the 11th.

"Think P-E valuation not most important, I am not acountant but guess they could book a FCF debt reduction of 250 million this year but profit only 50 million."

I agree. For an oil production company a large P&L deduction is the 'depletion of oil and gas assets' $437m in 2018 for ENQ. The money spent at the drill bit and on infrastructure is added to the balance sheet, but as the oil and gas reserves are extracted and the life of infrastructure (value) diminishes a portion of that expenditure is added as a cost component at the P&L level which reduces the potential tax paid. Another way of looking at it is that ENQ is not taxed on the capital investment it made in the past, only on the excess returns. As far as cash goes it's only a cash component on the way out of the business.

Hi chilting, how do you get to your 525-550 estimate?

As soon as I posted I saw an error in the gas numbers. My assessment (exhaustive but not complete) is that gas accounts for 9% of total boe. However Magnus has a 20% gas component after netting off for fuel. On Magnus gas this revises the gas revenue to $30m a gain of $18m. Non Magnus gas accounts for a further 1,000 bopd so other revenues is reduced by $10m.

A net change of 2018 FCF of +$20m

Revised numbers:

2019 FCF $200m
2020 FCF $420m

Just my shot at it

Hi Pelle, here are my numbers.

Basis:
Given the additional info in the RI doc I've split out Magnus revenue from total.
Magnus 18Kbopd for year plus 9% gas (17.8K boepd), OpEx $17 boe.
Total production 68K boepd, balance (net Magnus) at OpEx $23
I understand 68K is below some forecasts. I think my 18K Magnus is top end, Kraken 33.8Kbopd would need 40Kbopd from here (tough), a lot of H2 maintenance, and stuff happens, usually bad.
95% production to sales correction factor
Last but not least, realised pricing $65 oil, $36 gas.

Revenues:
Magnus oil (65-23)(18000*365*0.95)=300
Magnus gas (36-17)(1780*365*0.95)=12
Other rev (65-23)(48220*365*0.95)=702 Total operating cash flow $1,014m

Deductions:
91 BP 50%
34 BP 25% vendor loan
30 BP 75% vendor loan
275 CapEx
165 Interest
93 FPSO lease
36 3rd party gas costs
56 Finance lease
50 Working Cap reversal
5 Admin not assigned to Ops
--------------------------------------------------
2019 Free Cash Flow $180m (or $8 boe price margin on $65 oil)

For 2020 I'm assuming same again costs, prices and volumes except increase in Magnus volumes identified in RI doc, and 'flat' $175m CapEx I described earlier (note there is an additional $26m reduction in Magnus below)

2020 changes in cash flows
38 Magnus sales
26 Lower Magnus CapEx
34 No 25% BP vendor loan
100 Lower basic CapEx
-50 Extra payments to BP under 50% deal ($141 versus $91m in 2018)
50 No working capital reversal
22 Lower interest charge
-------------------------------------
2019 increase in free cash flow = $220m, add $180m, total for 2020 $400m. (or $17 boe margin on $65 oil)

Hi Pelle, you've spurred me to get back to it.

It was CapEx for next year that was holding me up. To my mind there was an inconsistency in the CapEx numbers in the finals presentation. Up to and including the 2018 interims ENQ had been guiding a $250m CapEx spend. In the event they spent $220m because of an over run in the DC4 drilling campaign. I make that $30m but during the call I recall a $50m number, but might be getting mixed with the working capital number. The 2019 CapEx number was given as $275m with a ' phasing and deferrals' component which isn't quantified but the graphic indicates $100m. Why $100m and not just the $30m or $50m?

Bottom line I'm going with the $275m for this year and a 'flat' 2020 CapEx of $175m, which is the $275m minus the phasing and deferrals component. I'll use this in my valuations.

I picked her up at 15:30 about a mile from Kraken doing 3.7 Knts, so I'd guess had just left Kraken. 10 mins later she was doing 7.7Knts

arthurchance, thanks for the detailed explanation.

Phew!

Has she sunk? Nothing on the BBC.

Tantalum, leaving the more optimistic views to one side, I think a tanker offload around the 30th Jul would be a disappointment. As I understand your numbers I would question your start date, which I take to be the announcement of first oil on 5th Jun or perhaps more relevant the tanker exit.

There was some debate about whether the tanker was offloading 'cleaning fluid, dregs etc', and I assume a tanker offload was also part of the commission process. Talk from the AGM was that it didn't deliver 'petrodollars' to HUR. That comes with the next tanker offload.

My confusion is what about the 72 hrs of production at 20K worth $3.6m. Who get's that revenue? Was that the payment for taking away cleaning fluid, or is that production still on the FPSO. If so it would bring forward expectations on the next tanker.

The FSPO has a sloptank with a capacity of 48K bbls.

Why? The news is confirmation of a plan outlined last month.

This from 15th May
To the extent that Cineworld consummates the abovementioned Additional Sale & Leaseback Transaction, the Board will actively consider returning future proceeds to shareholders in the form of a special dividend. The Board currently envisages that it will look to balance use of proceeds from both transactions such as approximately half of the combined proceeds will be used to reduce debt and the other half returned by way of a special dividend.

The stock has gone ex-div today, approx. 8p.

The reaction to the sale and leaseback seems neutral. This deal was flagged at the latest update.

chilting, I've just realised that my earlier post misrepresents my observations. At 12:20 I noted that the position hadn't been updated since 8am. The more important time is the observation by Krakenoil at 12:30 that the position had been updated. When I saw Krakenoil's post at 12:45 I noted she was just astern of Kraken. I don't know how closely one can interpret the symbols on the map, but when I looked again at 13:15 the symbols overlapped. This is my first tanker watch but this suggests to me that she was 'in position' closer to 1pm that mid day.

I don't know if the tug is indicative of hook up but my first observation of that in position was at 2pm.

I don't know how important precise timings are to you but I wanted to clarify my earlier post.