Member Info for londoner7

Galliford Try topped the Builders’ Conference BCLive contracts league for May 2019

Galliford Try reported 12 new contract awards valued at a combined £369.3m in May 2019. £295m of Galliford Try's new work in May (80%) came from housing and £65m from offices. Its largest new contract is a £125m housing job in Enfield on the Meridian Water scheme.

If habit is true to form I'll point one out on a bounce - if it comes.

I invested here 18 months ago, building up my investment as I tried to understand the company. I sold when I realised I really didn't understand the business or what was likely to drive growth from one year to the next.

As with all of my abandoned forays I watch and learn from a distance. The CEO selling last Feb was interesting but there can be many reasons for a director to sell - not in itself a clear sign of anything. The CEO resigning was more worrying. Today we learn that one of it's customers (ConvaTec) accounting for $30m pa of revenue has terminated a contract. Looking back at the recent finals update there's no mention of ConvaTec.

I prefer my investments less opaque.

romaron, it's an interesting development, but I'm not sure if it does cover Kracken if my interpretation of the following is 'no change'. "The new global limit will not change the limits in SOx Emission Control Areas (ECAS) established by IMO, which since 1 January 2015 has been 0.10% m/m. The ECAs established under MARPOL Annex VI for SOx are: the Baltic Sea area; the North Sea area; the North American area (covering designated coastal areas off the United States and Canada); and the United States Caribbean Sea area (around Puerto Rico and the United States Virgin Islands)."

But back to the fuel I understood from posts here that a gas import pipeline is being considered. Its size is just sufficient to supply the required fuel. Does Enquest consider it worthwhile to substitute their more valuable product worth $20m pa? I don't know if IMO 2020 does impact and that's driving the consideration of a pipeline, or it's just good cost control.

More important, the new standard might cause disruption in the refining market. At the moment ships run on the fuel oil close to the end of the refining process. Refiners aren't fully prepared for the switch so the extra demand on the cleaner stuff used by cars may cause a price spike at the pump. A prospect that worries watchers concerned about the standard's impact on consumers (Trump? - we could see an executive order delaying US implementation), but looking attractive to the integrated plays like Shell.

My calculator is humming as I post ;-)

Perhaps, but I think a significant part of that drop was due to a price differential between monthly contracts which switched late Friday and was known to the market.

The OGA numbers are necessary to those monitoring separate field performance and I'm interested in their findings. However, Enquest has already published their production volumes for the first 4 months of the year, which are more up to date than these numbers.

In the first 2 months 67.7K boepd for Jan/Feb and in the first 4 months 69.9K boepd, which makes 72.1 Kboepd for Mar/Apr, an advance not a decline.

Assuming the completed maintenance on Magnus was a 2 week window in May that impacts May/Jun by about 4.5 Kbopd, significant but more than compensated if Kraken manages >90% PE on the 45Kboepd daily flow rate CNE referred to a couple of weeks ago.

Pelle,

Thanks for the info. The first thing that jumped out at me is confirmation that Gas revenues are gross and 3rd party payments for imported gas are listed under 'other cost of production' as I suspected, so my earlier assessment of net gas sales looks about right. I'm using a 10% Gas (incl. NGL), 90% Oil ratio for my Magnus numbers. 3-5% across the portfolio.

On the FPSO lease, looking at the P&L account the FPSO lease payment is included in the Production cost number, separate to the finance costs, which includes interest and a financial lease which is not an operating cost component, for a reported profit of $94m.

This profit is added to the cash flow statement, and through the wonder of accounting is transformed into $794m of cash. To reach a net debt figure the FSPO lease is then added to the some of the financial costs for a total of $320m - for some reason they separate out the capitalised interest charge.

Bottom line, the FSPO lease cost is included in the forecast $600 operating expense, but the lease cost has to be deducted from the cash flow number along with finance costs and capex. On interest charges for the 2019 we know the current liability number but this includes capital repayment so I've a little more work before I can comment on the rest of your numbers.

NSeaOG. I was reflecting on your consideration of the FSPO lease as debt. I can see your point, but it seems to me to be more relevant when comparing one company financial position (or its 2P reserves) with another, although this is captured to a large degree in the Opex cost. An important variable is the oil/gas ratio wrt pricing and Enquest has that in its favour, and also future capital investment to realise those 2P numbers. I think the decom costs are a significant part of any assessment of Enquest. Last year's $50 from BP for the Thistle decom was timely, considering Enquest's position, but BP isn't a charity - I suspect they got a decent deal.

Thanks guys.

sorry 245MMboe 2P reserves. I'm starting to get too confident in my ability to recall Enquest numbers.

epiphany121, I wasn't at the AGM but 1.5 Kboepd for Kraken sounds about right compared to the Magnus field, which at 12 MMscfd is approx. 2Kboepd (Gas). This fuel is a key component of the difference Therapist highlighted between OGA and Enquest production numbers.

In the accounts 6MMboe of the 235MMboe 2P reserves is expected to be used as lease fuel on Kraken and fuel gas on the other fields.

Hi Pelle, I missed your post. Clearly at odds with my latest conclusion, Can you expand on these numbers? Source?

NSeaOG, it may take a call to IR to clarify but I like to try and work through these issues first. It adds to my knowledge base.

Another activity calls so I'll come back to this another time but it's been interesting and this morning's news supports our investment here.

Cheers,

NSeaOG, having looked into this further I'm comfortable that the FPSO lease is included in Opex.

I looked into HUR project costs for their Lancaster EPS. The components are similar. Within a $23 per boe operating cost they include $10 for the provision of the FPSO. They identify an FPSO lease charge for the first full year of operation of $91.3m, similar to the Enquest charge.

In hindsight it's common sense. ENQ and HUR have chosen to lease their FPSO. A larger company like say BHP has the financial clout to purchase the vessel or infrastructure which is why their Opex is typically $10 per boe rather than the low 20s. Pay up front and write it off through depreciation or incur the annual cost in the PL account.

I know that new accounting rules have changed the balance sheet accounting of this type of lease but I think including it as a debt obligation is too conservative. If the FSPO sank then obviously we'd loose the revenue to cover contracted payments but there will be a contingency for this such as insurance. Such an event would be a whack to the share price but not $700m.

NSeaOG, thanks for the clarification and heads up on this component. I'm still pulling together these charges on cash flow.

I note the current liability for the FPSO lease is $93.2. On net 2019 forecast Kraken production it amounts to a little over $11 boe. Enquest guided $600m Opex or $24.7 / boe (assuming mid case forecast prod).

In your estimation is this year's $93.2m lease charge included in the $600m Opex. I feel it should be but I wonder - it's too significant to ignore.

NSeaOG, you say, "Implies $3.5bn EV or ~54p per share (using est. YE net debt). That's the valuation math."

I wonder if you've understated your implied valuation.

$3.5B EV minus $1.8B (2018 Y/E debt) leaves $1.7B for market cap.

Current market cap is $450m. (1700/450) * 20p = 75p.

Hi Muktass, my understanding of the GFRD response is that the remaining construction business would need to be re-capitalised. As shareholders we can chose to participate or not. Either way our liability doesn't fall below 0p.

No doubt GFRD is in play, but also important is that the new CEO has the spotlight on him and will be expected to earn his large salary and bonus. I remember him laughing in a trading update web cast at the market response to the Rights Issue - I doubt he is feeling so comfortable now.

initiates coverage of HUR with a 100p target

I agree with NSeaOG's valuation method, although I haven't looked at the detail, here's another route to a similar valuation.

As maxandmonty pointed out my summary table of comparable assets included Ithaca and Chevron combined. Rather than extract the Chevron data I felt it might be more helpful to stick with those combined numbers as they are comparable to Enquest, although I prefer Enquest (more later) but add the cost of the Ithaca assets to compare with Enquest's enterprise value.

Going through the Ithaca news site there have only been a couple of relatively small corporate events since Delek's $1.24B acquisition of Ithaca in Feb 2017 - Wytch disinvestment $53m and Dyas acquisition $250m - for a total consideration of $1.44B. I appreciate that the Ithaca assets have not performed as well as Delek hoped and ex-Ithaca investors expected, but oil was then priced at $55. Being I think conservative in adding $1B to today's acquisition leads to a $3B valuation of the combined Ithaca and Chevron assets.

Now to the after cost cash flows on production (I'll spare you my workings)

At Oil $70 and Gas $36 (I used this price in an earlier post)
New Ithaca $1.150B and Enquest $1.157B - similar

At Oil $70 and Gas $30 (my estimate of current price @ 41p therm)
New Ithaca $1,08 and Enquest $1.150B - Enquest $70m higher

And rememebr that Enquest's 2P and 2C numbers are higher.

This underprices Enquest by $1B if one ignores Enquest's riskier profile, which one can't. But it shows the potentail valuation as that risk diminishes and IMO as importantly the increase in the equity component as the debt component falls.

and the purchased Chevron production is 60K boepd but we don't know the liquids content, or production costs. However, it adds to the relative value of Enquest.

maxandmonty, by golly you're right.

Ithaca have overpaid - even better!

"Enquest EV is closer to $3b"

That would make Enquest a less attractive option.

My enterprise value is Market Cap + Net debt = $443m + $1,774m = $2.2B

I'm sure Ithaca is well known to some investors here. They have an interest in some Enquest operated fields, it's the Chevron valuation that interests me.

Purchase costs $2B - Enquest enterprise value $2.2B
80K boepd (60% liquids) - Enquest 70K boepd (3-5% liquids)
2P reserves 225 MMboe - Enquest 245 MMboe
2C resource 45 MMboe - Enquest 198 MMboe
Op costs $17 boe - Enquest $23 boe

Swings and roundabouts but I prefer Enquests much higher oil ratio and resources.

The key for Enquest holders is turning the 20% equity component of the enterprise value into a much higher number through debt and interest reductions.