Member Info for londoner7

To be honest I wasn't impressed by the recent trading update. I know the slate was below comparatives from last year but I felt Cineworld had underperformed against its US competitors. That said, I've also found that quarterly comparisons can be erratic.

Yet, this non-exec has now made his first purchase in over two years. No options, but with his own earned cash.

I think that's positive, but then maybe he's a better non-exec than an investor.

Hi Muktass, you're right to look at the balance sheet but I believe your analysis is wrong.

It's important to distinguish between current assets (liabilities) and non-current assets (liabilities).

Current relates to payables/receivables due in the next 12 months and beyond that time period they are considered non-current.

If current liabilities exceed current assets then there is a potential cash flow problem. The interim report shows net current assets of +£475m. That's good.

Non-current borrowings are £197m, comprising the £100 private placement and £97m from the revolving credit facility you identified. Normally this debt would be classified as current but in this instance GFRD has the ability to roll over say £97m in this instance beyond 12 months, hence its classification as non-current.

The credit facility has several conditions attached to it but for the benefit of the market GFRD issues a single metric - average net debt - to guide the market on progress. As plilpot1001 says, that improved at the half way stage. However, there have since been restructuring costs and writedowns. In the recent update it was in the range £170-£190m, but I understood comments to mean that the H2 change folds other into the new financial year and something closer to mid 200s is on the cards. That's not good. GFRD need to get this metric below £200m. The market fear is another rights issue to shore up the balance sheet. Get through that and the GFRD SP could rerate.

But the core of your message was to suggest that if the bid went ahead GFRD would be left with gross debt(?) minus £100m. It isn't as simple as that.

The accounts are for the consolidated business, e.g. Linden, Partnerships and Construction (perhaps one more). Each is managed as a separate unit and has its own accounts. When Bovis say they viewed high level financials I take that to mean the accounts for each individual business - each will carry its own level of assets and liabilities. They will have made their offer based on those. They would not have had access to more detailed say, project level numbers as these would have been deemed too commercially sensitive to release to a competitor until the bid had been accepted.

Hi Pelle, my handle is out of date. I moved to Scotland two years ago and I've no plans to return south in the near term - I'm enjoying life here.

You don't need me to tell you that ENQ cash flows are highly geared to the oil price, so sentiment in that area will have a big impact on day to day movements. I don't expect that volatility to go away, but as long as an average level for oil around $65 is maintained I'd now expect an upward trend over time.

If the market is pointing to a price point very different from my own valuation then I'm inclined to believe either I'm missing something or my forecasts are above consensus. I do all I can to avoid the former, while being more comfortable with the latter.

I know that bearish forecasts from the likes of Barclays and RBS are as welcome here as a poke in the eye (keeping it clean) but I don't doubt the mechanics of their assessments and at the time of those forecasts oil was below $55 and Kraken was limping along. The Kraken reserves reassessment by CNE didn't help. I think the detailed presentation at the Finals on Kraken stabled sentiment, although in spite of expectations (loadings etc) it still only averaged 28K in the first 4 months. We know the numbers - if Kraken produces at 40K for the rest of the year, then taking account of the 3 week maintenance window it will hit 34K for the full year, top end of the 30-35K forecast window. If that is achieved (or looking achievable by end Q3) and the oil price stays near current levels, then you might see 40-60 by year end. Both components are key and somewhat in the lap of the gods - and Trump.

Best, londoner7 (Scottish branch)

Thanks for your patience guys, I now get it.

I'd seen the cash flow chart on pg24 before but had completely misunderstood the $100m element. I did not appreciate that Enquest were being REPAID $100m of consideration ahead of splitting the proceeds with BP. Also, I knew the vendor loan was first in line for repayment but hadn't appreciated that these repayments are SCHEDULED over five years.

My thinking was clouded by a belief that the proportional cash flow to Enquest (on the 75%) was greater in 2020 when in fact it is greatest this year.

A $34m repayment this year closes out the loan for the initial 25% interest in Magnus, so that's upside for 2020.

With the oil price at current levels it's quite sobering to think that when this transaction was put together it was built with the possibility of negative cash flows and a loan cap of $500m. And the array of small loans and their limitations (Oz) highlights the dire situation Enquest equity has endured over recent years. It may take the market a while to appreciate the turnaround, but as long as oil averages over $65, longer term investors and newbies like myself should benefit. My approach to investing is to build a stake over time as my confidence and knowlege increases - getting there.

I wasn't clear on the reason for this mornings announcement that Peter Tom was selling his shares and the detail of the new chairman's intent to purchase 10m and perhaps the rest at 72p.

But it now looks to me like an exercise in managing the transfer with minimal disruption in the market. Breedon shares are not a very liquid market and dropping 22m shares onto it would cause some indigestion. I noted this a few years back when a founding director sold 5m in the conventional way through brokers. The SP took a significant hit and it was several weeks before the share price recovered - I remember adding to my holding at the time.

I understand today's news to mean that 10m have been taken by the new chairman and the balance of 12m are available to other large shareholders at a price of 72p to widen the share holder base but if none come forward then he new chairman will take the balance too.

As of 10:24 21.4m shares have gone through the market at 72p, and I can sell my shares at 73p down 0.8p on the day.

At this moment, it seems to me that the transaction of clearing a large director's sale has been well managed.

Thank you for posting the link, but it's clear to me that your comment "BVS originally offered £950 million on May 8th. The offer was increased to £1.05 biliion last week." is wrong and not supported by the article.

Only one offer is mentioned, £950m consideration and the assumption of the £100m private placement.

If the offer had been accepted GFRD shareholders would have received £950m of Bovis paper, and the rump of the business, GFRD, would have been clear of £100m of debt.

A link please.

I find it hard to believe that Bovis understated their offer.

I was in the gym this evening when it clicked that I'd made an error in my analysis. It happens which is why I post my workings for others to comment and help me in my journey.

I applied my conservative estimate of $234m annual Magnus cash flows to the 75% vendor loan, but of course only 75% of cash flows ($175m) applies to that loan. So on those figures the payback period is 8 months, which takes us to the end of August. However, repeating my earlier comment, this is a simplified version and I feel a long term Enquest poster here will correct my numbers when it gets to a level of interest to them.

In the mean time I plan to throw out some numbers on the vendor loans tomorrow.

Just to recount an interesting insight into director dealings I saw on another board.

There may be many reasons which prompt a director to sell their company shares but there's only one reason for a director to buy shares.

Of course that doesn't mean their judgement is always correct.

Auson, just to respond to your query on DTY from the other board.

From my posts here you'll see that I haven't been in DTY for a while. I'm watching and waiting for a possible re-entry probably this year if at all.

A look back will reveal my current thinking - it hasn't changed since my last post. The Q1 numbers were shocking but as I suspected the price response was muted. If I could see what was coming I had no reason to believe the market didn't already have it priced in. In spite of my extensive research here I don't think I have any exceptional insight.. Hence my reserved judgement in our other share, but the gearing is such that given a following wind (oil price) it could do very nicely in the medium term.

Thanks Auson, as you observed I'm a newbie here. I looked at some Kraken data the other week and in passing noted the potential for 2x debt gearing. A ratio I haven't associated with Enquest for many years. I took out an opening stake while I looked closer. I felt there was a catch particularly as, frankly, many posters here seem OTT when compared to Enquest guidance. In my experience if something looks too good to be true I'm missing something.

I thought I'd found it in the boepd element of Magnus pointing to a $100m plus shortfall in cash flows. I'm now more relaxed about the gas - pun intended. But still looking.

I'll respond on the DTY board to your last comment

Looking again at that table I noticed it has a wealth of information relevant to cash flows.

Taking NGL first. I think I should have taken this into account in my assessment of gas ratios as the OGA may combine gas and NGL in their numbers.

For 2018 H2 then get 16,059 oil, 1,038 net gas sales and 682 NGL = 17,779 total. 10% boepd component - Enquest

Same period using OAG definitions get 16,059 oil, 5,193 total gas and 682 NGL = 21,934 total. 26.8% boepd component, which is now very close to the 27% calculated by Therapist from OGA numbers.

For 2019 revenue calculations I'm going to (conservatively) use 18K bopd oil and add a 10% gas&NGL component for a total of 20K boepd, and last year's $59.4 revenue per boe, which includes the 5% production to sales revenue shrinkage. Magnus (100%) revenues are $434m. The table gives $32m Capex and $75m Opex but I'm going to conservatively use last year's $23 per boe costs leading to $168m Opex. Resultant cash flow is $234m.This would cover the $116m (1st Dec 2018) outstanding Vendor loan in 6 months, say end H1. I appreciate I have oversimplified the vendor component here but I'm still coming to terms with the detail so happy for anyone to correct me.

In fact I'll leave it here for the moment to see if there's any corrective feedback.

I'm not knocking progress or potential but I do not believe that S3 and S4 are funded. They were funded by the November placement but due to the delayed S2 drilling I believe that money has been spent.

I don't recall if it was a JB comment or and RNS but I have the firm impression that S3 will not be considered until the S2 is performing to it's full potential, whatever that is, and only then will funding be considered for S3.

Mosman have not included additional Stanley wells into either their first or second projections. A successful rework of S2, a new well on Falcon and a continutaion of production from other assets takes us to 100 boepd.None of those are a given - this is the oil business and in case you hadn't noticed &^&%& can happen.

Pelle, that last page reference helps a lot.

Therapist, the OGA production data is exactly that and should be taken as read. Enquest will report the component that is relevant to Enquest shareholders. I would hope that the Enquest IR response clears this up, but I think I have managed to link up the OGA data with both Pelle's Rights document and your assessment of the Enquest update on NNS (I'm going with your figures).

The OGA gas ratio for the Magnus field is 27%. There may be some fluctuation but while Enquest maintain their current injection strategy which is described in the Rights document that ratio should hold (I think).

Using the table in page 203 and referencing the 2018 H2 row, we have 16,059 bopd oil, and a combined sales and fuel total of 24.1 MMscfd (4,154 boepd). The same document refers to a 20% shrinkage of wet gas to dry gas. Fair to say that Enquest burn and sell dry gas so applying that shrinkage results in a wet gas number of (4154/0.8)= 5193, which is 24.4% of the total (oil + wet gas). I'd guess those are the numbers the OGA would use and in my book that is close enough to the 27% OGA reported over recent months.

I'm assuming that Enquest do not report their fuel gas in their production numbers (anyone?) so the sales gas is 2,077 boepd and according to the table note this is split roughly 50:50 with other field operators (imported injection gas), leaving Enquest with 1,038 boepd net gas sales from the Magnus field (100%), or a 6.1% ratio.

Back to Therapist's 1,450 boepd query. My tally for Magnus oil Jan-Apr 2018 was 3,083 bopd. On the OGA 27% gas ratio that points to 1,140 boepd of gas. On Enquest 6% gas ratio it's 197 boepd. A difference of 943 boepd.

Okay, only 65% of the queried amount but I feel I'm getting a handle on these gas numbers.

I look forward to the Enquest IR response.

"currently involved in all three elements of GFRD"

I meant MGNS work in those business areas, not necessarily alongside GFRD. Although, there could be some existing partnerships, particularly in construction.

Unless Bovis come back we'll never know what the impact on the Bovis paper would have been. The value of a cash offer is that there is certainty.

In fairness to the GFRD CEO he has to consider the impact of the offer on all company stakeholders, which includes employees as well as shareholders - I can't make any judgement on that!

In some way we are now in play. A more suitable acquirer is a company like MGNS who are currently involved in all three elements of GFRD. I've no idea how GFRD would fit into their existing business, but I'd be very surprised it they were not making some sort of assessment.

philpot1001, we would have Bovis shares priced at 768p, assuming the Bovis stock, as the acquirer, was impacted by 10%. A guestimate on my part, but who knows. Shorn of the construction side the addition of Linden and Partnerships may have been seen as accreditive to the Bovis business, even in the short term. Of course they expect it to add value in the longer term otherwise they wouldn't have made the offer.

We would still have our full entitlement to the remaining GFRD business. If you own 0.0001% now you'll own 0.0001% afterwards. Any capital reconstruction would probably included a rights issue, so if you didn't subscribe you would then own a smaller proportion. The worst that could happen to shareholders is that it goes bust. Of course there are a 1000 or so employees who might face worse consequences.

Well at least Bovis told us the detail of the offer.

At £950m, and assuming a 10% fall in the Bovis paper, I'd put the offer at 768p.

It would leave GFRD with the construction business, which would need some capital reconstruction, but our CEO has experience in that area. I guess he didn't fancy it.

Hi Therapist, our posts crossed and I'm feeling a bit like a YO-YO.

I was just about to head out for a quick beer but an even quicker response first.

My original ratio was 41%, clearly higher than the 27% indicated by the OGA figure but not outrageous. I'll take a closer look at your numbers tomorrow.

Best, londoner7

Hi Pelle, Yes, I was pointing to that ratio - 12:8

However, the Rights document you pointed me too suggests a much lower gas ratio, but without being very specific. I think Table 4 would have helped but the table was blank in my download. (I note the Wiki page for Magnus points to roughly 50:50 oil:gas production???)

The basis for my gas projection was the $39m gas revenues in the 2018 accounts. The Rights document talks about taking passing gas from other fields and injecting it into the Magnus field. Obviously any produced gas will contain a mix of Magnus indigenous gas and the gas from other fields. The gas from the other fields is contracted and the cost will be recorded in cost of sales. The most likely entry I see for this is "other costs of operation" which increased to $48m in 2018 from $12.6m in 2017. That's a difference of $35.4m, so perhaps net gas revenues are closer to 39-35.4= $3.6m, which would equate to approx. 274 boepd (gas). (If anyone has better insight on this I'd appreciate it)

The gas price sensitivity table points to a 1:14 relative impact to the oil price which supports the idea that Magnus NET produced gas is closer to 274 boepd than 3,500 boepd.

A couple of other points from that part of the document caught my eye. Shrinkage of 5% between produced volumes and sales volumes - I'd never come across that before. The comparable gas price for $70 Brent in the forecast is ($6.77*5.8)= $39 BOE.

Bottom line: in the absence of any other inputs I going to take the Enquest references to boepd as essentially bopd, given there are only 300-400 boepd of net gas production in total.

Thanks for the link and page references.