Member Info for londoner7

Hi romaron, taking your point first because I think it's the easier to answer.

In my post I'm taking the 2018 OGA oil production numbers to try and assess gas production and impact on 2019 cash flows , rather than strictly any estimate for 2019. I think the strategy has failed (next post) but back to the oil production number.

According to OGA data oil production in the first 11 months of 2018 averaged 3,053 bopd for 25% Magnus. I extended this number out to 2019 to get the 12,212 number so that I could compare with the pro rata number for gas. In fact Magnus oil production (100%) was circa 18K bopd Dec 2018 through Feb 2019, and my assessment from the latest update was that it had improved in the most recent two months so I don't doubt AB's comment of "well above" 20,000 (currently).

Hi Therapist, we both seem to be taking an interest in the gas component but coming at it from different directions.

For what it's worth this is where I am.

2018 report points to $39m gas revenue from Magnus.
Using a wholesale price for NS gas of 50p/therm, and 1 boe=55.514 therms I come to a price boe of:

55.514*0.5*1.3 = $36 gas BOE

2918 Magnus gas production per day = $39m/(36*365) = 2,968 gas boepd

Taking your OGA Magnus data which I assume is oil only (bopd) I get a 2018 average 4,304 bopd and removing the Dec number 3,053 bopd (oil) for 25% Magnus.

Applying this adjustment to the 2018 Magnus gas production I get 2,105 boepd (gas) for 25% Magnus.

Extending this rate into 2019 (100% Magnus) would provide 12,212 bopd (oil) and 8,420 boepd (gas), or a total of 20,632 boepd.

In revenue terms ($70 oil, $36 gas) that's ((12212*70)+(8420*36))*365 = $422.6m

In net cash flow terms @ $24 boepd costs that's $422.6m minus (20632*24*365) = $241.9m.

OR (20632*(70-24)*365) - 241.9m = $104.5m less cash flow than if Magnus was assumed 100% oil.

Note: I believe the new infill wells for 2019 target 3,500 bopd (oil), approx. $60m of additional annual cash flow.

A fair point but there is much that goes on in these organisations than we as 'part owners' will never hear about.

First and foremost the board will consider their own self interest. How they benefit from the bid, how it affects their share options, the degree to which they can justify their decision, etc, etc. However, it is likely that in justifying their decision they will need to communicate with their larger institutional share holders. The opinion of these shareholders may not be as clear cut as ours because, as is the case here, many are holders of both companies and typically while the acquired company appreciates the acquirer loses value so the immediate net financial benefit may be neutral to these shareholders.

We may never know the detail of any offer made, but an RNS on Tuesday would be appreciated by those not in the know.

ps Any Kraken gas is probably flared. The North Sea permits a small level of flaring.

Therapist, check out page 107 of the latest accounts. That splits out crude oil sales from gas sales.

In 2018 96.6% of revenues were crude, against 99.6% for crude in 2017. In volume terms I generally use a gas price around half the oil price so in volume terms I'd adjust this to 93.2% oil (2018) and 99.2% oil (2017). I suspect Magnus accounts for the step change. I know it is a significant gas field. I don't know how much is injected back into the field and how much is sold, but from these figures and OGA data for Magnus it would be easy to work out.

If I've misunderstood your query then please elaborate.

"I recall it was significant, 5-10%."

Correction - looking again its more like 1%

Therapist, your OGA production graphs add clarity, so thanks for those.

WRT the mixed figures. Oil companies are normally precise in their use of these figures so I'd say that when they are referring to total production they are including oil and gas, hence boepd (barrels oil equivalent per day), but in referring to the Kraken numbers they are only counting oil, hence bopd.

This then makes me wonder if the OGA number includes gas which would make it higher than the oil only number. Last week when trying to get the OGA numbers I found a site that mentioned gas from the Kraken fields, and as I recall it was significant, 5-10%.

It comes down to the specifics of your OGA data source.

easyp, an extract from my post on ENQ today, "Today's update of 23K for Jan/Feb and 33K for Mar/Apr points to a 28K average YTD, so it appears that an interpretation of CNE's statement that production was within their 19K-22K guidance was factually correct, but only just. Scope to upgrade it later."

To be clear, CNE production for the first 4 months was 22K, at the top of their guidance, and expectations are that the Kraken number will improve, so assuming continued success at Catcher I'd expect a CNE guidance upgrade at the interims.

As a CNE investor, following last weeks updates, I came to this board with some queries on Kraken and received some helpful responses. The basis for my query was CNE guidance, which alongside an update on Catcher, seemed to point to max Kraken of 28K gross.

22000-13760=8240 (Kraken 29.5% share) = 27.932 gross.

Today's update of 23K for Jan/Feb and 33K for Mar/Apr points to a 28K average YTD, so it appears that an interpretation of CNE's statement that production was within their 19K-22K guidance was factually correct, but only just. Scope to upgrade it later.

The OGA number provided here was 26K gross for Jan/Feb, yet today ENQ state 23K - I don't understand the difference. Can anyone help? I'd guess CNE will have used the number provided by the operator (ENQ)

It also came out last week that - at least for one day - Kraken was performing at 45K gross. Today we learn that Kraken can produce >23K on a single train, possibly 26K. I find those numbers encouraging. I can only guess at the facility issues but my sense is that while they can't be fixed, in the short term, they can be managed, and generally with experience comes improvement. To meet the 30K-35K full year target, a 31K average over the remaining 8 months is required, that includes the 3 week maintenance window but very achievable. Now I'm waffling so I'll cut here.

Debt. While looking into the Kraken data on ENQ I saw the financials. For a long time I've viewed ENQ as too risky so I was surprised to see debt ratios of 2 becoming possible. It prompted a closer look and inspite of some earlier misinterpreations I liked what I saw, and I very much like ENQ revised debt guidance and the FCF into 2020 looks promising after vendor payback this year. For various reasons, some mentioned here I wasn't expecting a significant reduction in debt today. For the record the improved production over 4 months adds about £20m cash and $5 price improvement about $40m. As another poster said given 70/70 for the year it should be a good one for ENQ.

I'm in.

ps it looks to me like Magnus had a good Mar/Apr.

I'm with L3 on many of these issues.

On production, the expectation is that Kraken has improved over the last 2 months, the hope is that Magnus is moving above 18K but the fear is that the legacy fields are declining at a faster rate than has been guided. While average production may be up on the 67.7K for the first two months, we know most of the maintenance activities occur later in the year. Enquest has all the info so any revision to full year guidance would be more significant than the absolute YTD production number.

On debt, as L3 points out, there is a Kraken deferral ($55m) so any repayment over the year could be lumpy. I would not hang my hat on an absolute value for the YTD number but I suspect Enquest may add some commentary around it.

LONGWAIT, I wasn't attempting to make an investment case for or against SOU today. If I was I'd make it on that board but you probably know more about the detail of the investment case and Schlumberg's involvement than me.

I was responding to an earlier comment here which triggered a memory of my assessment many years ago and I was making a more general comment.

Good luck with your investment.

I find it hard to believe that SOU is mentioned in the same sentence as HUR. But as the comment was posted here.

A few years back when the SOU share price was exploding I took a look. I noted that the area had been explored previously with only trace hydrocarbons found - some of the wells were re-entries. As I recall I posted a link to the earlier exploration. I clearly hit a nerve and two posters came back almost immediately arguing that 'this time was different'. I remember thinking that the response was cleverly worded and coordinated and being the sceptic I am wondered if company PR was involved. I made up my mind to move on as an investment but I've kept an eye on SOU since. I soon noticed that it had strong PR and a very supportive fan base - I remained sceptical..

A while later Investors Chronicle posted a positive note on SOU. I posted a critical response and in a follow up a few week later IC retracted their recommendation and cited some of my comments. This history was lost when IC revamped its web site.

I make this comment not to boast but to warn of the hysteria that can follow any oil explorer. Many oil geologists fancy themselves as able to hit the pay dirt - each has their own approach. But most are average at best and if they succeed its often down to luck and isn't repeated.

Is Dr T different? I've put a chunk on money his way and I hope so. Time will tell, but he's some way on from trace hydrocarbons in a desert.

Cue the rabid SOU posse response. But I suspect those original two SOU posters are long gone.

That said, I wish SOU investors well - it a tough game. There may be money to be made at 6p. If you're lucky.

Decisions, some interesting posts today but yours in particular caught my eye.

Could you elaborate on how you were involved in the funding?

It might give us an insight into the mechanism of the funding.

Yes Biffadog.

Your last sentence is 'probably' understatement of the weekend!

I understand the points being made but it's clear from my post that I was assuming ALL of the cash from the additional barrels accrued to Enquest when that isn't the case.

In hindsight I'm surprised I wasn't lambasted for such a lazy post.

Yesterday, in a post at 16:07 I made some comments on possible EBITDA debt ratios for 2019. In the example I took the lower value of another posters estimation for debt reduction and my too simple expansion of last years EBITDA number. Although I didn't receive any obvious argument against my comments I did get a hint of something which prompted me to take a closer look. I now realise that the complex debt structure and repayments due to BP for the Magnus acquisition put any assessment of Enquest year end debt levels or ratios beyond such a simplified assessment so I'd like to retract that post.

Sorry for any confusion.

Assuming things are progressing as expected at an operational level, stating the obvious, greater clarity on the debt situation will be key.

Perhaps they'll put out a targeted net debt reduction level, but I think a rewording of the debt ratio is also a possibility. Current guidance is "approaching 2x in 2019". A $250m reduction in net debt would bring it down to $1,524. Applying a 2x ratio points to EBITDA $762m, a modest 6% improvement on 2018. With a 22% improvement in expected production volumes and perhaps similar average oil pricing if current prices hold for the rest of the year, I expect a bit more, so maybe "below 2x in 2019" may appear in the commentary.

Pelle, Therapist, in appreciation of your responses I thought I should close out my comments on this thread.

I was using an estimate of the Dec 2018 Kraken number as a basis for the start of the year, this is somewhat obsolete following your responses, but having put out my math I thought I should close that too. Based on the Dec number I attempted to calculate Nov and having found an earlier post from Therapist I saw that was out. Totalling the monthly columns I found that the OCG numbers are slightly (1.25%) above the numbers ENQ gave in their updates. This might not sound much but it magnifies the difference between two large numbers. My formulaie holds with the new calculation (368662-315378-(16253/0.705))*0.705 = 21,312, the correct OCG number for Nov.

But back to the meat of the issue. My assessment was prompted by the wording in the guidance from CNE and my interpretation pointed to 28,000 gross for Kraken YTD (end Apr). This is very much at odds with the higher numbers for Jan/Feb given by OCG and Pelle's ramp up from mid March, which I understand is based on tanker observations. I have more faith in your observations than my strict and perhaps inaccurate interpretation of CNE. I suspect CNE want to get futher into the year before updating their guidance, but their reference to the 4 month period was strange IMO.

All will be clearer with this weeks trading update.

It's occurred to me that in my assessment of PMO and CNE's recent updates my interpretation of today's CNE update may be wrong.

If anyone is interested or wants to add to the discussion I posted a query on the CNE board.

This is an extract from the update, "Group production for 2019 remains within guidance of 19,000-22,000 bopd for the first four months and an update on production performance will be provided later in the year."

My initial interpretation of this is that production in the first 4 months of the year is <= 22,000 bopd, but now I wonder if my interpretation is correct.

Did anyone attend the AGM? If so, did CNE add any clarity to this guidance?

If you are wondering why does it matter, I would point to yesterday's Catcher numbers and the potential impact on Kraken numbers.