Member Info for Plethorus

Whats worrying for NMC is that it has been falling dramatically in a rising market. What happens when the market starts falling at some point? Does NMC get crushed even more?

Enquest is well hedged for Q1. So if OPEC + cuts 500kb/d and sends brent to $60 then Enquest will be fine

Payment terms in the gulf are completely different to those in the West. Few gulf companies are listed in London or NY. In the gulf even credible parties pay late. So All the payment terms in the west are designed to be immediate and up 90 days which is deemed a bit late. 90 days is the limit because it would stretch into another quarter when you have to report results again. So i have no doubt that NMC uses reverse factoring or methods to stretch their invoices because thats the culture in the gulf. For the London stock exchange it makes it look odd that invoices are stretched but thats how it goes over there. Maybe NMC should not have listed on the LSE

The founder owns between 15-20% of the company. He now thinks that buying a bigger share is very cheap to do. Maybe thats why he’s trying to line up investors for a buyout

There has been a daily dump of shares and as of yet no signs of the buyback. The stock will stay pressured until the daily selling abates or when the buyback kicks in (which might be never)

Unlike some
Posters who thought 60p can happen this year, i still see 40p as a realistic target by year end.

Im impressed with debt reduction. I think we can still go lower than $1 billion net debt by end 2020. Im also impressed with the amount of hedging done for Q1. I was deperate for enquest to hedge because i knew we always get something to bring oil prices down in Q1 (this year its coronavirus) last year was Trump waivers. I think OPEC cutting 500kb/d-1mb/d should send brent to $60. Why is gross production at kraken of 35k deemed good. What ever happened to the 50k target?

There was an article in 2018 confirming that the main shareholders were leveraged on the company’s shares. Carson took a note of that. Then in the summer of 2019 when burford was attacked and NmC sunk on no news, Carson Block realised that NMC’s shareholders are weak they have no real conviction.

This will only end when the main shareholders are flushed out and when the debt on the shares has been paid off. Its impossible to know on the outside what are the true fundamentals of the company but this collapse looks to be almost entirely caused by the massive leverage of the main shareholders and founder on the company’s shares. Carson Block definitely knew they were leveraged to the company’s stock so all he had to do was land the first blow and then the banks would take care of the rest. Carson hasnt said anything in a long time because he doesnt need to

The biggest problem this company has in not the company itself but the fact that the main shareholders are borrowed huge sums against their stock. 2 out of the 3 big shareholders have been flushed out and have been forced to sell their shares to repay the loans on the stock. There is one shareholder remaining (the founder) and it looks like maybe he has been selling shares since the beginning without a formal book build hence the constant selling pressure. A few days ago it transpired that half of Finablr’s shares were pledged as collateral on loan as well. The biggest lesson from this company is that the founder and 2 largest shareholders are obsessed with borrowing against their shares. Never has there been so many shares pledged as collateral by so many shareholders. Hence the total collapse.

The second worrying thing is that despite the value of the company falling by over 60% there has been no bids or buyers for the company. Surely if the company was attractive it would be bought out if it was deemed good value

The lack of Share buybacks over the last 30 days shows that the company has no cash. These share prices are ridiculous. If the buyback plan was credible shares would have been hoovered up over the last month. The last share buyback was in December.

When does the profit share with BP over Magnus end? 2023 or when it reaches $1 billion?

I think we are in a range now. I still believe we will end the year at 40p and with Net debt below $1billion. I agree with epiphany that Enquest are unlikely to buy an asset in 2020 given AB’s inistence that even though they always looks at deals they have a very good near term drilling program that is highly lucrative. But beyond 2020, once debt falls below $1billion , i fully expect enquest to buy another Magnus type asset maybe in 2021 because if Enquest stops growing them declines will eat it up. Another magnus type acquisition would take production up to 85k in 2 years

I expect 40p by year end and the short term resistance is somewhere in the early 30s

The share buyback seems to have been a gimmick to scare away the shorts and allow the billionaire owners not to have to sell their pledged shares at a loss. There is no explanation as to why the buyback has only been activated twice when the share price has been in freefall for weeks now. If they were serious about the buyback they would be buying shares everyday at these ultra low prices

I think 40p by year end and 80p by end 2021 are very achievable especially if brent can average $65 for the next 2 years

If its until June then they have to buy $1m of shares per day because the total buyback amount is $200m. So they need to get going. There are 20 working days a month, 6 months left. So 120 days where they can buy shares. The buyback amount is $200m. So they need to buy more than $1m of shares per day on average

Whats odd is that the share buyback was supposed to be $200m and last until March 2020. So far since it was announced there have only been 2 or 3 days of share buybacks. Given that it lasts until March and given the steep share price drop over the last few weeks, the should be buying around $2m of their own stock every day.

If we look back at the moody’s upgrade in November 2018. (https://m.moodys.com/research/Moodys-upgrades-EnQuests-rating-to-B2-stable-outlook--PR_391526).
From the report.: ‘The deal should add approximately 60 million barrels of oil equivalent (mmboe) to the group's 2P reserves of 210 mmboe as at 1 January 2018, and boost its production, which averaged 54.0 thousand barrels of oil equivalent per day (kboepd) in H1 2018, by 11.4 kboepd immediately post closing expected to take place prior to year-end 2018. In parallel with the continuing ramp-up of production at Kraken, the acquisition will give a significant boost to Enquest's operating profitability and free cash flow going into 2019. Looking ahead, Moody's projects that incremental contribution from the 75% interest in Magnus (assumed to be acquired on 1 January 2019) combined with the continuing ramp-up of Kraken should lift EnQuest's average production by around 20% in 2019. Assuming a Brent price of $65 per barrel and capex of $250 million, EnQuest should generate EBITDA and FCF of around $950 million and $450 million respectively in 2019. Moody's expects that this cash surplus will be used to reduce adjusted debt’.
In effect they expected 2019 production of around 65k and assumed brent of $65 average in 2019 (Brent averaged around $63.5 for the year) and expected EBITDA of $950m and FCF of $450m. The production figure for 2019 might be slightly higher at 68k but realised Brent prices were slightly lower. The point is that in 2020, assuming production at the midpoint between 70k-75k and assuming brent averages $65 and CAPEX at $150m-$175m lower than 2019 level of $250m-$275m by $100m then FCF should be solidly in the $600m-$650m level especially as the increase in production from 65k that moody’s anticipated in 2019 to 72.5k that we anticipate in 2020 will be from kraken which has opex of around $10. So the fcf translation is very high from the increase in kraken production. Add $80m increase in FCF from increased production and $100m from decrease in Capex and around $20m from lower interest expenses and enquest should hit FCF of around $650m in 2020.