Member Info for Plethorus

What is the impact on EBITDA for every $10 barrel increase in the oil price?

What are your 2019 and 2020 EBITDA projections at 75k produced and $60 brent?

The reason I called on monday was to urge them to hedge not to try and find out if they did or at what level. But your right on such a volatile day it would have been a bit difficult

The only way for Enquest to fast track its way out of the long and hard road of deleveraging is to hedge big on spikes. Otherwise it takes ages to de-lever in the low $60s. Thats why I wanted as many private investors as possible to urge Enquest to hedge. One member on this board said he doesnt like to tell a company how to run itself. Fair point but then again hedging on Monday would have been the genius move and Enquest have missed very handsome hedging opportunities in the last 18 months

I contacted the IR department on Monday to speak to the guy in charge of responding to shareholder queries. He was away and his secretary said he would either call me back or I can call back tomorrow. I told her I would call back tomorrow which was Tuesday. We all know what happened yesterday, oil prices cratered. So if Enquest did hedge on Monday (genius move), if they didn't which i think is highly likely (then that is another missed opportunity to get ahead of this stubbornly low oil prices. Im not sure enquest are allowed to tell me whether they hedged because it might be inside information.

i hope they do because Trump will do everything he can to temper the rally in oil prices. SPR release now authorised

If Brent rises to the high $60s over the next few days and if the Brent forward curve (1-6 months out) moves up because of perceived physical market tightness and uncertainty about when Saudi arabia can resume full production then we should send an email to enquest IR and tell them to hedge more production for the next 6 months at the maybe temporary higher prices. I think we have 3.9mb hedged with a floor of $66 and 0.7mb with a floor of $56 so for H2 we have around 25kb/d hedged. If we can increase hedging for the remainder of H2 2019 and some of H1 2020 with a floor higher than $60 then it is worth getting the stability of cash flows. I’m sure Enquest management will be thinking strongly of hedging additional barrels at higher prices but if we all send IR emails to hedge then they are slightly more likely to do it. Let me know what you guys think? We are now producing almost 70kb/d but unfortunately not enough of those barrels sold are over $60 brent.

The reason Kraken oil is now selling at a slight discount to brent when it was selling at a slight premium in the May Update is because of the Philadelphia Energy solutions refinery fire. The refinery used to buy a lot of Kraken oil but after it closed down Enquest has had to find a buyer for its Kraken oil resulting in a discount to Brent to clear the barrels. Eventually it will sort itself out as new long term buyers are lined up. Kraken oil is low sulphur so ideal for IMO 2020

Remember that macro weakness (trade war, recession risk, Brexit, oversupplied oil market) and mico risk (Kraken getting better but not 100% resolved in market’s eyes, Enquest raising $100m in equity last November and still high debt levels for Enquest) means share price can diverge from fundamentals for a while until macro and micro risks are firmly in the rear view mirror

The Norway assets produce 170kb/d

The EV/EBITDA multiple gives more credit to a $ increase in EBITDA than to a $ dollar decrease debt so at some stage over the next 3 years i hope enquest can afford to add a Magnus or two and improving efficiency and adding additional reserves to them because that’s what Enquest excels at.

The article in the FT which uses EV/EBITDA as a valuation metric is referring to companies with larger reserves and higher annual production than Enquest, albeit they are shale oil companies with high depletion and high capex requirements so the future will decide whether they should be valued as such

For an oil producer of Enquest’s size (production and reserves), i think an EV/EBITDA multiple of between 3x-4.5x is reasonable. But given the current large debt, then a multiple of 3x is more conservative. As Enquest’s net debt/EBITDA drops from the current 1.8x to 1x, then Enquest will be de-risked and i would expect a higher EV/EBITDA closer to 4x-4.5x. To go higher than that, Enquest needs larger proved reserves because at the moment apart from the debt that’s probably an area where Enquest is small. Hopefully the drilling in Western Kraken can prove another 100mb of reserves and further drilling and operational efficiency in Magnus can add 40mb-60mb of reserves. Maybe another Magnus can take Enquest above 500mb of proved reserves. But at the moment enquest produces less than 100kb/d and has less than 1 billion barrels of proved reserves so it is difficult for Enquest to get an EV/EBITDA higher than 4.5X.

Does anyone know when Enquest will post an earnings update?

So as the Fed fund rate comes down so does Enquest’s cost of financing?

Is all of enquest's credit facility tied to the Bank of England's base rate or is some of it tied to the Fed funds rate?

You assume 75kb/d for 2019 and a little over 80kb/d in 2020? I assume $65 brent average for 2019 and $68 for 2020. What FCF and net debt levels would you have for 2020 and end 2020?

Hi HMhn,
Enquest has production guidance of 63kb/d-70kb/d for thE full year 2019 (which includes field maintenance for the year. How do you get 78kb/d for FY 2019?

If Brent were to average $70 in 2020 and production was at 70k what would EBITDA be? What is the Ebitda sensitivity for every $1 higher brent price?

i think it starts getting interesting post 2020.