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Absolutely Pelle

We already know 2018 was a good year for Enquest, but 2019 should be phenomenal. The debt reduction alone should slide straight to the market cap to give an SP of 39p and that's without an earnings rerate. On that score, with an EBITDA of $950m I've got EPS of 20 cents (15.5p) and a PE of 6-8 wouldn't be out of the way.

As always, it's about Brent, but those numbers above assume just $65/bbl.

A reminder (for those that clearly need it !) from the Moodys upgrade 16th November 2016:

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, including inter alia the amortisation of the secured term loan, BP vendor loan and BP's profit share.

hi e121

I was looking at the year end 2018 where only one month Magnus 75% (December) has been included in their calcs with an expected EBITDA of $750+ (AB Davos refers).

This from the full-year 2017 results:

"Any future payment of dividends is expected to depend on the earnings and financial condition of the Company meeting the conditions for dividend payments which the Company has agreed with its lenders and such other factors as the Board of Directors of the Company considers appropriate."

From "Lenders" I would conclude it's an RCF restriction.

With an EBIT of $750m after Interest payable of $250m becomes $500m which is then split between CAPEX and paying down debt. So debt reduction depends on CAPEX and I'd like to see it much lower than the $275m guidance for 2019. With debt reduction stated as their priority it should be.

I think the debt would need to be halved before thinking about shareholder distribution.

Yes, I am getting there epithany. There's a lot of quality accounting knowledge on this BB and industry technical knowledge too. It's just a shame there's so much dross to wade through.

Don't worry about the daily up and down ticks. Just remember business basics - price is what you pay, value is what you get.

Ah yes, thanks Pelle, it's early for me.

So 31st October debt striping out the rights (to be) paid over to BP was $1874m (1774+100) and 31st December it's $1774m. A reduction of $100M in 2 months.

Yes I appreciate that cash flow will be lumpy and extrapolation not straight forward, but it does give an idea of their capability.

From Ops update 31st October 2018:
At 31 October 2018, net debt including PIK and the net proceeds from the rights issue was $1,771.8 million

From Ops update 5th February 2019:
At 31 December 2018, net debt including PIK was approximately $1,774 million

The key point here is that the 31st October Net Debt position INCLUDED the rights proceeds of $133m (as then not paid over to BP) so 31st October Net Debt was, strictly speaking, $1904.8.

It's now $1774, a reduction of $130.8m in 3 months. Extrapolating that performance for the full year would see debt reduce by $523.2 and I'm more than happy with that.

KO

The half year accounts show a depletion charge of $216.5m and total production of 9.7MMbbls giving depletion cost of (216.5 / 9.7) $22.3/bbl

50glass

Your break-even figure has included depletion costs (@ $22/bbl ), and we know at an operational level break-even is actually around $25/bbl. H2 realised oil price will be slightly better than H1 I believe (reported at $59.5/bbl) because the hedges were better and this needed. My guess is H2 realsied price of $62-$65/bbl with H2 production broadly the same as H1 (9.8MMbbls) making full year production about 19.6 MMbbls.

Full year results expected Thursday 21st March. Closed period now so there will be no more Directors buying.

Indeed, 3 MMbbls hedged Q1 to be precise. If Brent were to stay at $60/bbl through Q1, with the hedge this would see a blended realised oil price to ENQ of $66/bbl Q1.

Even $60 Brent is absolutely fine for ENQ. Don't see what all this fuss is about.

Enquest realised an oil price of $59.5 in H1 2018. The H2 realised price should be slightly better where the 1.5 MMbbl hedge at $69/bbl for the last 2 months of 2018 actually kicked and was needed.

At these oil price levels ENQ are expected to generate 2018 EBITDA of $750m-$800m and i would estimate (assuming capex of $250m) a FCF of $425m before financing activites.

$60 oil is just fine. $80 is fantastic and we were there just 3 months ago.

His pleasure is in provoking a reaction, with some here quite obliging. Ignore and his hobby will be taken elsewhere.