Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
DK - Results due 21st March
https://www.enquest.com/investors/corporate-governance/financial-calendar
What MM ? It's traded on SETS.
Enterprise Value is a much better metric for valuation because it removes their capital structure from the equation. The current EV is $2.47b and with a full year ’18 EBITDA of $775m (AB Davos mid-point guidance) has an EV/EBITDA multiple of 3.18.
Fast forward a year to March 2020 results publication *might* see an EBITDA of $1000m and a modest debt reduction of $200m. All things being equal (3.18 multiple) the EV would be $3.1b, equity $1.4b, which is GBP1068m or 63p/share.
Apply the above using a multiple of 4 (reflecting a less geared and more stable company) the EV would be $4000m, equity $2200m, which is GBP1700m or 100p/share.
GLA
Fernan10
How can you make a balance sheet provision whilst at the same time vigorously defend the claim ? To do so would be an admission of liability !
Squif
AB has no control over the SP and therefore the market cap. He can only operate the company efficiently and add value where he spots an opportunity. If the market doesn't recognise the value that's not his fault.
If nothing else I think Squif has highlighted why we are where we are with the SP - sentiment. Nothing has changed since yesterday. Investors have simply become impatient waiting for the SP to double. Depressed and despondent investors sell out to those with hope and optimism. When the former have mostly gone the later take control and we rally, usually quite hard. Sentiment matters only in the short term, but in the long term it's fundamentals that matter.
Most of us know (or can easily work out) this company's profitability for a given Brent price and we can all see the Brent price right now. So, have some patience and chill out.
I think we need to have sight of the year end accounts before this will fly. Only just over a month to wait....
Squif
The last RBC "prediction" ended with them having to make an apology for their gross miscalculations. After that debacle I wouldn't pay any attention to them.
Hedging is always a difficult call in balancing risk. Personally I don't hold that against them, but yes let's hope they're lucky enough to get a better floor later in the year.
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.