focusIR May 2024 Investor Webinar: Blue Whale, Kavango, Taseko Mines & CQS Natural Resources. Catch up with the webinar here.
I think that borrowing money at 15% with a $100m a year interest bill and market cap of $240m to then pay out $18m a year in dividends is absolutely insane. But what do I know, I'm a long equity, long bonds deramper.
Stevo re lease payments
https://www.enquest.com/fileadmin/content/Corporate_actionsPDFs/Rights_Issue/RIProspectus.pdf
Hire rates are $447352/day dropping to $139860 … annualised is $112m saving and 70% equity interest of that is $78m saving
A potential synergy there is the tax losses and ability to refinance at much lower rates which would improve FCF (ENQ are looking at circa $100m in interest this year). However I think they’re more interested in punching up rather than punching down. Also this acquisition will keep their hands full and isn’t expected to close til 2024 Q4
I think an acquisition is likely instead of shareholder returns. It’s also very hard to justify shareholder returns when you have a term loan at 15%.
Interest expense next year is circa $100m a year if memory serves. Debt reduction has to rule all else surely everyone agrees?
I think prudent to consider decommissioning obligations as a further “debt” in the calculation of EV.
I bought more equity yesterday at about 13p. Oil is forecast to fall, but there’s still a margin of safety there. Operationally it’s just been confirmed on track. Long term production decline is the issue and how much capex required to maintain.
Steve there are optional redemption clauses in the prospectus which allow ENQ to redeem @ 104p in April 2024 or 102p on April 2026.
There’s also change of control clauses which I haven’t interrogated fully.
So opex is unexpectedly $30m lower than guided and they found $30m to reduce net debt.
But "some were saying" different. Like that H2 would be cashflow neutral? (Which it would have been but for lower diesel and chemical costs?)
Pleased with update as operationally all on track.
Can anyone clarify the arrangements re the Kraken FPSO lease. Are ENQ buying this via lease or just renting via lease? A twitter account has suggested that the FPSO will be essentially ENQ owned by 2025, but I can’t corroborate this with anything written in the AR.
The company are targeting net leverage of 0.5x EBITDA on a previous presentation and so I think it’s very unlikely they will actually look to reduce net debt to zero and it’s highly likely we’ll see more M&A before then, likely to take the form of a low capital payment and earn out (see Magnus).
Good for you Stevo12
Your analysis has made me realise that I was overly optimistic on FCF re Malaysia and the Magnus earn out and took ENQ from screaming buy at 14.5p to a moderate buy at 15p. Like you my interest is largely in the 9% retail bonds. The level of capex required for the falling production is not pretty for the equity. Also not enthused to see 13% term loan to settle the 7% notes, I thought the 9% notes were meant to settle the 7% notes?!
Pathetic comments regarding you “being negative” from our other resident analysts who get no further than ‘I thought we’d be up more than 10% after a good day last week’ and ‘this deserves to fly’
Keep posting please