Member Info for romaron

Excellent video. Thanks Mod. You get the feeling that the world adjusts to energy whatever we do. There is already a reduction in the quality and components of what the world calls "crude oil". Peak oil has passed. I think Saudi Arabia may well be right and we are close to a tipping point. Why produce a diminishing product at a price that does not reflect its true value? Renewables are being found out by the day and their argument is that 'storage' by batteries will cure intermittency are infantile dreams and as much chance of them happening at an economic price and effective scale as the likely return of Jesus which millions also believe in.

In the video it shows the limitations of 'tight oil' and I wonder just how valuable our heavy oil reserves in B&B are? The world still requires oil, especially diesel. If in the future the UK is attacked by a hostile country I do hope they choose a sunny, windy day to do it. Still, by then we may be in caves and bow and arrows are back in favour.

The announcement today of a new RBL by Serica (SQZ) loan is (as usual) being ignored by the retail investors. If Stevo was here I think he'd be more interested. The capital drought in the NS has resulted in the finance coming from the more adventurous lenders I'd imagine. I haven't been able to find the exact lenders but it raises a few thoughts.

What is the money for? If for the NS then it isn't exactly a crowded space and could/will impact whatever EnQuest are up to.

The rate is under 10% (SOFR +3.90%)and hardly excessive allowing for the 'noise' surrounding the sector.

Remember this condition attached to the new SQZ loan? "Net Debt to Adjusted EBITDAX financial covenant  3.5x, tested semi-annually" Highlights our current position.

SQZ are quoted on AIM. They'll need to be on the main market to progress imo.

Point of post is that it may well involve us at a later date. Chess pieces and all that.

Interesting article by Oliver Shah titled "Going green shouldn't mean punishing us all". Final para:

"Labour has resisted taking the Tories' green bait when climate issues are deployed as dividing lines. But its pledge to spend £28 billion a year on technologies such as wind and solar has already been fudged and fudged again. My prediction: it will end up being scrapped. So will Labour's vow to to stop giving out new North Sea oil and gas licenses, which has worried unions over jobs.

Everywhere you look, net-zero proselytising is giving way to hard-headed analysis as to what an energy transition will look like: what it will cost, who will pay and when, and how hearts and minds can be won over. The era of politicians steamrollering the vulnerable in pursuit of arbitrary deadlines is receding. That is a good thing, and not just for Colin the sheep."

*Colin is a Derbyshire Gritstone (a breed of sheep). Due to green policies his owner (a shepherdess) protested by taking him to market on a 471 bus to Bolton because of green taxes on fossil fuels.

*some hard-headed analysis https://www.youtube.com/watch?v=3N9xW1bBJa0

Sorry but this reply from a reader was too good not to be repeated:

“Well, if you insist on suicide, can I have your golf clubs?”

The Third World vultures went to COP28 hoping for an estate sale of the West. In spite of all the BS Western press talk, the West isn’t yet close enough to suicide to give their stuff away.

Maybe at COP29. The odds are the West still won’t croak, but the stakes are too high not to go. King Charles probably believes they loved him at COP28, but they were all staring at him with envy in their hearts, with the thought in their heads, “When are you going to give your stuff away?” The speech suggested the king desired to give your stuff away, which will get them all back next year.

----- TBF the third-world representatives have got a point. Buckingham Palace and the holiday retreats are a bit big and extravagant for an elderly couple whose kids have left home.

It feels like at COP28 the delusions of Western greens finally crashed against the shores of reality. The luxuriant doom-mongering of privileged eco-warriors who insist the world will end if we don’t phase out fossil fuels was confronted by a truth no reasonable person can deny: that fossil fuels remain vital to human life. In the gleaming oasis of Dubai it became clear that oil, gas and even coal are not going away anytime soon, however much the Gretas of the West might want them to. Why? Because – brace yourselves – India, China, Brazil and other nations are not prepared to sacrifice their economic health at the altar of our deranged anti-modernism.

Full story: https://notalotofpeopleknowthat.wordpress.com/2023/12/17/brendan-oneill-cop28-and-the-scourge-of-eco-imperialism/#more-69733

I should add that today looks like it was some kind of settlement day with window-dressing and book movements and there was a high turnover in the UT's. It might have been VoR who pointed it out to me or ukbbbbb on another occasion. Bit like when they go ex-divi and (I'm guessing) we might see a correction on Monday.

I'd guess the Swedish delisting had its part to play. The UT of 1,912,455 shares @ 12.46 followed by another of 1,189,397 at the same rate today are effectively what's been happening for the last weeks. I had discussed it with another investor who had spotted the trend also. Too many off-book trades that matched the rate of the fixing (UT). It has been one way because if you were Swedish and wanted to BUY you wouldn't have done it on the Swedish exchange. So the sells are by Swedish holders and the platforms/banks they use (I'm no expert here) don't want to be accused of ripping off small shareholders so will trade them at the UT which is a kinda official fixing and transparent.

I'm not particularly concerned as the share price is artificially driven at present. How do we know that Saudi Arabia haven't got it right and Q1 will have oil closer to $100. Biden thought it cheap enough to replenish the SPR now. I really think not enough people have watched the link I gave yesterday : https://www.youtube.com/watch?v=qqTh2nBEcCs

Art Berman has been particularly bearish over oil recently and is anti-fossil on balance even though it has given him a lucrative career. BUT, he is pragmatic and a realist. He is clear that not enough investment or new discoveries will compensate on the late, late, late delivery of renewables and as for an economic price I suggest you ask the genie. COP 28 was a precursor to the pantomime season. All the news we get is still about high energy bills. With wholesale prices back to longer term averages they can't put the blame on NS O&G this time.

As Modestus said, there isn't a lot of rationality around in O&G at present and we both think that Jevons Paradox is being ignored. Even if it only applies to electricity it will put extra demand on fossil fuels. They're both energy whilst fossil is more fungible.

KO - HBR was down too. And that makes even less sense.

Today on X by Martin Callanan desperately trying to change the narrative on Redcar giving the elbow to becoming a 'Hydrogen Village'

"Backed by over £2 billion in revenue support over fifteen years, we are giving producers certainty for the long-term.

This will not only deliver cleaner energy for industry, but will create over 700 jobs and bring us closer to meeting our net zero targets (2/2)"

I'm not sure I'm reading this correctly. Over £2bn for 700 jobs works out at c.£3mio per job over 15 years. Does anybody know how you get one of these jobs? (asking for a friend; Juan)

The "Logic" thread is about "Above Ground" matters and that is currently what affects us most at EnQuest. Geopolitics and a hostile Tory government likely to be replaced by another equally hostile. I am though still cautiously optimistic and a lot of my reasons are explained far better than I can in this latest video where Art Berman concentrates on 'below ground' where physics and science rule:

https://www.youtube.com/watch?v=qqTh2nBEcCs

Lifestyle ranks highest in all voters interest and politicians know this. The fossil fuel argument revolves around overpopulation and the only quick answer to that is for a lot of people to die quickly. That is still unacceptable unless you maybe happen to live in Gaza.

KO's post on the 12th @15:01 and the (on the face of it) stupidity of the US producing at record highs is not about NOW. It is the result of events going back 2 years and Art Berman gives an explanation of why they have little option. He also explains the problem around the absence of capital investment from the banks. It is a MUST READ imo. The US is running out of oil.

He doesn't have answers but what he is saying (imo) is that oil will be a valuable commodity due to its limited supply in future years. Staring at a screen doesn't doesn't presently give us any health benefits but on a longer cycle there is NO way that oil can be dumped or 'just stopped'. Watch the video; I doubt many politicians will. The comment about the Middle East and the military is backed by human history and they will have a totally different relationship towards fossil fuels than politicians looking for votes. Why does the US presently have 2 aircraft carrier fleets in the region and expect them to be not far from Guyana.

*Saudi Arabia will look at the current US production aware that it will soon dry up. They aren't day-traders. They look years ahead and adjust their productio0n to keep oil at an economic price. Painful for us with politicians who do not understand oil. That would take a war.

Https://www.gridwatch.templar.co.uk/

No wonder they don't promote solar in December.

"If you want to end it, then quit using it!"

https://twitter.com/toddamtrib/status/1734167988662665282

No more flights then. Back to sailing ships - and fertilizer? The list is endless. Then move on to meat eaters. I wonder if they have a plan for the diet of polar bears? Maybe Dale Vince was right when he said "bacon will kill you first is my answer - it won't be Kim Jong Un's missiles that kill us or harm us; it will be bacon - bacon will kill you first".

*the good news is that Pandas are safe.

Good point Frac - Wikipedia says that Drax provides 6% of our electricity. It has also somehow managed to get itself classified as a renewable source. The public are mostly unaware and frankly don't care. I heard on the radio today that one MP commenting on the Rwanda solution for illegal immigrants. He said that his constituents were largely disinterested and he got more letters about 'puppy farms'.

Labour have made some outrageous claims about the abilities, delivery and costs of renewables. An opportunity for them to back it up is beckoning. Talk about 'be careful what you wish for'. There'll be a lot of angry households asking why their energy bills have shot up wailing "but you promised".

Hi piper - In response to your 03:17 I've made a separate post to try and keep it away from the tax losses debate which has proven very informative. I came across this which is pretty much up-to-date regarding our electricity supply.

"UK climate crisis and electricity grid status Saturday 2nd December 2023

Sir, I imagine many P&J readers will be wearing woolly hats and jumpers, huddled around a candle trying to keep warm. It is very cold, calm and dark outside. Ideal conditions for excess winter deaths.

On Saturday 2 December I made a couple of spot checks on UK electricity supply and demand at 13:30 and 16:50. At 13:30 demand was 40 GW. The UK has 29 GW of installed wind capacity and 15 GW of installed solar PV giving a total for variable renewable energy of 44 GW, enough to cover all demand when it is windy and sunny. At 13:30 on Saturday, combined wind and solar were providing only 9.4% of demand and by 16:50 that had dropped to 3.8% of demand.

At 16:50, gas provided 56.1%, nuclear 11.4% and imports 14.3%. Those who claim wind and solar provide energy security are clearly deluded.

Euan Mearns PhD

(Dinosaur)"

*He's from Aberdeen and P&J is The Press & Journal (I think). There's a fair chance he knows what he is talking about. I'm trying to find out what the 14.30% of imports consist of. Some will be fossil - possibly from coal even.

Hi Stevo - is the $900mio recorded in the financial statement which is 40% of the tax losses of $2.3bio or is that your reading of them? I suppose the NPV is difficult to work out on what you call discounted amount as we don't know how many years it would take to unwind.

Frac - I gave up trying to read AB some years back. That statement is always subject to interpretation or being overtaken by events. This coming week looks interesting.

Thanks Stevo. Not exactly the answer I wanted but what I expected. I did wonder why AB and the analysts never made a big thing of the tax losses but it seems they have a value that can't always be extracted. It sounds complicated enough to keep lawyers and tax accountants busy. Your reply does tend to put a damper on the reason we are getting excited about the tax losses being the synergy for a deal. Something is going on imo with the replacements who have "temporary" stamped on their foreheads and the hastily put together Senior Management page. You can see why EnQuest only spent around $2mio up front on Bentley.

I do hope we haven't got overexcited and that it isn't more of the same but with a new energy business tacked on. Maybe this coming week will throw up some fresh clues.

I was thinking the same. How can something that cost $42million in April 2021 be worth so much and why the delay to 2025/26? Other companies could also have bought Bentley if it was such a bargain tax loss wise. Perhaps the absence of competition and lack of capital around forced the sale.

We have a few accountants commenting on this message board but a dearth of tax advice or comment. All this talk about Harbour may be true but what is to stop another NS producer or a consortium of producers reforming as a new entity and EnQuest being part of the new entity? It would it get scale benefits from increased production and our 2P reserves plus the benefit of our past tax losses. The 2C reserves of Bentley and Bressay have a lukewarm promise from Labour that they will qualify for future development if the sprint to Net Zero falls at Becher's (a.k.a. the Intermittency & Blackout fence). I see different numbers thrown around and ignorance of what the tax losses are worth; both to us and others. I'd say they're worth more to others (bird in the hand and NPV) as they can utilise them sooner.

I've double checked with IR and these are the latest numbers.

"You have the right numbers; as at 30 June 2023 we had c.$2.3 billion of historic tax losses immediately available as an offset to taxable profits, while we expect to satisfy the conditions necessary to book the $1.3-1.4 billion of losses associated with the Bentley asset at the end of 2025 or into early 2026.

Utilising the cash flows from our current portfolio will certainly take several years to extinguish these losses but we continue working to accelerate the benefit of these losses through accretive M&A."

My guess is that the value is subjective to a point and some profits would be eligible for a tax credit and fights with HMRC over some borderline cases. If production is high enough they should soon be hoovered up. Or, conversely (I don't know) they can only be used in specific cases. I haven't asked IR this question because tax losses aren't unique in the NS and there must be precedents. The real answer though is that the answer would probably be wasted on me as it would require a level of knowledge in taxation that I don't have.

No rush but we should have some answers in the coming weeks. Either from analysts or knowledgeable contributors here.

*In the email "accretive M&A" doesn't mean that we are necessarily doing the accretion.

Hi Frac - no idea but the article in Forbes made me think. I'm pretty sure we'll get a surprise when the company announces its next major move. There are a lot of moving parts in the North Sea. I don't rule anything out. Much finer brains than mine are involved. I think that moving into an election mode might concentrate minds. I'm fairly confident that each party has laid minefields and the rhetoric and narrative will change. The renewable industry and Ed Miliband talk a good book but the public aren't seeing the results.

Hi Nobull - I think talk of doubling is for AIM and exploration stocks looking for finance. I'd argue that ALL decent North Sea stocks are undervalued anyway so where do you double from? If we do get into bed with another company they are likely to be undervalued too. I anticipate an armistice between the O&G industry and Labour, possibly before the election. I've given up on the Tories who have gutted the industry. I'm glad you're contributing to this message board. Fresh ideas are always welcome.

Hi Nobull - while you're twisting yourself into a pretzel what about selling EnQuest Producer? Or maybe it is being kept on warm stack as part of a future development. The debt for equity doesn't scare me so much because of AB's shareholding. However, once the smart asses from Rothschild etc. get going who is to say what the alchemists can produce?

Thanks piper - like most I prefer to be spoon fed but read the Sheffield Solar and it makes more sense. It does get to the root cause of the debate. We've already established that they have been lying about the true cost of renewables but this goes more to the intermittency side of the argument and times when solar and wind are low or not available at all. It is a cruel fact of life but in the UK we need more energy in the winter and it is actually darker and the time when we need lights on more and storage heating but solar is at its weakest. The eco-zealots brush over this and on one point where I do agree with them is that HUGE batteries could be a solution. However, on an individual basis the cost of an EV battery isn't cheap so what would a household one cost? Then there is the added complications of cost and the breakthrough in battery technology hasn't happened yet and may never [a 10,000 tonne battery for a Boeing 777 creates a few problems]

Physics is a bugger.