Member Info for romaron

My take out:

2. Debt and 3 year hedging covenants means an additional topside risk.
3. Norway fields are much fresher, larger and the country is fiscally stable. Cannot compare as Labour proclaim.
6. Death of infill drilling. “Infill drilling can be quickly sanctioned, and wells delivered within just a few months. But that means the lion’s share of their revenue falls inside the EPL window. This involves dividing a projects NPV by its Capex. The EPL chops NPV down, meaning companies with assets and projects overseas will now easily beat the UK for any investment."
7. It removes debt capacity - a lot! RBL's are rapidly going out of fashion as they can quickly become short-term debt. Access to capital disappears.
8./9/10 “It threatens public services” Winning an election trumps economics.
“Our energy security is compromised” We knew that anyway.
“It is bad for the environment” Just turn on the import tap over which we have no control.

Atishoo

The cost of completing HS2 has ballooned from £33bn a decade ago to an estimated £100bn today, making the project “a sitting duck for cuts,” said New Civil Engineer.

I liken HS2 and all its (supposed) benefits to the promises of renewables. People just want cheap and reliable energy. When the political parties can no longer defend the billions spent on an inferior or unnecessary alternative they are usually replaced so actually nobody takes the blame. We have spent billions more on renewables than on HS2 under the cover of "religion" and waiting for miracles.
I reread the EnQuest RNS. Nothing has really changed since the TU of Feb 17 so why the delay? They are after all preliminary financial results so nobody would complain if late adjustments had to be made due to EPL tinkering. Not a good look if we were hoping for manna from heaven and it doesn't arrive. I do not expect good news.
I wrote to Andrew Neil last week.
"Dear Andrew,
I hope this reaches you. You are fearless when it comes to bringing politicians to account and reminding them of earlier quotes and promises. I include 2 letters that include public domain facts that run the risk of being overlooked and affect every household in the country and our security.
I am a small retail investor in the oil and gas sector that has been demonised and the North Sea is certainly not the home of “oil and gas giants”! They’ve left."

I sent them to Channel 4 and The Mail. The point of a letter is that it has to be opened and others read it. It will probably be binned but you have to try.

I wish it was as easy as that vog. I think the industry ignore the retail investor and we are treated like a William Hill client when in fact many of us seek a steady stream of income and some capital appreciation. They are so worried about perception and saying the wrong thing that everything is behind closed doors. We are each capable of breaking a confidence without much recourse whilst they are in the opposite position. We are all potential "nutters" and they need to keep us at arm's length. We are an unused resource but most here are voters and when pushed can quickly become a "nuisance". That is our power and even the misguided mob at juststopoil have more energy than the average RI.
I did get a carefully worded reply from Harbour IR.

"Linda Cook has asked me to reply on her behalf to thank you for your letter.

I think the other point to make is that while it may be that renewable energy sources are cheaper than fossil fuels on certain days / over certain periods (especially given the volatility we saw in gas prices last year) you cannot rely on it and there is insufficient reliable renewable energy sources and infrastructure to meet energy demand today. As such, there is still an important role for oil, and in particular natural gas, to play as we strive to deliver a just, affordable and orderly energy transition."

Completely bland and a safety first approach. They don't really have an alternative. However, in private I am sure they are more forceful and we should also use the media with far more aggressive and confrontational tone. My heading of the letter was "The Big Lie" and the the ridiculous claims regarding renewables. I doubt you'll see the industry use that terminology. Their advisors are scared of their own shadows it seems. We need a Mick Lynch.

Analysis
We spend time analysing listed companies, taking an in-depth look at their competitive edge and the quality and durability of their business, until ascertaining their true value.
Selection
We invest in undervalued shares in businesses that are easy to understand and provide sustainable high returns at a lower price than their intrinsic value would warrant, i.e., we give ourselves a wide safety margin.
Patience
On the strength of careful analysis, accurate valuation and cautious selection, time works in our favour. We wait for as long as necessary until the quoted market price finally recognises the true value of the companies we invest in.

--------------------

https://www.londonstockexchange.com/stock/ENQ/enquest-plc/company-page
Interesting activity yesterday. I don't pay much attention usually because for me every buy is a sell (and vice versa) and I did 28 years of chasing prices. We were a market leader in Italian Lira and at the end of a busy day I couldn't tell you what had occurred and if a deal was a buy or a sell. Classing a trade is pretty arbitrary, especially as most is electronic nowadays and it's hard to know what a machine is thinking. I like the big trades because they can tell you something. For me I'd ignore the annotation and look at the day's move. The late trades aren't late. They're done earlier and recorded late. If I was a buyer over a few days I'd do my very best to get the trainee to book them as sells.
Look at the last 20 trades and including the UT there was half the day's trades there. No idea when dealt but it is usually the morning and my "best guess" is this. A.M. the price wa sc.17.5 so the request for size came from a seller. I have no problem with that as ratios and mandates drive a lot of trades and there's always the 3 D's. This doesn't apply if you're a BUYER. In this case the BUYER which is often the MM will take the bet in the same way that a rails bookmaker will. Liquidity is everything and you can still shift amounts in EnQuest without cratering the price. The "size" buyers are for me, "smart money".

Dear Linda, I am only a small retail investor in oil and gas and this information is in the public domain but I haven’t seen it picked up by the media. At the 20 July Environmental Audit Committee hearing you were lied to three times.
14:43:20 Khan says on renewables “which are at the moment 4X cheaper than gas”
15:23:10 Lucas says “Linda Cook on something you said people buy oil and gas not because they like it but because it’s cheaper, can we just clarify that we do accept that renewables are 4X cheaper than gas”
Then later in the same exchange
15:23;50 “be quite careful with language and it is the case that renewables are 4X cheaper than gas.”
-----------------------------
With their success at getting away with this exaggeration they built upon it and in November doubled down:
6 Nov 2022 Ed Miliband – Sunday with Laura Kuensberg “solar and wind power is 9X cheaper than fossil fuels.”
6 Nov 2022 Adrian Ramsey – Green Party on Sky TV used the 9X quote
8 Nov 2022 – Sam Johnson juststopoil LBC “renewables are 9X cheaper than fossil fuels”
10 Nov 2022 Question Time - Caroline Lucas Green Party 44:00
“rather than chasing after more gas which is 9X more expensive than renewables”
There are no doubt more that I didn’t catch.
05/01/2023 in Keir Starmer’s New Year Speech he said “"renewables are 9X cheaper than IMPORTED fossil fuels".
And at Davos 19/01/2023 on a CNBC WEF Forum again repeated that “in the UK renewables are 9X cheaper than oil and gas”

Use this information any way you like but I think the British public need to be told the truth. There is clear collusion between the activists and the Green and Labour parties. This seems to be the source: https://www.carbonbrief.org/analysis-record-low-price-for-uk-offshore-wind-is-four-times-cheaper-than-gas/
I will be sending these details out to other companies and individuals but you have a week’s advantage. You may already be aware of these numbers and I am a bit concerned that they haven’t mentioned them for some days. They probably think they’ve got away with it. The public aren’t stupid and will start questioning why their electricity bills aren’t much, much lower with current wholesale prices. The environmental evangelists need to start telling the truth. I actually think it might be interesting to have an independent source explain the pricing relationship between gas and electricity. I struggle but feel confident I’m right when I get my utility bills. It is doubly insulting to me that they choose high profile events to present their lies undermining the British public’s faith in institutions.

There does appear to be something in this but has the date passed? There is stuff about to be printed so it won't wait until next Wednesday. Parties involved have probably been told not to announce anything but there will always be leaks. They don't appear too promising otherwise we'd be up 20% but then again the macro and markets have been working against us anyway so may have compensated. The market always wants certainty as far as can be expected and we certainly need some consistency fiscally.
Reason for post is that any whining or representation is now probably closed. I've exhausted myself with the amount of letters I've sent but there is one last opportunity. If you are in a Labour constituency send a letter to your MP. Promise them that you will do all in your power to promulgate the lies and damage that Ed Miliband has done to the industry unless they drop their one-sided campaign and lies against fossil fuels. The UK O&G is not produced by "oil giants" and "obscene profits" were a brief experience in this past decade and "obscene losses" were more common. Promise that you intend to get the "renewables 9X cheaper than fossil" fuels shibboleth spread across the country and will be asking Labour to explain why electricity bills aren't lower. They'll sense a trap. We'll make sure that consumers won't let them forget. It will help make them back off their ideological crusade which is becoming something of a vote loser. The British public understand a windfall tax. They'll also ask now why haven't renewables lived up to their promises?

I suppose it is the clearest sign yet that the industry have challenged the Chancellor and there are decisions for EnQuest (and others) dependent on what he announces "before the end of the month" regarding EPL. Reuters sources were right.

When I saw today's RNS. It is usually a bad sign when results are delayed. I just had to wait for the market response. There is ALWAYS someone who knows what is going on and if it was to delay releasing bad news then the price would reflect this. Today I will pay more attention to price movements. Early signs are encouraging.

*some years back I telephoned Simon Cawkwell (Evil Knievel) a pal of David Lenigas. I don't know him but his number was published. I wanted to short a company that was too small to be traded by the likes of City Index (was less than a mc of £100m which was their limit at the time). I correctly guesed that he would trade the info for my thinking at the time. I got some obscure broker in Basildon of all places that might facilitate (one of my family has a gym there). The laws of libel prevent me going further. However, I never forgot his first question; "are their accounts late?"

Just out of interest. The $HYN and the RB have a similar maturity by a few days. The $ YTM is c. 13.25 % whilst the £RB is 10.375%. I know that EnQuest prefer bonds for the freedom they give whilst the RBL (do they still exist?) was covenant heavy. There is a healthy appetite for RB's and I think the lower rate is because there are some safeguards. Could be an option in the future.

KO 15:46 bit early to be on the lash?

Couple of things. Stupmy, the 9% RB is a gift. With our credit rating we wouldn't get close to that now. The YTM for the 11.625 % $HYN is c.13.25% - for comparison the Tullow 10.25% is running at c. 19%. We're lucky to have them - the capital market to small NS O&G stocks is currently CLOSED.
KO - the problem with a bid for our tax credits is that they only apply to the NS when anyone with any sense is looking overseas. I'd say it isn't even encouraging for renewables or any inward investing to the UK. A windfall is exactly that - it only applies whilst the event impacts. Unplanned for and unexpected. The signal to investors is that UK governments will confiscate at the first opportunity you do well and wind is FREE and 9X cheaper than oil and gas. They must be next!
I'm looking forward to my electricity bills collapsing.

*The bond signals are good imo. The rump of the 7% RB is around par so not bad. I wasn't a bad risk in 1979 but my mortgage briefly touched 18%. Inflation cures a lot of ills. 9 per cent is cheap if you factor inflation in and you have to pay for credit risk.

I feel for their investors and am not posting there. It feels a little like attending a wake when you're not connected although trolls have no such inhibition and I'd not be welcome because it isn't easy to differentiate.
They produce c.9k bopd and have no debt. The deal is for £250m and they have almost £80m cash. I can't get an accurate number for their 2P reserves but I'm guessing around a fifth of ours. It is clear the management cannot see a way forward and the NSTA blocked an extension of the Lancaster field over flaring.
What they've missed imo is that Crystal Amber and Kerogen are probably even more upset. They are activist investors and the market has definitely not gone their way (EIG read the runes better). I'd go as far to say that they are having a bad time and sitting on large losses. They can't sell into the market as that would be self-defeating and are looking for a larger fund with deep pockets. It is still a buyers market judging by this deal.
I think that being thwarted in growth and a hostile political environment made them accept that selling up is the only choice. Hurricane's scale limited them and to grow would require capital which, sadly, is unavailable for smaller O&G companies [it is still available for mismanaged banks].
We are safe at the moment but it is the direction we are heading if the government doesn't come to the aid of the O&G sector.

*with my simple sums compared to HUR we are undervalued but I've been saying that forever. I think that this Prax/HUR deal is a fire-sale and the bottom for this market. We can hold our breath longer than some of our competitors.

I will start another thread because it doesn't directly relate to EPL but has implications for investors in EnQuest. There is an active discussion on Hurricane energy regarding the sale to Prax. I was drawn to it as they are a NS oil producer and we might use it to cross check our valuation.
The retail investors are up in arms about the terms of the deal and are wasting an enormous amount of energy posting. It will be to no avail but if they stopped for a moment and accepted that their shareholdings will have no effect as the 2 major shareholders have agreed to the deal (crystal Amber 29%, Kerogen 16%).
That energy would have been better used to write to all and sundry about the inequity of the EPL. There are a helluva lot more retail investors in O&G than there are members of juststopoil. Each retail investor has another vote - a chance to replace a politician. That would have more impact.

https://twitter.com/aeberman12/status/1636156288173219848/photo/1

It used to be called "Old Age".

"Gas imported from abroad usually generates more emissions because of the energy used to liquefy it, transport it and then turn it back into a gas. So, there is no real benefit for the planet if you replace domestic supplies with imports."

https://www.worldoil.com/news/2023/3/13/oeuk-ireland-s-natural-gas-drilling-ban-threatens-energy-security-sends-warning-to-uk-policy-makers/

*Thanks to Modestus for finding this article.

I got a nice email from her this evening. On energy she wrote "Labour pushed to stop energy price rises. Labour pushed for a proper windfall tax." She finsished asking for a donation but it did remind me that I needed to check what Pat McFadden said today on Politics Live.
When Faisal Islam suggested that some of their plans could be affected because gas prices were lower and there is less to play with. McFadden replied that there was still a "loophole" in the WFT because of the 90% investment allowance. He added "it doesn't need to be there. Something that could be closed."
It kinda went against something he said later that for the country to prosper you "need to grow your way out of it, not tax youer way out of it."

Presently labour won't rest until they've driven the industry into the ground by effectively ensuring the risks don't equate with the return. I can't join the SNP but he was followed by Stephen ***** who is an MP for Aberdeen and I shall write to him. He seems to know a lot more as Scotland exports 6X more gas than it uses. I'll ask him why gas bills are higher in Scotland according to him. Someone is making a fortune out of renewables which as we all know are 9X cheaper than gas.

If we were in serious trouble the RB and the $HYN would have cratered. They haven't ($HYN didn't move today). We are solvent and a "going concern". We'll just sit here having our coffee or a glass of ouzo. We're even busier when it rains or there are strikes. Bit like today really. Balls in their court. Do they want to engage?

Politics, as a practice, whatever its professions, has always been the systematic organization of hatreds. -Henry Adams, historian and teacher (16 Feb 1838-1918)

Antifragile - a book by Nicholas Talib (author of The Black Swan) reflected recent events. He starts off with who has the safest job? The middle manager at a bank or the semi-literate taxi driver sitting in the cafe waiting for a client. It is of course the resilient taxi driver who will always be needed. I remember when Credit Suisse was AAA. Maybe we will have an announcement later this month (I hope so) but we will survive because fossil fuels are needed for decades and eventually even politicians will begrudgingly come to this conclusion. We are highly profitable with a more than capable management.

https://www.reuters.com/world/uk/britain-announce-energy-security-measures-by-month-end-2023-03-15/

Maybe something later this month?

Nobody on here is a lobbying expert so whilst on the surface it seems our companies and representative body have failed to argue our case successfully we don't know if they have been heard and it is a question of timing. Any alteration to the EPL is highly political and I was disappointed in the reaction of Pat McFadden the shadow Chief Secretary to the Treasury on Politics Live (BBC2) after. He dismissed the windfall tax and said that the capital allowance needed to be removed (needs checking as not on iplayer yet so relying on a dodgy memory). The Government may slip an adjustment in away from the febrile attention today. It isn't looking good though.
I will remind AB of his response at the AGM when I said just run the company into the ground and he replied "it doesn't work that way". Afraid it does old son when you have a hostile government and opposition digging in. I cannot see any lift off for new developments in this environment and if they think the transition can work without fossil fuels they are even further removed from reality than I imagined.
The 100 percent allowance on IT, plant and machinery (for 3 years I think) isn't that different to the EPL allowance in my ignorance so perhaps the McFadden threat is empty. Needs someone like Stevo or L7 to investigate.
Cogitating at the moment but can anybody explain why we've done better relatively than Harbour today? They have buybacks and dividend, we don't! I think oil is more valuable than gas presently but even so?

I am actually still quite positive.