Member Info for romaron

MF made claims and projections which (imo) put us [EnQuest] in a far better light. Fine, he has ambition but both Serica and Tailwind have grown their businesses with buying older fields from Majors. We have too but more importantly we have the successful Kraken under our belt and know heavy oil and B&B better than anybody else in the NS. It is possible to buy in this expertise but we have it in-house (espe. Richard Hall). Even our Alma Galia experience will stand us in good stead. We are a bigger company and this is going back to the Top 10. You can have ambitions but like football teams it is always better to have the points rather than games in hand. Plus, other companies will favour a partner who has "been there, done it" against a newly formed group who may not bed in well and even if they do it may take several years. We are in an excellent position.
MF mentioned that oil is not as volatile as gas and they don't follow each other as closely as people think, "not a natural connection", and this makes them a good hedge and mitigates exposure to gas. He even called oil "insurance" and said it brings resilience to Serica. It looks like we have what a lot of people want and need. He said they will remain on AIM for now but a quote on the main index is anticipated. we're already there. We are where Serica want to be. I feel sure there is another growth spurt ahead for EnQuest. I think it's unavoidable with the industry development and Britain's requirements. Just don't expect AB to broadcast it all over the media. We are in a good place.

If you want it built; you know where to come!

Slide 22. I like the lay out
*ring fence corporation tax: $1.4bn
*supplementary charge: $1.2bn
*EPL: $0.1bn
He (MF) actually said that they expect these tax losses to be gone in 3 years (31:00)

I'd expect ours to be used up quite quickly on this basis and he did say that the tax loss/credits can grow as well with normal business.

Obviously I'm thinking EnQuest Producer. The Triton FPSO is 23 years old and past its design life. It is good until 2035 according to MF (c.50:00) but earlier I think he said 2030 and can't be ****d to listen again. What really excited me though was slide 21 which shows the tie-backs to the FPSO. Look at the distances they reach. It suggests to me that EP and the potential of Kraken Armada give us a huge advantage with B&B. NF did add that much of the NS infrastructure is past its design life but perfectly safe and fit for purpose, still.

I've used the breakdown of the Serica-Tailwind acquistion as a kinda aide-mémoire that works well for me because it means I have no interest or "unconscious bias" in the deal. I do however approach it through EnQuest lenses.
Firstly a bit of housekeeping and something I feel AB won't be happy with.
The Serica QA to retail investors today:
https://www.investormeetcompany.com/investor/meeting/investor-presentation-224 see slide 9 with Serica's list of Top 10 UKCS Producers.
and on here:
https://www.reuters.com/business/energy/north-sea-oil-producers-seek-price-floor-limit-uk-windfall-tax-2022-12-06/
see Woodmacs top 10 British O&G producers which I assume means the NS.

We are at no. 10 on Sericas list and don't even appear in Woodmacs. To make this happen Serica have left off Total and Repsol Sinopec. Have they sold off assets and dropped out of top 10? I'll repeat my complaint that both these lists can confuse because the gas and oil mix would shuffle them into a different order and possibly misses some important content.

I think AB would prefer us (for now) not to be in the public eye. It isn't his way and would never comment as Mitch Flegg did at 1:12 saying that Harbour were vociferous regarding the draconian EPL. The Q&A was OK but I feel some Serica investors were barking up the wrong tree with their suspicions of Mercuria taking the merged company private. PE don't hang around. Look at EIG and Harbour. They will probably exit rather than build a bigger shareholding.

I'll post some more comments but change the subject because there were some good insights from the presentation and QA.

Hobione I'm sure you'll welcome other views. Therapist has (imo) optimistically explained the qualities of this stock with his Panglossian view but it is incomplete without a wider perspective. I've copied this from Stuart Kirk who gives, let's call it, the macro view.

"If you are buying stocks, it should NOT be for any of the following reasons: They are cheap (mostly no). The rate cycle is near a peak (irrelevant). Flows into equity funds are strong (contra-indicator). The yield is attractive relative to bonds (irrelevant). Good years usually follow bad ones (lazy stockbroker wibble). To my mind, there are only two reasons to own equities right now - but sheez they are bloody good ones. First, timing the market is impossible so you always have to hold your nose and dive in. Second, you're bullish on productivity."

I have perfected my own executive decision model for important decisions. It has been honed to perfection and gives a firm prediction of two choices; heads or tails. Available from all good sofas.

Taxation
· Three elements to UK Oil & Gas taxation: Corporation Tax (30%), Supplementary Charge (10%) and Energy Profits Levy (35%)
· Tailwind retains significant tax losses at end 2022 currently estimated at:
• Ring Fence Corporation Tax: $1.4 billion
• Supplementary Charge: $1.2 billion

• Energy Profits Levy: $0.1 billion
· Losses available for utilisation against future taxable profits with potential tax offset in the region of £470 million based on current rates of taxation
Borrowing
· Reserve Based Lending facility of US$425m; US$370m drawn as at 31st December 2022
· Mid-year redetermination identified significant borrowing base headroom
-----
I feel sure there is a lot of read across from the acquisition of Tailwind by Serica goes ahead. The above is from an explanatory RNS today. Most of it is above me but if the deal goes ahead it will be a valuation marker for us. For instance their production will be similar and reserves lower but it really needs an Accountant's perspective and of course if EPL is fine tuned. There is the usual whingeing on the SQZ message board but much is because the price has been higher in the past.
There isn't a queue round the block wanting to invest in the North sea. Plenty though want to see how this pans out and whether the UK Government is listening.

Hi SIPP - I think the politicians operate via the air waves and the serious people meet. There they say things that we (the public) aren't privy to. The politicians are held to different standards where exaggeration and outright lying is acceptable, for example; Boris - 40 hospitals, Nuclear reactors, £350m a week to NHS, Brexit claims etc...)
If a company tried it they would be hauled over the coals and never forgiven. The companies allow governments to print and say lies because governments are all powerful and spiteful. In closed sessions I'd imagine the companies are much more outspoken and tougher. Basically there are two discussions in parallel. What we'd really like to know is the Treasury discussions with the companies plus defence contributions.
We're off the front pages now so I'd imagine it is a better environment for negotiations now. For sure another eventful year lies ahead.

Ooop - the new calculation should have been $8.89. Call it $5. Allowing for infrastucture and delivery etc.. the question is more how much we can give to customers to take the oil away. Simpler to just walk away. The greenies are completely unaware of how infantile and crackpot their outpourings are.

For real extremists they would argue that at the time of Keir Starmer's speech oil was c. $80 so a more accurate figure would be $11.43.

*I'm using the fact that oil is a fungible product because Sir Keir Starmer is comparing "clean British energy" to "imported" fossil fuels.
"Imported" doesn't help security whilst fungible is not understood or accepted by friends of the earth. If you can't get it from your allotment it doesn't really count.

*you all laughed at me when I said invest in ox-carts. You're not laughing now.

That's quite an easy number to calculate for oil SIPP. Highest reached (say) $120 divided by 9 = $13.33. Knock off a percentage for the filthy pollution and make it a nice easy number for the public to remember say $10. They will then say it's a level playing field.

I'm being flippant but it does in a puerile way show the idiocy of the 9X cheaper "big lie". Oil is a fungible product and I'm pretty sure Ed and Caroline will back me. Facts and common sense should never get in the way of ideology and zealotry.

Not at all KO - every so often you have to stress test an investment. Our problem is not with the need for fossil fuels, the energy transition or EnQuest but a government that is committed to expediency and picked on the softest target. Never a good look. Some might say bullying and it is completely at odds with the comments from Ian Duncan Smith.
I'm expecting another ratchet on the expediency model that requires cooperation from the G&O industry and expect a handbrake turn from both parties. We are overdue some support and good news. I think the mantra change to " clean British energy is nine times cheaper than imported fossil fuels" is highly significant. I've not seen the word IMPORTED inserted before. In a speech of this importance that wasn't accidental.

BTW, that's fine coming from you. Obviously your medication is working.

"Several senior MPs have claimed Chinese involvement in North Sea oil and gas operators presents a “very real risk to security”, as the UK’s diplomatic stance continues to harden." yesterday Energy Voice
"Iain Duncan Smith, chairman of the cross-party policy group Inter-Parliamentary Alliance on China (IPAC), said the government was “failing to take seriously” the involvement of Chinese-backed firms in strategic businesses, including North Sea oil and gas."
Note it says 'cross-party policy'. Statements like this seem at cross purposes with actions that decimate the UK G&O industry. Creates problems for Neptune too who are 49% Chinese owned whilst our own Golden Eagle field is operated by CNOOC (36.54%), with EnQuest (26.69%), NEO (31.56%) and ONE-Dyas (5.215).

Always something happening. Perhaps there is some strategic thinking at the top or IPAC is just another talking shop.

Hi Stevo - pleased to see you haven't taken umbrage and can take part in a robust debate. You are a welcome addition to this message board because it looks like you are prepared to challenge the status quo and go forensic. I haven't lost faith in EnQuest but the political actions trump anything our management can do.
I'm pretty confident our tax credits make us an attractive partner but it wouldn't benefit me going in too far because I would only confuse myself. I don't think they can be used as a blanket against every profit we make but a fair chunk can. IR are usually helpful with guidance here but pretty pointless giving it to me.
The 9X quote is out there and can be used to prove the "big lie" and there is also a cartel of regular users which puts Labour firmly in the camp of extremists and nutters like Caroline Lucas whilst Ed Miliband gives cynics a bad name and is simply a journeyman politician unsuited for leadership but keeps trying. I hope it comes back and bites them in the rear.
I'm not too concerned about funding if B&B goes ahead. If Equinor are involved in Bressay that will attract investment and I'm hoping that having Gareth Penny on board will fast forward the process. It really depends though on the UK Government and whether Labour are just posturing. There will be negotiations between people who understand the true situation that won't reach the front pages. I'm pinning my hopes on pragmatism and common sense.
I'm sure there are accounting and taxation tricks that can delay or push items into another favourable box but they're mostly beyond me. I think we'll be absorbed into something bigger and I don't think AB is ready to pass the baton just yet. It seems pretty clear to me that the existing PE companies in the NS want out and investors (including retail) are always prepared to take a profit but human nature means we are fixated on a price from the recent past which is higher. What it will create is a vacuum and I'm not sure who or what will fill it?

Be lucky

https://www.nationalgrideso.com/news/britains-electricity-explained-2022-review

From the UK and a security perspective it all makes sense but the hostility from activists and politicians will scare capital away. Who is to say that it [hostility] won't increase? Since May what olive branches have we seen and that with a background of a peak in gas prices in August to today's prices about 75% lower.
I was happy with the Millwall attitude and chant of "No one likes us, we don't care" but they aren't expected to start every game 2-0 down.

*https://www.reuters.com/markets/quote/NG.L
last year 26.8 % of Britain's electricity was sourced from Wind and 38.50 % from gas. I'd be delighted if the Labour party could cost the wind energy - multiply it by 9X and see how close it got to our wholesale gas cost.

From our last raise of finance we paid 11.625 for 5 year money. That is now c.94 with a YTM of c. 13.35 per cent. There is not a queue of lenders ready to finance a new, large field in the North Sea imo. I'm not trying to be negative or make an argument.
One of the many problems is that even though speeded up a new field will still be 3-5 years. We might get a few breaks as B&B are quite well understood now and Kraken has only enhanced the data.
Traditional G&O lenders don't like risk and even RBL is losing its appeal whilst you always have to count your fingers after shaking hands with Private Equity. I feel that many are behind the curve with how the industry is valued. The government have caused a lot of these problems by misunderstanding the complexity and timescales of the industry. I take my hat off to the majors who have all but exited the basin.
In the news we have Serica and Capricorn under attack from their shareholders. I think their shareholders expectations do not match the effect of EPL or the lack of spine in either Tory or Labour camps. If the government digs its heels in and does not change the taxation and timing this whole argument is pretty moot anyway and the money men do not invest in uncertainty or wishful thinking.
Next week we might get the results or level of interest of the 33rd Offshore Licensing Round. That will throw more light on the appetite to invest in the NS. I imagine you can withdraw bids up until the cut off which is 14:00 on 12 January.

Actually Juan - Stevo makes it look like a ponzi scheme with the UK Government taking the role of Bernie Madoff.

I'm not an accountant but that looks like piffle to me Stevo. The Govt doesn't lend or advance the money. If you had to fund the $1bn you'd have to pay a rate similar to our last $bond currently running at c. 13.35%. There's $135.5mio to take out of the kitty. Then there's the point that you need to be solvent and making a profit which we currently are but have had some terrible recent years and the future of oil in the UK is questionable. The benefit from the govt is only available if you make enough future profit to offset the initial costs. Another consideration is that who will lend the money? The banks aren't keen at all and PE are trying to exit. They'll look at situations but their charges are far higher and there's always a clause for an option on a pound of flesh.

Are you really an accountant? I do hope I'm completely wrong on this and you're right.

I'm intrigued Stupmy. I had you down as a pure trader and follower of tea leaves (charts etc.). I'm not being facetious but we each have different styles and methods. I don't think this time you are relying on St. Agabus.
I think charts have a place but all our carefully crafted models get blown away when a Putin, MBS or a rudderless government impose a draconian tax.

O/T I'm in DarkTrace too. Mike Lynch is a genius imo. As you can see I place a great deal on the management/owners.

Good post Zippy - you have to get behind the noise. I doubt very much that AB and team are trapped in the headlights.