Member Info for romaron

I think the Tories have made a rod for their own back but unfortunately the O&G industry will suffer the pain. Overall there will be a reduction in investment that will reduce the amount of revenue the Govt were counting on from the industry. They will likely pass this over to Labour in about 2 years.
We have been here before. It was low oil prices then. The industry, including us, shut marginal fields and companies went to the wall. The biggest difference was that then our bonds were also indicating failure or a fire-sale. That is not the case today. The situation though does mean that fields will be shut down early due to economics and the fact that end-of-life fields can become money-pits.
Even if the oil price holds up the risk benefit is largely removed by EPL and if a company wishes to continue it may well look overseas. The Govt cannot capitulate because it would be attacked from every direction. "Big oil versus nurses" or similar headlines. Never mind that O&G provides the heat, transport and equipment necessary to run a modern hospital.
I'm afraid we will have to wait it out. Thank goodness the tax losses give us shelter from the crazy "woke" world we live in. There may well come a time when they approach O&G as supplicants. That would be fine if we're still here.
I'm still confident we'll ride this out because it really is a case of last man standing. There will come a point where the Govt will have to make it worth the while of O&G companies to remain here. Whatever happened to "energy security"?

Hardly a good signal to Govt. Tactically better to wait awhile. The Govt is currently occupied with battling other essential services. I'm too old to emigrate.

Downgrade - that explains it KO. They are only following Government actions. Small plus is that it gives more credence to the Harbour announcement. Whether they will take any notice is another thing. The fundamentals haven't changed. They [Govt]are busily deepening the moat.

Could be something we're unaware of but may be a reaction to Harbour's announcement . You could argue that a company engaged in buybacks and dividend doesn't see a future in the NS then what chance does a smaller company, [EnQuest] basically reliant on the UK and NS have?
Trade volume quite low so I'm putting it down to a thin market in a little traded share. It happens a lot around this time of year.
I wonder if LC is posturing but I think unlikely. She obviously went back to the board with bad news following the recent meeting with Jeremy Hunt.

AOK - I have never found an accurate figure for major holdings and they rely to a great extent on the holders reporting. You deal the hand you are dealt and I find this Simply Wall Street one of the more accurate estimates. Better than the FT or Morningstar imo. The debacle with Premier and ARCM Hongkong shows how poorly recorded and policed the reporting of shareholdings is.
I have discussed with IR and even tried to see if it is possible to see the share register (it isn't). IR go manually through the register about once a month I was informed. The benefit is hard to assess as many proxies are used. For example I am in with AJ Bell whilst on one occasion Jefferies were included when in actual fact it was AB's holding so double counting occurred (I think it was Morningstar). The SWS is encouraging because it does suggest that Institutions are more involved than in the past. They are not so flighty as PI's who want action every day and it was encouraging to see that Cobas and Helikon are still around and holding. They may have sold some but fundamentally they are holding because they expect a rise.

BTW you are wrong in your post 18:01. I am only correcting so as not to mislead other readers. From SWS the AB Family and Foundation have to be added (10.71 +1.76 = 12.47%)
The figure you use is as at 31 Dec 2021 and there are purchases and vested options to be taken into account of up to another 19mio shares since then. So that brings up their holding to c. 12.46% which I think is close enough for me. I don't do precision. I leave that to the numbers guys. Some are very good.

Simply Wall St. 15/12/2022
10.71 Double A
8.34 Aberforth
5.57 Schroder
4.74 Baillie Gifford
4.02 Cobas
3.35 Dimensional
3.17 Avanza
2.32 Blackrock
1.9 HBOS
1.89 Pictet AM
1.76 Bseisu Foundation
1.68 Swedbank
1.65 Legal & General
1.49 Helikon
1.48 Ravenscroft IM
1.45 EnQuest EBT
1.34 Fleming Family & Partners
1.14 Columbia MIA
1.08 Modus selective IM
.84 UBS AM
.83 Barclays
.82 AJ Bell
.79 Goldman Sachs
.66 Brunel Pensions

Hi Boggi - I was about to pull apart the assertation that EnQuest have 64% Institutional Ownership. It is too high from SWS data imo but not that far. I expected to find they had included Hargreaves Lansdown who are largely retail. They didn't but included Avanza and AJ Bell who are probably largely retail. If Hargreaves are giving advice then that could easily be classed as Institutional. Clearly EnQuest is NO AIM stock and I was a little surprised at our high level of Institutions; in a good way.
I ignore the daily ups and downs because Algos and Bots aren't discriminatory and we get washed back and forth like the tide even when we're in a different ocean. The O&G sector is populated by such wide ranging companies that they shouldn't really move en masse but the trend and narrative has enabled this. That is about to change bigtime imo. to the benefit of well run companies with a future which includes us.
There is a moat around EnQuest ("The term "economic moat," popularized by Warren Buffett, refers to a business's ability to maintain competitive advantages over its competitors in order to protect its long-term profits and market share. Just like a medieval castle, the moat serves to protect those inside the fortress and their riches from outsiders." ) which oddly enough wasn't built by us but by climate activists and other ESG nutters. They have successfully driven competition away in the NS.
I have posted the SWS list in the next post.

Build it and they will come - just maybe not in the North Sea.

explosion in growth was mainly due to coal. It powered the Industrial Revolution. It is still being used yet the activists and market pricing expect the oil industry to docilely disappear in a matter of years - juststopoil is a ridiculous mantra but some Govts are going along with it. I only chose coal because it is hard to find another major source of essential energy that is plentiful and cheap which has been so hastily abandoned for Hopium. There isn't really a precedent and unintended consequences could sink our economy.

Here is an example of market idiocy. In The Times today, engineering company Rotork is given a BUY rating - it has a MC of £2.63bn and expected EPS for 2023 of 13.7p. It trades at 22 times next year's forecast earnings (or an EV to Ebitda of 14X).
Why do I mention them? Because they have primarily been generating 45 per cent of revenues from the O&G sector.

I don't believe you can have these high metrics for an industry that has a huge investment in O&G for its future but consign the much, much larger O&G sector to levels that indicate a death spiral valuation. Surely one of them has to be wrong?

Our EPS will beat there's in 2023 and we have a lot more shares.

Befuddled, Barnet

*I'm using a form of heat pump to warm my kitchen. I'm leaving the fridge door open. Why not - crazy is the new normal.

"In my personal finance column in the Financial Times this weekend I explained why I have more than ten per cent of my savings in Asian equities. Which means that when I'm wrong, I'll acutally lose money, unlike most investment advisors out there."

I'd say our Malaysian interests qualify. SK is from the same pool as AB.

Hi FlashCrash - you beat me to it. I've been thinking along the same lines and I have a few ideas. AB and his family have around 216m shares. I don't know his personal holding but there are several reasons he might also be in favour of dividends. We all appreciate a top up from divi plus his non-dom status is threatened (not confirmed but I'm sure his tax advisors would recommend) by a Labour Govt that may only be a couple of years away.
The company have never paid a dividend and it is long overdue. I'm guessing Aberforth and Baillie Gifford (LTHs) would concur. We are probably pushing at an open door as the international O&G industry is leaning towards dividends and buybacks rather than spending on capex. We are likely to have around 3 years of decent profits (tax loss shelter) and a viable business beyond.
My suggestion would be a minimum of 2p which including distribution costs would be c. £40m and for AB & family c.£4m. The reply from Craig is encouraging but they obviously cannot commit to a dividend payment from a governance position and legal ramifications on the unknown future. It is very promising however because of our direction production wise and the price of oil.
At present the long suffering shareholders are backing the company but we are a loose alliance. Maybe it is time to see if we could collate some numbers and get an idea of how many holders would agree to pressure the company if they are slow to take advantage of our position. It isn't only BP and Shell shareholders that deserve dividends.
If there is an interest in doing a straw poll of (say) collecting holdings away from this message board then there are several posters, both here and in Sweden who have shown integrity throughout and may be willing to assist. I'd suggest a minimum of (say) 200k shares otherwise numbers could become unmanageable. The company could even benefit from having a better idea of what the retail investors think.

Thoughts?

Are in the FTSE 250 and we ain't. They take a contrarian view and look for lowly valued companies with recovery potential. They try to separate value traps from companies in the grips of a shorter-term cyclical decline in earnings. Their 2 highest exposures are BP and Shell at c. 18%. They think that underinvestment in energy infrastructure will keep commodity prices elevated. They also hold Royal Mail and ITV. They [Temple Bar] are described as inherently high-risk and only for those with the stomach to speculate on economic recovery next year. - Source today's Times

So, if holding Shell and BP is high-risk you can see what they think of the likes of EnQuest; and this is one of the braver funds. Our fundamental weakness is that we are TINY in the eyes of Funds. This list is not accurate but good enough, we are at no. 376 http://www.stockchallenge.co.uk/ftse.php
We will continue to be avoided by most (all) funds and not necessarily because we are in the O&G sector. I can understand that the risk of noisy activists invading your H.O. or AGM is another reason and it is clear that the UK Govt and other parties are hostile towards the sector for short term political posturing. Why look for trouble?

Presently all O&G are shunned which explains their low ratios. There are many reasons NOT too hold O&G but the largest is political correctness. The reverse of this is that O&G is ridiculously undervalued and breakouts if things improve will be disproportionate. Analysis is not that deep imo in companies like EnQuest. I believe we are safe from any unwanted bargain hunters from PE because of the large holding by AB and family. So with no new buyers we'll just have to be patient and work with a top management team and rely on profits, FCF and dividends/buybacks.

*When the spread between the most expensive and cheapest stocks was this wide during the 2008 financial crisis, Temple Bar markedly outperformed the FTSE All-Share.

Goldman Sachs says China's reopening could lift oil by 15/bbl, article with gallery
Exploration & Productioncategory · December 12, 2022 · 4:00 PM GMT
China's loosening COVID-19 rules would likely lead to higher oil demand and in turn prices might increase by around $15 per barrel, Goldman Sachs said in a note on Sunday.

2 minute readDecember 12, 20223:24 PM GMTLast Updated 4 hours ago
Brent could quickly top $90/bbl on Fed pivot, China demand recovery - BofA
Both Reuters

Just to drag you away from making snowmen (our Swedish friends will understand - we have had a blizzard of snow; some drifts are up to 10cm deep here).
We all need a bit of cheer and although unconnected to O&G I thought it worth showing that LTH can have its rewards.
From Sunday Times:
"Gray, 52, made his name in 2007 when he spearheaded Blackstone's $26 billion buyout of the heavily indebted Hilton Hotels. The top-of-the-market deal was written down by a whopping 71 per cent as the financial crisis took hold, but Gray held his nerve and pumped in $800 miliion of investment. Eleven years later, Blackstone walked off with a $14 billion profit - making Hilton the most profitable equity deal on record, albeit quantitive easing played a helping hand."

You can live without hotels but energy is a different matter. How are they going to rebuild Syria and Ukraine without cement and steel. What will the machinery run on etc? Can shipping run on wind? It used to be powered by wind but I think shipping has progressed a little since then. As for QE helping Hotels we have mainly had adverse winds. When sentiment (or more likely NEED) changes we will see an uplift. The NS doesn't close at midnight on 31 December 2023 (pick your date but it won't be far from this) whatever the market says.

Like being a vegetarian between meals.

Hi Modestus - I don't really disagree with any of that. In my posts I try to give my take on the political and activist agenda in the UK. I realise news is global and fast but it still misses out on a more general local appraisal and we have investors who are not UK based (mainly Swedish) and the odd outlier like yourself (Belgian).
I just turned the radio off because the presenter was a rabid greenie and spouting half-truths. "Renewables ARE the future" another slogan which bears no relation to facts as it mostly revolves around electricity generation which is not the full story. A better quote would be "there is a future for renewables but much technology is unproven and uneconomic". Followed by "the youngsters of today have to resort to throwing perfectly good soup at old masters to get their point across". I have family going on a cruise round the Bahamas - some are under 20 years old; they have no qualms over their carbon footprint. Take it a step further and will youngsters stop flying to (for example) Ibiza? I'd like to see juststopoil demonstrate outside a nightclub there.
I'm comfortable with my holding and what froze us on EPL was that how do you sell a stock that has decades of market life in front of it and is grossly undervalued at double the price? That of course would mean changing the metrics of valuation back some years. Maybe "this time its different" applies but I still have faith in profit, FCF and an essential commodity.

Be Lucky

I should have added that the high teens was in another period when low oil prices meant we were making a loss and basically cut back on capex. This time it will be a cut back on capex because of Govt intervention and EPL. It wouldn't be too extreme to say that the O&G have NO friends in Govt. They are so desperate and out of ideas in Govt that they have sacrificed what could be a thriving industry going forward. O&G will go on. At present it seems we will rely on Norway and the US as our major partners.

A couple of reasons I can think of Tigar. His son is at Yale and that ain't cheap whilst they're threatening to take away the non-dom status and I'm guessing that AB (and Linda Cook) have non-dom status. Nice to feel welcome. There are also quite a few options that the directors will receive if things go well. Director buys in O&G don't have the leverage to the share price they once did so it makes very little difference. I expect we'll all be buying via buybacks soon anyway.
I think AB is very canny and one of the more able CEO's. I remember him once correcting me when I complained about our declines at an AGM. You learn from your mistakes and I was informed that older wells can be in the high teens without workovers which is something that is hidden from the public (or of no interest and perfectly understandable). Declines are currently working in O&G's favour. Apart from Russia, I'd guess that all producers are pausing on new investment. And I'm not gonna guess what Russia will do next. They have the perfect excuse. "If you're so ffffing great renewables; show us what you can do without us!"

OK Modestus, here's my summary. O&G is betamax in a VHS world; or so they say. Renewables are the new must have but there is a problem. Renewables are not as reliable or as energy dense as fossils but win the emissions argument.
They have had plenty of support and money thrown at them but the same system hasn't worked for the NHS so why should it work for renewables?
The majors left the NS and remaining companies are actually too diverse or lack the scale or rating for investment by the larger funds so even limited buying isn't there from funds. The Govt is desperately searching for revenue to pay off the unions and chose O&G because of the amount of discrimination and persistent attacks from greenwashing (ESG) and climate activists. It is wrong but options were limited. Lazy and populist government tends to be in vogue at present and the news cycle is everything. Expediency and short term measures are being applied to an industry that relies on LT investment. That is why the EPL will not encourage investment (why produce betamax when everyone wants VHS). There is a huge gap between what renewables promise and fossil fuels deliver but as the denouement is still a few years away there is always the slight chance that something may turn up for renewables.
The NS will reduce further and those left will benefit from "transition". There is a new definition now and it has little to do with renewables imo. It is a staged redundancy and elimination of the industry from the UK. The public were duped by Brexit so why should the lies surrounding renewables make any difference? The British public are now being led by dogma and ideology. Maybe you can fool all of the people all of the time.
We're actually in a pretty good place because the next 2/3 years we have the tax losses as protection and the transition to renewables will need us [the transition to industry redundancy is another discusssion). It will take a lot longer than the political parties understand so we have a decade easily ahead for transition to renewables.
I read that in the US the E&P sector trades at 0.8X its net debt adjusted PV-10 per share sometimes called NAV per share going forward. If we weren't in the condemned cell this would actually be a multiple the other way. In fact how much lower can they go? Perhaps if oil went to $25 but with no investment and a supply shortage is that likely to happen? They still need oil and natural declines on older wells is higher than the expected loss of GDP in the expected/happening recession.
There are opportunities ahead and we are well placed. Our share price makes no sense but we are lumped in with those that may well fail. Our EPS almost matches our mc so we could be worth 44p in 2 years or 66p in 3years quite easily.
The NS O&G industry won't close at 31 December 2023 which is what the price indicates imo. I think what the activists hate is that we won't die. Perhaps they'll try wooden stakes next?

I didn't expect to see EnQuest back at 22p but then again I didn't forecast Covid or Russia invading Ukraine. Just to make it easier Western govts got the ESG religion and decided O&G is the devil's spawn.
If you look at the financial pundits most are expecting a short recession and a bounce for equities as soon as H2 2023. That means that stocks will start moving up from January onwards [stock markets look 6 months ahead, so they say].
We are presently in a glut of oil assisted by the US SPR release and I hear that China and Japan also did the same. Gord knows what Russia and SA are thinking/doing.
I know that orthodoxy and charts says that contango signals a weaker oil market but I think that says more about orthodoxy and the herd but not what is occuring in these unusual times. I doubt there is a surplus once you look behind SPR. I read that Russia has over a 100 ships they've picked up that may well be full of oil as I write (no idea why?). The stocks are high for all nations as that is exactly what people who have cold winters do. It means you have more than usual but it depletes fast depending on energy needs and the weather. I'm old enough to remember coal bunkers.
If the recession is shallow then it will probably reduce demand by less than the production losses due to natural declines. That is bullish. There is less NEW driliing than usual and anway there is a shortage of capital for O&G.
Our Govt has panicked and done the equivalent of sawing off the branch we are all sitting on. Not only do they worship at the altar of climate change but expect a revelation to appear where renewables and angels appear together to save the NHS and pay workers what they ask for. As insurance they expect veganism to be adopted universally and cycling the main means of travel.
I think that the front end Brent should be a lot lower and it ISN'T. The problem with the charts and futures is that they should be $20 higher (guess). Anybody who has room to store oil only has to wait a month or so to be able to sell it much higher imo. Something frightened the life out of Biden and he had little option than to bluff Russia until some intern came up with the idea of the Cap. Mid-terms played their part too. There are so many things we don't know and unintended consequences that anything could happen but I haven't changed my mind about a worldwide imbalance and undersupply of oil heading our way.
Another problem for Russia will be the shortage of Western technology and chips. They are suffering bigtime in weaponry and a wartime economy relies on expediency + make and mend. That can only be short term for oil wells and pipes.
Meanwhile our govt is doing an impression of a headless chicken so we have little option other than to take the long view and wait.

I expected nothing less. The govt and Hunt are presently under siege and basically if he conceded anything to the O&G sector he'd have Labour, Nurses, Railway, Bus, Royal Mail, Firemen and Border Force (have I missed anyone) up in arms. I would do the same. They cannot fight on too many fronts. Interesting today that Yvette Cooper was asked several times if she would give the nurses what they are asking for. No govt of either hue would answer that directly and if you want to defeat inflation the answer is basically "we would negotiate" which means NO.
I am actually happier than before because I am accepting that it isn't EnQuest specific and we are one of the better placed companies in the sector. Most here basically know that the promises of renewables is undeliverable but that will take time to reach the public. Energy bills are already helping clear the economic miasma around renewables that no amount of lipstick will hide.
I heard on Bloomberg that private investors in the US are down 30% so far this year. They tend to take on more risk than the funds. EnQuest is up 12.8% YTD (google). Energy has actually held quite well against the headwinds. Regarding EPL I liked this: OEUK CEO Deirdre Michie said: “This is a potential slow disaster for the UK. If investment falls now, then in a few years time our gas and oil production will plummet and we will become ever more reliant on imports.
“And if we produce less oil and gas then we will also be producing less jobs and, ironically, far less taxes.”

Careful what you wish for.