Member Info for romaron

KO - You've got governments having convenient scapegoats in Putin and Covid and as always will suggest that any recession will be brief and mild. So on the one hand attack oil because it will be mild and of a brief duration. On the other hand why impose a windfall tax for 3 years and why is visiting Saudi Arabia so important?
https://www.reuters.com/world/us/back-europe-biden-turns-diplomatically-delicate-saudi-arabia-trip-2022-07-05/
It will become clearer next month one hopes. All I know is that our debt will have all but disappeared by end of 2023 and from then on all the FCF belongs to shareholders.

O/T KO I like this graph - Art berman - 20h https://twitter.com/aeberman12 UK GDP on Energy since 1300
I'm considering increasing my fleet of oxen and branching out. I've had a few problems with the wagons which are a bit wide for modern roads and I keep losing wing mirrors. I'm also having a problem sourcing yokes - interested?

https://mcdan.com/price-forecasts/
The latest figures are out. H1 2022 105.55 and they're forecasting 104.50 for H2
2023 92.31
2024 84.27
2025 77.47

These are best guesses and are a reminder that these are closer to what the industry uses in their modelling. I think they're far too conservative but it depends on how deep the recession is and macro events obviously. AB did point out that the $100 + prices may only be temporary. Industry veterans tend not to get caught up in the hype surrounding oil. I think you can take it as read that AB has lower expectations than many on here (me included). I don't see Saudi Arabia accomodating the West with vastly increased production. They too think long term and could easily argue that they aren't the insurance for when the West gets energy wrong.

Loving this exchange. There are some bright and knowledgeable people on this board. I was stuck in the mindset of Bressay for the EP and you're bringing it back to the real world. I did try and push AB at the AGM for exciting stuff but summed it up that basically they're getting on with the knitting. It is easy to forget that this is a company that has a successful business model that fits in very well for what is required in this transition period which I expect to go well beyond 2050.
I suppose Kraken Armada might have a roloe to play in development of Bressay. Now that would be some achievement and forward planning. Unlikely I guess but realism has entered the space.

Interesting thoughts there Prodopt - using EP for a shorter period might still make the economics work. Then there is the possibility that the life of the hull might be extended. As long as it passed safety tests why not? Buildings and bridges for example have a much longer life span and they're already talking about extending the Sizewell B nuclear reactor for 20 years. You say Mariner was probably overengineered. In tough times you tighten your belt in many ways. The government may well positively drive and encourage it. The times they are a-changin.

"You can blah blah blah about neoclassical economic flows like capital and labor but the price & availability of energy is not even the elephant in the room.

It is the room!" Art Berman

Hi Auson - I'm the wrong person to ask. mrc or Therapist with his ability to probe deeper is best bet. I think the hull was 40 years old and probably has another 10 years left. Richard hall has been called back from the Far East and he's a go to man for this sort of thing but I may be reading too much into that. I fancy we'll hear something once the current turmoil subsides. I think it may be early September before any signals.

Hi KO - it was more a post about how negotiations are kept out of the public eye. I'm sure the EP is worth something but its an old hull with a more modern topside. Beyond my ken.
Once the EPL bill passes through Parliament we'll have more discussions about BBK I'm sure.

Reading that Ping have taken the ex Spirit FPSO for their Avalon development. Owned by Teekay. Only mentioning because it was destined for the Nigg graveyard last I read. It is a 'round' FPSO rather than ship shaped which I remember was the plan by Xcite for Bentley. Goes to show how negotiations are kept under wraps. Second hand cars have shot up in value so maybe that applies to FPSO's too. Pretty sure they can't all be repurposed but encouraging for EP.

1 and a bit Lytham? In your dreams. We are currently hovering around 1 imo.

Using Tarmak's 2022 figures:
https://drive.google.com/drive/folders/1h_a4jmSsXq2iypyHqoFXfo49pIZzmoid
You get c.22p EPS.
The fundamentals page on here has a PE of 1.421 and earnings of 16.08p
The PE is a lazy calculation and of course on last years earnings and they seem a bit subjective as I've seen different ones. There has been quite a change between 2021 and 2022.
Just using the 1.421 would give you a share price of 31.25p.
All well and good but the market uses this marker without adding the further complication of tax. Most well run and solvent companies pay tax. For us that will b e a maximum of 25% for the next 4 years in the UK and could be zero beyond that for a while . Malaysia I leave to the experts.
I know that the death of fossil fuels is grossly exaggerated but even if true I'd give it more than 10 years. We'll be home and dry in half that time.
I read that the EPL is only being introduced to the Commons on 11 July so I think we'll be stuck in this range until it progresses or there are leaks.
In the past we've had to close fields early (as have other companies) which means that the UK SPR (a.k.a. the North Sea) doesn't have the fossil reserves it should have. They were run down or closed without adequate replacemnt due to a belief that renewables would take over. That isn't going to happen.

I agree that the current valuation is bonkers. At some stage our PE will move up as investors look for returns.

Hi M - I posted the link on Harbour but didn't credit you. I put it right just now with this post:

"I can't take credit for this article. It was Modestus who found it. For me the best bit was the comments at the end. Some serious contributors from the US with industry professionals contributing. We hardly ever get people posting on LSE who actually worked at the coal-face as it were. They read as right leading Republicans and it is good to get another perspective. They are pretty dismissive of the EU but that isn't surprising.

One of the comments towards the end is possibly enlightening. 30 June 1:43 PM "$1600/day dayrates for good mud hands in the Sahara right now. Phone a friend. Slow drilling, vertical wells, kelly rigs, and good old fashioned diesel oil based to take care of the salts."

Reply " that's back to 2014 levels. If I were 10 years younger, I'd be tempted. Now, I'll leave it to the younger folks, they've had a tough time the last few years. And, I don't know if i could take the strain of racing to the galley to beat the cementer in the chow line anymore. Cheers"

Fair enough the proposed EPL Bill provides tax breaks if you start a new field or certain capex. With all that's happening with pilot shortage, chef shortage etc.. where are they gonna get the experienced field/rig personnel and even if available, at what price?"

if people think I am skeptical about renewable claims they should read the comments of people who know a lot more than me.

There's a lot of recessionary talk around. First to go is discretionary spending if it arrives. That's restaurants and holidays etc. but keeping warm and eating is less discretionary. There's plenty of repeaat business around and whilst a boiler maintenance contract is discretionary a broken boiler isn't. Once they've seen the damage they've done to investment in the fossil industry and get educated about natural field declines the move back to fossils will be unstoppable imo.

Be Lucky

I can't take credit for this article. It was Modestus who found it. For me the best bit was the comments at the end. Some serious contributors from the US with industry professionals contributing. We hardly ever get people posting on LSE who actually worked at the coal-face as it were. They read as right leading Republicans and it is good to get another perspective. They are pretty dismissive of the EU but that isn't surprising.

One of the comments towards the end is possibly enlightening. 30 June 1:43 PM "$1600/day dayrates for good mud hands in the Sahara right now. Phone a friend. Slow drilling, vertical wells, kelly rigs, and good old fashioned diesel oil based to take care of the salts."

Reply " that's back to 2014 levels. If I were 10 years younger, I'd be tempted. Now, I'll leave it to the younger folks, they've had a tough time the last few years. And, I don't know if i could take the strain of racing to the galley to beat the cementer in the chow line anymore. Cheers"

Fair enough the proposed EPL Bill provides tax breaks if you start a new field or certain capex. With all that's happening with pilot shortage, chef shortage etc.. where are they gonna get the experienced field/rig personnel and even if available, at what price?

Also on the theme of circumspection. As investors in a price gouging, enemy of the people industry due to be eliminated by an ESG firing squad it does pay to be wary of the next pinball action of this government and the public opinion which drives it. O&G were the low hanging fruit and everyone enjoys a tax raid as long as it isn't on them. I won't even mention the hypocrisy in them pleading for us to increase investment and production in fossil fuels (sorry, couldn't resist) in the same breath.
At the end of this month (28 July) Centrica (owners of British Gas and Spirit Energy UK and a FTSE100 stock) will unveil bumper H1 results. They stopped paying a dividend in 2020. Today's ST "They need to be sensitive to realise they shouldn't be paying out bumper dividendsat a time when many are finding life so difficult. But at the same time, Centrica shareholders have had a pretty uncomfortable ride for a long period; it's only fair they are rewarded to some extent for their patience" adding "They do owe to their shareholders to pay something... It's a difficult political one to handle, but they've had a long time to think about how they're going to put this narrative together, and it's something they've just got to do."
Credit Suisse estimates Centrica's adjusted pre-tax profits at £1billion this year. It doesn't give their net profit but it won't be as high as ours for 2022 if Credit Suisse have got their figures right. They cant match our PE ratio either.
Even as a £5bn company one top shareholder of Centrica said: "It wouldn't be beyond the realms of possibility that the big oil companies, in their transition, might look at it as a way for them to get close to the end customer."
If this happened they would probably not want Spirit Energy or Neil McCulloch (ex EnQuest director). This industry gives incest a bad name.

There is something to be said about sitting back and let other penguins see if the killer whale is still there.

I really don't know what the fuss is about? There are other investors who think that quarterly reporting can be damaging too as it makes management short termist. If EnQuest had announced H1 results last Friday some people would moan that it means we won't have any more update information until 2 January 2023.
I think in a business that has to think long term we've got it about right. We can work the figures out ourselves pretty accurately (don't include me) with the likes of Tarmak and Therapist input. That means we aren't gonna be too surprised whenever the updates happen. I like to think they go for accuracy and don't pluck figures out of the air (include me).

Just-in-time reporting is so last year!

A full page article about Brian Gilvary the Executive Chairman of Ineos in today’s Times. Gilvary is an industry heavyweight and narrowly lost out on the top job at BP to Bernard Looney. He oversees Ineos Energy – producing 26,000 boepd and about $200mio ebitda last year.Looney committed BP to net zero by 2050 on appointment. Would Ineos Energy be committing to on/offshore wind and solar? He answered “No because there are higher economic returns available in the oil and gas, carbon capture and hydrogen space.”
He sees oil staying above $100 a barrel “for the foreseeable future this year” and the Ukraine conflict “could last decades”. He goes on to say that the EPL is “problematic” and will deter investment “The UK would have been our next growth node," he says. “We’ll have to go back and review plans to decide whether we go forward. Right now would I rather put my money into moving gas out of the US or into the North Sea? I’d probably move gas out of the US.”
Gilvary aims to quadruple Ineos Energy production over the next five years. “Our ambition is big. If you get to 100,000 barrels a day you become relevant.” Ineos is keeping its powder dry on big acquisitions for now. “When the oil price is $120, you don’t want to be the drunk in the roomn when it comes to M&A activity.”

Gilvary doesn't need this fluff job and I'm always suspicious of these kinda op-eds that aren't actually adverts. To me this is subtle lobbying and you can often read the exact opposite. Interesting all the same and that 100,000 boepd makes you relevant.

I've chosen a 7 year view. Costs $820m for every year, production 50k every year, oil price 2022 & 2023 $90
2024-2028 (inc) $70. The first 4 years tax2022-2025 (inc) @ 65% Net Profit $895m - 2026-2028 (inc) @40% NP $822m.
Total $1.717bn This would tally with the market valuation i.e. unexciting and not much more than outstanding debt.

Actual situation - using the $3bn tax credit.
2022-2025 (inc) NP $1,918mio
2026-2028 (inc) NP $1,028mio Total $2,946mio; Let's call it $3bn
You can deduct the debt and whatever way you work it DCF. NPV, wet finger in air, fag packet we are seriously undervalued. I know the 65% doesn't kick in until end May but it isn't precision I'm after just a realistic amateur overview. This is what I'd describe as running the company into the ground. Baseline scenario with fossil fuels having a severely limited future. Of course if people are happy to go cold and starve whilst returning to the stone age these calculations are invalid.

The gold standard of O&G is BP. Chosen because they're UK based and pay dividends and engage in buybacks. Their PE is 5.70 and suffering like ours. I'm not after that rating but AB expects our credit rating to improve as our debt dramatically reduces. As of Friday our EPS for this year will be something like $43 cents pre tax. Post tax $32 cents.
This makes our current PE lower than 1. That is rubbish.
I challenge any accountant here to justify this ratio. I know it's not just 1 year's figures but to make the current PE work either the oil price falls off a cliff or owning a team of oxen makes you a millionaire.

Warning: "Markets can stay irrational longer than you can stay solvent" - John Maynard Keynes

Well this article was definitely written by the 1%

https://seekingalpha.com/article/4521156-energy-turn-out-the-lights-the-green-energy-party-is-over

https://www.reuters.com/article/oil-global-kemp-idUSKBN2OC3T2

"If the Biden administration hopes its diplomatic activity in the Middle East will result in a substantial increase in production and lower prices, it is likely to be disappointed.
Oil prices will fall if, and only if, sanctions are relaxed on Russia, Iran or Venezuela, or the global economy enters a slowdown and oil consumption growth slows." John Kemp, yesterday.

Is stepping down as CEO of OEUK. "The process to find her replacement will begin immediately." Seems sudden.

source Energy Voice

Could EPL and incessant attacks on the UK O&G industry have anything to do with it?

Great find Modestus - seems we're not alone. Who'd have ever guessed that if you turn the lights off at night it goes dark? I hear winters can get cold too.

The oil shortage is supply NOT DEMAND driven. I do hope that AB isn't answering the increasingly pleading calls from Kwasi Kwarteng.

So far the only person with balls seems to be Linda Cook, CEO of Harbour.

Not sure any of this will make sense or be accurate as I'm only looking at EnQuest and is only my opinion. Volume today was reasonable (9mio) but there were very few tickets that were off-book and it was practically all AT and ALGO suffixed. The amounts weren't large and even the few off-book were lower than usual.
The only trade of size was the UT 1,106,500.
Markets aren't perfect but I always think that the UT can be used as a get-out excuse. It is in effect an electronic auction but it is at least more acceptable than an arbitrary price sometime during trading hours. Accusations of using tops and bottoms and ripping off clients are lessened (a kinda LIBOR). It also suggests that the bigger players were absent and today was algos sparring with spread betters. Serious money would be more interested in analysing the feedback from G7/NATO and the long weekend.
I understand recession fears but public announcements and actions of government agencies suggest that an energy shortage is real and it seems the market agrees. Why that isn't reflected in our share price leaves me flummoxed. Brent Future Dec 2023 is 89.27. Roughly speaking we could easily have 1.5 years of $100 oil.
I know we cannot guarantee forward prices but even so the dearth of sanctioning new fields is well known which is why the UK Govt is trying to get us drilling. Energy is the lifeblood of civilisation and we need it - recession or not.

Well I got that wrong, or did I? With what's been going on (G7 & NATO) I think it was a bit early for them to be debriefed on their return that quickly and to use it for market actions. I think it's more a case of the Lenin quote - "You probe with bayonets: if you find mush, you push. If you find steel you withdraw."
With the uncertainty around and many disappearing for the long weekend (US holiday) there would be a thinner than usual market and a scarcity of Buyers that hold. Bots quickly find the weakness and attack that side. With a weak market it is self-fulfilling to some extent. The mushier stocks (that's us and HBR for instance) move more than a BP or Shell. I think it was overdone and expect a rebound when some of the cannier investors realise what a bargain certain stocks now are. So Monday flat and Tuesday higher is my best guess.
I spoke to another investor and he is sticking with AB (a recent buyer) and Warren Buffet. They tend not to panic. I still get that warm feeling when I think of our tax credits.

*energy - gas, oil, coal up to day - copper, wheat down. There's a lot of confusion out there.

BTW - did it trigger any memories or was Jonathan Swinney talking about something different when I overheard snippets (I thought) regarding H1 results and windows to get things done in September? They'll need to tidy up the debt before October.