Member Info for romaron

Profits: Amount less EPL 25%
2022 $750mio $600mio
2023 1,000mio $750mio
2024 900mio $675 mio
2025 850 mio $637mio
2026 338mio $338mio
Total $3,000mio NetZero

During this time all loans have been repaid and some small dividends paid out. The 2bn in the bank after the now exhausted tax credit is divvied up among shareholders who receive the equivalent of $2 bn ($3bn less repaid loan) $1.06 (say) £0.85p per share. The residual (if it is worth anything) is split between a home in Aberdeen for destitute oil workers and a centre for fallen women in Malmo.

I realise it needs some fine tuning and the fall off of profits in 2026 is because it needed to add up to $3 bn. There is also the chance that the industry doesn't last another 5 years. Unlikely you might say but at least 4 years to long for Insulate Britain, XR and the mayor of London.

A bird in the hand is worth two in the bush (English saying). There is an argument for sitting on our hands and doing nothing other than work through existing assets. The more I look at EnQuest the more I like what I see. The share price takes no account of our tax credit, current trading (even the present shower think it'll last until 2025) or the uncertain future that has come to soon for renewables.

Whilst here. No excitement showing and if there were any debt problems the bond market picks them up quicker than an algo on speed. 26 May 95.923 > 7 June 96.526
It has climbed since the EPL was announced.

(cont) the whole country first than to pander to minority interests.

Interesting thoughts but surely the problem is what happens once the new field is in production? The interview that Therapist kindly supplied with Rishi Sunak mentioned 5 years when discussing concept to production. Does that mean exploration included? Where does that put Bressay which is pretty well understood and could easily be fast tracked (2 years?) The problem is that you may well be left with a stranded asset as who knows what the landscape will look like in 5 years? There may well have to be government guarantees and if they aren't forthcoming then it will rely on the risk appetite (probably) of private equity. Shareholders aren't seduced by the multiples any longer. I'm not and to be frank it is the $3bn tax credit that is the attraction here.
The hole in RS's plans is exactly that. BP or Shell could do a token field and it probably wouldn't even move their needle. Will other companies make the investment? I'm not so sure. There are other places to drill.
I think Norway and by extension Equinor may have a different viewpoint so Bressay may well be an outlier. Dunno if that's good or bad.
VOR is correct that assets in the NS are even cheaper. I'd go further and say that many have ZERO value. The tax relief on new fields is welcome but the question is more "what happens once production starts?" and that is 2025 - 2027.
I think the future is more likely a shale type approach with workovers and tie-backs measured in months rather than years. Who would spend (say) $5.5bn on Bressay [that was a price mooted] when you do not know who latest nutjob is in power or the direction or attention the ESG mob will be.
This government is so behind the curve and the solution is surely long term fixed contracts with refineries and energy suppliers as are planned for nuclear. That may well prove impossible because you need fresh thinking and a will to put

I didn't expect that ProdOpt - just goes to show you shouldn't make assumptions. I never moved on from the music of that era. I went to see the Temptations at the Royal Albert Hall a few years ago. It was like the audience had all been cloned. During the intermission I looked across the bar and thought I recognised someone and waved. They waved back. It was a mirror.

I am proibably the only person on this board that actually saw Jimi Hendrix live. It was at the Uppercut, Forest Gate E.7. It was the old ice-rink that became a music venue run by Billy Walker (heavy weight boxer) and his brother. I also saw Otis Redding and (little) Stevie Wonder there. The Lotus ballroom was opposite. Then there was the Two Puddings up the road in Stratford High St. Happy days.

The City loves a bit of gossip and Chinese walls aren't rumour resistant. Yesterday's fall being larger than our peers* did concern me that something was doing the rounds and was either a) true or b) needed debunking. If there was a rumour going around it would be remiss of EnQuest and its advisors not to have an inkling.
I phoned IR but went to voicemail. I got this yesterday evening from IR but didn't read it until this morning:

" I am not aware of any rumours circulating (and checked with a number of market contacts) and so am afraid we can’t make any comment in that regard either."

I have always found Ian Wood and EnQuest to act with integrity and professionalism. They do not release information that isn't in the public domain. I don't know about the rest of you but I find the comment reassuring. He didn't have to reply.

Yesterday was a combination of many things with the downgrade and Woodside CEO comment being the most obvious. One observation is that the company keeps saying guidance is unchanged. I wonder if this is a broad hint that the unhedged proportion of production is reaping benefits of the uplift (and of course bunker prices).

*peers - many oil companies are so unalike that sometimes I wonder if the term "peers" really applies.

Hi SIPP - it wasn't me that suggested the Levy would not generate sufficient revenue but mark Littloewood DG of the Institute of Economic Affairs. I can't do the numbers.
O/T we are in a classic situation. Being crucified on revaluations (share price) whilst making money hand over fist on trading (producing and selling oil). We'll comfortably repay debt and reward shareholders in the new time frame (life of the North Sea) which I am reliably informed dies on the 31 December 2025. I have no idea what happens then. The majors and most foreign companies have made their choices and already left. To enter into a major new field development will be akin to building a nuclear power station. Firm written guarantees will be needed from government as the future is so unclear. I'm not sure if it might not be EnQuest and Harbour (not Equinor) who decide not to progress to development of Bressay. For now I'm just happy to enjoy the high oil price and our tax credit.

Naughty hitman.
I was just about to post about a Director MON (Meg O'Neill CEO Woodside) who was quoted in today's Times:
regarding the Levy: "However, O'Neill has joined a number of leading companies, including Shell, in warning that the tax will hit investment. 'One of the things that's most important for us from a government perspective is a stable regime,' she said. While Woodside did not have any assets in the UK and was not looking to invest in the North Sea in its "base case", the windfall tax made it even more unlikely, she said. 'It sends us a message that is just a riskier jurisdiction to do business in than we might have previously thought.'

Two points. It is a double whammy today. Who had more influence; The Times or James Hosie?

This is an unintended consequence of a rudderless government who have the effrontery to pose as being "business friendly". The moat has just been dug even deeper but raises questions whether it is even necessary. Form an orderly queue - for the Exit. The Aussie CEO can afford to be more direct.

Another thought. There is a vagueness about the life of the Levy "In future years, if oil and gas prices return to historically more normal levels, the Government will phase out the Energy Profits Levy, and also the legislation will include a sunset clause, effective at the end of December 2025."
Fair enough, nobody knows how long the energy scarceness, crisis will last and if we will have to bring in rationing and emergency measures. It does though confirm though that they are pretty clueless about how long it will take to regain control of energy supply and bring the cost down. Then there is the possibility of this administration collapsing. I'd say this is the wrong time to be exiting the North Sea.
With the hostility being shown to the industry it might even mean that capital is not available to finance new FDPs. The majors may have the ante but of late haven't been falling over themselves to invest in the NS. In fact they've been doing the opposite. The Government was quite quick to release funds for PPE and QE. A question should be asked about whether they could help out in the NS by making funds available.
I imagine it is harder to get an appointment with Kwasi Kwarteng than it is with a GP. It must be hell on the frontline.
Of course we could ask the renewables to step in but I am trying to keep this post sensible.
I'm not seeing a quick resolution of our energy problems which suggests that the oil price is likely to stay above $100 for some time and may even break $150. Plenty of industry experts are forecasting this. They call it "revenge of the old economy".

I think the analyst is far too pessimistic and I have calculated the cost to be double the $450mio increase due to the Levy. With 3.60 years of the Levy that is $125mio a yearish. I calculate we'll double that figure which is actually something to brag about. My fag packet produces 2024 $105 and 2025 $100 using McDan projections (Barclays uses $111 for H2 2022 and 2023).. The figures should be reworked.
I don't blame the analyst for "underweight". He didn't implement a punitive Levy on a fragile industry. The timing today was unfortunate as it highlighted the benefits away from the NS with Woodside Energy makintg a stonking 9% gain on its London debut. There isn't a huge pool of liquidity for O&G shares in the UK and I think it exacerbated the price movement.
I doubt there is much EnQuest can do or say about this and it needs to run its course. We have money in the bank with production and reserves. The tax credits mean we could have FCF of close to $2.8bn over the next 4 years. Maybe I am too optimistic but against that JH is far too pessimistic. Then again he would have priced in that the NS is no longer an attractive place to invest. I think he misses that we have a wealth of experience and capital with a far from exhausted basin. Not everybody wants to move to Australia or buy oil from Russia, Saudi Arabia or Iran.

Be Lucky

Lets see how brave they are at going short overnight at around 27p. I wouldn't.

Possibly two pretty big buys for the punters today Woodside London debut and Serica RNS that would have attracted funds. Some might have required selling EnQuest to buy them. The pool is pretty small so there is often an overreaction. Possibly that EnQuest have no real idea what caused the movemnet and likely it'll be corrected to some extent.

I was looking at them over the weekend. In a thin market for fossil fuels their debut on the London market today would have had some impact. It has the scale that the funds like.

But cash is fungible (OK you may have to convert to Swedish Kroner and the exchange rate may wobble) and a pound in 6 months might be worth more or less than a pound in a year, or two or three but I still expect pounds to be around and my stack to be increasing because of EnQuest payouts. The share price will never match the ratios of a meme stock or risk off oil majors but pretty sure we'll outperform ESG stocks. The companies have to keep a low profile. They're under attack. I mean, even Looney is keeping his gob shut.

A desperate UK government is in the equation too. I'm fairly relaxed as we can choose to just take the money and tick over with new wells on existing fields and look for growth elsewhere. That $3bn tax credit means we can create a considerable cash pile. We are considered indebted - so what? - that's how oil companies develop, out of debt. Serica has none but half our production. It won't take long to leave them behind if we just "tick over".

I hope you're right mrc. There is some history that might be relevant. When Equinor (then Statoil) froze Bressay oil development in March 20106 Brent had been bobbing along just under $40 for the preceding 3 months. Forward oil projections for 2022 at that time were between $40-$60. The other partner Shell with c.18% has been an Exiter of the NS since then imo.
Statoil got an extension and I'm guessing here but suspect they were more enthusiastic than Shell. "Working alongside Shell and industry regulator the OGA, Statoil said it will develop a program aimed at securing an extension of the licences allowing the company to progress the project development in a new time frame. The company said it would “eventually” be able to bring the Bressay resources to the market in a profitable way following a change to marketing conditions."
Equinor have since then started production at Mariner which will also have bearing as will our Kraken field. All 3 being heavy oil.
I've no idea of present projections but the cost of developing Bressay was then around $5.5bn.
There was also windfall tax discussions (including Statoil) some 11 years ago:https://www.theguardian.com/business/2011/mar/29/statoil-north-sea-windfall-tax
and this: "But Osborne defended the windfall tax to the MPs as "perfectly reasonable" and insisted that Statoil had not yet cancelled any proposed investments. "They just want to talk to us about their investment plans," he said."

I imagine that Equinor will be more robust than we can afford to be so the outcome will be interesting. It is clearly a field that is pretty well understood and could help fill a vacuum. I cannot see it being ignored.

Hi Pelle - I asked an analyst at a big brokers for more colour on a downgrade (not EnQuest). He replied that hopefully I would understand that his clients (paying) came first and told me nothing. There must be some reasoning behind Barclays and it is highly possible that their clients were informed last week before the public announcement. It is rather knee jerk on Barclay's behalf and they have hardly been supportive of EnQuest over the years.

O’Neil (CEO Woodside Energy) told Emily Gosden, our energy editor, that the Treasury’s energy profits levy was a “red flag” showing that Britain was “not a particularly conducive place to invest”. Elsewhere Serica take a more obsequious approach.
It remains to be seen how Equinor, EnQuest and Harbour react and the decision on whether to move forward with Bressay.
The 3 companies will have lines of communication open between each other and the UK authorities and the question is going to be asked at the forthcoming EnQuest AGM.
I would say it is "delicately poised" because Equinor doesn't have to look for trouble but balanced against it might be compelling economics that weren't there in 2016.

https://www.youtube.com/watch?v=dhLRyVnJn3A

Much more open than our CEO and some interesting comments. "If you don't hold energy stocks, you will underperform". It was on another video but he said that BlackRock lent Tellurian money which opened the gates for the more traditional lenders to pile in. It wasn't that long ago that BlackRock was promoting ESG stocks and forecasting the demise of oil.