Member Info for romaron

Appreciate the input Indy but there is a minority (especially me) who are left confused. What is our B/E assuming 50k boepd?
Is it $50 a barrel or is it too complicated to produce an acceptable B/E? Is my attempt at simple numbers unachievable?
Why did AB throw in a B/E price last year if it is so volatile? Is the B/E subjective?

Apologies for so many questions.

Broad strokes from me. I didn't expect a leap of $18 a barrel. Perhaps James Hosie was right?
I however expect the workovers to increase barrelage and never expect costs to straight line but $18 a barrel increase, phew!
Is it the bit about GE and $430mio because it reads as though it kinda cancels itself out?

I was using old figures - from the Feb 2021 outlook “Our focus on cost control and capital discipline, combined with an improving oil price environment, saw the Group deliver free cash flow breakeven of c.$32/Boe and generate free cash flow of c.$210 million." That was from memory and I used $35 as a guide. I'm really surprised its $18 higher now but I'll take your word for it as accountancy isn't in my skill set.

Could be a good question for KO to ask at the AGM, why such a jump?

I used $30 a barrel on FCF on 50k boepd. Debt $1.2 bn divided by $1.5mio pd = 800 days but I used poetic license to make it 2 years.

The Government clearly haven't Stanley's message and is intending to fast-track Rosebank, Jackdaw, Marigold, Brodick and satellites to Catcher and Tolmount East. I think it's time he moved with his placard to Downing St.

Eh, so in 2 years we'll have repaid the debt using $65 oil and still have around 163mio barrels if we just sit on our hands. What a disaster! For the remaining 7 years just pump from oil and convert to dividend. Of course it is unfair that AB and JS will walk away with more money than me but that's life. I'm not technical so I don't know the slurp factor as you get to the last drops.

Still pressing your nose against the window chilting; why? Hoping that fossil fuel use ceases by 2030. How's the ASHP going?

*that was using 2P reserves. 2C are 279 MMboe (Magnus & Kraken 70MMboe) but I haven't included them.

Pelle - I said well done. What more do you want? If AB isn't up to it in your opinion, move on.

To avoid misunderstanding I am not complacent and don't think AB walks on water. I am as frustrated as anybody else with the performance of EnQuest but I doubt I'd be much happier elsewhere with a UK oil company. There are a few that have done better and more that have done worse. I also don't kick myself that I missed Tesla or Bitcoin.
Whatever happens next in the North Sea is anybody's guess but this is what I think.
The Majors are on a path and will continue to divest in the NS.
The transition requires companies to manage the hand-me-downs from the Majors.
There are private companies being formed just for this reason but I sense there is a shortage of ready made companies basically set up just to do this.
These same companies will (if they get it right) from time to time take on more ambitious developments with new fields.
You are describing EnQuest.

Pelle - the 2 companies you mentioned. I don't know/follow them but aren't they tied up into the Canadian market? Eric Nuttall has been blowing the trumpet about the success of them for months. Well done. There has been considerable debate on here about the difference in pricing companies in the US and Canada against the UK.
I cannot think of a CEO who hasn't made mistakes. In a peer group I'd say AB comes out towards the top. I traded for 27 years and met some very successful people. They had all made big mistakes in their life. The best were quite humble and not braggarts. Keep on about the hedging, it doesn't interest me. I'll hide behind Warren Buffet and George Soros who both profess to poor timing with buys and sells. However, they get it right often enough and have the instinct to know when to go in large. I doubt AB is that worried about the hedging. He can't control the movements or timing and is probably working from a figure closer to $65 than $100 because that's where the banks and bond market is. He is getting on with the role the company was set up for.

Which companies are they Pelle? All UK and North Sea based I hope otherwise the comparison is pretty meaningless I just look at the average oil price for the year and that we were within a reasonable margin. You'll never outcompete the average as there are costs for options. If you wish to gamble you might get it right. I haven't invested in EnQuest because they're speculators on hedging. I leave that to the trading arms of the majors and the likes of Vitol.
I realise there are posters here totally confident of their ability to hedge. It's fantasy hedging. In the real world the bondholders and lenders wouldn't be happy if we engaged in risky transactions. The sector is risky enough without that.

https://www.dailymail.co.uk/news/article-10487451/Six-North-Sea-oil-gas-fields-ahead.html

So, using the HiTechVision Exxon deal as a very rudimentary attempt at valuing EnQuest (06/02 09.02) they would pay $1.710bn for (say) 50k boepd. HiTech have bought a variety of fields and my argument may fall down if their average life/reserves varies dramatically to EnQuest’s. I liked using the comparison hoping it came without excess baggage and was a kinda clean purchase. It is/was a wet finger in the air exercise.
What Squif is saying is that nobody will buy EnQuest because “his” EV is $3.05bn. If you can only get $1.710bn at current prices then you’d immediately make a loss. On that/his basis we should be in negative equity. We aren’t so maybe he hasn’t got his head around EV?
The stuff about JS is just plain wrong and potentially libellous. A quick glance at latest information would show that he has 909,360 shares and in PSP 18,782,519. I personally hope he makes a fortune because if he does; then so will I.
The other stuff I can’t really comment on as I cannot read a balance sheet but then, who says Squif can?
You can either look forwards or backwards. Buy or sell. It is still a free world.
Nobody has addressed the tax losses which I believe are extremely valuable. If Squif's EV is correct then they are even more valuable than I thought. AB saved the company when the wolves were at the door. The shale wars and Covid were not his fault. Premier shareholders only got their pittance because of tax losses and a public quote. Chrysaor pounced like vultures but that is the nature of the oil business. That is history and I wasn’t invested but would buy Harbour if I wasn’t so heavily invested here. They were very poorly served by Tony Durrant.

Whilst here and to save a post. My comment on majors and vendor loans was really aimed at Equinor and our mutual interest in Bressay - Equinor are also well aware of the Bentley reservoir and paid some $15mio (memory) for data from Xcite on Bentley. Whatever some think of AB it isn't the opinion of Kwasi Kwarteng or AB wouldn't have been invited to a private dinner. Apart from BP and Shell I believe Equinor were there too.

Vendor loans. BP will likely attract opprobrium from the usual quarters with today's results but it could be good news for the smaller oil companies. The majors have made it quite clear what their intentions are and the prices of older fields remain stubbornly cheap whilst the smaller companies have had their own problems and not the scale to scoop them up. The article yesterday showed the reluctance of banks to lend so we have a mini vacuum. I'm suggesting theat the majors with their flush of money are in a position to help buyers of their fields. After all if the borrower goes bust they are only back to square one and if they can't handle the odd hiccup in the life of an oil field nobody can.

squif - would you rather have been in Tullow, or Premier or Hurricane etc... Stop torturing yourself and SELL for the sake of your health.

Build it and they will come.

....and he hasn't changed his opinion.

Hi mrc - I think Labour can say what they like. Because they are so far away from power anything said now is just hyperbole and the real world doesn't come into it. Tomorrow it is BP's turn to announce figures and a lot of their profit comes from Rosneft. Headlines from the usual people tomorrow if they can unglue themselves. They're like Labour. You can ya-boo from the sidelines because it is the woke position. When it comes to voting the British are far more prosaic. If an election was due Labour would hold a different position. I believe it is just "noise". What affects ordinary people is not the protestors. It is bills and explanations of why energy is becoming prohibitively expensive. Lack of investment and Covid got us here. Blaming the O&G industry is facile but it is what it is.
I too am seeing the tide turning with greater understanding of the cost of renewables.
Interesting you were in Xcite. In a few years we'll have what they couldn't achieve. The funds to develop.

A long story but I had to exit a particular stock and bought a small amount here. It was contrarian in that the herd was saying out of growth and into value and I believe there was an overimportance placed on the ML situation. He may be a bit dodgy but most entrepreneurs have been known to take chances that are borderline legal. I've never doubted his genius and think that DT because of its history may stay in British hands.
I will hold on to my shares and may buy more but contributing this message board is pointless due to the obsessional posting of one avatar. It destroys any discussion with its half baked theories and complete lack of experience of the real world and markets.

GL to all genuine holders.

https://www.energymonitor.ai/finance/investment-management/opinion-why-arent-investors-piling-in-to-build-new-lng-projects

I thought just another article from John Kemp of Reuters but I've been drawn to two points that have bearing on us. It is about LNG but it explains why high energy prices do not necessarily encourage development. The banks want guaranteed contracts from buyerss and therin lies the problem. Producers flog their existing plants to maximum capacity because finance to expand is not available. "Banks won’t offer project finance to cover construction costs unless an LNG plant pre-sells most (~80%) of its output under long-term sales and purchase agreements (SPAs) with credit-worthy offtakers."
This is why we are in the enviable position of utilising STOIIP and the proximity of Bressay (and later Bentley) through JV's and organic means. [*I read that China & Russia are entering a 30 year contract for gas. That will give them an unfair advantage if we decide to move towards expensive renewable.] What happens in gas crosses over to oil.
The second point was the mention of Tellurian in the article. Its Vice-Chairman and co-founder is Martin Houston who is our Chairman. I'm not sure if that's good or bad? At least he's not just sitting in an armchair earning board fees.
I take from this that the future as always is uncertain but frankly, we are looking at a much shorter future than those companies requiring chunks of finance. AB is fundamentally an engineer. He has engineered us into a sweet spot for a mid-sized oil company in these difficult times for the industry.

I get it. Just waiting for the market to catch up.

I wish he'd troll me. He could start by pulling my arguments apart. It's hardly news that reserves decline. M&S have the same problem with slippers and McDonald's with fries. Even Shell and BP have the same problem as EnQuest with their reserves; they deplete.
I don't suppose he noticed the two years of current total production just in Kraken's 2C reserves or plans for drilling. Doesn't matter too much which year we do them. They aren't going away.

Build it and they will come.

Material reserves and resources as at March 2021
- Existing 2P reserves of 189 MMboe; Golden Eagle expected to add
c.10%
- Existing 2C resources up 61% to 279 MMboe: Bressay (c.115 MMboe)
Magnus and Kraken (c.35 MMboe each) and Malaysia (c.87 MMboe)

The tax credit for 2020 of $172.5 million (2019: $23.6 million tax charge), excluding exceptional items, is mainly due to the Ring Fence Expenditure Supplement on UK activities generated in the year. UK North Sea corporate tax losses at the end of the year increased to $3,183.9 million (2019: $2,903.4 million), primarily as a result of the Ring Fence Expenditure Supplement generated in the year. From P.4 FYR 2020 released 25 March 2021

https://www.enquest.com/fileadmin/content/press_release_pdfs/2020_Full_Year_Results_and_2021_Outlook_vf.pdf

Maybe one of the accountants can translate that into some kinda NPV.

It finally dawned on me why our EV is so totally wrong. The comparison in my earlier post can explain why James Hosie can argue a valuation close to where we are but it doesn’t make it right.
If you take away the debt from EV then that is what we are (supposedly) worth. Like your house without a mortgage. However it is more complicated than that. A market cap (MC) treated this way is like the current rent and what you can get the shares for; a day traders price. I have been comparing asset sales whilst what most of us on here cannot understand is the ridiculous valuation of EnQuest if an entity wished to purchase the whole shebang. Hitecvision didn't buy Shell. That is where I’ve been going wrong and can make a valid point of why the current mc is effectively negative (kinda possible with decomm) and works on the supposition of the fossil fuel industry ending in a couple of years.
If you bought EnQuest, on top of reserves and production, you’d also get the intellectual capital and experience of AB and his team (squif would say zero value). You would also get the EnQuest Producer, SVT operating license and tax losses of approx.. $3bn. I have conservatively given them together a valuation of $1bn (MiFID wet finger practises) which would be $53 cents a share or 39p.

So, if the market says we are worth 20.80p I could say it is more accurately -18.2p. That is as temporary and as peculiar as the negative pricing of WTI on 20 April 2020.
On top of all this we have 2C reserves which are premium. By that I mean it is technically 2C but highly moveable and cheap to develop. “The best place to find oil, is in an oil field”. With tie-backs and existing infrastructure we have potential that is on our doorstep.
To paraphrase Michael Gove, “The small shareholders of EnQuest have had enough of analysts.”

Feel free to rip my suppositions apart.

In today's Times "Barclays upgraded their recommendation on the stock to "overweight". They believe that Tullow will be able to rebuild investor confidence over the next year if management hit their 2022 oil production guidance.
"Success reviving the Jubilee field in Ghana during 2021 has given the management the confidence to begin making longer term investmentsthat should add reserves and enhance the value oif its core assetsin the medium term," James Hosie, an oil analyst at the bank, said.
========
I've no axe to grind with Tullow but it reads like they're in a different universe to us. To save you the effort the Corporate brokers for Tullow include Barclays Capital.
I then listened to the September EnQuest HYR again and you can catch James Hosie at the end (47.25) in QA. I'll ignore his question but the reply from AB was (imo) guarded and couched in terms that anything we did to increase production would be organic and equity light. The exchange was short and although polite I got the impression there was no love lost between them. Usually the analysts are first in person followed by PI's via a host. JH came at the end. Probably nothing and others may disagree.
A couple of references to windfall tax over the weekend but I think we can ignore them. Labour can say anything as they're not in power and the next election is over 2 years away. The SNP is also relatively in the same position regarding oil. A comment about Shell was batted away by saying that investors were multi national and their assets were dotted around the globe. Pillaging overseas investors is not a good look for a country which purports to be the global centre for finance.
The big winner had been Gazprom as the windfall relates mainly to gas and who are unlikely to contribute.
We are protected by our tax credits and also by being listed in Sweden too I'd imagine. Any raid on our finances would result in angry Swedes sailing up the Thames in high dudgeon. They have form for this.
I had another go at a comparison of value with Hitecvision buying assets from Exxon last year:
https://www.reuters.com/business/exxon-divest-some-uk-north-sea-assets-over-1-bln-2021-02-24/
They got 38,000 boepd for $1bn in Feb 2021 with a $300m contingency for higher oil.. The oil price was around $65 the 3 months predceding and had been lower. Sad to say but using this means we are relatively fairly valued. A quick (say) 1.3bn against 50 boepd makes us $1.710 bn and that is close to our current EV. I think valuations are bouncing along the bottom but the majors haven't finished selling. Afraid another few months of doldrums likely until results at the end of March unless the whole market gets lifted.