Member Info for romaron

Looks like I didn't miss much and the usual suspects have whinged or patted themselves on the back which hasn't made an iota of difference to what transpired today. Agreed that EnQuest management have a poor record on not anticipating US or OPEC government decisions and missing Covid on their radar but when compared to (for example) PMO, HUR or Tullow have come out of the travails a strong and lean company which will soon be debt free if present macro continues. EnQuest tea leaf reading needs to improve.
The best bit of news for me has been missed by all the dreamers and financial obsessives who fantasise about the small print and is a proven indicator that things are looking up for EnQuest. I am not talking about the small private investors but the cold, calculating professional debt managers. Today the $HYN reached the highest level I have seen and jumped from 94.184 yesterday to 95.911 today. That is a massive lift in bond terms and I hope it isn't a misprint. Somebody out there likes our paper and it augurs well for refinancing which could well be after 2021 finals. The bond market liked today's figures. That's better than the amateur casino day in a thin market that seems to be the narrative for the usual tripe pedlars on here.
The professional analysts seemed happy and they will have their reports and advice prepared and sent out. I expect BUYING to pick up necxt week when people realise how well EnQuest are doing.
Helikon and now the bond market. What next?

I bought today.

If you build it they will come.

Opex was up to $19 from $15. On lower production this is simple maths. On higher production it goes down.

EnQuest will talk at 9.00. Unfortunately I have to go out so will listen later. There appears to be a QA side button on the peresentation which may mean PI's can pose questions. I can only listen until 9.20 so will miss the interesting stuff at the end.

I'll use your phrase again E121; "negative hedges". Much shorter than my explanation. You can't sell at $75 if the price never rose above an average of $42 in 2020. Only L3 can do that.

KO - turn your binoculars the right way around. Smart money always looks ahead. I never forget natural declines. Most PI's do. Just look around at other oil companies. You heed to make your own luck as raising finance for new fields will be nigh on impossible in the future. That's why BBK is so exciting.
Today's figures show that the effect of poo in 2020 and early 2021 on hedging. You may get tops and bottoms but you can't outperform the spread. Too much posting wasted on hedging. Look back. Today's results were impacted by previous lower oil prices.

Build it and they will come. Who do you think Helikon are? Summer visitors!

*If whingeing was an Olympic sport you'd be a gold medallist.

Juan you are incorrigible. You know exactly what I meant. Regarding t he Cuban Heals (sic) I have got my vaccine nightclub passport ready in case we breach 60p unexpectedly and my white suit should just about fit.

You could say they're talking their book but it does illustrate where the real money is. The front end is for the day traders to play with.

Good post Therapist (20.56) and exactly what the daily posters miss. There has been a lot of mergers and deals going through and I doubt the oil industry is left out. The important point is that we are a "going concern" and once GE is digested I expect further news/deals. Your list will keep the management busy and I'm expecting (hoping) that the BBK hub can be developed and that the SVT aircraft carrier can play its part.
A wise man said "A measure of true value is the long term discounted value of a future stream of dividends. " and that is where we are heading. AB isn't getting any younger. A good indicator was the Helikon stake. They could have passed or chosen another oil company. They chose us and definitely had the most recent opportunity to meet EnQuest management. I realise that governance forbids insider trading but like journalists you have to phrase the right questions and are sometimes directed to public information that many overlook. A nod is as good as a wink to a blind horse and Helikon aren't mugs, whilst leaks are a fact of life. They took the opportunity to get a chunk at a decent level (I believe it was placement related) and decided that now was good timing. Like us they don't know when the optimum is for this investment and their wet finger in the air guessed at March 2023. They [Helikon] don't have to wait that long necessarily and can always unwind the position but it is now parked and they are no doubt looking at other opportunities. They are what I would call LTH's as are Baillie Gifford and Aberforth (also not mugs).

I realise there is nervousness ahead of tomorrows update and there is heightened angst among certain posters but can I suggest an antidote. I achieve zen like calm from my new hobby, blindfolded archery!

You should try it, you don’t know what you’re missing.

Be Lucky

Thanks for the link Pelle. "A simple cash flow story" sums it up neatly. Regular dividends are the only truly reliable judge of a company like EnQuest and we're heading in the right direction. I wasn't going to mention it because August is a slow month but the Retail Bond was behaving strangely yesterday. It doesn't make sense for it to be going lower when the news is this good for EnQuest. An outlier idea but I wonder if any holders were exchanging the RB for equity? Probably just a thin market and a seller needing the money. The RB has had a good run.

*I accidentally swallowed some Scrabble tiles and experiencing some starnge vowel movements. The next trip to the bathroom could spell DISASTER.

In today's Energy Voice:
"Last week Ms Sturgeon revealed she had written to Boris Johnson asking the UK Government to review previously issued offshore licences where field development hasn’t begun."

What constitutes "field development"? For the radical environmental contingent nothing less than cessation unless production has started would satisfy or at a push might consider a FDP is enough pre production. That is the authorisation phase but what about the assessment stage and where on this line do Bentley and Bressay lie?

in 2013 on Bressay "Although Statoil will not make the final decision to sanction the development until later this year, it has submitted an environmental statement to the Department of Energy and Climate Change, a key milestone in the life of the field." Later that year they mothballed the field. Xcite had presented an environmental statement for Bentley back in 2011 but I remember them working on it up to the time (2016) they went bust. They had also lifted an amount of oil and sold data to Statoil. If the oil price had been higher then Bentley and Bressay would probably be in production now imo. I would say that the chances of Bently and Bressay going to production are quite high.

Boris and Sturgeon will play to the gallery but both face stiff opposition from their own party if they act too aggressively toward the oil industry. Also the choice of using "review" by Sturgeon covers a plethora of obfuscations. In that one sentence alone I read two wriggles!

typo: line 6 should read 19 months and I left off "Strong Buy" under opinion.

If you build it, they will come

Firstly I need to admit I was wrong and even worse I contacted IR and now they know I'm a dope too. My weak claim of mitigation is the unwieldy and clunky form TR-1 and the terminology they use. "Cash settled equity swap" is fairly vague and the expiration date confused me. I should have known better because it is not really any different to a FX swap but the last one I did in combat was 22 years ago. For penance I will explain how this works [I've had no help so even this could be wrong but I doubt it]. A swap would give you a position but only use of funds for 18 months with fixed rates. There are many more swaps than there is underlying economic activity but 'twas ever thus'. Its called speculation.
The mechanics would be: Helikon do a 19 month swap with (let's say Goldman's) where they sell and buy shares and buy and sell sterling.
We don't know the rates but somebody with a pointy head at Goldman's has calculated that (for example) spot is 24p and 19months is 30p. Delta isn't only a virus and you can get oil futures out that far and these guys don't only use black boxes they practise black magic.
So Helikon settles with Goldmans at spot by selling 56mio shares and receiving £13.44mio. On 02 March 2123 they receive 56mio shares and pay Goldmans £16.80mio [the forward rate on the contract could be higher or lower but Goldmans will have built in a risk premium as I doubt these contracts are OTC and are extremely specialist}
On paper that hardly looks attractive but now Helikon Buys the shares spot at 24p and uses the money that Goldmans settled on the front leg of the swap [spot]. This nets out and Helikon are left having bought 56mio shares on 02 March 2123 at 30p.
There is a paper loss on the swap contract but who knows what the share price will be in March 2023?

I contacted IR because I was suspicious and it wasn't sinking in and sad to say but I was once considered an expert in forward Lira swaps in London. For an amount/shareholding this size I would have been very surprised if EnQuest hadn't spoken to Helikon as the naturally cautious Italians would have done due diligence. This was the reply from IR.
"Helikon had expressed an interest in investing in EnQuest equity a few months ago and we have been helping them understand the business. They are interested in (and obviously supporters of) the free cash flow generating potential of the business. We do not see them as activist or shorting the stock."

These are my sentiments too so I find the reply very reassuring.

Nuff said!

Thanks mrc - it does open up an opportunity to take advantage of a future rise. The fact that there is no short by Helikon showing makes my hypothesis weaker. We know that the future price of EnQuest isn't very different from spot (using City Index Dec spread). I doubt you could go out much further before the risk premium makes it not woth doing so would no doubt involve periodic settlements. However, for Helikon to make this work they would have to sell spot and buy back on the settlement date. The bank writing the swap would cover the exposure whilst Helikon would have to leave the position open [netting out at the front end and moving the purchase to the settlement date (for arguments sake let's say Dec21). I could see it working and with electronic trading the opposite side of the deal could be effectively managed. The likes of Goldman & Morgan Stanley would make a price and even City Index will quote you for smaller amounts. The framework and structure could mean that they expect a steady increase for the foreseeable future. The end date could easily be as far out as the bank writing the swap is prepared to go.
My problem is really with the wording. If it is a straight forward purchase then why mention a swap? They own the voting rights now so do they give them away (or back) when they move the price forward to the first settlement date. The requirement for a swap may involve accounting and reporting influences we are unaware of but does offer to accomodate size so is welcome for that reason alone.
You can see why I don't want to go down the swap rabbit-hole!

*Could be jumpy next week with Afghanistan kicking off. Where's gkb? The smell of cordite is catnip to him and usually brings him running.

Thanks SIPP - If you short oil, forex or shares you have to have cover. You can't buy them as that defeats the objective. If (as you say) disaster strikes, they already have the set up to short the shares. If there is a swap arrangement that allows you to buy at a discount then that is outside my experience. The purchase option is usually at the end of a lease. I accept that It is possible to lease something and during that term make an outright purchase. My question is why have they taken on ownership of shares for a limited period unless they intend to do something with them? If the cost is negligible it supports my argument as a possible insurance but if you think it is going higher why get involved in extra cost?
I did consider an activist holding but if hostile then EnQuest could outwait them. Also, on the limited info available it doesn't seem to be Helikon's m.o.
If Helikon don't show up in the FCA shorts then I will assume I am wrong.

The RNS of 3 August records a major holding. Helikon now own 3.0204 per cent until 02 March 2023. They then have to return the shares when the trade is run to maturity (or earlier – deals can always be unwound). Timing of events is impossible so this is a medium term view to cover what they expect to happen. Hedge funds are about leverage and this is a cheap way to borrow shares. There isn’t even a dividend to consider and the lender of the shares is currently earning zero on them. The capital risk will be covered by a charge on another asset, for example a long term holding of a stock held by Helikon. A good example is remortgaging your home, you don’t have to move out. The only cost is what you can negotiate for the borrowing of the shares. You might use as security a non-dividend paying stock to match or if it is dividend earning the lender might pay you. The point is that idle holdings are utilised by both parties and costs kept down.
Helikon now SELL these shares expecting to repay them by buying back when they are lower (between now and March 2023).
EnQuest stock on loan in percentage terms was [from Euroclear]
April 2.36
May 1.86
June 1.96
July 3.12
I’m not sure if Helikon did this in one trade or have been borrowing (and selling) for some time and have only had to report once exceeding 3%
There is no matching reporting of a short position in the daily FCA reports
https://www.fca.org.uk/search-results?search_term=short%20positions%20daily
which weakens my hypothesis but ARCM did not report their shorting of Premier Oil (155 notification failures) and was the first time the FCA had taken enforcement action for breach of SSR.
If anyone can make a different hypothesis I would welcome it.

Have you ever noticed how a retired person tends not to get excited about an industry he was once in? The plumber loves a simple installation where he was paid in cash and the job was uneventful. The real world is about difficult clients, chasing payment and carrying boilers up 3 flights of stairs. I once traded FX swaps for a living so did not in fact pay as much attention as I should of to the 3 August RNS on a similar basis. That's my excuse anyway for both myself and onedb possibly both being wrong. You see an increase in a holding and that's good news, isn't it? However, I profess to knowing little about equity swaps but will assume they aren't that different to FX swaps.
As for hedge funds I know an Italian hedge fund based in Mayfair where a mutual acquaintance of mine and hitman worked. I know quant analysts and more about Brevan Howard than I should. I worked with Italians for 23 years so know a little about them. I left the City in 1999 so accept I may be a fossil in derivative terms (and physical). The language they use is arcane but the maths is usually quite simple once you get past it. "Tom next cable" is indecipherable until you learn it is the rollover of tomorrow to the nest day of dollar/sterling. I visited the youtube for equity swaps as recommended but didn't understand a thing. I wanted a physical worked example. I couldn't find one.
Have I got your attention?

Around 2010 PFG was the most shorted stock in the FTSE. I bought for dividend but the quadrupling of the price was a welcome bonus. I bought back in again last year between £1.50-2.00 and regret reducing at £2.50 (take a profit and cry). My posts of 16/17 March are still relevant. LTH's will be rewarded.

I thought it'd go over your head KO. There was no need to confirm. You won't be at the party anyway.

Hi onedb - thank you for your perspective. I fail to see what a sword fighting fictional hero from the Napoleonoic wars or a small town in Sicily with a famous monastery have to do with EnQuest as an investment but I know you are a student of these charts along with many others so you must be listened to. If nothing else they throw up anomalies that require further investigation and teaches you financial discipline. My feeling is that what attracted you to this stock also attracted Helikon.
Hedge funds are opaque anyway let alone one that is based in Switzerland/Italy. From what I can google they have a presence in London and for a small fund that is telling. They are all experienced and in Italy "raccomandazione" is still widespread and they would not have moved from Julius Baer without clients willing to follow. They are young and with connections. They do things differently to us but Italians are a cautious race which even carries over to their football team. Never underestimate them. Their investment in EnQuest does seem a tad unusual, especially as oil is hardly for widows and orphans whilst the natural caution of Italians makes this an unusual choice imo. They would have done deep research and like what they found. My only reservation is that I don't fully understand the instrument used. A cash settled equity swap could mean just that you swap cash for equity but I don't understand the 02 March 2023 expiration date? Many of these funds and deals are bond based and that date seems closer to existing bonds so may well be a derivative well beyond my ability to understand. For the returns they're after you have to evaluate and take on risk. This isn't a death-spiral type deal that are more common on Aim stocks and the market took this in its stride even if details of what is behind it are sparse. It is possibly indicative of the fact that we are preparing for the bond maturities in 2023? Securing longer term finance is always a positive.
I said at the time that this was smart money and your post made me investigate further. I am not disappointed in what I read. Thanks.

Earlier this morning looked at Bloomberg TV and saw that oil price lower due to Delta variant. Went out and surprised to see upon my return that nothing has really changed. Looked at Bloomberg 5 minuyes ago and read these on the rolling side-bar:
"Forecasters backtrack on need for more OPEC oil" followed by "cheap US oil snapped up in Asia even as Delta lingers"
It is contradictory and basically meaningless. It either means that in the dead dog days of August there is little going on and you have to resort to facile headlines or KO now works for Bloomberg?
Last century even the two World Wars left August alone with WW1 starting on 28 July and WW2 on Sep 1. Europe is basically on holiday. In Italy it is Ferragosto on Sunday which basically means the country shuts down (try booking a hotel in Milan in second half August). It does though herald action once August is finished and our update on 2 Sep is timely. Could be hold on to your hats time. Sell in May and all that with the update and the St. Leger nine days later.
Regarding wars the Afghan situation is particularly worrying if you're an Afghan and they are neighbours of Iran and ****stan (nuclear). This is a tinderbox region and I think we can expect fireworks. The US has decided they are far enough away and supporting Saudi Arabia solar panel fields is no longer a top priority.

I think September will be eventful!

Build it and they will come; because they need it!