Member Info for romaron

https://www.youtube.com/watch?v=cJkM_iibg6w

This is uniquely British humour. The Swedes might not quite get it but practically any episode of "Only Fools and Horses" is a good entry level. Always funny.

Amazing how quickly things are moving. Some new faces here and some may even be benign. I'm posting the reply I got from IR on the 20th January 2021 regarding impairments. I'd forgotten how recent it was. here it is:

"The impairment in 2019 related to North Sea assets and were attributable primarily to changes to the long-term oil price from $75.0/bbl to $70.0/bbl, revision to production profiles in the Heather/Broom, Thistle/Deveron and the Dons fields and the anticipated cessation of production at Alma/Galia. We haven’t broken this down specifically but I would suggest the decisions to cease production had more of an impact than price in this instance given prices only moved a little lower and this was the long term price.



Both the Heather/Broom and Thistle/Deveron fields were fully impaired as a result of the impairment assessment conditions as at 31 December 2019.



We then also took further impairments in the 2020 half year results following the dramatic collapse in prices seen in March (OPEC, Covid etc.). The prices used at 30 June 2020 were $40.0/bbl (2020), $47.0/bbl (2021) and $60.0/bbl real thereafter, inflated at 2.0% per annum from 2023 compared to those used at 30 December 2019: $63.0/bbl (2020), $65.0/bbl (2021), $67.0/bbl (2022) and $70.0/bbl real thereafter, inflated at 2.0% per annum from 2024. Quite a change… so these were definitely price driven impairments and the impact was large as it was near-term prices that moved (so less discounting on a present value calculation is applied)."

I cannot read it in the way an Accountant can but I read it that there are add backs that will do the opposite of what impairments do.

Pelle - I don't have the obsession that others have with hedges and I've a suspicion that our hands are tied to an extent. You often hear suggestions of it when other companies are making presentations. Sometimes they are forced to hedge when they don't want to. Late hedgers or those letting it run might have the last laugh. I don't criticise any company for what happened in Q1 2020. Sometimes panic and bale out is the right call.
My post wasn't really about the hedges but Goldman's pronouncements. They aren't silly and are possibly talking their book but they move in exalted circles (bit like Juan).

Whilst browsing I came across this; "Bloomberg estimates based on government data show that Mexico has spent $15.1 billion in fees buying put options over the last two decades, but has earned $16.5 billion over the course of those twenty years—with the biggest profits mostly in 2015 and 2016 when oil prices tanked.
Banks and oil traders on the other side of the hedge have in the past included Citi, Goldman Sachs, BP, JPMorgan, and Shell."

Two things I take from this. The hedging was hardly worth it but it does provide stability and helps budgeting but what I found more interesting was the other side of the trades. They mention 5 companies. Goldman Sachs aren't always popular but they deserve to be listened too. As do the other 4. Some people prefer to listen to Malcy's bucket list. The good news is we aren't on it.

I'm always respectful of Goldman's view whilst the KGB are more open than the trading arms of Shell and BP.

Message from engine room to bridge: Juan, what's going on? You are the last person I expected to be affected by pier pressure. According to Boris we can have the party in July. Don't let this promotion go to your head. Remember your roots!

It would probably be more rewarding to watch these 2 webcasts that Pelle found than read a message board.
https://sb1menergyconference.com/170202
https://sb1menergyconference.com/1702
However, it was aimed at oil professionals so some went over my head and more dangerously I may have thought I understood something. I'll admit to not listening to all of it but on the North Sea Oil & Gas at 2.33 the BWE rep. says he detects a shift in terminal value because of ESG pressures. There is confidence returning and attention is now on the front end where people are prepared to accept near term outflows for future gain. He was also asked what keeps him up and night (2.35) Who will his partners be in 5 - 10 years time. The guy at Waldorf is ex Goldman's. Access to capital keeps him awake but I'm as interested in his story. He has plans for that tax loss. We have one too. Don't forget its value.
I also liked the presentations of Lundin Energy and International Petroleum Corp. Both potential future investment for me.
My biggest question is the terminal value to do with DCF/NPV? I understand how discounted bills work and they've been going for centuries but I don't trust accountants and I'll explain. I asked for an explanation from a partner at a big 4 accountancy company. We were friends and had plenty of time.
He waffled and I'm convinced he didn't really understand it. He knew how they treated it in Accountancy terms but TBH I'd rather trust AB than an accountant. It has elements of mathematical certainty (discounted bills) but plenty of assumptions and variables. The long cycle of oil also complicates it as discounting of bills is usually less then a year. I think HMH would understand it better. Am I warm? I think there is a sea change going on and some get it whilst others don't. I think we're well placed especially since we are now quite a mature company, battle scarred and making money with an extra premium because of tax losses.

I'm thinking of getting a new sofa. I've pretty much made my choice but thought I'd ask L7 and HMH for confirmation advice. The salesman told me it will seat six people without a problem.

L7 asked for measurements and had I any idea of the age and weight of the people who would use it? Were the materials of a suitable standard and provenance? He would do some calculations and come back.

HMH replied that in this day and age where would you find six people without a problem!

This started as an interesting debate between two highly intelligent men. HMH and L7. I don’t consider myself as learned as either but understand where they’re both coming from and they both said it. L7 needs evidence and confirmation that his numbers work. There was probably an engineer on hand with his reed brush and papyri when they built the pyramids. HMH has an economics background which is a far younger science and (imo) works basically on the imperfections of the world. They know things aren’t always as they seem. Statisticians have the same problem. It isn’t only in share trading that they use algos. The betting industry makes a fortune out of them and they are highly sophisticated but they still cannot pick the winner of every race. They can’t even predict election winners.
I’m glad they’re both here because they make us think. The answer lies out there sometimes closer to one than the other but there are so many variables that it swings one way to the other. Then you have Juan who is more the everyman. His view is equally important because of his life experiences but he’s no mug either. Mrc could be valuable but has personality issues. Squif gets angry but seems genuine. I could go on. Pelle is always searching and I’ll probably be back later regarding the Webinar he found. Why listen to the likes of me when there are expert views freely available.
I would say that HMH and L7 posts are just as valuable as outside experts. We all want certainty and sometimes get it but it has a short shelf-life. We all know how the market responds to certainty or in HMH's case, what they perceive as certainty.
One thing for sure. The world ain't perfect!

Incidentally. Nassim Taleb (and he has a brain as big as a house) challenged the Black-Scholes option pricing used by derivative traders around the world. Everything works if you all believe in the same thing. Even becoming a martyr becomes an option.
I was in banking when people could hardly spell "derivatives" and I was at a talk given by the chief dealer, a Welshman, at JP Morgan. At that time one of the few AAA banks around. He had a simple system. The bright young things were allowed two attempts at convincing him of their model. They were never given a 3rd go. All these algos are great until something like the 2008 collapse or Covid comes along. Engineering is great L7 and Stonehenge is a great example. Tower Bridge is a tourist attraction whilst Hammersmith Bridge is falling down. Keep up the posting. Your views are always welcome by me. Not being in the consensus doesn't make you wrong and don't try to steal the anecdote crown from me.

chilting - you said fossil fuels have limited availability. No they don't. They are still massively cheaper than renewables and please don't mention hydrogen again. None of us will be around if it ever reaches economic viability.

Oh dear- an intelligent debate and then chilting joins in. L7 wrote:"I get the bull case for oil. Links to it are posted here ad-nauseum." That is true but not surprising on a board where the majority are holders. What is repeated 'ad nauseum' away from here and by chilting on this board is the imminent climate challenge. It won't happen tomorrow and it isn't going to be next year or the year after. It is going to be decades away. Germany aren't due to phase out coal until 2038 and we know how often dates are missed. India wants CHEAP oil. The emissions aren't the problem. A decent water and sewage system probably has a higher priority. Stop for a minute. The West want clean air and can afford it. So you have two options. Export economic advantage away and basically make the 3rd world die for you (breathing in the poisons) or impose sanctions on them taking away any advantage from them and the benefits (there are many) of fossil fuels. I somehow don't see them docilely agreeing and gun boats don't have the impact they once had.
Australia and New Zealand are already bleating about carbon tariffs with the UK because they aren't as bothered due to their economic exports and population density; and they are two of our closest allies!
It's in the paper again today the failure of the UK's flagship £1.5bn green homes grant scheme. Chilting is a defender but I have slaughtered his arguments because I have done work at the sharp end. I am not a dreamer.
As usual Greenpeace, The National Trust and Friends of the Earth have written to the prime minister and the chancellor warning that the UK will "lose international credibility" if it cuts funding. No it won't. These groups live on funding themselves. Who the f*ck do they think pays for their lifestyle. They hardly add to the economic wealth of their homelands.
It's practically impossible to quantify the exact cost of fossil fuels but there are untold benefits too. India, Africa and China to name but three know that. I suppose whilst people still go to places of worship there'll always be supporters of different faiths. I've only ever lived in the real world so perhaps I just don't get it?

.... and its being made every day. It is quiet so I'm researching. Actually I think browsing is a better term. I recently went up a trades cul-de-sac and today found another connection. I was looking at the Avanza trading page that Pelle brought to my attention:
https://www.avanza.se/aktier/om-aktien.html/221108/enquest-plc
Top of the Broker statistics is IEGG. I googled them:
https://en.wikipedia.org/wiki/Instinet
At the foot is the Nomura Acquisition. My ex-neighbour was a trader at Lehman's when their equities and investment banking business were taken over by Nomura in 2008. He lost his job with Nomura in 2012. His job had been taken over by the machines.
Those large Off-Book trades still intrigue me. There are dinosaurs still trading. They do have their uses. When the Swiss scrapped the Euro peg in 2015 two ancient Citibank traders (who knew how to use telephones and had contacts) made their annual bonus by lunchtime and a few guys had it off large in Essex in April 2020 at the WTI fixing.

*The phrase "Who goes there?" has been around for sentries.

I make you right Juan. The oil price is like the price of oranges today. Not in a week's time and certainly not in a month's time and so on. I wonder if there'll be a physical AGM later this year?

I thought the recent fall in the oil price was due to a temporary surplus of oil due to the shut in of the refineries in the US. A natural event that cannot be avoided. Bit like when frost attacks have the opposite effect on coffee. These things happen. Over here it's smaller (like ****ermouth) which could be prevented by building 3m walls around the town I suppose but a bit of over reaction to these once in 50-100 year events. Oil will settle down (I read no LPG shipments out) and may go higher or lower. The Saudi's seem quite confident that its going higher so I'll side with them. I don't think we know enough here to understand the crude- refinery connection.

gkb7 - dial down the bigotry and casual racism. Save if for when the pubs reopen and you're amongst friends.

Hi Guys, I was looking for the PYUECK post of 16 Feb which I thought was well written and needed saying and found this board. I am a tad annoyed about the claims on the share board of what the new US administration will do. That is as easy to be right as picking the oil price. I was going to use the PYUECK post as a supporting argument. Now I won't because it might attract them to this board. I am very interested in the RB and HYN. I started keeping track of the HYN and Tullow's bonds since October 2020. I know a bit about interest rates and did deal in them 20 odd years ago. I even set LIBOR rates in Italian Lira 40 years ago so I'm not up to date but the maths hasn't changed. I dealt in forward foreign exchange which is based on interest rates. What I wasn't expert about was credit ratings and still am not. I'm certainly rusty and you two are probably better at the sums than me. My wife did bond settlements and she's forgotten everything. I also know someone well who worked for Moody's and the only tip I got was to AVOID the dreaded phrase "on watch".
I do of course have a view on the oil price and the new US administration. Oil will be higher and at some stage dragged back by shale. Biden will negotiate with Republicans (and Democrats) because that is what always happens. Oil will see us out.

Stay Lucky. If I have anything to say or add to HYN or RB I'll post it here. It gets drowned out on the other board.

KO -they're blaming it on the weather as refineries in the US are shut in and can't process the oil so demand drops.

Reflection - he couldn't explain the UT away. He talked about the "mark" and "away from the touch" but even he said these were archaisms. They would double count trades that had been recorded during the day and put in one total trade (the clients interest) to make their market share look good. I've asked another guy who is a well known analyst and he waffled but I could see he didn't know. I don't think there is one easy answer but I've come up with one answer. Secrecy is still valued in the City. Not out of honour but to stop a competitor stitching you up. One of the biggest competitors is - you've guessed it - the algos!
What I would do is the equivalent of turning off your mobile so you cannot be tracked. That means dealing with a trusted intermediary/s who know how to keep their mouths shut and trades hidden, not electronically. Espionage still works that way. This would entail direct dealing with others but the algos need to be kept in the dark (like us). After the market closes you can enter the trades. Again today there were chunky trades after the close. They don't show up on normal days so something is clearly going on and we cannot decipher much during the day with the sheer number of trades. He did comment that on busy days markets start with a spike, tail off mid-morning, then up when Wall St. comes in and up a bit at the end. Sounds familiar.
Because we're on an uptrend even I can say that they're BUYS and I suppose that is all we really need to know. What would be nice is if another Institution had to report an interest or increase in their holding.
I've wasted enough time on this so I'll just say that the people putting the late trades through must have a reason. They ain't gonna tell us what it is. Just enjoy the trend.

*He took the exam in Stockholm

....forget the question. It is only of academic interest now. I've just spent an hour talking to somebody who does know what they're talking about and I'm basically wrong. My understanding and experience of modern financial markets is the equivalent of Richard Arkwright giving advice to Boohoo or ASOS. I got a few things right but DO NOT try and outwit the market. You cannot.
The Institutions do not require brokers. Smaller ones maybe but certainly not the Blackrocks of this world. If you read "tree shake" or "MM after your stock" immediately Filter the poster. Getting annoyed with the market is akin to a drowning sailor shouting at the sea.
His major complaint was that although front-running has been illegal in the UK for many years the machines have no qualms or restrictions. They are that sophisticated that they have developed algorithms that are developed for front-running. His view on Gamestop was illuminating. The reason they have free platforms is because the owners of the machines are happy to pay their costs. A bit like putting slot machines in pubs. The algorithms front run and entice. Turn at the right time. Rinse and repeat. They are happy to pay brokers/platforms to access flows.
The small algo amounts are not small. They are that sophisticated that they can for instance add 5 percent to all the buy trades that day and build up an amount behind a smokescreen. Machines don't go to lunch or leak info. He said old fashioned requirements were long gone. In the past if the days spread was 14-15 and you for instance bought at 14.40 you were a winner. Now days its more like the middle could be 14.30 and the machine is happy with 14.295 (logarithms etc...it was a long time ago).
It's a relief in a way that I can now safely ignore the trades. Big volume days are obviously of interest and the Institutions still have to manage pension funds and the like but you are not going to beat a machine that can do a thousand trades whilst you make a coffee or go to the toilet.

Hi Pelle - very interesting. It emphasises the difficulty of raising capital which is why I avoid new fields. They're only going to lend to companies that have good relationships with their bankers. Outside of the NS and the US raising funds is extremely difficult. RBL seems to be the gold standard for financing and becoming harder to get. E&P has high cost of capital with (I'd say) the emphasis on E. I will listen again to "terminal value" and concentration c. 2.33 because I think its important. Some very good people there. I liked the Waldorf guy (tax loss again) and the BWE guy. They talk a lot of sense. The OKEA guy mentioned the lack of knowledge by the media and in general. One third of the world lacks energy but are dictated and lectured to by the ESG minority. An excellent find. Thank you.

When Isaac Newton stayed at home to avoid the 1665 Plague, he discovered the Laws of Gravity. Optics, and he invented Calculus.

I watched Netflix and rediscovered Tunnock's Teacakes.