Member Info for romaron

About oil. Nothing.
In today's first Sunday Times of the New Year with the usual tips and punditry; on oil not a drop! Surprising because there isn't a human endeavour that doesn't require it. It even provides the PPE and powers the ambulances as we fight Covid.
This is to be expected in someways as the media panders to the ESG narrative. It looks like the sector will remain a dirty secret until we are all rebranded as "Energy companies" whilst still making most of our money from oil and gas. Makes me think of tobacco which never did me any harm (as a financial investment).
Next week I will probably book a skiing holiday for March. Unfortunately it will require an air flight and transfers to the resort by taxi. I will also visit Norfolk , Ross-on-Wye and Cheltenham which isn't easy by public transport once allowed so it'll have to be by car. I did have the ox-cart as a back-up but I sold it to a young Swede and since Brexit the red-tape is formidable for moving livestock and the snow would have melted.
I don't know what it's like in your areas but the minute you go out round here they still use words like "traffic". My reasoning for booking ahead is that the pent-up demand to travel and enjoy being waited on is what everybody is waiting for. There will be a shortage of flights and rooms.
This board has been great the last few days but will probably deteriorate as the day traders return but to compensate we'll hopefully get more data and news as the world pulls its way out of the pandemic.
If you want a true contrarian bet then it has to be oil. They've even stopped talking about it. However, 'cash-flow, and Ebitda' are still in the lexicon.

Phase 1 built - early arrivals checking in

In today's Times. Private equity 'lining up goldrush'. Falling pound and weak stock markets tempt cash-rich predators.
Potential targets: ITV, Crest Nicholson, Mitie, M&C Saatchi, Indivior, Wincanton, Morgan Sindall.
Already taken over: RSA, McCarthey & Stone. The AA under attack. There are more and many will say it's just a function of the market and to be expected. Only mentioning because there was no mention of Premier's takeover by Chrysaor or any oil sector stock come to that. Perhaps they've given up? More importantly it shows how difficult it could be for us to be scooped up for a song with the blocking holding of AB and the EBT (15%). Forget the hedging - this is foresight and by protecting his interests he protects ours.
PMO shareholders were badly let down by TD and his team. If he'd spent more time protecting their interests than in Santini's it could have been so different.

*The list was made up by the Quest team a division of Canaccord Genuity. They are highly rated in the City for their forensic analysis of companies and their strategies, risks and valuations.

wrote "Making a boatload of money at $50 should not be an oil companies target. Sticking around for the good years while be able to solider on in the bad years should."

I wish I'd written that because it's so true. I've been a holder since 2015 and it hasn't been easy. Having said that the whole sector has been out of favour. Maybe we've all had too narrow a view. Farmer's expect good and bad years whilst a ski resort may not have snow. Large projects in oil take many years and a lot of money. Commodities have one of the largest cycles of them all.
"There's many a slip 'twixt the cup and the lip" as the old saying goes.
There is a lot of collateral damage and the survivors should enjoy a time of plenty-but it won't last. It never does but it also won't be a temporary blip. I see a good few years ahead of us whatever route we choose.

Always enjoy your posts HMH.

Pelle wrote - "Sorry but I dont see him exceptional better then other CEO's, maybe slightly below average."

Well he's certainly better than Tony Durrant (ex PMO CEO) and to use a football analogy- we didn't get relegated. On performance he wasn't exceptional but few managers excelled last year. An early exit from the Hedger's Cup lost EnQuest Albion the opportunity of a valuable cash injection from a decent run. However, a new season begins and we have a fully fit side but maybe not the financial resources to strengthen by bringing in new players. It does mean that with an injury free spring schedule ahead we could finish near the top of our league. Harbour look like being promoted to the next division and will be playing Lundin and Aker BP next season. If we successfully negotiate the play-offs we could join them.
Negotiations are ongoing with some premiership teams to sign players on a semi-loan type arrangement with a view to a full contract when conditions permit. The owner/manager of EnQuest Albion said he looks forward to the challenges ahead and his first job will be to strengthen the defence but will continue to play an attractive attacking game.
Some fans have been calling for his sacking but he retains the full support of the board.
Talk in the game is that other interested parties have looked at buying EnQuest Albion but consider the manager's and family holding make a deal almost impossible. The ground and team with its loyal fanbase make it an interesting target. It has an unusually large following in the Middle East and Asia.

Good points Pelle. AB may be an autocrat but he is essentially the driver of the company and the team appear to have stuck with him. I missed the (possible) signal of Jim Buckee resigning/retiring in 2016 but they are always mixed. I thought that when Richard hall stood down after Kraken completion it was goodbye too but he has returned as MD of Malaysia. I only throw in Spirit because although it seems well run the owners want out and they have Neil McCulloch who was a director of EnQuest until 2018. It doesn't appear that we are in a position to bid but nothing surprises me with the creativity in M&A. We bring a lot to any deal.
The hedging has been poor but we don't always know what drives decisions. The OZ set up locks in a certain amount of production but I think the biggest clanger was the swap in the 30's. However, I've lived through some events and panic or bailing out is sometimes the right decision. We then have agreements to sell which are commercially sensitive no doubt. AB should be challenged about these but I can't recall an instance where he has. I did look again at Chrysaor's hedging and the headline figures look good (average $60) but once you go into the detail its about 16 percent of production for 2021 and for 2022 its 1 percent hedged. I missed buying Amazon so we're all good at dealing backwards. I don't place as much emphasis on hedging as others do because the oil price proved extremely volatile last year and "luck" is involved. Timing is impossible and I withhold my judgement because I don't know the facts. Add to that the point that you can only really hedge for 1 year and most is 3 months. Time soon goes. If we carry on our forward selling model we could easily get it right in the next cycle. If oil is at $70 then hedges below will look ill-timed.

O/T Man moves into new neighbourhood. Has troubled sleeping because of rooster crowing. Asks owner of rooster to get rid of it. To his surprise he immediately agrees. Following nights he is kept awake by cacophony of many roosters crowing. He goes back to the owner who removed his rooster and asked for advice. "Ah, that's because my rooster was keeping the other roosters quiet". Iraqi joke. The USA didn't get it.

Ignore the Permian rig increase. There are still pockets of the best (economic) shale plays and a 101 reasons why they might drill. They might even be more optimistic than me and see a $100 dollar oil. Contrarian etc....
Shale is less economic than offshore is all we really need to know and that the price of oil is increasing ($70 by summer my guess). The US will always have a strategic interest in shale and maybe they'll keep their noses out of the Middle East now. Africa has had its share of tyrants but no oil so not worth invading. Mind you, Robert Mugabe and Trump are similar when it comes to accepting election results.
Next week we'll start seeing market movements and volume signals.
I really appreciate Therapist's work even though I don't understand the spread sheets combined with hitman's pithy posts they give me background numbers. I don't need to know about the unexplained overordering of staplers or the missing post-it notes from the Malaysian office that some other posters drone on about.
Hedging hasn't been the best at EnQuest but not for lack of trying. Events often take over and we do have restraints. Oil fields decline and we probably stinted on maintenance which always catches up (Chrysaor did) but all this fades if oil moves up $10. I'll worry if we dip below $40 but don't expect that. I expect a considerable rise as mentioned.
I listened again to the Chysaor webcast of 17 Dec and it makes me more positive. The market treats us like a PMO when in fact we're more like Chrysaor. I was thinking that overtures would have come from Chrysaor or at least general discussions when considering Bressay. I doubt that Sea Lion will be part of their future and was a mistake by PMO but we cannot gloat with Alma Galia. They like the far East too as another region to diversify in (Vietnam, Indonesia).
Linda Cook harped on about majors still off-loading but there are not many buyers who can acquire. Well they have to digest PMO first before growing the North Sea assets which she described as the "goose egg of cash flow" for Harbour Energy's future. Organic growth will be possible for us but I'd prefer us to get involved with another company but instead of being absorbed for AB to run it. Still a chance with Spirit imo.

Looking good. Be Lucky.

Goodwill to all and Filters are off. This is our year. AB put it so well:

"As the truth about oil supply becomes clear, investors will gradually trade in their environmental ballroom dance for the chance to cash in on rising oil prices."

(That's Art Berman not the other one)

AB and team (Amjad Bseisu) built it and early arrivals expected throughout January

Trump is de-classifying intelligence that China has been targeting U.S. Forces in Afghanistan. Uncorroborated is being thrown around and it may only be a side-show to stitch up the new administration. Looks like its only OK for Russia to do it though.
One misstep and it could all go horribly wrong.

What a way to end an already terrible year. Next year has to be better all round.

Hi gkb - funny old year and here is me agreeing with you. On CNN today they announced that the AZ vaccine will be launched in April in the US. They are far more litigious than we are(but we're catching up) and AZ are fully aware that collective humanity will soon be forgotten if there's a chance of damages for negligence. I also attended an AZ trial (posted on here) at St. George's where my high blood pressure (white coat syndrome)made me ineligible after tortuous questioning and prodding. I said at the time that they were looking for gym bunnies and only the superfit should apply. They are terrified of being sued imo. Novavax and King's were much more accommodating but I still don't know if I got salt water or a vaccine.
Having said that I think the risk is low but of course it is there. AZ's CEO saying he has a "winning formula "is what all CEO's say. If you get a choice then I'd recommend Novavax because they tested ordinary people rather than budding astronauts.

We disagree on certain views gkb but I always enjoy your posts because you say it as you see it and don't mind going against the trend. I'm actually with you on potential outbreaks of hostilities and am surprised how quiet its been. Trump will want to vent his rage somehow and I fear for Iran. Frankly I find it hard to back either side but enjoy seeing American imperialism get a bloody nose.

BTW, did you go to the same charm school as HMH from the Swedish message board who occasionally posts here?

HNY

EIA numbers don't add up.
48 min ago twitter
"Weekly refined product demand (consumption + net exports) increased +0.5 mmb but product stocks fell -8.9 mmb.

Did 8.4 mmb leak out of the tanks (or move to floating storage)?"

Don't get out of our depth here. This from Moody's in June on EnQuest. "The rating downgrade reflects Moody's expectation that - despite the rebound in oil prices since mid-April and the significant cuts in operating costs and capital expenditure - an extended period of low oil prices averaging USD35 per barrel over the 2020-2021 period would require a third of the final amortisation of USD360 million due under the company's credit facility in October 2021 to be refinanced."
This is wrong anyway because the price improved from then on. However, Lundin is still Lower medium investment grade whilst we are non-investment grade with substantial risk.
Credit risk is a specialist business and I know a little but it is the same as a plumber, bricklayer and electrician knowing about other trades they work with. A little knowledge can be a dangerous thing! This could be in a foreign language regarding the Lundin refinancing "The structure of the Facility is such, that it is compatible with unsecured bond issuances through the debt capital markets at pari passu terms, which could be utilised at an appropriate time to diversify the Company’s capital structure." Does it mean the debt will be tradeable and we can get an idea from the pricing?
Remember- Ineos debt was trading at 10 cents in the dollar back in 2009.
Keep up the good work Pelle but I think you're closer with the Apples & Pears.
As long as oil holds up we have few worries and our cash and ratings can only go higher. Personally I hope for new deals because this is a time of opportunity. Our own "transitional" period was hijacked by events in 2020 but we still have scale, an excellent team, world class assets and tax credits. Our public company status is also sought after. It isn't always/only about debt.
Try and make friends with someone who can access bond and credit data. It is much harder to obtain than share data.

Hi Pelle - good questions. My poor English by using "nowhere near" but it does help each of us to quantify horizons when we're talking. I doubt the bonds will ever be repaid on current maturity date because a lot is going to happen between now and then. We easily fall into the trap that we expect the other person to follow our train of thought. It is much easier face to face and you can interject or clarify. The dates of October 2021 and October 2023 slip into our conversation too easily and the only date we'll perhaps get close to or honour is Oct 2021 imo. I think there are subtle nuances in terms like RBL, RCF and SFA and I have said before that pushing forward the Oct 21 bank debt would push up our share price. It is interesting that we seem to be the only people (retail investors) bothered by this. I really think that all will be revealed next year. There will be other deals so why not tailor a better financial packaging to include new deals and an improving trend.
I am no expert on this kind of restructuring but commonsense says that for efficiency and prudence these things should be addressed at opportune times. I believe we are off a lot of radar screens. Institutions don't like large single shareholdings (AB and EBT 15%) and whilst this may dissuade them it makes us stronger in seeing off unwanted vulture/venture funds.
The absence of a financial deal or unwanted attention suggests (to me) that AB is up to something. He won't want to further complicate something that will no doubt be complicated enough when he shows his hand.
The reason I said "nowhere near" is basically because we lost a year (2020).
2022 is possible but my wet finger in the air says 2023. AB knows what is going on and doesn't see the urgency that some of us feel. It is always worse being in the dark. I don't know if anything I've posted helps and I certainly wasn't having a go at you or Tarmak. the problem with forecasting is that there are so many variables and additions means you have to reassemble the model each time. I think the future is very promising for us but there are no clues with the bonds or dividends at the moment imo. They are only temporary in one sense.

This is imo the weakness of this and many message boards. If something is complicated or hard to understand it tends to get ignored (PMO and ARCM for example). We have just had two Swedish guys discuss P. 293 of the RI Prospectus and I think they're both wrong but nobody has corrected them. The date of 15 April 2020 applies to total or part redemption of the HYNs. Of course EnQuest can do almost anything they like if they're debt free. The chances of them paying off the debt is basically zero and why would they? There are restrictions on certain payments, including dividends with respect to outstanding share capital. I have no idea what this means but as a layman I suspect it stops shareholders and Directors paying themselves dividend they don't deserve. At current prices/levels we definitely don't deserve. However, if we were throwing off cash and the HYNs were above par it would be a different story. In fact the structure of the notes has a heavier penalty if they are repaid early and would only happen if a windfall amount of profit had happened and the bondholders want a share of that. I'd have signed up to it as well because as shareholders we would have had embarrassing riches to contend with. I'd give bond holders peanuts out of my winnings.
We have no spare cash so cannot buy back bonds or shares. EnQuest are paying 7% and have a PIK arrangement below $65 so what's the rush? The bonds may be a raging BUY but the company cannot take advantage of this at present and never will. If they could afford to buy them the company would have excess cash and the return on buying bonds would be higher than from producing and selling oil. Even as we increase FCF there will be a resultant uplift in the price of both shares and bonds. It actually make the bonds less attractive (lower return) and I doubt there would come a time when our excess cash coincides with a bond dealing at a price below (say) 90 with 2 years to run. Current borrowing rates (according to Harbour) are 5 percentish if you are bordering investment grade. That isn't us and and 7% is luvverly jubberly. Things change but not overnight.
My point is that the whole argument is pointless. We are nowhere near a position to pay dividends but never say never.

*PFG did buy back part of a bond at 96.90 in August, coincidentally due in 2023 @ 7%. Covid basically stopped their clients spending so rather than pay interest they used the money from their Vantage bank deposits to cancel some of their debt. I had already backed up the truck around £1.50 but took another load because if you want a better buy signal than that I can't imagine what you're looking for. The price is now 100.28. They had an excuse to buyback. We haven't. I invested in oil - not bond trading and that is what the management need to get right.

Mousetrap this way>

Hi Pelle - I do appreciate what you Tarmak and others do. It saves me doing it and you're all better at it than me. I do use the figures but only as far as the back of an envelope; not a spread sheet.
The debt/Ebitda ratio was going great directionally until this year. We've hit 'pause' but we'll soon be off again. Trump speeded up the demise of shale and that is good for other producers. Covid depressed demand but it also winnowed out the failing companies. It has created a lot of opportunities for those remaining.
As for bad hedging. I think Tullow and Premier did better than us at hedging and look at what happened to them. I think our debt management has been superb from an admittedly weak position.

Hi Tarmak - I was once good with numbers and worked with them but nowadays and after Covid and shale (both black swans imo) I see a certain futility in spending the effort so only go for broad strokes. It's kinda pointless building a model and then Putin or Trump crater it and oil moves $10. I have a certain cynicism towards green energy as I did spend some time working in the industry and believe that progress will be slow. Even slower if the full cost is shown to the general public. [EAGA 2011]
I put the company hat on and they will have a view(at my first AGM in 2015 Jim Buckee and AB had a bet that oil would be $80 by YE - I can't remember who was on what side but it was $61 at the time ). They are also fully aware that they have no control of certain variables so contingencies are used (hedging, PIK etc..)
Not avoiding the question but I'm here because oil will be above $70 by the summer (imo) and we will be in clover. I'm a pragmatist at heart and have seen much ignorance and it wasn't all from message boards. I'll take what JS EnQuest said in September and they think debt at bank $500m and bonds $500m in 2023. That would tie in with other plans in the pipeline so you can see it's hardly worth the effort. Production could be 120k bpd and oil $75 by then. To get production to that level you'd need specific financing which is just too complicated for me and is of course unknown to everybody.
Jumping back to the front end it looks like we'll be free of bank debt next year. The Bonds are irrelevant at this stage but are unlikely to be paid down to zero. If the conditions are favourable we'll refinance. You never know - we might be close to investment grade by then.
If you want numbers then hitman is a better choice. He's even more pragmatic than me. I'm more in line with HMH who posts mostly on the Placera board but knows more than me.

Be Lucky

For somebody who is into diversification and has only a small interest in EnQuest you spend a disproportionate amount of time here chilting. Anyway, I'm sure we've bored other readers to death here. I'm ending this vein of conversation. Good luck in your search..

So chilting you are actually an apostate. You were once an EnQuester. I'm a lapsed Catholic but now avoid dogma whenever I can. I prefer the here and now.

Dodger - the comment from the last webcast by the CEO is that the "RCF bullet payment of $360m due 30 September 2021 is expected to be well less than half, a small amount" - at the then current price (between $41-45). They have plenty of options if not cleared.
The bond debt is just less than 3 years away. Let's say it is 2 years away from needing restructuring/renewal. I expect developments will change these dates anyway. For now 7 percent isn't a bad price for an out of favour sector/company to borrow money. They ain't called High Yield Notes for nothing. I bought some more RB yesterday at 67.

error in my last post - "led by ill-informed proselytisers." Not being faith-led or religious I mess up the terminology.

.....and don't forget Pelle the increase demand for cement to build wind farms. One of the worst polluters on the planet (cement) is likely to double (from 8% to 16% of global CO2 without checking) because of wind farm development. Ammonia production too uses a lot of energy. Not as simple as some believe. You guys in Sweden have adopted air/ground source heat pumps more than any other country. Over here they are completely misunderstood. You are years ahead of us in insulation terms and your housing stock is newer. Too many experts led by ill-informed apostates. I actually qualified as a Green Deal Domestic Energy Advisor (2012).