Member Info for romaron

I listened to the PMO webcast just now. It was worthwhile, I'd even say invaluable and I'd advise anybody who can read more than 2 lines or has an attention span greater than 2 minutes to listen (they'll have it on the website later).
Some notes.
The new company, Harbour, was formed to take advantage of conventional opportunities in 2014 when many were piling into shale. It is expected to be at the upper Q of the FTSE 250 when it goes through. Production of 200k plus boepd and net debt 3.2 bn. with 7 yr RBL & 2 yr repayment grace. Linda Cook even said it'd be in the FTSE 150 if one existed.
De-comm because of Conoco assets believe they're the leaders in this field.
Current situation in NS means they can be selective. Not many buyers.
Peer group included Tullow and Cairn which they don't like. EnQuest not even in it. They despise sub-scale and too much debt.
They couldn't go into the granuality of finances because of legal restrictions with the reverse takeover. Understandable and believable.
Linda Cook and Phil Kirk are impressive. LC did day that the NS is their golden egg of cash flow (1.11.00listen).
half way through I was considering selling some EnQuest and buying more PMO and may still do so but I did learn something. They couldn't answer an analyst question for legal reasons but it was about the tax losses carried forward. They are just so frigging valuable imo and that is why EnQuest is such a raging BUY.
I would imagine that AB would be mightily p*ssed off that EnQuest isn't considered to even be worth peer recognition. It is all about scale and I suspect that AB and team aren't sitting on their hands. I think we'll have an interesting Q1 regarding acquisitions.

Be Lucky

Hi spin - I see you found time from tracking those pesky French trawlers. The black economy of transporting illegal immigrants by sea is a summer job (not that you're involved; cough) I'm only answering because you made me the subject. I've no bloody idea really because this is my first real plague. I got complications from measles as a child but this is a first for me. I don't think you can underestimate the greed and stupidity of humanity so I expect a quick rebound. The fact that interest rates are so low has been a boon at this time imo. I've just been told I've got to drive to Mundon in Essex next week. I'll have to practise my accent.

Be lucky

Sven - Covid is now and I don't know about you but it interferes with everything I want to do. Imagine the price of Brent if Covid hadn't come back? Even with the death toll and media addiction it is remarkably resilient. That is what is holding the sector back imo, you cannot move for Covid gloom. Once we are in the sunny uplands it will look like the Serengeti wildebeest migration as investors chase growth due to oil demand not being satisfied.

Hi svensson - here's your answer.
Rationality is from a newer part of our brain that is still dominated by the more primitive, intuitive, and emotional brain structures of the limbic system. Modern economics assumes the rational brain is in charge, but it’s not. Combined with our tribal, in-group nature, it’s understandable that fake news works, and that people resist uncomfortable notions involving limits to growth, energy descent, and climate change. Evolution selects for fitness, not truth . We typically only value truth if it rewards us in the short term. Rationality is the exception, not the rule. For good evolutionary reasons (short life spans, risk of food expropriation, unstable environment, etc.) we disproportionately care about the present more than the future, measured by economists via a ‘discount rate’(Hagens and Kunz, 2010). The steeper the discount rate, the more the person is ‘addicted to the present.’ (Laibson et al., 2007). Drug users and drinkers, risk takers, people with low I.Q. scores, people who have heavy cognitive workloads, and men (vs. women) tend to more steeply discount events or issues in the future .
Unfortunately, most of our modern challenges are ‘in the future’. Recognition that the future exists and that we are part of it springs from a relatively new brain structure, the neocortex. It has no direct connection to deep-brain motivational centers that communicate urgency. When asked to plan a snack for next week between chocolate or fruit, people chose fruit 75% of the time. When choosing a snack for today, 70% select chocolate. When choosing a movie to watch next week 63% choose an educational documentary but when choosing a film for tonight 66% pick a comedy or sci-fi (Read et al., 1999). We have great intentions for the future, until the future becomes today. Our neocortex can imagine them, but we are emotionally blind to long-term issues like climate change or energy depletion. Emotionally, the future isn’t real.
Human beings are unique but so too are tree frogs. Our caloric needs are met so we can spend time on message boards. Income rank is also important (winners/losers) as opposed to absolute income and is what predicts life satisfaction. Losers are often led to depression, drinking, stockpiling of guns and other adverse behaviours. They may become "proud boys" or message board trolls.
Hope that helps.

Build it and they will come

......this isn't about Ammu so it's safe to read on. This from Art Berman's twitter feed.

"Bakken oil production increased +1 kb/d (+0%) to 1,176 kb/d in October.
Output is -286 kb/d (-20%) less than a year ago this month.
-$10.33 discount to WTI at $37.25 vs $47.58 (WTI) spot price."

In my ignorance I was assuming that the WTI price is a benchmark for shale oil pricing. It varies and would only be a worthwhile yardstick if some shale was priced higher than WTI. I don't know if I'm right and shale quality/economics varies but I have a suspicion that ALL shale sells below WTI. Am I right?

If I am right then shale is in a far worse predicament than I imagined. I've got a graph in front of me that says breakeven for NAm Shale is $65. For comparison offshore shelf is $41 whilst onshore ME is $27.

You are of course referring to your opinion of EnQuest Ammu. I know you are in denial but I'll let you into a secret. Most people believe (including me) that Biden won the US election.

November 4 post by Ammu subject "If Biden wins"

"I expect oil to fall $5 and enq to be in the 8’s..."

Keep up the good work. We need a jester more than ever; especially as the pantomime season is restricted at present.

Hi HMH - you've just crystalized my thinking with one sentence "I don't think financier's will come around this time as they all know OPEC+ can flip a switch and kill them all over again."
In the hey-days of shale they were promoting American ingenuity in turning oil and gas production into a manufacturing process with an on/off switch. Because of their 'leverage' over Saudi Arabia they expected the Saudi's and their influence over OPEC to reduce supply to keep shale profitable. Shale would survive if SA kept reducing supply whilst Russia would enjoy seeing these allies engage in a mutual death spiral of sorts. I believe there was already a disenchantment between the US and the Muslim world which Trump exacerbated with his clumsy attempted ban on 6 Muslim countries entering the US in 2017. As usual Trump didn't know when to stop and kept crowing about US energy independence on a flawed premise - shale economics. He persuaded the US oil industry and financiers that this was permanent; that's what snake-oil salesmen do.
Enter Putin 8th dan judoka. It is a simple sport that turns a competitors' strength to your advantage. It is accepted practise that in judo you can often retaliate to an attack with the self-same throw. Some people consider Putin plans moves like a chess-player. He is a much simpler individual than that imo. He watched Trump throw a roundhouse punch and the rest is history. He is also an opportunist and the US has never been known for subtlety and Trump just came up against the better fighter. Between them, SA and Russia now own "the switch".

L7 - that's a bloody big "if".

"There are now some big serious players there who will "drill, baby, drill" if they can hedge production 2-3 years out at $60-$70 oil."

Just look at volume or the open interest in oil futures. The volume falls off a cliff after a year. You can get a "bespoke" deal but the price setter makes such wide spreads it's better to look at another form of hedge (invest renewables, buy a tanker, buy lithium etc...) which is why the amounts are pitiful. Sure the oil companies would like a market 3 years out and longer but it's up to the market makers to see if its worth the effort [it isn't]. There's gonna be a supply/demand imbalance in almost every sector of commodities and there is a limit to the supply of finance. We know it eventually finds a level but remember shale is owned by more grown-up companies now who also own conventional resources. I have great confidence in the inability of markets to predict what will happen to fossil fuel prices. Meanwhile you can invest in the lottery for which environmentally friendly energy source will become standard. I fancy that they'll solve CCS before they can make hydrogen or nuclear compete with fossils. Wind and solar are doing better after the huge investments in both but I'm still concerned that expanding wind farms will double the CO2 emissions from making cement, whilst they haven't quite succeeded in making solar panels from bamboo yet.
I know there are bonds that go out for decades but they are nothing like commodity futures or swaps. They have govt bonds from which they can calculate and the massive credit rating system to facilitate. Afraid in commodities you need huge cojones to take on these bets. The financiers on the opposite side don't and still have the wounds. Shale won't die but it isn't the beast it once was.

This was Norway's previous position.

https://www.theguardian.com/business/2019/jun/12/worlds-biggest-sovereign-wealth-fund-to-ditch-fossil-fuels

https://www.reuters.com/article/equinor-russia/equinor-buys-49-stake-in-russian-oil-venture-from-rosneft-idUSKBN28L1MI

I didn't hear the North Sea mentioned by Boris so that may have been a reporter's assumption or I misheard. It looks like it means that foreign aid will no longer be given for fossil fuel projects (meaningless in that it is probably a tiny percent anyway) except in "very limited exceptions". Of course it means that we have created pressure on ourselves with our own fossil fuel projects. However, we didn't achieve the pejorative phrase "Perfidious Albion" by accident. A verbal contract isn't worth the paper its written on.

There is a climate ambition meeting going on today. Boris to speak later. António Guterres just spoke. Usual guff. As usual Boris wants to make an extravagant gesture. They are pretty meaningless from the buffoon. Live now Boris

"end tax payer support for fossil fuel projects" latest phrase. I suspect this is part of the Brexit imbroglio and an attempt to distract from the abysmal performance of the Tory party.

Only in the sense that I may have a part explanation for the dire performance of EnQuest recently. We know that smart money and funds sometimes coincide but the fact remains that retail investors, especially day traders, will keep churning and the result is often a gradually lowering of the share price. Funds look at the bigger picture and have much better research/information available than we do. They abhor uncertainty and risk. At first I was thinking 'Brexit' but even if it is a negative effect on Britain's trading future that shouldn't bother us too much as our exports to Europe are minimal and it looks like we're expanding our footprint in Malaysia. So whilst others may place weight on Brexit I discount its effect on EnQuest.
This morning I heard on LBC whilst in the car that next week the Government is to announce a ban on new drilling licenses in the North Sea. They will only be granted in "exceptional cases". I wasn't paying 100 percent attention but I did hear it. I'm gonna try and see if I can get playback. I've googled it but can't find anything and I suspect it is has been fluffed up by a sub-editor or a green campaign is putting on the pressure and is potentially "fake news" or at best a "half-truth". It is obviously a follow-on from Denmark's action and in the current febrile political situation could be an attempt to change the narrative and reduce pressure on the Government. It does appear though that there may be a weak promise to curtail drilling in the NS.
It is there on LBC. They will no longer fund fossil fuel projects (whatever that means?) mentioning oil, gas and coal EXCEPT in "very limited exceptions".
This means that Bressay may be dead on arrival? However, I doubt it and think it is better news than at first sight. AB has excellent political connections and I imagine would have sounded out the regulators and the plans of the Govt before committing. If there is anything in this rather than a typically vague Boris promise it could be excellent news for us. At worse we have not lost much but if it is developed we will have an incredibly valuable reserve. Existing oil in the NS is becoming daily more valuable but there is the risk that unless the money is there and a license granted they stand a good chance of being "stranded". I haven't looked to closely at Bressay but it is an "old" field in that it was discovered decades ago (1976) but economics have delayed development. The funds and smart money would normally be aware of rumours circulating and this would explain the torpor in the NS. It may mean the basin is declining but existing reserves and those "limited exceptions" are going to shoot up in value imo. Others may say that this is the death knell of NS crude.
This hasn't changed my view and in a strange way it may boost prices as it take some of the uncertainty away.

Debate.

"AB should continue to shape the business even more in 2021." - we're almost there [2021] and it is his job after all. I suspect that with the cornucopia of oil companies for sale there is little chance of us outperforming the sector. Last week Centrica announced they will restart the sale process for Spirit whilst Exxon is selling around a $1bn of NS assets (likely to HiTec). This is depressing the market and the pressure on funds to avoid fossil fuels is constant. I know a few investors think that AB's absence from buying EnQuest shares means he's involved in talks. Possible and it could mean that even if he considers them a bargain the fall-out from 'insider knowledge' is avoided by not buying. One thing I'm sure is that he isn't sitting on his hands.
I don't think the industry can win the ESG campaign in the West whilst politicians require votes. Eventually economics will show the true cost of renewables and there'll be a negotiated peace deal. Who knows what the fall-out from Brexit will be, for instance? I am relaxed though because the wealthiest people I've met haven't worked for public companies. To an extent they work under the radar because they don't have to report annual or quarterly updates under the scrutiny of analysts and peer reviews. A steady FCF and a future dividend will solve all problems. It won't matter then what ESG funds think. The same people that buy the likes of PFG and BAT and may not even be based in Britain will see to that. US funds with their penchant for weapons of mass destruction will also be interested. The timing is still not quite right for a sector recovery imo but it is close.

..... and many judge economies by what's happening here in England or the US which has been in the news a lot lately. Not all South Korea's exports come to this country. We get so used to a situation we expect it to be an even recovery throughout the world which is not going to be the case. Sometimes we ascribe too much value on British "exceptionalism" and ability to prevail. The débâcle that is Brexit might be closer to the actual situation. I think the phrase "we keep buggering on" is more apt. It is on the face of it though, very good news.

Mouse trap this way >

Forgot - PMO dropped to 11p and ENQ1 to 53 whilst briefly ENQ looked likely to breach 10p.

Very true L7. To succeed you need all the feeds, 100 percent attention and a monk-like discipline. I fail on all three. It is also essential that you short as well as go long. The problem with shorting is that you need cash upfront and the minute something goes temporarily wrong they close you out. It means you must be on top of the trades all the time. Something I am not prepared to do.

My last 3 trades:
Aug 21 Bought 20,000 PMO @ 23.0499
9 Sept Bought ENQ1 18,869 @59.212
11 Nov Bought 50,000 EnQ @11.477

I am considering buying soup stocks. I hope to become a bouillonaire

Sorry, last post on this. Could be a sell. The broker gets an order from a retail fund (say Hargreaves Lansdown). The professional traders think - "dopy retail IC chasers" and happily fills the order. It can still be a competitive price because there is competition but basically easy money. Really we could create a plethora of scenarios but we've ended up with some substance that is unarguable. A decent amount gone through and a jump in the price of Brent. Somebody got it right.

If you hadn't posted Shax I'd have missed them. I don't religiously follow trades but on balance I think they're Buys. There are always a few traders happy to quote in size and use their short term techniques to lay them off in the same way a bookie does. For larger amounts you go to the equivalent of a rails bookmaker. People jump to the conclusion that it was one buyer v one seller. That is possible but with the low volume of late I wouldn't be surprised if the broker got a few to quote and averaged out. What you see is a compilation because the worst job in the world is reporting trades (think VAT forms). My guess is that it was one or two buyers but more sellers. The broker may well have incorporated some electronic trades in the order, possibly to influence the price maker. The reason I say Buyer is because they would be happy with the sell annotation. The sellers accept it is a Sell because that's the side they got hit on. The buyer is happy because he got his amount done and stands a good chance of keeping below the parapet. The smart money isn't after publicity or 1 or 2p usually. If you're stake building then you want the market to think the opposite and you never brag.
Of course I could equally make a case for it being a sell and it might not even be because they doubt EnQuest. Could be an opportunity to sell into a rise and use the funds for a better prospect. Still nice to see a decent amount go through.
That's the problem with Buy/Sell. It isn't often until sometime later (days, weeks) that you see what side you'd rather have been on.
Personally, because my timing is so poor I expect the price to go against me when opening a trade and I take it as a good sign actually. Getting it right immediately angers the good luck Gods.

Shax - Sells? Most of the morning the price was below 12p. They're buys in my book. These were reported after/at the close. I ignore the annotations as they're subjective and the subject has been done to death. Every buy is a sell and every sell is a buy. We don't know when they were traded. It does though indicate that it wasn't a retail trade because of the size. Let's hope it's smart money and the buyer is right.

In FX an approach for a quote in size often has the caveat "is it his full amount?" It is also good form not to broadcast the trade because both parties could be in the opposite position for a future trade. When I looked around midday there had only been c. 2mio trades. These amounts if clumsily handled would have disturbed the price. You don't close avenues to brag. As I've posted before the traders at banks hide large trades from their sales desks because they blab. This trade was well done imo.