Member Info for romaron

Hi L7 - I wasn't making a comparison. I just pointed out that Terry Smith is a successful and rational fund manager. It was more his philosophy to stop worrying about things we cannot control. i think CV-19 fits into that category.
I hold Fundsmith and it has been rewarding and I am fully aware that he wouldn't touch EnQuest.

Hi hitman, I've given up trying to understand the psyche of Americans.

Terry Smith today's Times: "We spend little or no time thinking or worrying about things we can neither predict nor control, like the outcome of the pandemic and the resulting lockdown."

Fundsmith Equity fund - over 5 years it is top in a field of 151, with a return of 115.7 percent, compared with a sector average of 37 percent. Sometimes if you've got a decent company or fund you just have to sit it out. We'll have an operations update on 21 May and with the current pace of change we should get a clearer picture then. Both from the company, CV-19 and demand. I'm with you on production. If they've cancelled or cut back (practically every company) I cannot see them changing for some time.

Hi E - your figures point in the right direction but they are over optimistic imo. I've got Q4 at $35 and H1 2021 at $39. I've ignored Q3 because of the glut but maybe $29 from futures. These are my own calculations but they do match what I read elsewhere to an extent. They are future prices and speculative but it is where the trading is and I expect plenty of volatility. You may even be understating the rise so I'm not going to say you are right or wrong. I'm just saying what the figures say and that certainly doesn't make them right in the future.
I checked back with the latest McDan https://mcdan.com/wp-content/uploads/2020/04/G200401.pdf
Their forecasts were at April 1 2020 and conveniently have the first 3 months of WTI and Brent with their 9 mos forecast for the rest of 2020.
April was so vicious and records were broken; May isn't looking brilliant so I'd put money on the remaining 9 mos being lower if they did the figures today; especially with WTI.
I'm not despondent just being realistic. I know we are at the cheaper end for breakeven and there is a future with our current asset base. That is not the case with shale as we all know. We are priced for a long shut-in which already has signs of crumbling and could speed up the back to work movement.

My gut feeling is that trump will huff and puff but shale will be left to fend for itself. It was effectively a bubble and had similarities with the California Gold Rush (7 years). I wonder who made most money? The US seems to have an affinity for these home grown schemes. As long as we can survive the belt-tightening period EnQuest are in for a golden phase. Energy is an essential and I really don't think the M1 will have a separate lane for ox-carts.
I'm with you for the pick up and I think the rebound could be considerable. It is however impossible to predict but for now I think the market is totally risk averse. When that changes there will be fireworks.

The US is an amazing country. Poor people struggle to get assistance for medical treatment and care whilst the Republicans have no shame in considering helping oil companies. If the Democrats tried it they would be screaming "socialism". The irony will of course escape Trump. I thought they might offer some support by calling shale SPR as it remains in the ground and can be turned on at relatively short notice.
Anyway, if they want to rely on expensive oil that is their call. We meanwhile are firmly on the left - look at the image for 'Breakeven Price of Crude Oil'

https://seekingalpha.com/article/4331919-oil-blood-in-streets-share-views

Only ME oil is cheaper and we are a healthy number two. NAm Shale is extreme right but we knew that anyway; both politically and pricewise.

Whilst another virus simply loves the sunlight and is encouraged by it. Herpes simplex better known as cold sores.

Spoke to a pal this morning in Australia. They only have 75 deaths and they're coming into their winter. Mind you he went to the beach last week (37c).

I bow to your greater knowledge E - many people invest in companies and products that they don't fully understand (me included) and that's fine. You don't necessarily drive a car and know what's going on under the bonnet or even how my keyboard tapping is showing up here. In a past life I'd arrive in the office and check dollar interest rates (sixteenth spread) and calculate the FX swaps with scant regard for Italian Interest rates but used them as a guide (much thinner market). There is and was a massive market in Italian BOTs and Bonds that the Investment banks were all over. Even FX swaps are a kinda derivative and are a multiple of what reduces to actual physical flows. My somewhat primitive calculations somehow made us number one in Lira Forwards. It made us the place to go to for the like of Goldmans, Salomons and Morgan Stanley. They didn't care how you did it they just wanted amounts. The MS trader once asked me if I thought it a good idea to buy all the BOTs at a regular Italian Government auction (billions). These guys had little fear but this was arrogance and a step too far.
The point I'm making is that at the root there is quite a mundane market transaction and FX forwards are all about interest rates. I don't know the secret to oil but I'm guessing you won't find many PhDs among front end oil traders. The main aim is not to get caught holding the baby/parcel and the skill is in knowing the exit routes when smoke fills the room.
I'd say forget this glut because it is a fact and caught most unaware. Some will say they saw it coming but NOBODY saw the tsunami that arrived.
I'm pretty sure I'm working out the oil futures incorrectly but my flawed calculations will hold me in good stead. I'm roughly right. I haven't understood how the front end exactly works but we all understand contango and the importance of storage. Throw in the madcap ideas coming out of Washington (China to buy oil from the US FFS) and many of us by this stage don't discount anything.
What I do know is that order is quickly restored because Governments want to be reelected and citizens can get very angry if they are short of food or energy. The Central banks always work with one another in times of crisis. Remember, Trump is a day trader too and conveniently forgets or omits his losses. He swerved a question at last night's Trump rally. The journalist asked what apart from the SPR (limited effect) is left in the tool box to help the US oil industry. Trump gave a meaningless reply saying the answer was getting America back to work. The economics of US shale oil weren't working before CV-19 and it has only speeded up the denouement.
I'm bunkered down and waiting for it to pass. It will.

With prices so volatile the spot end is almost impossible to measure but using the futures I calculated the following:

$33.10 Q3
$37.85 Q4
$40.46 H1 2021

Everything moves so fast I use these as a wet finger in the air and I guess they are artificially lowered because market sentiment is so negative presently. With these numbers we are solvent and the potential of EnQuest to go higher is massive along with the price of oil.

From The FT:

In terms of the action in the broader market, the analysts noted that it was unlikely that Brent prices would replicate WTI and go negative any time soon because, unlike WTI, the ICE Brent futures contract is cash settled rather than physically settled, shielding it from such supply bottleneck issues.

An indicator of negative rates in Brent, which is ultimately a seaborne crude, will come from shipping freight rates. If these costs go up, it probably indicates global storage is filling up.

Thanks for info E. What I'd really like to know is how EnQuest sell their oil and do they have much at spot or prompt whenever that is? I doubt we'll ever know because of "commercial sensitivity". I was wondering if this has been WIN/WIN for KSA. We all read that they'd chartered tankers for the increased volume they were going to sell. CV made that a non-starter but these tankers are gonna be empty and it's possible to buy oil cheaper than even they can produce it. They might even get paid for taking it! They are the kings of contango.

Pelle, are you winding me up. Mormon's don't drink alcohol and I thought you liked a beer?

Incidentally Ollie the Director Carl Hughes is a member of the General Synod of the Church of England which hints at his integrity and he was a partner at Deloitte which probably has the best reputation in oil among the big accountants. It's not the amount of the purchase but what he is saying by publicly buying. I think his rectitude is emphasised by the speed of the announcemnet - in minutes! Eat that Signal.

Further to the previous post I did the sums again using a spot of 25 April and the same numbers. It made a small diffence to the Dec/June $43.31 but the July/August becomes $27.38 which is quite a dip. Obviously the Dec/June is a better guide because by then the demand level will be better understood and hopefully CV-19 is behind us but the July/August does emphasis just how volatile the front end is. It is also a guide to where Brent might be. I imagine EnQuest are bystanders to the current fun & games but July/August will probably affect us.

Hi E - you won't find a better explanation than this https://ftalphaville.ft.com/2020/04/21/1587427987000/The-United-States-Oil-Fund-mystery--revived/
The video is very informative but quite technical and dense. I understood most of it because FX works like that too. It kinda explains why I couldn't get a simple answer to the spot date and 2+2 delivery was mentioned. It seems that not everybody follows the rules and the video lady admits to a lack of data available. Roll costs are extremely important and not the problem for EnQuest but traders. However, even producers need a functioning financial market but she does say several times that this negative pricing is because the market is bottoming. In WW2 parlance "This is not the end, it is not even the beginning of the end, but it is perhaps the end of the beginning".

*we talk about shalers going bust but a few trading companies will go with them imo. Fortunes being made and lost. Many electronic traders will be lost as the voice trader/brokers come into their own in these markets. Quite a few US retail "day traders" will be buried too. The casino always wins, eventually.

From IR this morning in response to my question about the May AGM:

We will be holding an AGM this year, but unfortunately wont be able to have attendees given requirements for no gatherings and our desire to protect the health of employees and shareholders.

Further details on voting and asking questions will be provided in the notice of meeting which should be issued at the end of this week (along with the full ARA) – it’s all at the printers so hopefully logistics will work!

As I previously said I don't know the spot date but I used to work with futures and swaps so I've got together a rudimentary system to calculate the 2/3 month and the 6/12 month forward oil price. I used 25 May as spot and the dates I used are 27 July, 25/8, 25/12 and 25/06/21 using the numbers here https://www.cmegroup.com/trading/energy/crude-oil/brent-crude-oil-last-day_quotes_globex.html
I get $34.72 for July/August and $42.72 for Dec/Jun21
What is interesting is the 6/12 is higher than yesterday.
I only mention this because these are more important than the excess liquidity at the front end which don't have the impact of excess liquidity or factor in the back to work actions which are just starting.
Last night Trump thought it wonderful that the oil companies would pay him to increase the SPR. He seemed remarkably relaxed but that was more likely to relate to some good viewing figures and I doubt he really understands the intricacies of oil. It was after all Rex Tillerson who described him as a moron. That may be true but a dangerous moron.

Good spot Pelle. I got that completely wrong. I've never been very good at detail. Signal was only ever reported by EnQuest and not here for example: https://markets.ft.com/data/equities/tearsheet/profile?s=ENQ:LSE which I don't completely trust and as I've said before relies heavily on the companies reporting.
Signal first appeared on 9 Sept 2019 (51,036,396 3.01%) and were not listed in the Sep 2018 Prospectus. If you look at the RNS it should have (imo) had the "Position of previous notification (if applicable)" mentioning the 3.01% holding. They weren't in a hurry to report it either as it states that the date on which the threshold was crosed or reached was 01/04/2020 so not connected to the AB purchase by the looks of it.
A worry is that once they drop below the 3% they go dark and it's possible they have unloaded more shares. As it stands it is a sale close to the bottom and the price seems resilient here.
Your attention shows the benefit of having many eyes looking at the company and the input of others is much appreciated by me.
I would add that we can get over excited about minuteae and that sometimes has a completely mundane reason behind the action.

They are playing down the may WTI future but it was mentioned at the daily Trump rally (it's meant to be a Virus update). IThe may contract settlement may be an auction fluke and unlikely to happen again but it certainly got them spooked. In reply to a question about Saudi deliveries of oil to the US and the possibility of "tariffs" Trump replied "we are looking into that". That is his usual delaying answer to something that he is trying to decide in the background. His base likes it when he bullies smaller nations and Russia. Trouble is he wants his cake and eat it. Life doesn't work like that and people are beginnimng to see the US as an unreliable ally. You can't be the richest nation in the world and keep demanding more.

Thinking aloud. The volume of today's settlement may have been tiny in comparison to the monthly/annual production sales and no doubt there are swaps and other contracts unaffected directly but it has created a circle of fear. A couple of traders may have taken a big hit today and even if the shalers missed a bullet it has put their fragility on the line. Isn't the problem that the US are in a zero sum game that wasn't anticipated? The US economy wants/needs cheap oil. The shalers need a higher oil price. Trump can't really win as the shalers and those states involved are part of his core support. He will lie and bluff his way through this but he has used up a lot of his chips to date and just how much leverage has he got left? I know you should never underestimate the US but fundamentally no industry can be built upon false economics in a cyclical industry that relies upon the goodwill of many other countries and feeds off their infrastuctures. The US spoilt the party and (mainly) US investors funded a flawed industry. The US doesn't like losing so i am preparing myself for some response but cannot at the moment think what it might be. A scaled down shale industry makes sense but we are 2 quarters away from a US election.
The rest of the world is unlike the US in the scale of its oil production and usage. The r.o.w. has some diversity whilst the US does kinda have all its eggs in one basket. They want a fixed price that keeps shale functioning and voters happy. What you need and what you get are often very different.
Maybe isolationism is the route for the US energy wise. They almost net out on oil but it is so unAmerican not to have their finger in every pie, especially in the most traded commodity in the world.

The problem with going private is raising capital. It is actually easier as a public company but there are pros and cons for each. It's a personal view but I think AB prefers public. His old firm, Petrofac, is struggling and I wonder if there is a connection still. Petrofac is also has a CEO with ME roots. We are in the middle of some shake-up. This is the hardest test many companies have ever faced. I think our team are up to it.

The WTI movement today is a result of the glut and low demand. Even if it was 2 hedge funds doing the final trade one of them has taken a hiding. The shalers look on in askance wondering what the appetite for June contracts is? I think we know the answer to that! Meanwhile Saudi tankers queue up waiting for a berth in US ports to honour their side of the contract. Here's a few ideas. Trump invents an excuse to renege on deals with KSA or Trump exports surplus oil abroad at (say) $10 a barrel with Federal subsidies to the oil companies. I expect him to strike out. Some toddlers do that when they don't get their own way.

Hi Squif - I bet you thought ARCM? I haven't been able to get a price for the HYN since 8 April. The question is has AB brought them on board? These types are magicians with money and until I hear differently I take it as a good sign. If they'd done a kinda reverse takover (I'm no expert) by buying bonds cheaply then what would be the point of buying the stock too. The M.O. of death spiral financiers is usually to get a cheap placing and feed the stock to dopes (often on AIM) with manipulated pricing or to pick up a company cheaply by buying bonds for pennies and shorting the equity (ARCM - PMO).
Nothing points to them being anything other than genuine buyers and they do exist. They are of the right size to be involved with EnQuest. I doubt their intention is to run an oil company. They see a multi-bagger.