Member Info for romaron

I don't know enough about oil but the trade at -35 might not have even involved a shaler. The physical and derivatives (cos that's what a future is) are symbiotic but don't always tie up neatly. You have contracts and have to honour trades. If you left it until the last moment or couldn't find a buyer then you have to pay the price. Maybe it was a Shylock but anybody with storage capacity could name their price. Bloomberg just said the June contract is mid teens heading for $10.

You also have to balance the fact that the WTI collapse may only be for a matter of a few days. Perhaps they have turned the tap off but the system is draining down?

I looked at the new shareholder, Signal Credit Opportunities, which triggered a RNS. I’m assuming they’re related to Signal Capital Partners Ltd. who are their adviser.
You don’t find many mugs among venture capitalists and they aren’t always friendly. The timing is indicative that these aren’t your usual Fund. Best to be a bit wary but for now I’m going with the view that they know a bargain when they see one. https://www.signalcapital.com/philosophy

This market is going to throw up so many opportunities. I think our management are up to it.

*I wonder if we'll have an electronic AGM this year? I've sent an email to IR.

Keys through the door and do a runner!

I posted on 17th that with any luck we'll miss the front end carnage or at least have only a small amount of spot/prompt or whatever they call it. We're of course Brent and the glut has impacted WTI before us. We should be careful because I expect Brent to track WTI to an extent but I don't know enough about oil trading and settlement to comment. What I do know is though that in the FX market throughout the 80's/90's there were huge swings in liquidity as currencies came under pressure. I dealt mainly in Italian Lira and you got used to these swings. The traders at the front end will be making a killing but the smart money is already planning ahead. The purchase by AB hints that he isn't too worried about the front end and I expect the glut to be of a short duration. If you were a small shaler in the US you'd be doing the equivalent of putting the keys through the mortgage holders door and doing a bunk. It is a collapse in shale which in many ways is a local problem (self-sufficiency huh?).
In WTI it's the equivalent of a burst pipe and the first thing to do in a plumbing emergency is to TURN THE OIL OFF. The US is both a producer and consumer so are in quite a unique situation. We are in a much better position. Luckily shale does have a Ball-o-Fix valve and trump needs to know that even he can use one. They boasted about shale's quick reaction time; now we'll see.
I played around with Brent futures and the Dec20/June 21 is about $41.00. That is artificially low imo as people cannot help but glance across at the motorway pile-up over the pond. I think we are to a large extent protected from what is happening in the US.

*I saw interest rates in 1,000's of percent in Sterling and Lira and the Swiss went negative back in 78. The US Government will be forced to act and will lash out. It's how they do things with Trump in charge.

Hi E - I posted before reading your 11.58 find. It is essential reading imo. Either smaller shalers die or the country adopts prorationing. Either option means higher oil. It reads more like minutes of a meeting or notes than a journalistic piece and it makes for better understanding of the problem imo. Prorationing kinda goes against everything the US stands for and accuses others of doing. We know that isn't true and the US interferes in markets throughout the world but not usually with such publicity or evident self-interest. They got themselves into this mess so no sympathy from me.

"When drinks in, wits out" just saying 60p - bit early but each to their own. Small correction to your 11.38. Trump is a failed business man whose evasion of taxes and fraudulent schemes have kept him afloat. Having said that there are grown ups in the room who by now know how to manipulate him. They want him to succeed as much as he does. His ineptitude and ignorance hardly surprises anyone now but as a TV reality star he is still No. 1.
I have no sympathy for his/their quandary. To jump start the economy cheap oil helps. A forthcoming election means they could lose oil state support. Scapegoats are fine but it's wearing thin now that everything is somebody else's fault. Big oil will be fine but those pesky mom and pop outfits are voters and part of his support base. His pin ball approach to politics and running an economy ensures that the end result is likely to be failure and chaos. Despots never understand money supply and love the fact that you can print it. I pray that Trump is a temporary aberration.

*hard to choose out of Trump, Putin and MBS who is the most egotistical and ruthless.

"Strangely throughout History war has been used as an instrument to get Countries economies moving." Or was it a reaction to economic or pandemic impact? People have always been aspirational and will want a better car/house/job and they are bargain hunters. Cheap flights and packages will work wonders. Never underestimate the chav in all of us.

Thanks Nick but the miasma hasn't cleared. I like that the May contract pops up in the Crude oil futures but if you go into the Brent futures the earliest you get is Jun 20. I suppose it doesn't matter too much as long as you stick with one or t'other. The link you gave gives lower prices than Brent but it's being pedantic as the front end is a mess and EnQuest oil is a mixture/blend anyway attracting different pricing. I need to pick a date and stick with it so would the earliest 'spot' date to use be 20 May?

I'm not to worried about the carnage at the front end because that's a fact and you have to live with it. If EnQuest is acting responsibly they should miss a fair amount and hopefully trade a few months out and may miss most of it so hopefully it's academic but good for news headlines. That's why I'm following futures and intend to get a better feel for what the futures indicate and you'll have to offset the oversupply which we all know stems from the near end. The real question is how long until demand kicks back in. The front end is very speculative and a traders dream but EnQuest is a producer not a trader. I doubt they'd tell us their strategy but we don't really know the impact at the moment. If lockdown goes beyond 3 months we're all in trouble but i can't see it being longer. The world economic stakes are too high.

I listened to a Platts podcast a day or so ago and there was a negative pricing at the front end of -6.53 May/June and -3.48 Jun/July which was contango related. I'm in a mess at the front end with the talk of spot/prompt delivery. FX is a doddle compared to oil. That's why I'm starting to follow the futures but further out. The front end continues to be a mystery to me.
E, what would you say spot is? I don't need granular data just what date you'd use? I need it to get an accurate ides of what (say) July/Aug is running at. I'm not after preciseness but when the futures were all 20th the earliest I found was June 20. Could I use (say) April 20 as spot or is it effectively 20 May because of the problems with physical delivery settlement. I'm guessing there are several dates you can use but what would you say is earliest. Conveniently spot is the same up to June 20 roughly but what about the negative carries from Platts?

I've been using this https://www.theice.com/products/219/Brent-Crude-Futures/data?marketId=5049363

Baffled, Barnet.

*I was actually encouraged by the Trump presentation last night. It seems the adults might be in charge. The pressure to start the economy is coming. I give it the 3 weeks we're using. I expect a gradual relaxation.

Usually you send your young men to fight and die but this war is different. The enemy is a virus and Trump has promoted himself to Field Marshal and taken command. He has quickly assembled an army that requires you to be over 70 or unfit through ongoing conditions. Those with respiratory problems are particularly valuable and used for particularly dangerous missions. I mean, what have they got to lose?
Trump is eligible himself to fight but unfortunately an existing foot condition means he cannot operate the adapted zimmer frames whilst his tiny hands make operating the Dettol aerosol impossible so he intends to establish a command centre at Mar-a-Lago and direct operations from a golf buggy. His first move is audacious, brilliant and simple. Welfare cheques have to be personally collected to avoid fraud and face masks are not allowed. The man is a genius.

*I hear that NH has fallen on hard times. He has put his dogging equipment on eBay. No bids yet but 12 people watching.

I agree E - In times of stress expediency is always a handy crutch. Trump is transactional and cannot be trusted, he'll say anything because he has no problem in not honouring his promises and always passes the blame. I think fracking will continue but only in the prime acreage because there is a reckoning is coming and the lenders and investors will take a hit. They will leave the shale industry alone until memories fade and oil prices look like staying at a profitable level for some time. Nobody knows how long it will take but there will be many who just "won't go there" again and it will take years imo. Shale will take a hit but won't disappear. It's the severity of the hit we're discussing.

Hi E - I'm not so sure. Memories are short but I sense there is a lot of underlying conflict in the US. There are plenty of pros and cons in having political influence but this is Donald Trump influence. He is making shale even more unpopular. I may be wrong here but I read that shale is 90 percent small businesses. That's a lot of jobs and votes but do you really think people will subsidise shale owners that have had the good fortune to own land above oil. The imbalances in society put centre stage by Covid will reduce the support for shale imo.
Interestingly the several times quoted Daniel Yergin in the article is a Pullitzer prize winner and an expert on oil so should be listened to. The article finished with "Despite all this, Mr Yergin said that US energy was not at risk. "The oil is still in the rocks he said. "It can be produced by someone else in three years from now."
The article added that the big banks are readying for collapses, apparently setting up independent companies to take over the energy groups they lend to if their debts become unmanageable. What did surprise me was that it said 19 energy groups in the top 1500 largest US listed companies are running long term debt-to-capital ratios of more than 50 per cent. Among those 19 are Halliburton, Apache, Equitrans, Williams companies. Outside the 1500 Chesapeake, California Resources and Ultra Petroleum are seeking restructuring whilst still more companies have missed debt payments.
There's a lot to play for but Trump crowing about being self-sufficient won't help support for shale when it'll be possible to buy it cheaper overseas. We've seen Trump's fire fighting skills. His solutions don't reach the problems and of course he's never wrong.

Tail end of an article in Times about Centrica and its management woes: "The upshot? It's now down to Mr O'Shea to sort out the mess, starting with trying to sell Centrica stakes in the Spirit Energy oil business and UK nuclear plants in these markets. If he makes a corporate video, it'll probably be X-rated."

I mention it because Spirit's Executive VP, Technical & Operated Assets is Neil McCulloch who was EnQuest's COO Mar 2014/Dec 17. He obviously has good contacts with his old firm. Could be interesting?

Another article about Shale and its lurch from boom to bankruptcy. Nothing new but I did like this comment from the VP of research company IHS Markit, Daniel Yergin "One of the "great virtues" of shale was its short cycle. "You can step it up very quickly. That's also a problem. You can turn it off quickly, too." Note the use of the past tense too.

Unfortunately I never traded oil so have no real idea how the front end works. What is spot or what is prompt oil? In FX spot is 2 working days forward but I doubt oil can be delivered that quickly if the oil is in Rotterdam and the buyer in Kuala Lumpur so expect there is quite a bit of speculation and qualifiers to the prices. I haven't a contact and have learned little from years of reading bulletin boards so anybody with actual experience is the proverbial chicken's teeth. I'm not expecting one to turn up.
What I do know about though is markets and futures. There is a forward market in oil but for professionals only so the retail guy gets a glimpse through the futures which are practically as accurate. If one gets out of line it is arbitraged back into its rightful place.
There are two oil prices. The one that gets the day traders and media excited and the future prices which the professionals follow. The oil sloshing about at the moment does affect us because sentiment associates immediacy with a long term industry. I did a couple of calculations using these: https://www.theice.com/products/219/Brent-Crude-Futures/data?marketId=5049363
As I said I have no idea where to start and the next 2 months will be awash with oil due to Covid so I started from 20 June. 28.49
2 examples. The July 20 - Aug 20 oil is 36.60. The Dec 20 - Mar 21 is 40.50
If Covid prevents the world going back to work then the July/Aug and Dec/Mar will go lower. The gyrations of the spot market have little bearing with these futures and I'd even hazard that they would be higher if it wasn't for the glut even though the link is tenuous. How do we know that EnQuest is even involved at the prompt end? The companies move on and most of the front end stuff is contracted out or already sold to the speculators, brokers, agents call them what you like.
The spot/prompt actually stems from what was happening from early March (Covid) so the glut will probably spill into May, possibly June so I've done the calculation of 20 June to 20 July and it's c.29.00 NOT 10 or 15. Agreed we have yet to see but if the naysayers are so confident they should sell the future.
If the futures are accurate then it's likely that EnQuest (ignoring hedges) as a professional company is concentrating on oil from June/July forward. It will make sod all difference to them if oil trades at $5 for all of May. We know shut ins will start taking effect around that time and the glut will possibly by then start attracting bargain hunters so we may see a return to some kind of balance quicker than expected. The futures suggest it's back to work by June/July. If things get back to normal quickly then a price rise is inevitable.

*It's really getting out of hand in the US and the President is being called ever more egregious names. A new low though has been reached. He is now being called "The day trader President".

Hi L7 - I got the date from here https://www.coursehero.com/file/p7jpf42/1-Source-Seadrill-Morgan-Stanley-Equity-Research-International-Energy-Agency/ and thought it worth throwing in. The article collects data from various periods and I only noticed because of the fuzzy resolution. I can't do the small detail which is why I like people like yourself picking apart my suppositions. In defence I would say that the oil industry hasn't changed much since 2014 other than shale has grown. It isn't as relevant to EnQuest today because we have moved further to the left if anything (see image) and we are safer than (say) PMO but there is always some kind of movement within. I didn't get the Times today but get the gist and I think in oil if the tap gets turned off it isn't always possible to turn it on again at a later date. Even shale might be affected this time but more likely to be a funding more than a technical problem.
I hope you read the McDan forecasts as they come from people with a similar mind set to yours. They are trying to use data that may be irrelevant because of Covid but you have to start somewhere. The fact that it was released during Covid is important.
Glad you acknowledge a potential new world post CV. We're both old enough to know that expediency rules and pragmatism usually beats idealism when the chips are down. I expect the return to work to quicken and I wouldn't be surprised to see large infrastructure projects unleashed to take up any slack from elsewhere. I doubt they'll start in the oil sector though.
Overall I'm very happy with our position.

It’s possible that Trump underestimated! We expect him to be disingenuous but in reality the whole world is guessing. I use this as an aide-memoire that Modestus found and find the image ‘Breakeven price of Crude Oil’ very helpful : https://seekingalpha.com/article/4331919-oil-blood-in-streets-share-views
It dates from April 2015 but is still sound imo. As you can see OPEC+ control about a third of world production. I think it fair to say that those on the LHS are in a better position than those on the RHS. We are in the better half under ‘Offshore Shelf’.

How much will those outside the OPEC+ cartel cut? They don’t at the moment have any option as tanks are near full and who wants to produce at a loss? Add to that the lenders will seize the opportunity to rein in the recalcitrant producers (shale?). Money rates may be low but it won’t be easy to raise especially if you’re not particularly loved by the ESG fraternity who can find other assets without the cyclicality and poor PR that comes with oil. Those on the RHS are in deepest trouble and will have to cut harder than OPEC+! They don’t really have a choice in the matter. How many abandoned wells will be reopened when things improve? You have to be around to take advantage.

We have no idea how quickly or how much demand will bounce back but commerce will return. There are a few starvation months to get through before though. The winners will have a good future and if there’s one thing that Covid-19 has taught me is that we rely totally on our support structure and medics who are very poorly paid in relation to their importance. The solution to getting the world back on its economic feet won’t be EV’s or expensive alternative energy. We’ll need to source the dense energy and adaptability of existing sources. We’ll have higher priorities than worrying about what Greta and Extinction Rebellion might say. Poverty, health and feeding yourself pragmatism rearranges the order of priorities. Talk about unintended consequences; Covid-19 may have extended the life of oil.

addendum: There is a commonality in surveyors in that whilst they fear a negligence claim the biggest risk is being sued for incorrect valuations. It is drummed into them the danger here. Using domestic property valuations the easiest house to value is one in an area with hundreds of similar properties (London, Leeds, Liverpool) and they would struggle with a converted lighthouse in Anglesy. PI insurance is increasingly expensive and we all know what happens to premiums when you put a claim in. The risk is in overvaluing, not undervaluing.

These guys have produced forecasts that include the virus. They produce quarterly forecasts.

https://mcdan.com/wp-content/uploads/2020/04/G200401.pdf

The cuts in production have to a large extent been forced on producers so they would have been factored in imo. The producers of this information don't go in for hyperbole or wet fingers in the air. Surveyors are notoriously "careful" and tend to back their judgement with years of experience and getting it wrong. I mean that in a good way. Their feet are on the ground. Being the type of person I am I think they are on the low side but I can live with their estimates.

No chilting. I don't think I'm being contrarian unless you mean not following the herd. Basically I have faith in human ingenuity aided by nature and government's drive to improve. I'm not contrarian in an economic sense unless you think that the age of oil is over? This is another cycle with the added complication of a pandemic. Contrarian or opportunistic?
I'm betting that looking back in 12 months people will be kicking themselves for not holding or increasing their oil stocks.
All investors should have diversification. Mine just has more oil. That's because I expect it to outperform the others.