Member Info for romaron

Thanks Modestus - the article was all about shale though. Title "Coronavirus and Saudi Arabia bring day of reckoning for embattled US shale operators."
Bit more research needed but it shows that it's not only the US shale in trouble. The article led with comments from the CEO Todd Stevens. The journalist, Danny Fortson, is usually spot on and I followed him religiously when he was based in London and reporting on the NS. In some ways you pointing this out has got me even more interested. His contacts in oil and gas are at the highest level and I thought he'd moved into tech full time on the West Coast of the US.

I was surprised at how quickly shale can hit the OFF button. In today's Sunday Times, California Resources Corporation, the state's biggest oil and gas producer, liquidated all the contracts it had struck to sell oil at prices agreed well before the crash. The manoeuvre netted them $76m. Their CEO said: "We have experienced this type of price drop previously and will implement our low-price playbook."
It might have concentrated his mind because as of December, the loss making producer was down to just $17m in cash reserves; its stock had plunged 90% in a year.
This means that he has taken the moth-balling and cessation of drilling to gain more time. They are slashing all spending except that required to keep current wells operating safely. My cynical reading is that some unavoidable bills/dividend payments were due and this is selling the family silver. It reeks of desperation but that isn't my point. It is how quickly they can do it.
We are ticking over at the current oil price and obviously look forward to an improvement with the virus situation and that comes before everything but I suspect the shale lenders aren't as keen as they once were to finance the industry and hit the ON button.
In the past 5 years 208 US oil companies went bust weighed down by $121bn of debt. In the last half of 2019 24 went belly up and that was when the average oil price was almost double and that pace has if anything, quickened.

Hi Modestus - the article had a lot of numbers in it but some excellent simple images/graphs which I have saved. The "Oil Production Type Breakeven" is easy to understand and I trust Morgan Stanley research. Basically everything on the RHS of the blue is in trouble for now. However, we are nearest to them and even our heavy oil is attracting a premium so it could be worse and this is also encouraging on a similar field size in the NS:
https://www.offshore-mag.com/field-development/article/14075202/equinor-brings-mariner-heavy-oil-field-onstream-in-the-uk-north-sea

Madness of crowds - just been to Waitrose. Chocker and for most products with a bit of life it's as though a swarm of locusts had passed through and many people are buying for older relatives (I talk to people in queues). My wife gave me a list but TBH we could last 3 months with what she's stockpiled. It will settle down but presently it's too early and the same with the stock market. It doesn't have to make sense but the tide carries you and it is pointless swimming against it. I remember the Great Storm of 1987 and being the diligent sort got into work by car (no tube). I left an hour or two later as the bank of England said there'd be no settlement on that day and reopened on 17 October. It's amazing what can be done and plans that are in place. EnQuest even have plans for emergencies on rigs/FPSO's including illness and lockdowns. It affects them but doesn't stop the operation for long if at all. All oil stocks were swept along with the almost perfect storm of a low oil price, the KSA announcement, bull market ending and Covid-19. Thing is the oil sector was already under pressure. It could be worse. We could be in TLW or PMO. Since the Rights Issue we have outperformed them and ours [RI] is in the rear view mirror whilst both companies face some major problems and are not helped by their low share price.

I am worried though, who wouldn't be, on many levels but when I analyse it soberly I relax. Oil is a major component of World Energy and that ain't gonna change in a hurry. The current aggressive actions could easily spill over into outright clashes but I don't see an electric aircraft carrier or bomber being that effective, mind you drones are a threat and as the head of the Russian general staff indicates future actions are roughly 4:1 ratio of non-military and military measures and on that measure the Russians are more than a match for the US. They lead the world in militias, surrogates, cyberattacks, fake news and "little green men". In fact I'd go further and say that few countries are that scared of the US battlefield mastery any longer. The odd assassination gives Trump's base good coverage on Fox News but he has hollowed out the Diplomatic Service and replaced it with amateurs and yes men. The Chinese haven't forgotten the bombing of their Belgrade Embassy either and mock the expense the bloated US military spends on "attacking birds with golden bullets....an American made bomber is like flying a mountain of gold". You don't need a Ferrari to do the shopping.

I've no idea how this will all pan out but I'm betting the world will look something like we've been used to in a few months.

I haven't a clue. Trump can act irrationally and in a self-serving way but maybe with the power of the US behind him he gets away with it. Investors are split on oil but I expect those who manage risk are in ho hurry to jump back into oil and may stay away from it for good. We haven't heard much from the likes of Extinction Rebellion but they never stay quiet for long. We live in interesting times. We are tripping up over unintended consequences. I don't think Trump supporting shale is a vote winner though. Republicans don't believe in it. It's a capitalist society and you win some, lose some. The democrats will begrudgingly put up with it but not encourage it.

*went to the theatre last night. Counted 4 masks only but plenty of seats available on tube and I left at rush hour. At the interval many still not washing hands after using toilet. Theatre 95% full though. My wife tells me that 1 in 4 are not changing their habits due to CV.

Chinese experts with expertise and equipment arrived in Italy to help the fight against Covid19.

https://www.reuters.com/article/us-health-coronavirus-italy-respirators/china-sends-medical-supplies-experts-to-help-italy-battle-coronavirus-idUSKBN2101IM

Cooperation does exist and it does work. Italy has the second oldest population in the world and many of their fittest and youngest have moved to the cities or abroad for economic reasons. This is no time to be proud. The US turned down test kits from the WHO. Respect to China for this humanitarian aid.

on BBC World Service News 13.30 - Germany is offering unlimited credit to companies. Half a trillion was mentioned - its a lot whether it's Euro's or dollars.

I know what I said but this is so uplifting. We have our own way by resorting to masculine rectitude and stoicism but was there ever an aria so beautiful and so Italian.

https://www.instagram.com/tv/B9oaTdFpaq2/?igshid=b4ekuaiz8ikz

If you can dream—and not make dreams your master;
If you can think—and not make thoughts your aim;
If you can meet with Triumph and Disaster
And treat those two impostors just the same; (from If by Rudyard Kipling)

Sorry - last one. It's what doddery sentimental old fools do.

https://www.youtube.com/watch?time_continue=2&v=0_ZHCUDYhoM&feature=emb_logo

The Italians certainly know how to get comfort from tragedy. We use comedy (badly).

Attention LT and hitman:
Breaking news - The RB Leipzig goalkeeper who played Tuesday night against Spurs has tested positive for corona virus. Spurs players have been advised not to self-isolate as they didn't get anywhere near him.

Italy is ahead of us in outbreaks of the virus and my wife has many friends and family still in Italy. Today she told me they are storing bodies in Bergamo as the numbers are overpowering the system. In Italy the period between death and burial is much quicker (couple of days) than in the UK and is almost at Jewish and Islamic speed. They are a wonderful people and are much more emotional than us British but I defy anybody not to well up at this:

https://www.youtube.com/watch?time_continue=12&v=-OiaTS3YMDQ&feature=emb_logo

If it leaves you unmoved you should check for a pulse.

Are the authorities being too PC and overprotective regarding the Virus? Today everything is run through focus groups and rigid parameters. An anti-semitic, racial slur or using the "N" word can destroy a career. Have we elevated old people into this group? At odd times our parents and even children have made suffocation a momentary possibility. Who here of a certain age cannot recall, when children, their harassed mother use the comforting words "I'll swing for you". Are the authorities afraid of saying that the real problem is not the fatality ratio but if they all turn up their toes at the same time. Older people and those with health problems are the main victims of CV. Old people own more of the houses and annoyingly many spent their kids inheritance on holidays and cruises. How unthoughtful! Some UK figures:
There were an estimated 23,200 excess winter deaths which occurred in England and Wales in the 2018 to 2019 winter, the lowest since the winter of 2013 to 2014.
Respiratory diseases continued to be the leading cause of excess winter deaths which occurred in 2018 to 2019.
More people die in the winter than the summer. We present data by sex, age, region and cause of death.
In 2018, there were 541,589 deaths registered in England and Wales, an increase of 1.6% compared with 2017 (533,253); this is the highest annual number of deaths since 1999
Between 2000 and 2018 the death rate of the United Kingdom fluctuated between a high of 10.4 deaths per 1,000 people in 2000 and a low of 8.7 in 2011. From 2011 onwards the death rate creeped up slightly and in the most recent year of 2018, reached 9.3.
Food for thought. The ratio is comforting bearing in mind their is no vaccine as there is with flu.

*I'm 70 BTW and have relatives and family at more risk than myself.

Hi Modestus - is it the same overseas or is stalking a particularly British problem?
https://www.theguardian.com/uk-news/2020/feb/03/emily-maitlis-stalker-edward-vines-jailed-breach-restraining-order

The ban on shorting will only have a minimal effect on EnQuest if it is implemented by the UK authorities. For other stocks just the threat will be helpful. There are NO shorts on EnQuest above a half percent. There may be some amateur/retail shorters but nobody has had above a half percent for about a year in EnQuest which is where the professionals are. [A halfpercent in ENQ is c. 8.5mio shares]

We have been ignored for sometime and have a relatively low profile but get pulled down by indiscriminate lumping together. Over the past year better rewards were available elsewhere in this sector but nobody is immune from association.
I quite like it that we are off the grid to many and the sheer fact that Tony Durrant gave Malcy video time shows how desperate he was. Mind you they are only round the corner from each other. Might be worth checking out Santini this afternoon. It gets pretty raucous there Friday afternoons. Look for the table RHS at the back as you come in.

Shorts as of yesterday FCA:
CNE .59
PMO 19.3 (ARMC 16.69)
ENOG .63
BP Zero
TLW 6.44

Be Lucky

You cannot expect a concerted action by Governments that quickly but the world's central banks have had plenty of practise and can react far quicker; and they do. Financials don't require a movement of goods or troops and they are used to operating secretly and under the radar. In the many crisis in FX over the years you would get currencies under attack with governments falling and you could relatively safely predict that a currency under attack would raise interest rates (except Switzerland). It all went swimmingly until the threatened central bank turned nasty. To make matters worse he had the backing of other central banks and they acted in concert. There would be a liquidity squeeze on those shorting the currency and they would instigate rules and holding requirements that stopped speculators in their tracks and pushed the market in the opposite direction. Sometimes the speculators win. I once got a Danish Kroner devaluation almost spot on. I had cheap financing (unknowing client) and went in the next day to fill my saddlebags. I was lucky to come out flat. I'd taken the position too late.
The oil sector is becoming a bit like that. Timing is impossible but the best positions have been taken some time back [e.g. Odey, ARCM] If you've picked a company that's doomed you'll be OK. The others are looking oversold and the market is looking pretty one-way. You shouldn't pick fights with countries. They can always trump you. They have plenty of tricks and weapons.

Just saying.

The question you have to ask is will EnQuest be here in 6 months and will oil be closer to $50 in 6 months. I think we'll be here for the foreseeable future but there'll be so may attractive opportunities who knows what mergers/sales may happen. I expect oil to be $50 in 3 months.

The financial markets are always prone to panic and overshoot. The oil sector wasn't popular before so it seems an easy target but I'm surprised by the robustness of my overall portfolio excluding oil. Its down but then which stock isn't. If you can imagine a disease that directly attacked companies then the oil sector got it first. That means it will be one of the fastest to recover. The world will need oil for decades to come. The fatality rate of CV19 is high but it is not an existential threat to whole populations. I may need correcting but I think something like 98% plus will recover and people are reacting like it's the first day of the Somme, every day! Some oil companies will go to the wall and exploration will be severely curtailed but when PMO and TLW were sailing high EnQuest was struggling with Kraken and needed a placing in 2016 and a Rights Issue in 2018 not helped by the earlier spat with shale but we got Magnus.
We are being lumped in with companies that are now where we were 4 years ago. We are in good health but cannot avoid CV19 but I will tell you some things that will happen.
The RCF will be extended if needed.
Direct government help will be extended to the NS (taxes/grants).
The lease on the FPSO may be frozen if necessary.
Unite will kick the SVT dispute into the long grass.
The government will back/threaten the banks and financiers. The companies that are temporarily under pressure will be helped if they pass certain criteria. Where would Bumi move the FPSO to if EnQuest defaulted? They are a serious company and will receive help from Malaysia and I dare say Malaysia might help EnQuest too. The bonds are 3 years away so we can forget them for now; that is unless you think the CV19 effect is going to last that long.

It isn't pleasant but we are going to be fine. I will be buying more EnQuest. There are other oil stocks to be avoided.

I pinched this from longtermthinker on the PMO board: "Shale carries on relentless because it's had free money; no business model in the world over produces into a market thus reducing the price it can charge for it's product, it's insanity, the only reason you would do that is if you can't stop."
He sums up shale nicely. It's as though they (shale) were trying to kill a competitor who can produce far more cheaply than them. Not really that clever is it!

*anecdotal but my wife's family come from near Piacenza, Italy. Cases of CV are going down there. She lost an aunt in January with pneumonia but she was 98. She wasn't tested to see if it was CV.

Lets be honest none of us know where this is going but self-interest of Governments will save us. I think most of the US will be worrying about other things and they still have the shale in the ground so they won't be able to use the strategic argument to save it. It will still be there in times of need. It does leave an opening for the grown ups to take over and I'll be a lot happier when the oil majors control (what's left of it) shale.

Does having no sympathy for shale billionaires make me a bad person?

Hi Pelle - who's squealing like a stuck pig? It's the shalers. When you tease somebody bigger than you in industry terms its best not to overstep the mark. Shale did this and even worse believed the rubbish spouted by Donald Trump. Roughly half of US is Democrat and Trump will need their support to attempt to bale out shale. He won't get it imo because there are higher priorities than shale at the moment. They will hang on but be severely reduced in size when this is over.