Member Info for romaron

We're in good shape. We need to pay $45m by 31 March 2021 and $360m by 30 Sep 2021. That's 12 and 18 months away. The bonds/HYN's are 3 years away. All forecasts of future oil prices are higher and on a worst possible basis for some of the ridiculous prices being touted they would end the North sea and shale industries. For that to be possible you need zero fossil fuels in the space of a few years. Does anybody really think that will happen? Can renewables replace them and at what cost? Nuclear is an option but how long does that take to produce? Decades. Short term pain is never enjoyable but part of life and business. We are in robust financial health for this temporary situation. The weaker companies are going to the wall and that strengthens the industry. Corvid-19 is not an existential threat to EnQuest.

Hi Jeffrey - most here are holders. Any downturn attracts the usual insecure dogmatists and oddballs who get pleasure from others misfortunes. I find putting them on filter works a treat. If you don't know by now who they are you're not a regular reader here. Markets move both ways and the more intelligent investors accept this. When the price went to 29p it seems many were in profit so in the scheme of things and speed of change the current price is not surprising but also not out of line with other healthy oil companies but unlikely to move up until Covid-19 cases are falling. When it does it will be FAST. I'm not making much sense of the health advice but there is a lot of talk about 9 weeks as being the period of highest number of cases. I don't know if we're into this period yet but it'll be over (the disease) by early May. My personal view is that we'll see the turnaround much sooner.
I've made sure I have enough cash for the next 6 months and don't need to sell any shares as I think we are nearing the bottom. It made me think that EnQuest also have a healthy cash balance. They may have to delay a few purchases or early debt repayment but expect we are well set up and the year end figure due later this month (26th) will confirm this.

*The first virus fatality in the UK is a woman in her 70's with underlying health conditions so her death was not totally unexpected whilst cruise liners have played a role in the publicity. The age of many on cruises is high and most know that they have mortuaries aboard as deaths during a cruise are quite common. Whilst losing loved ones is always painful those most at risk are in the unproductive sector of the economy.

Romaron (retired).

Popped into the chemist earlier and asked an assistant "what's good for Corona Virus?"
She replied "Ammonia cleaner"
I said "Sorry, I thought you worked here"

It does seem one directional at the moment I agree. However, and I've said it before, we stand out against several of our peers on a simple PE basis (PMO, TLW) and for now I think you can also ignore those needing extra funding to move to the next stage.
Unless PMO and TLW have further to fall we are underpriced on a PE basis. Our debt ratios are getting better too and unless the world bans fossil fuels we have a profitable future ahead.
I fancy that Putin, who has been one of the most successful leaders this Century, has the measure of the US whilst Saudi Arabia is a US poodle. He out thinks me but he clearly doesn't enjoy subsidising US Industry through shale whilst they operate sanction against Russia and its allies. A few months of a lower oil price won't harm us in the longer run.

Hi chilting - I don't think it wise to put target prices and $50 is a nice round sum but with our coffers partly filled we can easily survive a few months at a far lower price and in all honesty there is nothing so far that indicates the virus will impede world trade in the longer run. We have seen how easy it is to manipulate the news and there is a blame game mentality where many will ignore their own responsibility with lifestyle and environmental influences (diet, alcohol, tobacco). I'm not preaching but getting old is unavoidable and the more important part is how you've lived the intervening years. The old are always at a higher risk as are those with existing problems. The media cycle always promotes the dark side. There is little point (for example) in printing a story that says "plane lands safely". Like any disaster once the numbers start descending or the problem improves the media have moved onto the next "story".
The only defensive move I've made is to make sure I have enough funds for the next 6 months although I think 3 months will be more than enough. People get bored with being scared and want to get on with their lives which cannot usually be done in a vacuum and I've no idea how people with young kids will cope under quarantine conditions. I'd be a lot more relaxed if I was younger that's for sure.
Once the CV is in the rear mirror funds will look at the market and see unmissable bargains. The climb back will be fast and there won't be a warning. Like the disease itself these things need to run a course.

typo: "promise of shareholder returns a few years from now"

I listened to the webcast. I do not have a position and listened because PMO has a large interest in the NS and is a peer of ours. They seem to have a lot of balls in the air and it was the usual corporate flimflam. I think the presentation must have been prepared in January as page 24 was pretty clumsy (to me) making promises at $65/bbl and 40p/therm. They clearly don't follow market collapses or pandemics but look toward the sunny uplands. It kinda suggested that under $65 they flatline. I waited until the QA for some interrogation but sadly it was ultra-friendly (think Fox and Trump) imo. Either that or the analysts there are totally two-faced; their broker notes will be interesting. I learned that infills are kinda OK but suffer from the law of diminishing returns and the promise of shareholders a few years from now (1.04) clearly didn't rock their boats! Durrant probably thought he'd wriggled out of the last question regarding the Zama sale but used too many weasel words to satisfy me (or the analysts judging by today's movement).
No mention of the Asia research short (they have had it off large) but why should I care?
I care because I hope our Directors take note of how coming over with an air of complacency and waffling responses is possibly more damaging than being frank and they check their presentation before publication.

Be Lucky

Isn't it really better to live with the current oil price until the Covid-19 threat has passed or run its course? It would cull the inefficient producers and deter FID's, perhaps forever on long cycle projects. A better decision would surely be to keep production around these levels and be in a much stronger position when demand returns. To reduce production just to keep the price higher would help keep the higher cost producers alive for longer. They may need to cut though to stop it overshooting on the downside. OPEC and Russia need income the same as elsewhere but surely it's better to live off financial reserves until the panic passes and demand picks up.

Hi E - In case I was making a fool of myself I checked the energy equivalent of 1 metric tonne of coal to barrels of oil. Its worth 7.33 barrels and the price of a metric ton of coal for UK power producers in Q3 2019 was £57.23 ($75). No doubt there are varieties of coal but you can see why the likes of India and China are loathe/slow to embrace renewables or why Warren Buffet is still a major player in coal.

To avoid confusion I'm suggesting that equivalent of gas isn't worth the same as if it was Brent oil. There are fixed values for intrinsic energy but we all know that there are wide pricing differentials for various products.

PMO Y/E " Tolmount (UK) on track for first gas by year-end 2020, adding 20-25 kboepd (net, Premier 50 per cent); Tolmount East development planning underway targeting 2020 2H sanction"

I'm assuming that the boepd in this statement refers to the energy equivalent, not the equivalent of Brent oil? There also doesn't appear to be much of a queue forming for Zama. I mention Zama because we once tried to sell part of Kraken. I consider Kraken to be a working asset whilst Zama still has some hurdles to clear. I

under bellicose nations I think you have to include India too.

Hi L7 - It's not impossible for oil to reach $40 and it was below this level for about a year 2015/16 touching $30. We survived that and we were weaker then. I threw in the 2 years because it was the best way of getting you numbers guys to respond. It was more to get an idea of where we could tread water and for how long. I just did 70,000 bopd at $40 and thought that'll do. We've a final payment of the RCF ($360m) end Sept 2021 and the RB/HYN in 3 years. We have opex at $20 so it's how we handle capex and RCF debt. More to the point we aren't threatened at the current level but things change.
Whether it's academic or not I can see oil at $40. Unlikely, but you should model in all eventualities. If Covid-19 becomes a pandemic then you cannot forecast all the consequences. When trade is threatened barriers go up but in a global context it isn't usually wise to increase your prices (OPEC) when demand is cratering or a good move politically. I don't think OPEC's hand is as strong because in a global meltdown we'd quickly move to coal to counter other energy shortages or high prices. Needs must and a pandemic is as serious as a war. I'm not fearmongering but expediency always rules and emergency measures (martial law) are slipped in. Throw in the inevitable wars that would be a by-product of a serious pandemic and there will be volatilty the like of which none of us have seen. The world economies are preparing to drop interest rates even lower and I'm not sure how much influence OPEC will have in controlling the price of oil. That's now.
Against this there could be opportunist incursions by bellicose nations (China, US, Russia) and closing of pinch points throughout the world which will likely raise the price of oil and would benefit the NS and shale.

I've just talked myself in accepting that in the worst scenario the thing to be long of is oil!

This CV has changed things regarding our projections. Nobody has any idea how long it will last but we can make estimates of how long EnQuest can last at certain oil prices factoring in loan repayments. I cannot see the SVT dispute being a threat at this time or BP pulling out. The whole concept of being antifragile is to be able to survive during these social and economic upheavals. I'm not a scaremongerer or am I frightened because I think the exercise will calm down the more excitable among us. We are one of the more strongly positioned mid-sized oil companies able to ride out this storm and it isn't going to last years. I think it will be 3 months but the economic impact maybe 6 months. To get back on track we'll need $65 at least but forget that for the moment. I believe we can survive at $40 for several years and I doubt it will reach that level or last that long because by then shale would have folded up their tents and Putin would be an enthusiastic cutter of production. This CV will change the NS completely if it goes on for long. It possibly already has. If that happens we will be winners. Others will cease trading.

“Only Thing We Have to Fear Is Fear Itself” FDR 1932

Interesting Modestus. Unexpected consequences and all that. I'm not convinced by anything at the moment. We know CV deaths but there has been little testing of those who just had a mild illness and weren't even aware. It could mean that the denominator is underestimated and has possibly been added to the flu statistics. Maybe it's the more normal Flu that has turned killer. If you torture a set of figures long enough you can often get them to say what you want to hear. Before I read the article I thought it would say that China has exaggerated the virus's lethality to gain long term advantage. Whatever they've done they will likely know more about it than any other nation. Whether this traditionally secretive nation has passed on all the data is moot imo.

Pelle O/T where did you go in Italy and what was the snow like?

That's outrageous chilts! Suggesting that the US would take measures to protect their own interests whilst enforcing sanctions on those who won't "bend the knee".

Neatly summed up HMH. For now the shale companies may be protected from the lenders but as things stand when they breach covenants and/or look for refinancing the ownership effectively moves across to the lenders. The lenders will not have lost as much money as the equity holders and will cut their losses. They don't like to increase losses. That's what they do. Of course if oil is $100 that all changes.

*been listening to LBC this morning. All about the Virus. Seems pretty evenly split between those forecasting the end of the world with others saying its no worse than the silent killer Flu. Statistically its worse than Flu by a factor of 15-20 times. Poised between caution and panic.

I'm no more expert than you riskingit but consider that the US is more welcoming towards energy companies than Europe (big empty spaces) plus their acceptance of lower environmental standards. The American pysche is unlikely to change overnight and Trump (US economy, isolation & big business interests) has shown that a fixed percentage of Americans are happy to be led by the nose. BP are attracted to this whilst at the same time moving away from older fields and long cycle conventional projects that risk being stranded. I'm still confused as to why they continue to pump shale when for many it's uneconomic. Maybe they believe that oil could be much, much higher in a year or two. The US certainly has the military might to make it happen.

Makes no sense to me. BP was crushed today (Shell too). That removes the "rush to quality" argument. There will be some interesting investment opportunities when this turns. It's easy to say no buyers but what it actually means is that those who broke mandates/covenants, panicked or see CV as an existential threat exited at the available prices. Traders dropped the bids and we are where we are. If nothing else this is fascinating watching events unfold.

The attraction of shale remains. I think we all accept that we're going through a transition in oil towards renewables. There is a genuine fear that long term conventional projects could be stranded and companies aren't chasing new fields like before. Shale with its short lead times and relative cheapness practically has an ON/OFF button by comparison.
I don't know how the smaller shale companies are hanging in there and it may be because to pull the plug would collapse a few of the lenders - it may all be a house of cards? The majors are increasing their acreage in shale and they have the financial muscle and experience to play a longer game. Shale is here to stay and will end up in the hands of powerful majors who like the portfolio spread and flexibility it gives to their resources.
I imagine the pressure for shale to stand on its own feet is higher than ever and some must fall by the wayside. I also expect some smaller conventional oil companies to go to the wall too. The plans of Centrica, Spirit and Neptune will be put back in the cupboard unless there is intervention which I feel is likely. The CV threat has got the Governments of the world talking because it is a major threat to their staying in power. Trump can carry on his mimicking of Canute but the grown ups will know what they have to do and won't be in a hurry to move towards more expensive energy. A few million deaths of largely sick, elderly citizens is far less damaging than having millions unemployed. Think what it could do for hospital bed shortages and the housing crisis! The Government can blame it on somebody else but will still be left with the more serious problem of keeping the economy going. I'm a great believer in expediency rules.