Member Info for romaron

If that subject isn't enough to put you off then I don't know what is. Just been to see Armando Iannucci, Jess Phillips and Jan Ravens on "Satire in an Age of Absurdity". It revolved a lot around the internet and the new world we live in. They all think Trump is ill. Predictive behaviour, AI and algorithms also cropped up. On the way home I picked up an Evening Standard and this editorial by Anthony Hilton affects us because I believe in some minds we are lumped in with AIM stocks but what's the difference? Small caps and AIM are basically ignored anyway and he was scathing about the dearth of research. The article says the equity market might cease to exist in 20 years. Here it is:
https://www.standard.co.uk/business/anthony-hilton-overzealous-watchdogs-have-put-the-bite-on-liquidity-a4365106.html

*Jess Phillips wasn't there just to make up the numbers. Very funny and intelligent.

Spokesperson on LBC for XR is stating that the world's largest potash mine is being approved on the Yorkshire moors (supports monoculture). Fracking is ruining the countryside along with roads. Defending digging up lawns which are "ecologically sterile".
At least I've an excuse for not mowing the lawn. Doubt the wife will be happy though. Is monoculture worse than starvation? We have one of the lowest trees per head in Europe, 13%, against an average of 35%. Well not where I live but many people are happy to live in apartments and take advantage of nearby parks of which there is no shortage in London.
If the "good life" is so important why is there such a pressure on immigration into the UK? If XR was right surely the attraction of being surrounded by fauna, trees, plants and defecating in the woods would mean the direction of immigration is wrong? I see it as vandalism, plain and simple.
They (XR) can easily win the argument by getting the public onside. I don't see them winning.

Two ways of looking at it Dave.
"It is arguable that a PE of five or less is not a remarkable bargain. While it might look as if the company’s prospects are being viewed too negatively, it is not a bad rule of thumb to filter out companies with a PE below this level. It suggests that the future outlook is quite bleak, and that there are far too many problems facing management."
or Amazon which fluctuates and has a median of 144.11. I think it's yet another ratio that makes us a screaming BUY but takes us back to a recent HMH post comparing us to the EV of TLW and PMO and don't lets go down the net debt/ebitda road! I'm beginning to suspect that AB and JS have maybe hidden the body of Jim Buckee down one of the plugged wells or some other skulduggery?

Looks like the virus is coming to a denouement. Is it a pandemic or just another version of flu? I favour the latter but it is off the front pages to an extent and people are now becoming bored with it. Fingers crossed there.

A small cheer is the RB and HYN. Both have improved and getting close to pre virus level when oil was c.$65. Last nights close 92.18 and $90.473

Be Lucky

Hi Weny, interesting article; it's almost an unwinnable argument from either side. There's always something popping up that adjusts your view. This from the Sunday Times yesterday: "Blackrock, the fund management giant, has said it will sell its stake in companies that derive more than 25% of their sales from coal. Glencore falls below this hurdle: it makes 6% of its revenue from coal but about a quarter of its profits." I'm somewhere in the middle and I think the argument has some of the partisanship that you find when discussing Brexit or Trump. One thing I do know is that forcing voters to follow policies that make them considerably poorer is not sustainable. Germany's strength is its manufacturing and it is heavily energy dependent. There are plenty of poorer countries that are prepared to ignore the environmental costs to replace them. Does anybody really think that any country would put itself on the road towards impoverishment to satisfy noisy activists promoting a theory that some say is not proven?
I think EnQuest's role is to follow Glencore and stay onside with the Blackrocks of this world whilst giving token attention to the activists who are an annoyance but don't seem to understand that life is always about compromise in one form or another. What other parts of the world wouldn't give to have our life style and pollution problems?
I read somewhere that Leeds (a UK City) does more business than all of the UK does with Africa. The gap is enormous. There are plenty of countries prepared to step in and take advantage of cheap energy if the West prices itself out of being competitive. Coal will be around for decades and that is dirtier than gas and oil.

*of course there is a third way. Go private or move offshore. You can avoid a lot of the "noise" that way. Many people are prepared to hold their noses and take the money.

Hi WEny, the EROI article you linked to (14.12) sums up the dilemna facing Governments and investors going forward. As the activists achieve their aim (I'm not saying it isn't a noble one) there are hard decisions to make. The graph simplifies it. Not everybody can have Hydro and Nuclear is enormously expensive and has its detractors. What they both have as well as gas and oil is a high storage capability. The remaining sources fail on the storage but do massively better on the pollution argument. This argument will continue for our lifetime but fossil fuels will still play their part. With this going on is it surprising that investors are shying away from oil & gas?
That is why I'm sticking with the numbers argument. With our short timescales and no heavy capex for new fields we are highly profitable and the negative of debt continues to drop. With the present bias against fossil fuels the lack of new competition will keep prices relatively high. Our expertise will be in much demand.
A couple of points missed. The demand for energy will grow in whatever form it comes. It has happened in every other walk of life and unlikely to change. The portability of oil and gas is hard to replicate and the infra structure is already in place. I'm not the world's greatest traveller but in Beirut they have apartments selling for millions of dollars and a Ferrari garage. Every house also has a generator for the regular power cuts. They don't have a railway either and this is one of the most sophisticated and talented countries in the Middle East.
There are still plenty of bargains in oil and gas but not so much in exploration I feel. The infrastucture for other parts of the world to copy us just isn't there at present and many parts of the world will not stop using fossil fuels to please the countries that colonised and extracted wealth from them in the Industrial Revolution. It's now out turn to pay.

*I wonder if we'll have any activists turn up at the AGM. They did at our 2017 one.

If the link doesn't allow access to the article google "can the world kick its oil habit?" and play around. The answer is "possibly but very slowly" BTW. To achieve these aims in 30 years it will need technical breakthroughs. They may or may not happen. It seems that markets believe we've already done it and oil stocks are paying the price. We know that isn't true. It's alright for Greta but for the world's poor "But oil and gas, he adds, are commodities “of necessity".

"This will be the sixth waiver the US has issued for Iraq since US sanctions on Iran energy exports snapped back in November 2018. After an initial 45-day waiver, the State Department issued two 90-day waivers in a row followed by two 120-day waivers in a row in June and then October.
Previously, the US had asked Iraq to show signs that it was reducing its imports of Iranian gas and power to meet its electricity demand. It also urged Iraq to establish contracts with US companies."

No hypocrisy or self-interest there then! No wonder Iraq wants the occupying forces gone.

The energy sector’s share of the S&P 500 today is already down to about 4 per cent, from more than 11 per cent in 2010https://www.ft.com/content/dddb57ec-4d2d-11ea-95a0-43d18ec715f5 .
The Chinese word for crisis means apparently a mix of danger and opportunity.
I think anybody invested in oil can confirm the first sentence. Oil has been a poor investment these past years. We're heading for net zero and it will be the West that leads the way. It won't happen overnight (2050 BP aim) and will be a mixture of various measures. This isn't only to save the planet but to save themselves. Threats from big investors that they toe the line or have problems with "changes in capital allocation [Blackrock] does help decision making.
I think EnQuest is ideally positioned for this new environment. It will be a very SLOW transition and the media headlines are only recording what most here have known for some time. I really believe we are past the worse. Now it is up to the industry to drive the message home. It can be fast or slow but I like the reply of Bob Dudley the ex CEO of BP when investors suggested BP "move really quickly into renewables", he'd reply: "Well, we can do that. Would you like us to cut the dividend?"
With EnQuest's experience in mature assets and ability to respond far more quickly than most other oil companies, certainly the majors, this is a golden, once in a lifetime opportunity. Not too big but certainly not too small. This Goldilocks company has blossomed at exactly the right time imo. If the majors want to keep moving away from mature assets and into renewables then we are here to facilitate. The debt is close to an acceptable level (or already there?) with current production and there appears to be a willingness for earn out arrangements with the vendors.
The climate activists have forced the hand of the majors but it will take decades before the world stops using oil but it has resulted in a winnowing out of companies and stopped investment dead in its tracks. We are ideally positioned.

Build it and they will come.

Steve, have you ever consider carts drawn by oxen? It's the direction we're heading.

This is 9 months old but first time I've read it: https://www.pressreader.com/uk/the-press-and-journal-aberdeen-and-aberdeenshire/20190521/282114933037159
It is just as relevant today, maybe more so, but shows how timely our 2018 RI/Magnus deal was. You wouldn't want to be in that position today. Unfortunately Hurricane are and I wish them well. Whatever their future it will take time and are for me, uninvestable at the present time. One important difference is that they describe themselves as E&P and clearly consider themselves medium-sized. We are a production and development company. What is surprising is that we've only recently (January) achieved a higher MC than them. I don't follow HUR but the Centrica divestment of Spirit is of interest to all of us. It began in July 2019 and they expect to receive initial bids around the end of this quarter.
The article does say that doors were slamming shut in public markets but still finding favour with private equity. That was his view 9 months ago and the situation has, if anything, worsened.
What is slightly worrying (if he's right) is that if public markets don't open up again, private equity could struggle to find an exit route as IPO's become less feasible. That helps explain our current undervaluation. It will worry Centrica, Chrysaor and Neptune more. As I write BP is down 3.5% after promising the environmentalists almost everything they asked for.
Thank goodness AB and his team have gained us the flexibility and maneuverability denied to HUR and BP. Of course I don't like the current oil narrative but regular profits and disappearing debts will be impossible to ignore. Maybe the EnQuest SP will remain undervalued? OK, I'll take dividends instead.

*absolutely irrelevant but our net debt/Ebitda ratio is better than British Gas (Centrica).

EnQuest is now a really solid company.

The only oil stock I hold is EnQuest but do look at others from time to time. Yesterday there was an article about Centrica and its problems in the Times. I only mention it because it holds a big chunk of Hurricane in the form of Spirit Energy which it is trying to unload. I think Spirit regret their investment in HUR and judging by the price the clever money has already sold out. There is little appetite for projects requiring large capital outlays (Sea Lion, JOG, Bentley, Bressay?) and Mark Carney recently said "Up to 80% of coal assets will be stranded, [and] up to half of developed oil reserves" which is another concern.
The (eventual) sale of Spirit will give us various markers but I am just glad we are not in the position of either Spirit or HUR. There will be a little blowback to EnQuest because of latent ignorance about the company. The fact is that any NS company with "potential" rather than an owner with deep pockets is going nowhere imo. Production and 2P reserves are what count at present. I'm not worried by the current oil price as much lower and those stacking will rise exponentially and with the dearth of investment we will see a large hike further down the road. The virus has speeded this up. I'm not cynical enough to suggest that majors cosy up to smaller E&P companies then pull the plug to buy at fire sale prices. I just think they are NS sellers whilst they follow their own destinies.
By luck or good judgement that isn't a problem for us. We have the best part of 2 years before we have any large debt repayment and 3 years before the bonds are due. Revenue will be a tad lower because of the virus but even the most negative experts don't expect it to last until April. Our Capex requirements are modest, we're making good money and are in a strong position for growth and (whisper it) new deals.
Another pointer to our health is how quiet this board is becoming. Boring works best when it comes to message boards.

Enquest is now a really solid company.

I think the company now has a smorgasborg of opportunities in front of it. The oil companies that are solvent and without a looming debt maturity are sitting pretty. Many household stocks went through a long period of consolidation (Amazon, google, netflix) whilst BP and Shell haven't raised the roof the past 10 years which is how old this company is. Sure there's been mistakes (Alma,/Galia) whilst Kraken coincided with $30 oil but this is now a battle-hardened company that is still youthful. I was thinking about what HMH said about the Kraken premium. AB keeps this info to himself because he isn't after a temporary upward spike in the SP to please the day traders and prices can always change. He values flexibility whilst keeping his cards close to his chest. Whatever his vision is it isn't the next quarter but several years down the road.
The OZ loan may have elements of a Pay Day Loan but we weren't in a strong negotiating position when we were let down on the farmout of Kraken. Against that you have to balance that with Kraken being a more valuable asset today. I'd say both parties are happy with the deal and if EnQuest want to now make adjustments I'm sure OZ will do their best to accommodate. That's what financiers do.
I hold the RB too PRDaynes and can only explain the difference between the PMO RB and ours is down to the fact that they are FTSE 350 (292ish) whilst we are around 425. Providing the Virus situation improves we can be FTSE 350 in a matter of months if we reach the broker's target price. I also detect a change in sentiment towards us and agree with HMH "Enquest is now a really solid company."

Build it and they will come.

or commitments due to be repaid in 2020. In 2021 we have $425m of the SFA taking it to NIL whilst the RB an HYN's aren't due until 2023. We could easily be debt free in a short space of time but I doubt AB and team's intention was to achieve the production and reserves level we have and to pay off debt. Debt is your friend; it's the amount/ratio that counts. BP has debt too!
Nobody has laughed at my comparing EnQuest to BP which surprised me. I don't actually think we'll ever challenge BP but at the same time I cannot see BP quadrupling its MC whilst that is very likely with EnQuest.
The virus is a threat (black swan). It does seem under control but it will impact the world economy and oil. I'm factoring in a flat first Q and maybe first half but still expect the average oil price to be $65 for 2020 as the second half could easily be a bounce back. Brent is off 15% since the virus hit the headlines so I suspect we're bottoming out on the lows. A benefit will be the impact it has on shale. EnQuest is under no pressure this year as we can handle a lower oil price and I'd be interested in what the number guys think the B/E for EnQuest is as an oil price.

Be lucky.

*zebbo - you haven't read the accounts or you wouldn't have flash posted that puerile comment. Afraid you're straight into the crèche (Filter) along with "Needy Neil" and "No show KO". Play there to your heart's content; it's adult free.

McDaniel produce them every 3 months. Not sure what use they are but throwing them in anyway. Obviously hasn't got the virus factored in. https://mcdan.com/forecast/data/downlaods/january-2020/G200101.pdf

Good find Modestus and repeating what E121 has been saying for some months. I thought that in the gold rush it was the sellers of shovels and pick-axes that made the money. A bit worrying when they decide to pull out for the time being (Halliburton, Schlumberger). I thought this was succinct too "I submit that over the past four years, the price of oil was dictated by the price shale operators were forced by banks and bond holders to sell it for."
The Directors were getting paid, the banks were getting paid and bond holders were getting paid (bribed too). Who suffered? Well that's pretty obvious - equity holders. This is confirmation of what has been a minority view on this MB for some time. It was in the bankers & bond holders interest, with the collusion of shale directors, to keep the industry on life-support by driving the equity towards zero. Now it's their turn to take some pain. It does also help explain why Trump always goes on about "we got the oil" when talking about Iraq. It isn't US oil but a strategic necessity. Just to add to shale pain is that it doesn't produce the oil most in demand and with far fewer flights due to the virus it must hurt. The US attacks cartels and "dumping" but have their own method of doing just that but renaming it. The US military play a huge part in this and they help mini dictators practice vicarious bullying throughout the Middle East. I think Trump is a dangerous liability to the world and has proven that he cannot be a trusted ally (Kurds). I think Saudi Arabia have woken up to this.

Or a joint agreement between SA and Russia to crater the US shale industry with Russia taking the hit for being anti US. I cannot see the logic in Russia subsidising the US shale industry. I know SA benefits from US protection from Iran but feel sure that Putin has some suggestions here.

Hi L7 - that was poorly worded by me. I meant that private finance is attracted to mature fields being moved from majors to the next level. I was thinking Spirit, Chrysaor and Neptune. What I was trying to emphasise is that if you have to go to cap in hand to traditional lenders for a new development then you are likely to be turned down. We are incrementally getting stronger but a new development like Kraken would imo not be viewed favourably. I believe that AB and his team are looking for increasing production and 2P but it isn't going to be a new development so there will be competition from private finance by which I mean the likes of Chrysaor and kin. Earn-out arrangements help and there is a lot of mutual back-scratching behind these deals. I would add that you need a certain size and exposure to be considered by the vendor and OGA support is essential. We are a senior player in the North Sea.

*I mentioned to another holder that our declines are underestimated when forecasting. He agreed that declines are a part of life and we have a few older fields but added "What shale would give to have declines at our levels."

Another result of being in an unloved sector is that raising finance is always a problem. With the current narrative on fossil fuels it's becoming increasingly difficult to finance new developments. There is now a moat around existing oil companies and few companies (outside majors who are largely self-funding) can provide the compelling case to attract the sums required. Earn-out arrangements help but these are for existing ageing fields and even private finance is more attracted to these. As the world becomes more anti fossil fuel it will prevent new players entering whilst those remaining will have protection from new competition. The future is very bright for companies that manage this transition and the fact that so many are vying for a piece of the action shows how rewarding it is for those who successfully handle it. We are sitting pretty and are past the worse. Think tobacco; there are decades left for oil.

Tesla shows what happens when hype overcomes reality. Mind you a bit of FOMO wouldn't harm EnQuest.

We've debated to death the Net debt/Ebitda ratio so was surprised about this (to me) new ratio being promoted in Tuesday's RNS: "Net debt reduced by $1.1 billion in the quarter with gearing at 31.1%, down from 31.7% at the end of the previous quarter." It is of course the BP 4Q19 results. I then tried (with assistance) to get some idea of what our "gearing" ratio is. I'm not after perfection and before anybody says that comparing ENQ to BP is like comparing the Vanarama League to the Premier league I will say that there are more similarities than differences. My argument is that we are League 1 or Championship. We are not a HUR or RKH or one of the the myriad E & P companies on AIM but a well run FTSE company with bonds trading at a reasonable level and debt now under control. We manage/own a variety of assets and call ourselves an Independent production and development company (a mini BP). Our production numbers and reserves make us a serious company so the comparison is not so ridiculous imo. The gearing BP talks about is already good and anything within 25-50 percent is best unless more debt is needed to operate although there is no set ratio. Our gearing is around 155% and would generally indicate a company in trouble. My argument is simple. Our equity is seriously undervalued.

The numbers are stacking up. We now have two ratios that indicate we are undervalued.

Build it and they will come.