Member Info for romaron

Just when I thought the virus was being brought under control it flares up again on this message board. Luckily I've quarantined most of the carriers (Filter) and waiting for the arrival of L7, hitman, E121, HMH, Prodopt and a few others in their Hazmat suits. I'm talking directly to other holders about a few issues thrown up by today's BP RNS.

Hi HMH, there was an interesting piece in Saturday's Times about dividend. It was FTSE 100 based but good enough for our purposes. It said the broad rule of thumb is that dividends should be covered at least two times by earnings, so that the company has spare cash for things such as investment for future growth. The average FTSE 100 dividend cover is 1.69 (it was 2.9 in 2011) with an average yield of 4.6%.
HSBC has 1.4X and a yield of 7% - Shell and BP 1.4X and 1.3X both yielding 6.7%.
Like the FTSE itself companies can move in and out of dividend but a cut is painful and results in a downgrade of the stock. When cover drops below 1X companies have to borrow or raid reserves if they want to maintain a dividend.
I believe we aren't far from a dividend too. Once started you have to keep it up and the first dividend will cause a sharp rise in the equity. We mustn't forget that the CEO himself would benefit from a dividend and who could blame him. Maybe a few more quarters before a decision is made but if the direction continues and fundamentals don't change too drastically it is inevitable. I think a 5% dividend (1.5p using 30p) is conservative. It would cost the company $33.58 mio and is more importantly maintainable.

Build it and they will come.

Sorry to hear that Therapist. I thought there was nothing malicious in your nemesis Kneel Gammon and it was funnier than most attempts at humour here. Someone obviously put in a complaint. I have my suspect and he has dropped even lower in my estimation (if that's possible). You shouldn't throw abuse and accusations around if you can't take them being used back even if they are intelligent and funny [the replies]. The complainant is obviously very thin skinned and full of his own self importance. A suitable patient for your couch?

Carry on the good work with the calculations and research, it is appreciated. All the Best.

*To all. The filter stops you falling into the trap of responding to trolls.

There are no medals for holding a stock over a weekend when bad news could still happen so holdings are reduced of stocks susceptible to a pandemic. That's what the professionals do because generally they answer to people. Some call it CYA trading. It is also sensible. Most of us here are weathering the storm and holding.
We've actually done better than Shell over the past couple of days. The FTSE is a good indicator and that hasn't collapsed. The virus currently has a mortality rate of 2 percent. That's also a 98 percent survival rate but it is early days and the situation could worsen.
Once the events are on the front page it is often because the worst has passed. The real money is always one step ahead so overall the situation is concerning but there are a few good signs.

Lucky he didn't contract the real flu then: "So far, 8,200 people have died and 140,000 people have been hospitalized during the 2019-2020 flu season, according to preliminary estimates from the CDC. "The flu season began early this year and took off aggressively,"
Better safe than sorry is not a bad adage. We're not out of the woods yet but the health authorities are taking this seriously.
Without the flu jab (for elderly and at risk individuals) I wonder what the flu total would be? That's why they're so concerned about the coronavirus. There is no vaccine at present so isolation is the only safe option.

*in days of old hospital matrons welcomed a wave of pneumonia cases in the winter. It really sorted the bed shortage problem.

or not? Whilst we are frozen between the update and the coronavirus I revisited SVT. I have probably leant towards making it more important than it actually is. At first I was suspicious that BP was using the Magnus deal to unload a dodgy asset and EnQuest was in such a weak position that it had to accept it. I now think it is just an ageing asset that is handling vastly reduced barrelage and volumes that no longer suit the BP business model; plus it passed on a problem over staffing requirements to another company (Philip Green tried the same thing) but I made the mistake of assuming that BP kinda owned SVT. They were the operator and actually were never the majority owner of SVT. The threat over Clair might actually be subtle lobbying/leverage but my limited research makes it seem that BP will struggle to wriggle out of the existing contract. The model for SVT COP is a shutdown in 2030 and EnQuest will no doubt aim to extend this and will be helpful in the union negotiations as potential exists to carry on to 2039. This might explain why BP is reevaluating SVT in 2020 as Clair might/will last longer.
Rough numbers of SVT costs down to £150mio of which we own 15.1% (original stake + BP) so we are talking about £22mio p.a. so no great number in the scheme of things. I do wonder about the breakdown of the total as it seems a lot for a business requiring only 240 staff.
All pretty boring but this spiced it up https://www.shetlandtimes.co.uk/2010/07/23/bp-scotches-talk-of-sullom-voe-transfer-to-taqa-as-assets-sold which if nothing else gives some idea of who the owners are/were. Magnus oil goes to SVT so there is no doubt its imprtance to EnQuest. We receive a small management fee for providing its services in addition to amounts received from other SVT owners to meet operating costs.
All pretty boring but appx. one third of EnQuest production is via SVT.

Build it and they will come

However the HYNs are $88.878 against $93.418 on 17/01/20 when I last looked which although lower still doesn't reflect the stock drop. If the corona virus is as virulent as the market is forecasting then the movement maybe deserved. Chances are (imo) that it will be a false alarm and we will see a recovery over the next few days. It could be a godsend for OPEC to use it to their advantage and apply the coup de grâce to the smaller shale producers. If we're concerned how do you think holders of shale stocks (not the majors) feel? Even if OPEC don't act it will scare the life out of lenders. We are in a much stronger position than they are unless this is a potential 'black swan' event which sweeps all before it.
I was hoping we'd hold 25p today but we are still ahead of the year end stock price and January isn't over. That isn't a bad result following a pandemic scare and a lacklustre update (Cairn) from a partner in Kraken. It's not scientific but I've found that economies jump back after a restriction and expect the same to happen after Wuhan is free from lockdown.

*No doubt itsa, NH or no show KO are boasting of their holdings in the Malaysian latex glove sector.

Have you seen the FTSE? It's everywhere. I believe this MB is infected too. One of the symptoms is a fever. A few posters are acting irrationally and should immediately contact their doctors! Most on here are safe as the posters I'm concerned about rarely go out in public and certainly never to an AGM.

Be Lucky and wash your hands.

Been away so not following news. This corona virus looks serious. The number of deaths have already exceeded the daily firearm deaths in the US. I'm speculating here but MBS, never one to miss an opportunity [hint: annoying journalist walks into Saudi consulate] has not reduced production but stood idly by while the US increases the current oil glut. Personally I don't think it's as much a lack of demand as overproduction by the US that's causing the weak oil price. The US squeals like a stuck pig when other countries practise "dumping" but I'm confused over this action. Few shale plays are economic around this level but the lower oil price is beloved by Trump. There is a strategic benefit to having your own oil but surely that fades when you have the best military by some distance? Panic over a pandemic just gives it a push. Meanwhile, MBS sticks a hose in the mouth of a drowning US shale industry by doing exactly nothing. I'm sure there are deals we are unaware of between SA and US.
At the end of the day fundamentals never go out of fashion and we are making money.

Build it and they will come.

I wanted to add. Some people accuse EnQuest of making complicated deals. Yes, they are complicated for the like of me and the general public but don't seem to phase the likes of L7, HMH, E121, and hitman whilst Pelle has a good stab but when reading up on FPS I noted that even the BP and Ineos deal is a mix of cash and earn-out arrangements. They are actually pretty standard in the oil sector.

p.s. I ticked you both but hitman's mention of Dreams deserved an extra tick. Tied in perfectly with the old saying of putting money under the mattress.

*For Swedish readers. Dreams is a store selling mattresses and beds in the UK.

Pack it in you two. It's my post. Hitman's OK , I've met him and am in contact with him but we don't have to agree on everything. I can promise you HMH that he is nothing like NH. There is a massive difference between them in intelligence, honesty, knowledge and rectitude. I know I'll never meet NH because individuals like him are afraid of the light. He added nothing to the conversation other than making poor attempts at contention on subjects he doesn't understand. that's why I filtered him months ago.

L7 in the same post praised the Magnus deal but left SVT out. I think that SVT is kinda marginal but still enough for some investors to be hesitant. It may even have put off some potential buyers of Magnus as it would have come up in DD. BP have form in shifting difficult/unwanted assets (most famously the 2 refineries to Ineos in 2007) at the last moment and SVT could have been a potential deal breaker. I'm mentioning SVT because I don't think it is a problem and here's why.
BP are quite a toxic brand at the moment (charities refusing their money) yet almost everybody in the UK owns a bit of them. Whether it's deserved or not we all know it's about perception. SVT is uneconomic but imagine the hurrah if BP was making Scottish islanders redundant! The Unions would be talking about "fat cats" and how much the CEO of BP took home last year whilst nationalists would be focusing on 'British'. Instead they are now in consultation with a company that will simply say we cannot afford to continue and if it closes the Unions will be blamed. EnQuest has the defence that you "cannot get blood out of a stone", an argument more difficult for BP.
BP sold off the FPS to Ineos in 2017 who are now in legal dispute with Apache for raising the price from 60p to £1.20 a barrel. It is another potentially headline attractive story that BP can do without. Ineos on the other hand are after a higher profile. and not scared of controversy.
Are BP really threatening to stop using SVT? It certainly suits the EnQuest stance and there is the possibility of us raising the price anyway. If it did collapse because of BP abandonment it would attract the kind of publicity that BP is trying to avoid.

*I'm a fan of L7 and appreciate his research and skills. Only posting because I'm off to the mountains next week. No, not Davos, I'm skiing in Andorra.

L7 raised some interesting points about AB in his 19.57 post. Hard to respond simply but from defeat comes victory would be one answer. L7 wrote "To date Enquest management hasn't been up to the task of developing assets, A/G being one example"
He had written before that A/G project was entered into with $100 oil. The super-majors also didn't come out of the collapse in oil prices too well either but had the benefit of a wide portfolio and reserves of cash and oil. Mistakes/misjudgements are common in oil. Deepwater Horizon for cutting corners on opex/maintenance and should PMO have bought Sea Lion for example. We have increased production and reserves but have a heavy debt burden to match so L7 has a point.
and this "but IMO it has never been a good investment [EnQuest]" That depends on when you invested but there is truth in the statement. The OO and RI is common to quite a few here and I'd guess the current price is a level where many are flattish. For them this almost a new beginning.
AB has plenty of skin in the game but the analysis is surely where are we now? We are 10 years down the road with a seasoned team that have overcome the worst headwinds. I think that the slate is almost wiped clean and we should compare ourselves to newer companies. Not TLW or PMO but Spirit, Chrysaor and Neptune where I think we have similarities.
Spirit are being sold off this year and probably Neptune. I briefly visited Spirit and the wet finger in air price is £2.5bn with little or NO debt. They have 1.910mio shares with 955mio being preference. They paid 36.96p dividend a share and 4.92p for the preference shares. They're all at different prices so beyond me what to make out of it. Out of book value you get A shares divi 17%, B shares 11.5% and preference 5.50%. Their production was 128,000 boepd and 2P reserves 270 mmboe.
I take 2 things from this. We are near to dividend and AB is overdue as are LTH's. In a years time, without new deals but organic growth, we will be worth around 80p using a spirit level (or wet finger in the air). I'll be happy with one or both scenarios.

*It is expected that Spirit is likely to appeal to a number of private equity backed firms.

If AB goes to Davos and gives a video interview as he has twice before might he obliquely refer to anything that comes out of Tuesday's Operational Update by Cairn Energy. AB is a stickler for following the rules when it comes to speaking about the company with information that may be RNSable but has form in referencing information that has been released into the public domain by a partner. Tuesday morning could be very interesting.

These are closing their doors on shale. Under investment in conventional since 2014 is well documented. But the world moves on and oil demand won't disappear overnight. It seems pretty clear to me that there will be new projects as lenders don't disappear overnight either, neither does ambition.
Where does that leave EnQuest?
We are rapidly paying down debt and I feel pretty confident that even if it reaches 1 X the EnQuest team will very quickly take it back to at least 1.5X. Why?
Because that's what they do. The Bonds are now effectively in single figures until April 2023 [the company is in at coupon 7%] and heading lower. Here's a forecast. The RB and HYNs (last close 92.575, 92.73) are heading for Par. That would tell the market that we can soon borrow money around 7%. AB and his team will not be able to resist that and will lose support if they don't take advantage of cheap money.
They say the market looks 6 months ahead. Not sure I agree otherwise we'd be much higher but I hope you get the gist. I'm sure AB and his teams do though and are even now going through opportunities. Even if it's not brand new deals it does at least mean organic existing developments can be funded sooner e.g. Worcester Bosh, Maureen, Eagle (imo) than the market has factored in.

Fill your boots!

*HMH, what do you think?

What I didn't add is the likelihood that Saudi Arabia is playing ball because at the end of the day they are a US ally who will do as they're told following US support of MBS after his ordered assassination of the journalist Jamal Khashoggi.
They are terrified of Iran and will always suck up to the playground bully.

Hi E121 15.43 - I listened to a podcast available through Platts that expanded on this: "Adam Waterous, CEO of Waterous Energy Fund, thinks North American oil and gas producers face severe capital flight risks in the coming years that could result in US crude output falling by 2 million b/d or more. He says the sector is experiencing a prolonged downturn unlike anything it as has seen before – not another typical boom/bust cycle of the past. Waterous thinks the sector is in only the second or third inning of consolidation that will be required to improve rates of return and please capital markets."

He says the only ones left will be the Super-majors because of their capital discipline. They aren't sentimental and as only 10-20 percent of fields are commercial under current conditions expect ruthless euthanasia in coming months. I think there are 2 reasons for shale refusing to die.
1) Is hope and an insurance against the Middle East kicking off.
2) The smaller stockholders have borne the brunt of losses (basically everything) whilst the creditors are keeping them on life-support because they have to at least pretend to be paying interest and some capital back and anything above zero is welcome. As the numbers get worse they use up every DUC and work the machines until they stop. I doubt much maintenance is going on.

Most here understand the "sunk cost fallacy" and shale has it in abundance with many initially believing the hype surrounding shale. It is basically all over for shale and we are seeing the death throes. The serial liar Trump is still boasting about shale whilst the cynical grown-ups behind him make sure they still have a strangle-hold on ME oil. For shale - it's over and the increased production is actually proof of this. It is production at a loss but a bond holder will extract the last dollar and they're in front of the equity holders who will get NOTHING.

Dunno if this'll work: https://www.spglobal.com/platts/en/market-insights/podcasts/crude/011320-capitol-crude-peak-permian-capital-flight-risk?mkt_tok=eyjpijoiwldfmvl6ag1omkzttwpbmyisinqioijmtujmehpwzuzqovhyv0xtb3njznnuenddafyyvgywbufsdnpqc3dacgjsmittswhwvu5gqko5wupst1fvelfcu2t6uuv0wjhiufwvdfrvs3znndqywwu4d2ffewc4wutewgd6ohvlowhlzzlmzvbqwvm2envhqxheynl1ovrtdlkifq%3d%3d

Sitting idly by my keyboard and feeling bored I thought of something pleasurable to do with my right hand. Well, I'm no longer fourteen so I reluctantly looked at today's trades. I always look for Off book for 2 reasons. I don't understand how algos work but do know the amounts are relentless and small. I don't even consider that they might add up to decent size as they take profits regularly and it is to some extent a zero sum game (bit like bookmakers). The off book also do something that computers don't do. They rely on human input and if there is decent size you don't have to post the trade immediately. Remember, algos are driven by off book. Sure, there's some Auto trading but you never get anything done when you trade in pennies.

Back in the day if you had an enquiry in FX in SIZE there really weren't that many people you could go to. I'd go to Investment banks who nearly always had a side they were interested in. A lot was involved with the bonds and their access to cheap dollars. You couldn't do it all the time as they'd realise you were fishing for positions so your credibility was on the line too. Deals when struck weren't publicised in the same way that stocks are but the principles are the same. It still goes on and there is a constant battle between traders and the sales teams for info on trades/orders. The traders trust brokers more than their own sales team who really do trade in pieces of silver.
I feel that the Institutions are now involved and the word does spread because brokers are now getting involved and the Institutions are as keenly attuned as the brokers. They have developed early warning systems and there is always gossip.
Something is going on; that's for sure and it isn't day traders. Because of our history this stock is fairly illiquid imo.

*Only joking shed. If you aren't in yet buy some EnQuest - plenty of upside. Email me and I'll give you more info.

Hi shed - what's the saying - "a bad penny always turns up". Please don't buy EnQuest as I'm actually in profit and the company is on a roll. Stick with those that have 'potential' and lots of 2C reserves. I worry about any possible 'Jonah effect'.
I've only got this one oil stock and (whisper it) future dividends are not as silly as they sound. The CEO and Employees are heavily invested and that alone is unusual in oil stocks, they usually go for options which cost f****all.. It is (imo) the only way you can satisfy any personal cash flow as we know how the market frowns on Director's sales.

Hope the family is well. Are you in UK now?