Member Info for romaron

Three stimulating posts on the subject. It's safe to come out now and admit that A/G has been a disaster. We had two potentially mortal wounds in the past 4 years, A/G and Kraken. One turned into a resounding success whilst we'd probably rather not talk about A/G. It was [A/G] brought up at AGMs and on analyst's calls and AB could only be defensive, what else could he say? I've yet to see a CEO say something along the lines of "we totally misjudged the oil price movement and over extended/committed ourselves on capex requirements, we are lucky not to be in administration!" There was little that could be done about it so this is the closing of that particular chapter. we aren't alone among oil companies with white elephants, disasters and poor timing.

So putting my Pollyanna hat on there are plusses from the A/G adventure:

1. The losses feed into our tax credits so that we will recover a percentage.
2. The field is put to bed and sometimes an acceptance of failure moves you forward. I expect the analysts to like the clarity.
3. It shows how quickly fortunes can change in the oil business. In the middle of a vicious down turn we could lose what?, a billion dollars and still survive.

*I don't think AB and his team are perfect but to survive what we've been through, paying off debt and to be in profit takes more than luck.

The End

You'll go blind! Screen watching is like onanism. I used to do it for a living (screen watching that is); not because it paid well but because you need to be there if something happens or there's breaking news. Otherwise it is a waste of time.

The professionals wander in, have their meetings and go through weekend coverage and world news. They are the ones that move the price. Maybe they want to Buy/Sell EnQuest but waiting for something to happen or busy elsewhere. Maybe they're having breakfast. The algobots never sleep though and they'll be skimming and earning their fractions.

Be honest - will a penny movement one way or the other make you trade?

Hi Beerbull - well then you can tell me how "synthetic warrants work and what the current rating of PMO debt is? Whilst you're at it can you tell me what the current 2P reserves of PMO are? It seems that PMO are engaging in a quite complicated deal with BP themselves. It seems that vendor assistance and shared future revenues are quite common. I hope they know what they're doing. This from Neptune Energy in September:
"The competition for North Sea assets, however, has become tougher since, as oil prices rose. “I think asset valuation and competition in general is quite fierce in terms of doing M&A deals in all of the North Sea,” Lumens said.
“We haven’t done a lot of M&A recently as it is quite expensive, but we continue to look at the market,” he added.

A conflicted Rights Issue with a complex deal that brings instant barrelage is hardly what a company near to breaching its covenants needs. Somebody more suspicious than me might say that smacks of desperation. BP isn't a charity and takes commercial advantage to dispose of ageing assets.
EnQuest might meet PMO in the FTSE 250 lobby! We'll be going in as they are going out.

Something to bear in mind about Moody's. They don't cover all companies. There may be some unsolicited coverage but that is usually because they are strategic and/or a large company. A friend did sales for them in Spain and Italy and Fiat had no problem with Moody's coverage but wouldn't pay a fee so they called that 'unsolicited coverage'. I'm no expert but there was a Swedish guy who posted occasionally here who is and can correct me if necessary (I don't think it was you HMHn but he sounded like he went to the same Charm School as you). My understanding is that we pay for coverage as do Tullow.
PMO and CNE do not so I doubt they get any coverage.

What this means imo is that we could bring mild pressure to bear on Moody's if we have a good story to tell. If they're talking about the sector we would get a mention. At the minimum we have a line of communication to Moody's. I don't know when the next review is but I'm sure leverage can be applied if needed.

I believe it is a good discipline and although it might be expensive it does show a willingness to have this 3rd party check. You run the risk of getting a bad rating but it does mean you are prepared to be audited. After all we had no problem paying Gaffney & Cline Associates who did a similar job with our oil reserves. You might think that Moody's could be accused of sell side bias but then you could aim the same comment at Gaffney & Cline. The truth is that the whole raison d'être of both companies is to be impartial and independent assessors/consultants. Their work is accepted throughout the world. They have a lot more to lose than us if they weren't thorough and I'd be more suspicious of companies that shy away from credit agencies. Especially if they access the bond market.

Hi Z.F.G. I've always thought the FTSE 250 a bit of a blunt instrument because it doesn't show the dynamics of a particular stock. Each one will have its own story and are always moving. They slip in and out of the index so when our turn comes PMO might not be in it. You can have the required MC but your debts may be excessive or you struggle to pay a dividend.
That can have an adverse effect the other way as funds divest if you leave the index. What is important for us (I believe) that we have momentum on our side. The market hasn't woken up to the potential of EnQuest in the next 6 months.
With the Barclays seal of approval I think it's a slam dunk for a Moody's upgrade. That will only increase our investor base as well.

So Barclays, who were never overfriendly to EnQuest reckon we’re worth 40p! So do JPM but I’ve ignored them because of sell side bias (potential). I don’t think the market really appreciates what 40p will mean for us and this goes back to The Times not really following the company. When we are 40p we will automatically enter the FTSE 250 along with Premier Oil, Tullow, Cairn, Petrofac and Sirius [PMO and TLW are on a downward trajectory, CNE are unexciting, Sirius are out whilst more about PFC later]. This will then kick in the multiplier effect as tracker funds will automatically top up added to the fact that the Times and others will start following and reporting on us. Increased coverage will increase the demand for a stock that is (imo) held tightly and unlikely to be released at 40p. Oddly enough the much talked about 60p party would probably be the level at which some long term holders will sell.

Early next year will also see the IPO of Neptune Energy (April) and if it goes ahead there will be increased coverage of our sector and I wouldn’t be surprised to see more M&A in the North Sea. At some stage I would imagine Spirit and Chrysaor might wish to become public companies too. I included PFC in the few names I mentioned because it is the CEO’s old alma mater and I’ve always had an outside bet that EnQuest and Petrofac might get closer. I think 2020 could be very exciting for EnQuest. For us long term holders this is just the beginning and any new investors can buy today at a similar price to what we’re in at. Come on in, the water’s luvverly.

Build it and they will come

Where’s the liquidity in this stock? It’s available to retail investors but I’d expect a frustrating time if you are an Institution who wants a decent amount. Let me explain my thinking. Because of the history of this stock and the Open Offer and Rights Issue many long term holders of EnQuest have more shares than they intended. The recent uplift, whilst welcome leaves many around break even so that removes one reason for selling as the intention is to make a profit after all. I am always surprised when low volume posters state their holding because it is usually quite a lot. Other retail investors I have met at AGMs also tend to hold decent amounts, often into 7 figures. This indicates they are not complete novices and relatively flush so won’t be selling at the first small profit [day traders are a law to themselves]

As a wet finger in the air guess I’d say 50 percent is with Institutions, AB (CEO) and the Employee Benefit Trust. That leaves 850mio shares with PI’s. If they all held a million that’d be 850 shareholders which is a bit ridiculous but I think less than many similar sized companies. This company has been flying under the radar for some time. Even today I read in today’s Times under ‘The day’s biggest movers’ that Tullow Oil moved up 7.7% on Friday. No mention of EnQuest. I think I know the reason (more later). Many investors will look at this stock and look at highs and lows and let it cloud their judgement. Without knowing some background this is irrelevant. EnQuest suffered with the $30 oil and almost went bust, in fact another partner in Kraken; First Oil Expro did. Kraken was brought on line in the most demanding of conditions and it underscores the calibre of the management. Financial demands show how hazardous it is bringing large projects to completion e.g. Sirius, Xcite Oil and will Sea Lion ever be developed?
Our current performance is quite spectacular imo and to be producing around 70,000 boepd after recent traumas is impressive. We are paying off our debt at a rapid pace but I will leave it to others to explain FCF, decomm liabilities etc. because they are so much better at it than me. From being practically “on watch” by Moody’s we will soon be in the position of having lenders queuing to finance the next chapter in the EnQuest story.

(cont)

and three come along at once.
https://www.londonstockexchange.com/exchange/prices-and-markets/stocks/exchange-insight/trade-data.html?fourWayKey=XS0880578728IEGBPUKCP

RB close 91.725
HYN close 91.522

Unusually this week PI's have been given a window into the esoteric world of oil financing. I was going to use the phrase "when thieves fall out" but realised I am of course talking about serious companies who follow legal (cough) rules and have reputations to protect. I'm talking of course about ARCM v PMO. The response of ARCM https://arcmcap.com/ARCM_Response_to_Premier_Oil_PLC_V2.pdf is a kinda RNS and it will be interesting if PMO respond publicly. I was drawn to this bit from ARCM.
"In our view, one of the main reasons why the Company must delever now is its inability to
access the traditional RBL market in any meaningful scale given its declining oil production
profile and existing decommissioning liabilities of $1.2 billion."
I contacted EnQuest IR with a question about our access and got this reply: "I am not aware of any issues in relation to the lending market for us. We have been making great headway in reducing our debt over the last 24 months. You will have no doubt seen Barclays updgraded us yesterday based on our stronger balance sheet and more stable operations. Similarly, JPMC just upgraded us this morning as well. For us, if we execute our plans we could simply continue to pay down the Existing credit facility, meaning the bond maturation extends to October 2023. At which time we could look to refinance the c$1bn of bonds into a combination of smaller RBL type financing and bonds."
A pretty bland corporate response but it makes me feel better anyway. EnQuest isn't the most exciting company but keeps buggerin' on with the day job and we have found ourselves in a pretty strong position financially compared to our peers. I know AB and his team upsets some here with his refusal to pander to analysts or PI's for more frequent updates but the financial rectitude exhibited will bring its rewards. It's always about finance and we are getting stronger by the day. There is a lot of flair in the team and they are no doubt weighing up opportunities. We might not even farm out Kraken - we don't need to! Looking forward to the next Moody's assessment.

Dunno about you but PMO seems a tangled web of financial contraptions (synthetic warrants?) but not surprising with an ex City CEO specialising in corporate finance and by comparison we are a haven of straight forward vanilla accounting.

The climb back has only just begun.

Squirt 09.49 - well said. I hold a decent amount too and it can affect your thinking. I've been more positive than you but have the advantage of seeing & speaking to the management at the AGMs. Plus I live in London so can easily attend. I've been speaking to a few other large investors avoiding this BB as the parasites and manipulators do their best to destroy. I doubt they're even holders or have meetings amounts. You'll never meet them at an AGM. I will post at the weekend as I feel the situation is even better than Barclays or JPM indicate. For now let the day traders have their fun.

Build it and they will come.

Hi Modestus - and I had you down as one of the more intelligent contributors. I don't actually follow my own advice with sells and that has cost me money. The reason behind this is that I spent most of my working life staring at screens and find that with SELLS you get chased by enthusiastic salesmen and you always run the risk of being taken out on a big move that is often exaggerated and temporary (not convinced by the PMO move today). Then you have to be on top of your margins which for me is like being back at work. Hence you need to pay more time to your short positions whereas BUYS can be a kinda deal and forget which is more suitable to a lazy investor like me. I hope Chaps52 doesn't take my flippant response to heart but personally I've never made PMO a direct comparator to EnQuest but you can compare metrics and we are ahead of them on many. Sure PMO has the wider spread of potential money spinners but a scatter gun can give similar results. I'd go as far as to say that PMO are clinging to the same lifebelt (S.S. Sealion) as Rockhopper in the South Atlantic. Others think it is a route to riches. “You pays your money and you takes your choice.”

Be Lucky

Potentially I am worth £100 million. I've got the Euromillion ticket to prove it.

https://arcmcap.com/ARCM_Response_to_Premier_Oil_PLC_V2.pdf

read 2) 2) Increasing the Company’s exposure to the UK gas market and transitioning Premier to
becoming a gas producer

I immediately thought of our new chairman.

I'm getting quite excited here L7. If I've read it right the new debt of PMO is closer to 9% once you include the add-ons. They use the term hamonise so I'll do the same. Our debt "harmonises" with PMO except ours is already in the bag. We harmonise on production, we harmonise on reserves (P2 actually higher) and we've already gone through the trauma of getting an FPSO to plateau production. We actually harmonise at a higher note when you use leverage (net debt/Ebitda). So why the bleedin' hell is our MC where it is?

Here's an arbitrage. BUY EnQuest, SELL PMO. Can somebody call AMRC?

Hi L7 - That's interesting info. So PMO propose raising the RB to 8.25% maturing Nov 23 . I'm speculating here but the other forms of lending will be at a similar rate. I take the point on nothing is completely covered regarding the short. Bonds have a topside which will mean they'll hardly become AAA but anything over 100 is usually manageable and a good target. The PMO RB is 104.50 today with 31/05/21 maturity (c. 3.5%). Equity can move between zero (administration) and pick a number 1.20/2.20 > etc... maybe the formula that AMRC had this possibility at a tiny possibility and low risk with their short anchor in place? The (looking) successful extension has obviously not worked well with the AMRC formula.
What it does is give us another debt comparator. Our RB is c.10% with an April 2023 maturity (it says 2022 but there is an inbuilt extension). It is early to guess how well the PMO debt will be valued but for us "a bird in the hand" comes to mind.

*In FX you can fund currency deposit needs through (usually) dollars. So if you need Malaysian ringgits and have cheap dollars available you do a swap. You buy and sell ringgits and sell and buy dollars. The dollars net out and you have the ringgit requirement. You also have a spot risk and it is usual to match far end amounts and do a spot deal at the front end. Some banks didn't do this and if uncovered could turn a profitable deal into a loss.

Once the excitement over the PMO squeeze is over they're gonna look at the details of the refinancing. The lenders always demand their pound of flesh. At present they're making it a positive and it will give impetus. All they would have needed was a leak that ARCM was buying equity and that would light the touch paper. What you have to wonder is that with a short this size is how the PMO equity actually held up? Our turn will come.

I thought the PMO update was due Thursday but never mind good news is always welcome early. The endorsement of the lenders to extend until 30 November 2023 had more impact than the BP deal (imo) which also seems to have been taken well by the market. Perhaps that is an endorsement of the Magnus deal that EnQuest entered with BP? I've been giving more thought to the AMRC short of PMO. I haven't drilled into the positions of AMRC for 2 reasons. (1)They are fiendishly complicated and (2) you have limited information. What I do see though is in some ways an arbitrage deal. They are short equity but hold bonds. The restructuring of the bonds in 2017 created (are you ready for this?) equity warrants, synthetic warrants, convertible bonds and then you can throw in seniority of debt, Schuldschein and other uncle Tom Cobbley variations. This means that they probably have access to the ability to exercise warrants at a price of 42.75 pence.
The professionals look at the short of AMRC in the round rather than what appears at first glance to be a short that isn't doing too well. If it is arbitraged out the short is only a record of one side of a position. That may be losing but the other side is doing well or it is a tail wag dog scenario and has to be reported this way. Playing the WTI v Brent could look similar on the books of a trading company. It is basically what you are in at. Of course we don't know exact dates. I'd even go as far to say that AMRC may not have reported the shorts because of this? I did try asking a question some time back on the PMO board but the knowledge there is limited also.
I wish PMO holders well but I doubt many understand the funding arrangements and analysts may struggle too. If you think EnQuest has complicated deals they are nothing like PMO's. Today's PMO news is good for EnQuest I feel.
I'm not 100 percent sure here but I don't think the Retail Bond holders of PMO could exercise warrants.

Build it and they will come.

I've been guilty of the sunk cost fallacy in the past but admit to being a little surprised that the world's greatest businessman (self appointed) suffers from it too. Trump has decided that too much has been spent on Iraq so they're not leaving the country. Everything is transactional with him but we knew that anyway. I did have a chuckle when he said that North Korea had reneged on a signed a contract whilst he has no problem in tearing contracts and treaties up. Anyway, back to the illegal squatting. I think he might be doing a bunk as there is presently a lot of helicopter activity but that may just be because of IED's which whilst primitive are very cheap and effective.
Whatever happens next I hope that the landlord (Sovereign Iraq) goes over the properties and calculates the damage done and keeps the deposit as well as charging for essential repairs. The US have proven to be poor tenants and the US will have to pay for the bed and board of their bloated military domestically now as their reputation precedes them.
I imagine most in Iraq are thinking good riddance.

In 1953 the United States played a significant role in orchestrating the overthrow of Iran's popular prime minister, Mohammad Mosaddegh and installing their own preferred choice, Mahammad Reza Pahlavi, better known as the Shah of Iran. The Eisenhower Administration believed its actions were justified for strategic reasons; but the coup was clearly a setback for Iran's political development. And it is easy to see now why many Iranians continue to resent this intervention by America in their internal affairs. During the Vietnam war Iran policed the Middle East as the US was politically unable to. The Shah was deposed in 1979. The West were grief stricken but soon recovered and backed the Iraq invasion of Iran (along with Saudi Arabia) the following year.
Today, the diplotainer Trump, fresh from his success as a reality TV host has marshalled the "Evangelists for Trump" and what a moving occasion it was. Their dogma comes from a book even older than the Koran. He praised the US military (again) and restated that they are the most exceptional and virtuous military on the face of God's earth. Partly true, I have problems with the virtuous bit (Gallacher). The Evangelical leaders then left by their private jets to spread the word.
I'm so glad I live in a secular country.

Bring our troops home!

Hi hitman - "the snag list was quite considerable". In the real world they always are. The only perfect worlds are found on message boards. You're right about not feeling celebratory if the gain is at other's misfortune.