Member Info for romaron

Just a thought. If future developments in Kraken are accepted as having a relatively high chance of success would a farm out by EnQuest entitle the new partner to a share of future exploration success? I suppose the answer is YES because I'm assuming Cairn is committed to future plans. If that is the case then the value of our potential farm out has gone up as the field data and surrounding plays build up.

Hi Colebrooke - whilst that is true the decider is economics. For PMO, Sea Lion could have future growth and if Bentley or Bressay ever get developed in the NS you could say the same. The difference is we've already got troops on the ground and infrastructure in place. Developing Kraken further is a different challenge to virgin wells. The biggest hurdle is FID and I have my doubts about any of the three I mentioned ever being developed. We've seen what developing Kraken did to our price and you don't have an OO or RI if you have full support of your creditors. I think a few will look at our story and think they "missed a bullet." It nearly did for us but excellent management and the oil price saved us. We are in a strong position because a huge gamble came off. I don't think the risk appetite is there for others to follow. Organic growth needs you to be there in the first place.

I'm Ajes.

Some posters here are such imbeciles (not you Ajes). They make me so mad that I become a keyboard warrior and I just lose Ctrl!

I've just crushed a grape with my bare hands.

*I also have private conversations with IR by email.

I'm Ajes

What I should have said is that the discussion was pre-Kraken production and Magnus where we were heavily reliant on the older fields.

Hi Ajes, nothing wrong with being optimistic and the company has traditionally been conservative with projections. IR will not say anymore than is in the public domain and this is a company that follows governance. They will though correct any misinterpretation of a statement already out there or answer it more fully as in the QA at the end of a presentation. I find there replies guarded but that is how it should be and I guess it's similar in Sweden.
One thing I will say is that the older fields that really are at the end of their economic life have much higher depletion rates than most think on here. The wells must be pretty much understood at this late stage of their economic life and the rates of depletion are double digit and without regular work-overs is closer to 20% imo. I base this on a discussion I had at QA with AB some years ago. He stated that depletion rates were 'typical' with wells of this age. What he didn't say that part of the reason was that the cupboard was bare and practically all spare cash was being spent on Kraken and we just couldn't afford the expense of increasing their production or life. The big 3 (Kraken, Magnus and Malaysia) should more than pick up the slack but don't expect EnQuest to crow about it.

Be Lucky

In 1969 a hoover cost £88, equivalent to £1,044 today. A colour TV cost £300 equivalent to £3,500 today. In 2010 a FTSE250 oil company producing c.20,000 Boepd cost (MC) £900mio; today that company producing c.70,000 boepd has a MC of £330mio and doesn't even reach FTSE 350 inclusion.
OK, we know trees don't grow to the sky and companies can only produce at a loss for a limited period (with massive PR management) and only proves that well known economist's (Gloria Gaynor) maxim. Only the strong survive!
I know it isn't as simple as that with climate concerns and the wobbly oil price among many factors but there are some universal truths.
Oil has many years ahead of it and the world continually searches for investment returns which are even more important in an ageing society.
There is a transition going on and decommissioning and carbon capture plays a part.
Shale has hit economic reality. It had already been partly responsible for a cap on the oil price. More importantly there is now a FLOOR.
A healthy FCF and dividends will never be ignored.
Good management isn't a given.

Still at a loss to explain our price but the future is promising.

MO 15.15 - blending is YOUR area of expertise. Quite a few well known wines are a blend of grapes (Châteauneuf-du-Pape. Chianti and Provence Rosé, even Champagne). I hear on the grape-vine (sorry) that Kraken 2019 is a possible vintage.

I'm not a PMO holder and I come in peace. I hold EnQuest and thought their accounts complicated until I looked at PMO's. This was posted in Motley Fool on Sunday regarding PMO and I'm questioning its accuracy:
"This explains why a fund based in Hong Kong – Asia Research and Capital Management – has taken a massive short position on the stock as a hedge on its own $380m holding of the company’s huge debt pile. This way, it has some protection if the oil price stays low until the debt becomes repayable."
Is that amount correct? Do they hold $380 mio of bonds? I looked at your Y/E 18 and your total bonds outstanding were Fixed $408mio and Floating Rate $130 mio. I've ignored the Retail Bonds as it seems clear that they are held by many more in smaller amounts.
It doesn't seem possible that one hedge fund controlled 70 percent of the senior loan notes. Hardly an elephant in the room; it was the room if true. Or another way of looking could they possibly hide their ownership of 15 percent of total debt? If the amount is true then I would assume that the PMO management have been aware for some time (there were plenty of clues) and ARCM's involvement was surprising to the general public but pretty benign.

Be Lucky

I don't know enough about PMO to comment but I wonder if the movement in their Retail Bond is to do with the recent shorting attack. If it is it means there will probably be downward pressure on the EnQuest RB. Knee jerks work like that.
This kinda supports my theory that shorting a stock is a normal action of certain debt holders.
"This explains why a fund based in Hong Kong – Asia Research and Capital Management – has taken a massive short position on the stock as a hedge on its own $380m holding of the company’s huge debt pile. This way, it has some protection if the oil price stays low until the debt becomes repayable.
The fact that ARCM has stated that this is normal practice may help to assuage concerns, but it’s not exactly a ringing endorsement of Premier’s position. Ask yourself: if professional investors feel the need to make such a massive bet against a company they already have an interest in, do its shares truly represent the best opportunity for retail investors to make money?"
Unfortunately you cannot underline on this message board but if I could I would underline "this is normal practice ". I think we have had this pressure in the past and there may be some residual shorts but a much lower level. We also know that reporting isn't all it should be. I don't think it is a worrying situation now but it did help to drive us down making the recovery slower.

Mind you I was a little concerned when two shifty people left Santini's in close conversation over the weekend. It was a murky night so it might not have been Tony Durrant and Putin. However, the very unusual movement in the PMO Retail Bond yesterday certainly made me question that night. The Bond market often reacts ahead of the equity so a 3% drop is not insignificant in the PMO RB. It affected the EnQuest RB and that too lost .58%. What is going on?

*Or it could have been a Coupon payment (11 Dec I think?) and the RB reacts like when stocks go ex-dividend. The EnQ RB could have been a sympathetic as there are only 2 RB's for oil. Both RB's are illiquid and hardly ever trade so you have to be careful. However, from a distance I could have sworn it was Putin!

Conspiracies. What a load of tosh on this message board. So what that Swedbank reduced. EnQuest involvement. It's b*llcks!
There could be a plethora of reasons why Swedbank reduced and if they want to be an ethical fund that is their choice but like the Norwegian Wealth fund they are being selective with the truth, hypocritical even. Ethical funds tend to underperform but you can always dump coal whilst other fossil fuels are more nuanced. They promote their climate credentials because they can afford to; even BP does. There was a suggestion that EnQuest even got involved. More tosh. Companies speak to large clients but insider rules apply and the market is easily big enough and liquid enough to handle Swedbank's holding. This conspiracy stuff might work for LIBOR fixing but for the big stuff you need to be a heavyweight like the Fed Chairman or OPEC and even they often come second. We've had climate activists at an EnQuest AGM 2/3 years ago. Two very polite, well dressed middle-class ladies who spoke eloquently to the board and were respectfully answered.
Swedbank has not 'dumped' EnQuest and the highest I have seen is 4.22% (they were 4.02 at RI). They went to 4.06 in Mar19. The drop seems to have happened in Sept19 to what I have now 2.82 but my figures are not exhaustive. Where are Blackrock now 3.40? They are in EnQuest's figures but not the FT's.
None of us are blind to climate change and it is something that has to be taken into account but we are not unique in being the only company affected. I think a bigger danger is to try a hook-up in heavy seas that would possibly sink the company as well as the FPSO. Some seem to think that AB is at fault for not controlling the North Sea in winter.

I can't copy it but Platts had a good podcast on shale, titled "As majors move in, US's shale growth spurt ends." Not a lot different to what E121 and hitman have been saying. Points I picked up.
Model has changed.
Less DUCs than reported. Long delays in reports.
Exxon building up a DUC mattress for strategic reasons.
Majors increasingly influential.
Model has change; no longer like tech startup and budget discipline the buzz word.
Incentive to grow reduced.
More volatility as OPEC culls when necessary i.e. bait with higher price then drop.
Portfolios to be more responsive, short cycle.

Pelle - you wrote "I would not blame the market sediment too much."

I don't. I filter them.

Hi Pelle - Yes, it does mean the MC looks too low. I worked backwards and took the FCF from the 30 June 2019 of $138.3 mio and doubled it to get a yearly estimate =$276.6 divided by 65 times 100 = MC of $425.5 divided by 1.696mio = $25 or 25 =19p.
Assuming my sums are right then this is an outlier figure. Maybe it's a hiccup and unsustainable?
I took these figures for FCFY https://finbox.com/XOM/explorer/fcf_yield_ltm and although they are US stocks 7% isn't unreasonable for a profitable well run company. So I used 15% for EnQuest to see what MC I got. The answer is $1.847 MC. This would mean the share price was $1.08 or 81p.
On 12 Dec you wrote that with regular debt reduction the risk goes down exponentially. I thought that a bit over the top then. Now I'm using it.

*I realise there is still the debt to pay and a general scepticism towards oil companies and the sector but this still looks a screaming BUY. I know that if you torture a ratio long enough you can make it say almost anything you want to hear but the figures are compelling!

Hi HMH - believe it or not I got most of your 20.18 post. Perhaps that's to do with its brevity (not one of my skills) and your explanations. I went through the CMD presentation and immediately hit a speed-bump. P.10 "FCF yield of over 65%; rapid de-leveraging" so off I went again to try and understand FCF yield.
Investopedia says this "A high free cash flow yield result means a company is generating enough cash to easily satisfy its debt and other obligations, including dividend payouts." The higher the ratio the better it is. I'll settle for that. Any analyst reading the presentation would surely be impressed by 65%. It seems that 12% is closer to the average. There is obviously some distrust that the company cannot keep it up or a belief that oil is heading South.

Thanks Pelle, HMH - I think I was getting a bit too clever for my own good. I'd imagine if you got a room of accountants and oil experts they'd probably still disagree but I'm only after a rough consensus. The exercise did provide me with some insight and it did help me control any "irrational exuberance" I might feel. As a layman it makes me wonder why they use EPS when it has so many qualifications it can get close to being as useless/useful as an analyst's target price.
I would say that we're a far bigger company now and in that sense easier to value once we tidy up the last few years of issuing new shares and complicated purchases and borrowings. The reserves of 2013 (194.8 MMboe) had Kraken at 60MMboe following sanction. That was relatively conservative but understandably wouldn't put a rocket under the price as the professionals know "There's many a slip 'twixt the cup and the lip" and weren't they right.

I'm not even sure what figure you use to get EPS and diluted/undiluted is surely how you choose to drink Scotch!

Hi Pelle, I'm getting in a mess which is what usually happens when I try and read accounts. In the actual hard copy report of 2018 it has on P.92 under group statement of comprehensive income 'diluted EPS $ 0.0625'
On the results RNS'd on 21 March 2019 it has under reported basic earnings per share $ .104
It isn't actually that which is confusing me (it is) but more to get a figure to make a comparison with an earlier year.

In Y/E 2013 we had reserves 195 MMboe, production of 22,422 Boepd Revenue of $961mio and EBITDA of $621m
Reported basic earnings per share $.244

My reason for choosing 2013 was that was the last time we were flying and I was hoping to make some useful projections/comparisons. I'd say (I don't know) that the 2013 reserves included Kraken. Problem with EnQuest is that it's not only difficult to make peer comparisons but even year by year needs a PHd in forensic accounting.
Of course oil was c.$110 in 2013 and the share price was c. 100p

It's probably a wasted effort as so much revolves around the oil price and then you have debt and sentiment, both company and sector. I'm not even sure of debt in 2013. On the RNS I have $454mio and in the report something different but I'm probably looking at the wrong column. The number of shares in 2013 was 802mio

What did come out is that we shouldn't get overexcited using 2013 as a marker but as the FCF keeps growing, even whilst we sleep the picture improves all the time. To get back to .244 EPS we need to make $413mio and I haven't a clue how close we are to that! I don't pay much attention to MarketScreener as under shareholders (Company) it counts AB @9.45% and Jefferies at 8.64%; they're the same and it's double counting.

Hi E121 - I'm not in disagreement with you. The smaller companies in shale face years of attrition and pray for a spike. The majors are probably quite happy as things are. They have an asset [shale] that can be brought into play very quickly into an increase in the oil price. What they don't have to do is keep pumping to make creditors happy whatever the price. They won't produce at a loss unless there's a very good reason as that would undermine the output of their EUR wells. People mention that shale is close to a manufacturing process with an ON/OFF switch. However, the majors are really the only ones who can take a longer view and press the OFF button. They aren't mom and pop companies and have zero sentimentality. They'll certainly hit the ON button if oil spikes and turn the revs up.

Anybody - Our reserves end 2018 were 245 MMboe and EPS $0.062. What are we guessing for Y/E 2019? I'm not sure when we'll have an official audit of reserves but at back of my mind I have Q1 2020.

Do we have a figure for EPS (est.2019) and an estimate of our total reserves end 2019?
End of 2018 EPS was $0.062