Member Info for romaron

L7 - Now I am confused. Your response was due to a question I responded insultingly to? You've lost me. It might have been easier if they had responded or perhaps they weren't insulted?

Hi Londoner7 - I didn't realise your EBIT interest cover question was rhetorical 23.31 Sunday. I struggle between EBIT and EBITDA so my eyes glazed over with the mention of EBIT. I see where you're coming from and that BP is in a much stronger position regarding interest cover. For some time I've been using a rough rule of thumb and halving everything when using BP comparisons and we still look a good investment. These ratios are subjective in many ways but some regard them as a creed. In my defence I would point to my post of 25 Nov where (like you) I pointed out that half a billion dollars was a not inconsiderable sum to be repaid within 2 years. Others think we'll do it standing on our head and with a $65 oil price I'd agree but there are no guarantees with oil. My Nov post was more to suggest that Moody's and analysts cast a more jaundiced eye on debt and today's events (PMO, TLW) confirm that.

Consensus: Source MarketScreener
Tullow 9 Buy, 3 Outperform, 10 Hold, 1 Underperform
EnQuest 1 Outperform, 3 Hold, 2 Underperform, 1 Sell

I don't think they are despicable. Unimaginative maybe. There is (perceived) safety in the herd.

Excellent timing for a director BUY. AB showing again his support for this company. AA this time but he also buys for the Charitable Foundation proving that his rectitude is higher than most CEO's. He doesn't brag about it but when he buys for the Foundation he has to report it otherwise we'd probably not know. Jonathan Swinney spent a night on the streets to help the homeless. These actions are important and demonstrate the calibre of our management.

My record keeping is intermittent but I did find this.
PMO 16 Oct 19 shorts 5.63% Stock on loan 26.37% (Sep).
The belated entries/report to the FCA make interesting reading:
https://www.fca.org.uk/search-results?search_term=short%20positions%20daily
If you look at the historical they basically built up the position over a couple of years at a fairly regular rate. To me it smacks of a trader getting a bit of profit on the book from initial trades and then milking the cow. There was a calculated risk but we all know what has happened to oil equities over this period. I'm yet to understand why the market not knowing the actual shorters is such a crime. An oversight that they'll surely pay for but it could have been a host of shorters all under a half percent. I'd buy PMO on this news as I expect the 'culprits' to unwind and take their profit (and punishment).

that blows nobody any good. Crazy start to the week. Nobody complaining I see about AB's circumspect and prudent assessment of our projections. Maybe we'll get a little more scrutiny and that can only be good imo. JB did mention that Tullow were a little economical with the truth back in 2013 https://www.youtube.com/watch?v=WdjTi-uhoqI 6.30 in.
PMO is interesting and we'll know more as the story unfolds. I think it's an overreaction but it makes you wonder why it took so long to surface. The recorded shorts (over half percent) had been at odds with the stock on loan for months. makes you wonder just how on the ball the FCA are and the management at PMO? The actual trade seems fairly mundane. Almost anybody buying bonds could short the equity if they thought the equity price would stay flat, fall or increase at a lower rate (allowing for borrowing stock) than coupon returns and a possible bond gain. It's quite a simple arbitrage operation and there is also a currency risk to take into account I imagine. I don't expect our bonds to be ignored now. I think they are seriously undervalued but they'll be all over them like a rash after PMO.

Hi L7 - Buy backs can be subjective and the motives can be as you say. My tongue in cheek was more to counter a suggestion that I had been on the juice and considered BP and EnQuest equals. I recently watched a video where Warren Buffet discussed buy backs and said that you had to research each one because they could suggest growth had stalled. He was talking about Apple and thought their timing was good. The worry is sometimes that the management hasn't a clue what to do next. There is also the consideration of what has the buy back done for BP shares? I really haven't a clue but it usually lifts a share price (it didn't) which is as acceptable to many investors as a dividend. I do though think that on many metrics we are improving and I will shout them out; subjective or not. Partisan support is allowed.
I included the EBIT ratio because I considered it part of the sentence I copied and pasted. It means nothing to me.
https://simplywall.st/stocks/gb/energy/lse-bp./bp-shares/news/bp-lonbp-takes-on-some-risk-with-its-use-of-debt/
I can do the big numbers but leave the clever stuff to you and others like hitman and E121. HMH also usually has an interesting view but isn't a slave to numbers although he understands them a lot better than me.
I've started using MarketScreener on Pelle's advice (I had to give my email details) and that has ratios which could be handy for reference purposes in posts. I'm assuming they know what they're talking about. As for your challenge on the interest cover on EnQuest I'm afraid I'll have to pass as I haven't a clue.

E121 18.26 - I was tongue in cheek there because I've got tired at trying to find a peer comparison so I went for the biggest in UK. It doesn't matter what company you choose there is always a qualification e.g. CNE tax and India, PMO Sealion etc. so why not choose BP? I was going to make a full post with the subject "Dipstick" but held myself back as Kraken Oil would probably take it personally.
We have a lot of variables but so do other companies and I just wanted to illustrate how ludicrous our MC is. I wonder where BP would be without the buybacks? Not that far away I feel sure but the Directors of BP aren't trying to halt the tide imo. They know a bargain when they see one!
Shock horror with PMO. It looks like they might have discovered a Nick Leeson in Hongkong. Probably a trader with insufficient management oversight who played the gap between borrowing stock c. .50% and a coupon of c.7%. Forgot to tell the authorities (cough) and obtained an unfair advantage. Expect a massive fine if we have the reach. It might though free a log-jam tomorrow with EnQuest if there has been any malarkey.

*In my day the Bank of England would randomly intervene in the sterling market because overseas clients had to trade Euro Sterling which traded at a higher rate. Would you believe it; some of those Johnny Foreigners were borrowing on the domestic interbank market. The Old Lady would let them get comfortable and on a reporting day squeeze the market. You could have overnight domestic trading at (say) 5% and Euro sterling at 2,000%.

Simply Wall st. 24 October 2019 - "BP has net debt of just 1.4 times EBITDA, indicating that it is certainly not a reckless borrower. And this view is supported by the solid interest coverage, with EBIT coming in at 9.1 times the interest expense over the last year."

Pelle and some others think we'll be below 1.4x if the oil price holds so when do the numbers guys think we'll be at the 1.4x level of net debt to EBITDA?

We're not BP and we're not reckless but the evidence builds up as to why EnQuest is a raging BUY.

HMH 12.20 regarding paying off the bonds on maturity. I concur. The old adage that JB espoused "always, explore out of equity, develop out of debt" also applies to AB in my view. The company hasn't gone through all this pain to capitulate to populism or a quick analyst fix. In a market with possible explosive growth due to to conventional capex starvation and a shale industry built on a financial bubble only a fool would worry about creditors who although supportive through our recent travails exacted their 'pound of flesh'. They only run the company (indirectly) when they are struggling.
A certain level of debt is expected of companies that see and pursue growth and is not unusual. Even BP have around $67 bio of debt. If you want a more rousing endorsement of oil then note they {BP] have used a chunk of this debt to buy back their own shares over the past years. I realise there are also covenants on EnQuest buy-backs, dividend, PKI etc... but they were entered into in our loss making period caused by $30 oil and developing Kraken. Things are changing rapidly but I expect AB and his team to look at returns of 25% plus at a cost of 7% as irresistible. It's possible he might even increase the debt at some stage. The RCF the same. If the numbers allow there are ratios with debt that analysts and creditors like. Once we are fully in the clear I expect us to follow more traditional/conventional practises and supportable debt is totally acceptable.

The world still casts a dubious eye on the oil industry so for personal amusement I watched this:
https://www.youtube.com/watch?v=CGh03ErAxpM
For those who think the company needs to promote itself better they could always hire this guy, David Lenigas. Here he is claiming 128 bio barrels of oil in the Weald basin with a recovery factor (in his opinion) of 40/60%. Mind you he is more modest about Horse Hill which is his connection at only 11 bio barrels. He continues to be in discussions with oil majors. Shame that the stock is at all time low and failed a recent funding so relied on a mysterious 'single institutional investor' to fill the gap. I'd describe them as death spiral financiers who accept a 15% discount gives them enough room to gradually pass them to unsuspecting retail investors. I did like the tailpiece about 'when the story broke with the BBC'. Who do you think started the story? Trump would be so proud.
Secondly I glanced at BP's continuing buy-back. They bought £68mio between 26/11 and 3/12. That didn't push the price higher and they bought £37mio around 4/12 at an even cheaper price. I conclude from this that oil is still nobody's favourite but if you trust the management of a super-major there ain't anywhere better to put your money.

Build it and they will come.

The thing to remember is that this trade is "off book". It could have been made yesterday. You don't have to tell the Algos everything. Once entered the Algos have to work it out. Also some small trade with the SINT type of trade. Haven't seen that before but I don't study them every day. Significant but not in the participants interest to tell us. Other people have better info. It would have needed human beings to do the size.

Hi Pelle - it gets a little difficult for me when I drill down into accounts so I'll take your word for it. I did try and look something up on BP and was looking for the "BP at a glance" slide but was unsuccessful. What I did notice though was that the format of the presentation was uncannily like EnQuest's. Perhaps there is a standard format but there isn't that much difference in certain areas except we're much smaller and our focus is slightly different but the raw materials are the same; oil and gas. We're pretty safe now and have to wait for the tanker to turn. We've slowed down and will soon be going in a different direction (as will BP and other oilies that are a 'going concern')

Build it and they will come.

BP down 2.43% today
ENQ down 2.92%
BP issues bonds at c. 2.50 % and pays a dividend. I have no idea of their debt but expect it to be a better ratio than ours. Practically all the pension funds include it in their portfolios.

Don't cut your wrists, prices go down as well as up.

Hi Squif - I don't think either of us are bond experts but your video find did lay out the 3 levels of debt: 2.5% large-caps, 7% mid-caps, and 17% small-caps. One of our problems is we're transitioning from small-cap to mid-cap [I think we're only small- cap from an equity value perspective, talk about tail wag dog]. I assume Kate Richard knows what she's talking about and it resonates with what we know. We're not out of the woods yet but it does look promising.
I googled BATS share price and looked at their maximum graph. They faced headwinds throughout the 90's as great as if not greater than climate concerns to an oil company. We know tobacco harms people yet it has been an excellent investment and is on an upward curve.

*yesterday was a green filter day for me. Maybe this message board doesn't effect the price immediately but I bet the company and some analysts look in from time to time. They don't follow as closely as some of us and the rubbish from trolls is another disincentive. As usual our resident troll engages and has a problem with verbal diahorea. I was pleased to see the rest ignored them so can we remember not to engage. The trolls add nothing. We have enough intelligent posters to curb our enthusiasm when necessary.

Typical; I missed the whole point. Our borrowing rates are mid-cap too (imo).

I'd say our reserves are mid-cap too. Management are mid-cap to large-cap.

I also struggle with the terminology. I have often wondered about the differential between us and PMO and think I can explain some of it now. PMO is mid-cap and in the FTSE 250. We are small cap by definition yet strut around as though we are mid cap. If you take our production we are definitely mid-cap but our market cap is pathetic in comparison.
https://www.sharecast.com/index/FTSE_250

http://www.stockchallenge.co.uk/ftse.php

The only things that can get us moving is a Moody's re-rate which is only a matter of time. Perhaps the equity buyers will wait for that before buying. One step at a time and the aim should be FTSE 250. You automatically get bought by trackers then whatever happens. Our price is wrong but you can produce good arguments explaining it. Sentiment and herd behaviour are hard to shift.

We each gain knowledge from other posters thoughts and their finds. Squif found this yesterday, Sun 13.10: https://www.youtube.com/watch?v=0-BxxbDmKd4 and his point about small caps and interest rates bears analysis. I had to go back to the prospectus P.283/284. Nobody has picked Squif up on a conclusion he drew which I think is wrong. I'm not having a dig because you could argue that he is right by quoting the Retail Bond and HYNs current valuation. He said that the rate for small caps fitted in with where we roughly are (12/13%). The regulars here know I don't agree with the current RB valuation but bonds are more structured and we are considered junk and the Moody's (credit rating) influence is paramount. I started thinking and we have two recent borrowings that may give us another indication of what we pay through our recent travails. I'm talking about Mercuria and Oz. Mercuria has elements of factoring whilst Oz has restrictions which place covenants on us. I've lumped them under that well known accountancy term "pounds of flesh". They are not eye wateringly gouging but almost win/win for those two companies if we did fail. The actual rates are Libor +7 for Mercuria and Libor +5.75 for Oz. Let's say 8% and 7% roughly. Not 17% and as the cash flow improves we shed the pounds of flesh. You might say that these are secured lending and I'm not sure of the various hierarchies with all the debts we have but the bonds have at least £350mio wriggle room as they get paid before equity in the case of default.

Hi AK - just doing a bit of reflection. I came across this one which isn't in your list:
The Bank of New York Mellon Corp. (Investment Management)
AS OF 02 NOV 2019
51.04m 3.01% https://markets.ft.com/data/equities/tearsheet/profile?s=ENQ:LSE
I realise these lists are a bit hit and miss and they certainly don't include Hargreaves or Barclays that many on here will hold their shares with. I'm with SelfTrade (Equiniti) and AB hold his in Jefferies and neither show in your list. My reason for posting is that I was checking to see if any of the analysts who attended the CMD have company holdings.
Aberdeen once had a shareholding (c. 3% from memory) in 2015 and they had a representative at the presentation. I caught Barclays and BMO as well but couldn't really catch the names of the others who asked a question in QA. One sounded like Soros but I could be mistaken.
Just going through things and sometimes expressing your thoughts on here trigger some posters who might have something useful to add. I am expecting some fresh holdings as you can only put a stock in purdah for so long until the returns and ratios become deafening. At the moment it seems we are priced for oil at sub $40 and declining reserves whilst shale is the new sliced bread.