Member Info for romaron

...and those pipes running to SVT might even have another use?

With US basically closed with Thanksgiving we're gonna have to wait until until next week to see if there's any traction imo. Encouraging trades of 251,593 and 115,081 at 18.60 first thing. I'd imagine they're the same buyer and more than half the day's trades in total. Perhaps they don't want to wait for the US.

I don't know what will happen first. Either a re-rate of the whole oil industry, playing to the North Sea's advantages (there are some) or an acceptance that EnQuest's production isn't a hiccup and the FCF is here to stay and in the hundreds of millions of dollars. As a famous person once said “The market can stay irrational longer than you can stay solvent.” and that applies to companies too. We are solvent and as long as 2020 doesn't hold any major surprises then the long climb back will be unstoppable. I think the video proved that EnQuest hasn't necessarily been singled out but has been treated more harshly than some other mid-sized oil companies. I'd be exasperated if I was AB. He can say to the market, "We saved the company, we increased production, we increased reserves and are turning in an increasing profit; what more do you want?"

The only thing that can crater us would be a collapse in the POO and that none of us can control or forecast. Following that video I am much more happy with the predictions for oil and energy. It actually encapsulated what a lot of posters have been saying on here for some time. AB has continued to show his belief in the future and EnQuest by persistent buying of equity.

PE below 1 Pelle doesn't indicate fireworks. According to LSE under fundamentals the PE ratio for Cairn (CNE) is -1.18. They don't even produce one for BP. Sound (SOU) is -5.606 whilst Tullow (TLW) is 28.263. I think playing darts blindfolded might be as good a guide. We are 2.254 for what it's worth.

For a quick taster listen at 47.30.

I realise many haven't had time to watch this video but I cannot recommend it more highly. It is a ramp but by a guy who admits to being human and getting things wrong. He is ex Soros and Goldman's and it appears Goldman are with us. There is so much to pick up in this video that if you son't watch it you are not a serious investor.
Return to scarcity.
EV sales driven by Governments not people.
Fear of stranded assets (majors not bidding Brazil)
Largest capex cuts in history.
5-7 years for conventional projects.
No new discoveries for a decade (he mentions Brazil and Johan Sverdrup) we have Kraken.
FCF making a mockery of valuations.
I think Pelle will take this as an endorsement of FCF and the seemingly market ignorance. Mark Gordon expects the market to change in 6 months, in our favour. Shale/tight oil has its part to play but has been a catalyst as well as a smokescreen for where we are.

Thanks HMH for posting this and well done to Malu for finding it. I've even sent it to EnQuest IR in case they haven't seen it. My opinion is that traders get into ruts and play the existing trades. Banks used to have "prop" traders who because of their contrarian views became an endangered species and many moved to hedge funds. Like an oil tanker it takes time to turn. I believe we have just tilted the rudder.

Are we being too imaginative and making incorrect assumptions. The answers are probably more prosaic. We know oil is out of favour but we [EnQuest] are producing increasingly good figures and don't deserve the low rating and stock price. There are a lot worse companies out there than EnQuest. That's the background.
I blame shale. It has taken a long time for the parlous state of US shale to reach the general public although we have had several posters here giving us the true picture for months (E121, hitman). Trump misses no opportunity to broadcast that the US is the biggest energy producer in the world. That may be true but it also needs to be economic and profitable. Something that Trump has struggled with throughout his career. Sunk costs mean the shalers keep producing so the creditors get something back and keeps the bailiffs at bay hoping that something will turn up.
This results in the banks and hedge funds reining in their lending to shale producers and suppliers etc... Banks aren't always quick to react and there is always internal competition. Sales people vying with the credits department and contract lawyers. The word is out now and funds have dried up unless you have the highest rating or are a major. This creates a market narrative and everybody is tarred with the same brush. Do not underestimate the influence, size and leverage of US banks. Even banks we used to think of as non-US are International now e.g. Barclays, HSBC, Deutsche and have specialised oil divisions and one stop banking. I guess our HYN's are held by US holders (apparently traded out of Luxembourg) and our brokers are US entities. AB holds his stock with Jefferies (US) it goes on. I think I've laid a trail to the US financial fraternity.
The message is that highly indebted oil companies are to be avoided like the plague. A cursory glance at us shows a high amount of debt, with our bonds (junk) trading at a discount (RB 86.00 HYN will be similar), and a stock price near its all time low. Try getting that past the investment/pension committee.
Fortunes are made by those who ignore the noise and have a higher risk tolerance. I'd suggest that attractive as I think we are we probably fail on several investment criteria.

Conclusion - we have either been lumped in with shale or damned by association. It will change but not whilst all the attention is being focused on domestic US concerns.

Be Lucky

I do actually try to understand the accounting minutiae but are we forgetting why it is so complicated? We were on our uppers with not a lot of wriggle room and our financing had to be "creative". Another point is that it takes two to tango so Oz, BP, the bond holders, RCF lenders, Bumi and Uncle Tom Cobley also played their part. I'd imagine BP were happy to unload Magnus/SVT so instructed their lawyers and advisers to just "get on with it". In the course of these deals we may even have unintentionally created a new synthetic derivative that others may copy, God forbid! Hopefully the existing deals will be paid off and unwound allowing us to be more easily assessed as a going concern. There are some clever people on this BB who understand accounts and were challenged by the complexity of our finances. No wonder the analysts and funds aren't sure whether to invest or not. Nobody is really selling so that's a major positive but how do you get them to buy? It might not be until they've been 'shown the money' and some deals are over and the RCF is close to zero.

For accuracy - I'm talking about the RCF debt. The HYN and Retail Bond are c. 4 years away to maturity.

Steady on Pelle (21.18) - message boards don't like a vacuum and as Squif continues his conversion I've become a tad more sceptical for balance. If things stay as they are we should pay down debt standing on our head but there's the clue "if things stay as they are". To the naysayers (analysts) they see it as a company with close to a half billion dollars of debt with short deadlines and that's without all the other noise regarding oil. We may have to wait a few months and fingers crossed that things stay as they are.

"We want our sound to go into the soul of the audience, and see if it can awaken some little thing in their minds... Cause there are so many sleeping people." -Jimi Hendrix, musician, singer, and songwriter (27 Nov 1942-1970)

Don't be unkind Therapist. Don't be a Lady is transitioning. He/she sounds familiar. It takes a lot of nerve to come out anonymously.

chilts 12.30 - juts noticed you included apathy. I'd like to say....., F*ck it, I can't be bothered!

Hi gkb - I think all of us are aware of downside. Hitman and Pelle are more relaxed than me as I still think half a billion dollars with a short timeline (Oct 2021) could be a concern. I think, for arguments sake, we have to work with present figures and the consensus is for more of the same, both here and the wider world. You guys have convinced me on shale, especially E121, and I think that it is a fading threat. We've seen this herd behaviour before in the US and nothing surprises me with what comes out of that continent. Our absence from Malcy's list is a blessing imo as we are a serious company. I'm with chilts and I feel at times we're like Beetamax as the world moved to VHS. I think that the move away from oil to renewables will not be in years but decades. Crazily, the world is acting as though it will happen in the next few years or that's what the market is saying. We'll buy your stock if there is a decent return (dividend) otherwise we have NO INTEREST.
It also follows that Capex is undershooting with the reluctance to invest or get credit.If you worked for an Institution you could get wind, water and solar power through more easily than oil imo. Carl Icahn likes mature industries (HP/Xerox) and holds oil. From experience he knows that there is a lot of life left in these ageing assets.
As long as Pelle and hitman's confidence follows through and we clear a lot of debt in 2020 our case will surely be beyond dispute.

Hi Pelle - based in Sweden you need to know more about Malcy. Colebrooke & gkb have the measure of Malcy. He is basically a "tipster" and trawls around the penny stocks. He loves AIM and it appears to be reciprocated. If EnQuest ever required Malcy's 'research' it would be a SELL signal for me.
This is a sample of his output:
https://www.malcysblog.com/2019/08/bucket-list-6-month-update/
check out the current prices. I gave up after the first two.

It looks like EnQuest keeps him at arms length and that is the correct decision imo. It sends out the wrong signal imo that you might need his assistance and I have strong feelings about his independence.

Thanks for that AK - I'm sure you're better at it than I am. Used to say "not for widows and orphans" but it looks like the widows are dipping their toes in.

I do have a few niggles about EnQuest. I think we're ahead on repayments of the SFA and AB did say next year's amortisation schedule is quite low. I believe the SFA debt is currently $535 mio so repaying $75 mio in 2020 keeps us within limits ($460 mio by 30 Sept 2020). However, the repayment gets steeper and by 31 March 2021 it's $425 mio and by 30 September 2021 it's the final payment of $360 mio. That is less than 2 years from now and we have around half a billion dollars to repay with heavy loading at the far end. That will not go unnoticed by the analysts or Moody's. I think we'll be fine but nobody knows the POO for the next 2 years. Banks don't think like that.
I looked at the H1 2019 results again and although not fully understanding them can see why on the surface they raise questions.
EBITDA is $525.9 mio but gross profit is $269.9 mio and below that it says Profit before tax & net finance costs is $264.5 whilst further down it says Statutory reported profit after tax $44.3 mio. I cannot read accounts and use simple numbers.
Revenue less cost of sales, interest, G&A and the lease of the FPSO. It look fine but we are still very POO sensitive and may need all of next year to prove ourselves to the market. It might also coincide with improved sentiment as lets face it; things couldn't be much worse sentiment wise for the oil industry.

Ignore (you already have) my post of 9.36. I read it out of context and that interest ate up all our profit. There are not enough hours in the day to educate me about accounts but could one of the reasons for our unpopularity be a misunderstanding of the operating costs when they include acquisition costs which in later years turn into production and increased reserves. Effectively seed money and certain analysts are predicting crop failure?

Is this right? "in the EBIT word that stands for interest (interest costs) the profit is consumed ."

I'd say that's b*llcks

EnQuest also has to weigh political events and it may be better to keep your head down.
Labour want a windfall tax on oil producers - they may win the election.
Scotland may be independent in a few years. The SNP aim for 90% reduced emissions by 2040, and net-zero target for 2045. Interestingly, when asked why not stop producing oil Nicola Sturgeon quickly backtracked by saying we'd then have to import oil and that is more damaging.
EnQuest do not want headlines when there is a strong lobby against oil producers. Bit like a tobacco company promoting how much it contributes (indirectly) to the NHS. They pay £9bn in tax and tobacco diseases cost NHS £2bn p.a. That wouldn't go down well. I think all Governments have a vested interest in keeping tax revenue flowing and there is an element of hypocrisy.
I think AB and team are more aware than most that pushing the company too hard is a waste of effort when the whole industry is moribund, I include the majors as it is only dividend keeping the relative higher PE. I keep repeating myself but there will come a time when the money talks.
You cannot blame our management for the price. Apart from AB there is the Employees Benefit Trust with a large shareholding so we aren't the only people wanting the equity higher.
I'll shut up now!

That's where we are and it ain't all bad. Jim Ratcliffe "Ineos never wants to be the dumb money in town, never, never." He was discussing overpriced or difficult to value assets. This was after discovered a huge differential between what he was prepared to pay and what the owner wanted. Abramovitch wanted north of £3 billion for Chelsea. How about United assuming the Glazers were willing to sell? "They are in quite a big pickle as a business. They haven't got the manager selection right, haven't bought well. They have been the dumb money, which you see with players like Fred." The big six in England are now valued at £2 billion and above. JR went on "And even though clubs have those valuations today, nobody has ever paid those amounts of money. How much did Abramovich pay for Chelsea, £100 million? The Glazers, what £500 million? You can say it's worth three, four billion but no one has ever paid those sums."
My point is that valuation is subjective and in a moribund market the buyer has the stronger hand. BP wanted shot of SVT and end of life fields and we needed reserve replacement. Magnus and the like are cheap because of the market and not the astuteness of EnQuest, Spirit or Chrysaor. However, unlike Premiership teams there is a realistic pricing mechanism.
My point is that maybe AB is aware that currently the market is not placing the value that EnQuest deserves and maybe it's better to let the numbers do the talking. If we carry on as we are Moody's will upgrade us and banks will be touting for business. Opportunities will arise and we will be in a strong position. Dividends will be paid and Institutions buy in. It won't happen overnight but I'm prepared (not happy) to wait.

*JR bought Nice for £95 million. Modern training ground and new stadium. France produces the highest value players in Europe.