Member Info for romaron

Hi WEny - very interesting. Renewables still cannot match the EROI of coal or oil. The rich nations can afford to take the moral high ground now after polluting the world. We've had our Industrial Revolution so now lets deny the rest of the World an opportunity to improve the lives of their citizens. Tobacco is even more dangerous to an individual but continues to be a good investment. I cannot see other nations giving up oil but using renewables as a comfort blanket and to prove they're doing their "bit" is good for the conscience but not the wallet. There are plenty of parts of the world (e.g. Lebanon) where there is no rail transport and electric power is intermittent, for them oil has little alternative and pricewise there is little competition in EROI terms. I moved 2 tons of metal to Cambridge from N London and back last night for 9 litres of fuel at a cost of c. £12, I'd call that a bargain. I am always impressed by dense energy (petrol) and what its flexibility can do.

Here's another side of the coin following the narrative of anti-fossil fuels https://www.youtube.com/watch?v=j3tTdN1Of3M

Be Lucky

Hi Auson - true, there is a danger of that but most here see through half-truths and distortions. The danger is engaging in long conversations with them which drive away decent posters. In the larger scheme of things retail investors influence is limited but I enjoy reading other balanced opinions. BTW are you the piano guy?

Hi Therapist - I'm afraid the answer to disruptive posters is the Filter because it denies them the one thing they treasure - attention. It takes a while to wean yourself from them because some days the board is mainly green but they have nothing to say and I've been free of them for well over a year although they are persistent and change names frequently. Maybe Taverham is one but newbies may engage with them unknowingly. I'll give him a few days. The sadness is that you also end up Filtering those that respond to them regularly who may be genuine holders.
The most vociferous or keyboard warriors can be safely ignored. They may threaten but will never attend an AGM which is really the only place you can be sure someones is a holder. Jeering indifference is my defence from these sad individuals and I can recommend it. Think of them as pub bores that you'd rather not associate with.

Be Lucky

*not many posters here attend AGMs but you can trust that Epiphany121, hitman, michaelhighbar and myself are holders. There are others too but they rarely post. Appreciate the excel workings but over my head.

Be Lucky

Hi Pelle - I wasn't comparing Shell to EnQuest in the sense that they are comparable. It was to highlight that even good investments in oil (which I think Shell is) are shunned. By good I mean dividend paying with high credit ratings and cheap, manageable debt; that certainly isn't EnQuest. You can't have it both ways with guidance. In the past he played down how poor we were doing but that was necessary as we were facing existential threats. Going forward he will not be trapped by painting a Pollyanna picture; we are not a David Lenigas stock. AB is not a one man band and I believe the strengthened board has Directors with strong enough personalities not to be dominated. When they are negotiating with lenders, contractors and conducting investor meetings they will be interrogated at depth. The naysayers will say the low price is because they haven't been successful but then neither have Shell in the past 5 years.
EnQuest handle themselves as a professional mid sized oil company should imo and if you want regular updates there are other stocks that provide them. The analysts have been pretty good so far imo. They don't always say what I'd like to hear but I accept different opinions and unlike most here they do put their name on what they write and often have plenty of experience to help back their judgement.
The management have always been approachable at AGMs and IR answer quickly. It isn't their fault if I we ask dopey questions and they display remarkable tolerance to some questioners. As for complicated accounts I lean towards Harrymacboatface and HMH. They look at the bigger picture and don't get excited when items are squeezed into columns that confuse the retail investors. The net debt/EBITDA is used by some of the lenders in their covenants with EnQuest. It made sense when set up but is not a good indicator when you consider the FPSO lease. Debt goes down there but the lease remains. Finally, if accountants were so perspicacious why are there so many facing legal actions for negligence?
I expect to do very well with my EnQuest investment. This is a cyclical market.

Build it and they will come.

"It's only a conspiracy if it's a conspiracy. Without the conspiracy it's just a Monday." Bryce Elder FT.

HMHn - Filter Kraken like I do. He promised to attend an AGM but swerved with a week excuse the day before. He's just after attention and I have no idea of his motives.

I'm with you HMHn. This from today's ST: "Whilst the renewable energy sector is flying (up from £847m to £7.8bn in 6 years) at the other end of the energy market , oil companies are priced as though they are going out of business. Most are trading lower than they were 5 years ago despite the SA refinery attacks." The example the author chose was Shell (which incidentally spends $2bn a year on cleaner energy) and is priced at just over 10 times corporate earnings and yields 6.2%. If this isn't enough to encourage investors their CEO has recently stated the aim to distribute a total of £101bn to shareholders from 2021-2025 (more than half current stock market value of £186bn). With this on offer is it not surprising that widows and orphans ignore us?
There are covenants which stop EnQuest paying dividends on top of the fact that it would be disastrous to the stock price at this time but to suggest that AB is selling us out is puerile in the extreme bearing in mind his shareholding and the large LTHs. I imagine he wouldn't mind dividends either.

*Londoner 7 posted on 28 Sept 13.33 " I came aboard in May this year " and this is for him, HMH and ProOpt who bring common sense to the discussions.
https://www.youtube.com/watch?v=rKy4gVUUmNg

Hi Pelle, Re: your 06.20 post. Directing me to those analysis pages are pretty pointless to the likes of me but I appreciate those that do try to understand them. I'm not surprised that analysts fail to understand EnQuest but they were more right than wrong in the past and seem reluctant to change their stance. MiFID II was intended to aid transparency and reduce costs to investors but had the unfortunate consequence is that banks now spend less on analysis leading to a "juniorisation" of the industry. Investment banks from Macquarie to Investec have laid off analysts, while Nomura closed its European equities franchise ahead of the new regulations (a neighbour of mine worked at Nomura, he's now a greengrocer).
The bloodbath among analysts has led to less experienced analysts (RBC anyone?) and led to less experienced analysts and fewer detailed reports.
Add to MiFID II the avalanche of failures Patisserie Valerie, Debenhams, Thoma Cook and the unrelenting attack on fossil fuels and it's little surprise we are here. It doesn't make it right though but in a world of CYA safety first and risk avoidance will always trump optimism. Analysis has been devalued and I'm not alone with this view.
One last thing is that end of life fields always require higher opex and injections of capex as the depletion rapidly moves towards 20% (we've seen it) so on the one hand you can understand majors leaving the NS Field but there seems to be smart money sitting on the bench waiting to replace them (Spirit, Chrysaor etc.)
BTW, the failures of companies has led to many big name auditors coming under scrutiny for poor analysis.

Hi Kris (22.10) - Thanks for that especially the final paragraph.
I don't think that either 'Arry or I ever queried the propriety of the accounts viewed from an accountants perspective, whether EnQuest or EY. What I gained from Arry's posts is that there is a world of difference in leasing if you are BP or Eddie Stobart. I did a quick trawl of FPSO's and BP has about 8. Two are a 30% share with Aker. We have 2. I think you can see where I'm going with this. Size does matter and whilst the leasing costs of an FPSO are relatively insignificant to a BP they are critical to us.
Lets stay with 1 because I know little about the Producer FPSO and have no idea the size and value of BP's FPSOs. The market cap of Enquest is £324m (LSE under fundamentals) whilst BP MC is £103,911m. That is 320 times bigger than us. I have no idea what the EV of the 2 companies is.
Pretending that our lease concerns are of little consequence because they haven't been hidden and flaunting the net debt/EBITDA ratio doesn't really show (imo) the true position. I think we're coming out of it now but it does give a clue to why the analysts weren't fans of EnQuest. I think a lot of this now rear view mirror stuff but it does explain our current MC which I think is a travesty. I am a confident holder but not a complacent holder or a Pollyanna. I think 'Arry deserves credit for bringing it to the attention of us less accountancy minded investors.

The US banned airing tobacco advertising in 1970. The UK banned tobacco advertising on TV in 1965. It helped slow demand; it didn't stop it. Just saying.

60pPARTY - you are right and I would be very angry if wages were c. $120 million a year. Lets file the lease out of the way and hope the analysts and Moody's miss it.

I’m likely to make mistakes here and expect the numbers guys to correct me. Firstly the Bonds. Forget about them for now. The maturities are 15/04/2022 and can be renewed for another year. A renewal now is unlikely because the current rates are punitive but NOT to the company. The company is paying the coupon plus fees and PIK. The Equity and Bonds have had a loyal and long term holders. Some of the original holders are long gone but if the company repays in 2022 those holding long term in Bonds will get all their money back and a nice bonus in PIK and fees. The company is NOT paying the c.13.50% return you and I could get by buying the RB today. If the company tried refinancing today it would attract prices close to 13.50 (see AML).
So Bonds are due in 2.50/3.50 years. It leaves us with the SFA/RCF and this cannot be kicked down the road. In fact there is another safeguard linked to the bonds/RCF “an automatic further extension of the maturity date to October 2023 if the Existing RCF is not fully repaid or refinanced by October 2020”
The SFA main schedule Tranche A is (P. 276 2018 prospectus):
From 1 April 2019 up to and including 30 September 2019 : balance outstanding $680m
From 1 October 2019 – 31 March 2020 $580m
From 1 April 2020 – 30 September 2020 $460m
From 1 October 2020 – 31 March 2021 $425m
From 1 April 2021 – 30 September 2021 $360m
On 1 October 2021 (the SFA Final Maturity Date: nil.
*An outlier thought – Vulture funds in junk bonds look for distressed issues and (lets say) buy at 10 cents in the dollar. They aren’t looking for the issue reaching 100. They are happy to be out all the way up; take their profit and look for another 10cent in the dollar. I’d suggest that the bottom feeders have moved off from our Bonds and they are basically lock-up paper now. Nobody really trades them. I’m relatively happy to ignore their prices as they send out the wrong message.

So, with plenty of head room we could be in the enviable position of only having the Bonds outstanding as (official) debt. I think we can do this standing on our head. Throw in the leasing capital figure (choose your own estimate) to make Harry happy and you now have a truer picture. Just to complicate it further we may farm out c.20% of Kraken. DYOR but I’m very happy with that outcome. I cannot control world trade or the price of oil and leave that to the fluffers.

I agree with HarryMcOilface. It may not be technically right, or common (accountancy) practise but it is stretching credibility to pretend everything is hunky-dory by promoting the net debt/EBITDA ratio when the annual leasing costs are higher than the annual interest costs on the net debt! The analysts haven’t fallen for it and I thank Harry for helping me consolidate my research/thoughts. Its accepted usage (net debt/EBITDA) means that EY are fully covered in signing off the accounts. It’s a bit like having a modest mortgage and then leasing a Bentley. One is debt and the other is outgoings which could easily be greater than the debt. Harry hasn’t fallen for lazy acceptance of what is undoubtedly true but doesn’t paint an accurate financial position. Sure you can cancel a lease on a car (heavy penalties) but the Kraken FPSO lease is baked in and taking the egg out of an omelette is never advisable. I think it can be reviewed in 7 years. When the deals/arrangements were made this scenario wasn’t anticipated but over the course EnQuest and Bumi have taken risks. The market doesn’t like that and lenders have taken their pound of flesh.
Having said that I’m in agreement with Harry that this is one of the best recovery prospects out there. The accounts are complicated and the result of events outside of the control of management. It has hit the majors hard too and I’ll make another post to explain why EnQuest is a raging BUY.

*If my numbers aren’t precise enough, tough – I’m not an accountant.

Hi Harry (Tue 16.37) - I saw your helpful and polite reply to Boggi who although mistaken was at least trying to put something into this MB. I don't know either of you but (for example) if you are an electrician or a train driver then you already have an advantage over me. This post isn't aimed at you but to balance the misinformation that others seem to enjoy peddling. I know something of debt and you need a basic understanding to explain why we are where we are and the importance of the difference between EnQuest and BP seen through a debt lens. Our bonds are now quite close, rate wise and same maturity date, to Aston Martin (yesterday's RNS) which hints that we are in trouble but I digress. The financial world is run by debt and it dwarfs the equity market. It is also unpredictable but has much more scrutiny and risk aversion.
There is an element of an equation in valuing them or as I like to think of them, run on tram lines. This is why we have the almost indecipherable ratings system (e.g. Moody's). I found a BP Bond nearest our maturities 2.5 06/11/2022 priced at $101.19 producing a yield c.2.09%. It is lower than the coupon because it is valued higher than 100. We on the other hand are valued c.86.25 and a 7% coupon which gives a return c. 13.68%. What really confuses me is the valuation of the PMO Retail Bond at c.6%. I keep returning to the PIK and complexity of deals when we were facing existential threats. They (PMO) also don't get rated by Moody's as far as I can see. Moody's is a paid for service and it is likely that EnQuest pay for their coverage; that isn't running away or hiding!
Off out now but will have something to add later.

*after the global recession INEOS bonds were trading at 10c to the dollar. It is now one of the largest global companies and made several owners billionaires.

This post could stay unread for some time. I say this because I attended Thursday’s AGM and I was the only retail investor there. It did make QA at the end interesting though. This is an unusual investment for me because I don’t do IPO’s and in fact only bought the stock recently. The reason was an old friend who lives in Australia had invested and encouraged me to do the same.
My pal’s reasons were basically the pedigree of those involved and personal contacts. I attended the AGM for both of our interests. This post is not about the potential of the company because you can read the AIM admission document and learn as much as me. What I did find intriguing though was the list of stockholders. There are few retail investors and the IPO wasn’t about raising finance from the public. I know this because I asked.
You can see yourself that the free float is arguably only about 8% and as those holding under 3% do not have to report their holding it really could mean that me and my pal may be the only retail investors (I’m joking but all trades since IPO are shown and there aren’t that many). Ignoring the concert party the major holders are Dermot Desmond and Woodford Investment (c.30%) who are not day traders so this bulletin board will be free of them. The shares are held tightly so shorting will be next to impossible and those involved are professional and know these things take time. If you’re impatient I wouldn’t bother investing here.
It was explained to me that the reason for the AIM quote is because they are on the acquisition trail and it makes it easier to purchase companies if they are publicly quoted. This was a lesson learned from the successful buy and build strategies followed at DrugDev and Quintiles. The people involved in INHC know how to make this succeed.
If anyone finds this message either tick the recommend box or say hello.

Build it and they will come.

Hi Therapist - I doubt that kind of harmony is ever achievable and I think it's time (for me) to give this BB a break. There are a few whose posts I enjoy and I have some of them on whatsapp but will look in from time to time (a la MO). Plus I'm having trouble typing with the new acrylics (orange blush) as painting them was taking too long. The key totrolling is jeering indifference. You win because you don't care. To atroll, caring is hilarious and should you make the mistake of replying, fatal. They'll be here until we have some news. Let them talk to the day traders, they have nothing that interests me anyway.

For those happy to play in the sand pit, enjoy. À bientôt !

*I had such an interesting day yesterday. Starting with an AGM where I was the only retail investor. QA was the best ever.

Build it and they will come.

He certainly had a way with words.

“Time was, everyone mauled Mr Trump. Boris Johnson, now the foreign secretary [now the prime minister], said he betrayed a ‘stupefying ignorance’ and branded him ‘unfit’ to lead America. Ruth Davidson, leader of the Scottish Conservatives, turned to Shakespeare: ‘Trump’s a clay-brained guts, knotty-pated fool, *****son obscene greasy tallow-catch,* right?’”
A Difficult Hole; The Economist (London, UK); Jan 28, 2017

*William Shakespeare; Henry IV, Part 1; 1623

I do think Ruth sugar-coated it a bit but that's the Jocks for you. She'll be sadly missed from the political arena.

Londoner - Jefferies is where AB holds his stock.

Londoner 13.39 - Following major holders isn't an exact science. Morningstar have been wrong for months whilst the FT
have these (as of 2 Sept). https://markets.ft.com/data/equities/tearsheet/profile?s=ENQ:LSE
They should mirror the EnQuest page, but they don't. Maybe if they updated on the same day but both are reliant on holders informing them. Suffice to say the top 3 holders have been remarkably patient and consistent. I imagine the other two have built up a relationship with the management by now.

O/T so you're a Spurs fan. I attended Jimmy Greaves first game. Mauricio Pochettino lives about 300 yards from me (far bigger house) and I have never seen him around. I'm not an avid fan but when pushed say Tottenham. The rugby is a bigger attraction for me. A pal still swears that we played against Glenn Hoddle in a Harlow Sunday league. We definitely played against his brother though. Where are you based now?

I forgot to add. Our highest ever rating was in March 2014, B1 outlook stable. In Dec 2014 we began the descent, B1 affirmed rating negative.