Member Info for romaron

Going through some old stuff and I came across this regarding Kraken:

Closest Field Analogue

Mariner (Heimdal-III)

I had taken my eye off the ball regarding Mariner and since getting OGA production now needs a degree in advanced computer management skills I decided to go to default mode and google it. Oh dear, the mighty Equinor with all its resources is still encountering engineering obstacles. This oil business isn't as easy as criticising management. Perhaps it would be a change to congratulate the team of a much smaller company getting a project the size of Kraken to production. Nobody said it'd be easy.

https://www.reuters.com/article/uk-equinor-britain-mariner/equinor-again-delays-start-up-of-britains-mariner-oilfield-idUKKCN1RM0ZH

*Heimdal-III sands (Palaeocene) is the same as Kraken and they also make comparisons here to the Captain field. Please don't imagine I understand this stuff but blame ProdOpt (28 Feb 19)for sending me off at a tangent.

https://www.spe-uk.org/aberdeen/wp-content/uploads/2014/07/16.-The-HSP-Versatile-Artificial-Lift-Choice-for-the-Heavy-Oil-Subsea-Kraken-Development-EnQuest.pdf

It is a fault. I composed a couple of posts that didn't complete the transition after pressing post. Possibly due to the new website being prepared. Suggest you check the post went through and copy in case it doesn't.

Don't undersell yourself Londoner. Trainspotting can be stimulating and exciting. You'll find many fans here. What you bring to this board is valuable, especially in the fact that digging deeply into the figures drives away the more puerile posters who shrivel in the face of reality. Who knows what you'll dig up? Stress testing at this level leads to other discoveries and I follow the gist of most of what you write. I am also aware that this comment of yours is germane " I very happy with this because the 'not knowns' in total account for less than 1% and some of this will be fuel gas, so would reduce the error further." There is the danger of missing the wood for the trees but rest assured there are those among us who can only see wood (mainly because we can't do trees).
The performance of the FPSO or the price of oil can crater all your hard work but the complete picture is always worth knowing and feeds into our decisions, buy, sell, hold, continue watching or short the stock. You are definitely a welcome poster.
Years ago I met a deep sea diver on a skiing holiday (he had fcked up knees but tackled everything) he also rode a 1000cc motorbike. I guessed he was a risk taker and said that you need to be brave to do his job. He disagreed because he said the money involved (100's of thousands of dollars a day for a rig) meant that everything was done to ensure he didn't drown (think airline pilot). He also praised Bob Crow who as head of RMT ensured that he earned loads of money. The point of this anecdote is that I am in contact with another investor who doesn't post but works in the industry. He is confident that the problems with Kraken and the FPSO will be solved because there are very good success bonuses for the engineers that solve the problems. Maybe ProdOpt has a view here?

One other thing. They always refer to the huge amount of heat required to lift the oil. Reading between the lines this requirement was miscalculated/underestimated during construction of the FPSO.

It may be irrelevant but I've a note from the AGM:

"Kraken back up engine availability. 1st time all 4 working."

I never said these were trouble making refugees. Some became my friends (still are) and their stories were harrowing. All they want is mutual respect and I have no problem with that. Many of their stories go back to foreign interference so I try and keep an open mind. I know plenty of work shy, ignorant people who claim British nationality and on balance I find immigrants harder working. I don't know who these weak, softy liberals are who you say run this country are. All I know is that nativism is ugly and confused with patriotism. I doubt you'll agree with me but this is from a true patriot.

"Patriotism is when love of your own people comes first; nationalism, when hate for people other than your own comes first." -Charles de Gaulle, French president (22 Nov 1890-1970)

My earlier post was from the Express, not military.com. Still rather than waste a post I have something to add to the first class research on shale provided by E121, our man to go to on shale. I was revisiting Ineos and thinking about something I read that stated the shale producers tend to concentrate on spot oil rather than further out. This seems disingenuous to me if you look at it from the refiner's point of view. Their ON/OFF switches don't work quite so quickly for them. I suggest that the refiners have long term contracts in place with producers to ensure continuity of supply and maybe price is included? With the shenanigans affecting shale they are unlikely to deal with the mom and pop or Chapter 11 companies. It follows that the majors and larger shalers might be more relaxed about the lower price than at first glance as they have effectively hedged a proportion of their output. The current glut is more an existential threat to the smaller and heavily indebted shalers who have to pump and have no other strategy as debt payments are due or investors refuse to put more cash in. The larger shalers could also see this as heralding the demise of competitors who undercut them and work on a kinda Micawber strategy. Nobody can produce at a loss for ever so I'm against a conflict in the ME as it might yet save the weaker shalers and keep them alive longer.

Reasons why a conflict isn't guaranteed to end in the favour of US or its allies.

1. Iran is a REALLY BIG COUNTRY – it is 3–4 times larger than Iraq, with a much larger population.

2. The terrain is more like Afghanistan, ringed with mountains, not deserts. It isn’t a good place for tanks to run amok.

3. Worse, the Strait of Hormuz is REALLY narrow, especially the shipping channel. Nearly all of it can be fired upon from Iran with short-range missiles or can be attacked from shore with small boats. There is NO WAY to try to sail tankers out during war times.

4. Iran is right – they probably CAN block the Strait in the event of war. No business wants to come under missile attack while in transit.

Anecdotal but the teller believed it. I attended the Cambridge of Plumbing (a long story). Willesden College of Technology and got to know asylum seekers and economic refugees there (Tip - don't mess with the Albanians). The students would often compare what they said were bullet wound scars but the Iranian's story was most chilling. During the Iraq war he was part of a human charge and the officer leading had his arm shot off. The story teller said that the officer picked up his arm, waved it aloft and said "is this the best they can do" and charged ahead. His men charged with renewed vigour. I doubted it as the trauma would probably kill you but they were drugged (according to reports) and stories do get exaggerrated over time. There was also an Iraqi there, a little guy. I heard he went to prison after being bullied on a building site. He retaliated by turning his blowtorch in his oppressor's face. These are crazy f*ckers.

True Londoner - there are possibly comparisons to be made with oil and forestry. Most trees need decades to be ready for market and who can forecast that far ahead? We have some posters who haunt this board that measure their thinking ahead with an egg-timer.

*I've forgiven you for your insensitivity to the humiliation I suffered those years ago in Italy. It got worse. The head of the Milan office, Giovanni, was an oenophile and chose the wine. A real waiter took my glass away before I'd finished it and I said "oi, I ain't finished". Giovanni looked at me pityingly and said in perfect English "I'm sending it back, it's corked". I had learned my lesson and after the episode stopped wearing the knotted hankie poolside.

Hi Ndalla – you are not the only one to rack his brain over understanding the current EnQuest value but I dare say that we would still have the same questions whichever oil stock we held. I think the most important points are is that it is a commodity subject to cycles and we don’t place enough importance on refineries. Yesterday the Times had an article saying that May’s legacy will be no gas after 2050. That is plain ridiculous but the new best thing is hydrogen with the by-product of water rather than CO2. Guess what, the best way of producing hydrogen is through methane which comes from natural gas. Now, what do we do with the carbon produced from this chemical process. The answer is bury it apparently. Another article mentions that the US will supply $8 bn worth of LNG to Poland. Weapons (F-35s) and the threat of Russia are behind the deal. Almost everything regarding oil has its nuances.
I thought I was onto something when I read that Ineos are shipping huge amounts of ethane from the US as feedstock. As natural gas is 95% methane and only 4% ethane (with crude oil you’re looking at naphtha) I wondered if the API builds were of unwanted or less valuable stuff. I believe there is something in this but we really are amateurs here. I liked that Ineos were buying end of life fields in the NS but realise that it was more because they’re “cheap” and security of supply is important for refiners. The other issue is that Ineos cannot get gas in Europe and Grangemouth cracker was running at 40%. Ethane is running out fast in the NS. What the view/situation on naphtha crackers is I don’t know? It is obvious though that if ethane becomes cheap as chips then it will be a negative on oil.
Since time immemorial companies grow and die. Sometimes it’s hidden within mergers rather than simple bankruptcy. Some companies have a portfolio and can take the hit of misjudgement and economic swings. Feel like giving up?
I bought EnQuest for the management and they have proved their value in this downturn. We’ve evidence that shale is marginal in places and some of its cheapness has been helped by huge cash advances by investors. The majors had to get involved because of economies of scale and the risk of angry investors if they missed the boat (Jury still out on that). There are barriers to entry with oil (it’s a battlefield and like the route to Everest, dead bodies everywhere) and those still standing will make excellent profits on the next upswing in the cycle.
As the say in the rom-coms “it’s complicated”.

What is worrying is that it appears it is an attack on Iranian assets. I'd suggest that it's almost impossible without Saudi oversight. They've already tested the US with the Khashoggi murder and gained encouragement from that. With the application of "fake news" we'll probably never know the truth but I've a pretty good idea where the US will lay the blame. The orange man is likely to say "self inflicted" or similar whatever the truth. The timing is likely tied up with the Japanese visit. The last time the US played around with Japan's oil supplies (1941) it didn't end well.

The picture is complicated but personally it is now clearer to me. I wonder too if there isn't also a cultural clash with the home of shale and the rest of us. On this board even LTH's have a view of less than 2 years whilst in the US they have deeper pockets and longer views (e.g. Uber, Amazon) and are quite happy to fund deficits to win the big prize for a lot more than 2 years. The WTI v Brent spread will eventually close again (E121 10.34) and with unavoidable consolidation those left standing in the US shale race will engineer a better price for shale because of reduced competition and indiscriminate production forced by (eventually) impossible to finance debt covenants.

*they seem to stretch this out in the US. Chapter 11, where a lot of shalers are congregating is followed by THE END.

This build is being forced upon the second tier shalers because they are undercutting the majors. OK they have to commit suicide to do so (undercut) but those left with the best shale sites will have vastly reduced competition and the power to increase prices. A few years back the Saudi's tried the same trick by forcing the economic price of shale oil down by extra production of natural crude. This time it's the majors who are increasing the actual product (shale oil) and although suffering as well (temporarily) have the resources to hold their breath longer. When a competitor's drowning stick a hose in his mouth is a legitimate business ploy.
Another point is that with the hand to mouth existence one of the first casualties is maintenance. I can see a lot of worn out equipment that is basically worthless (though not on balance sheets at fire-sale prices) compounding the problem.
Another point to remember that shale does work well if the price of oil rises above current levels or competition decreases. Some of those holding shale assets obviously expected oil to be higher than it is now. I wonder if their will be a chain reaction if a decent sized shaler goes to the wall and the impact it might have on the US economy. A brief war in the Middle-East would be helpful to shalers but I'm sure the Americans are not that venal.

Hi Londoner - In the late 80's I bought a jacket from Jaeger reduced to £100 from £300 because I was attending a meeting arranged by our Milan office and they had somehow persuaded the London HO that because of shortage of hotel space (there wasn't but used fashion week or some excuse) they had transferred the meeting to the Hotel Splendido in Portofino. On our first night I sashayed down the wide staircase as I imagined Daniel Craig would. I spotted my group and moved towards them. Without interrupting the conversation the guy from the US half turned and handed me the wine bottle with the comment "more wine please waiter." Oh, I haven't mentioned; the jacket was white.
I went back upstairs and changed. The jacket ended up in a charity shop. Did I save £200? No, I lost £100.

Perhaps BHP made a wise decision. There must be a logic for the majors that's not available to smaller players and the ON/OFF facility with shale must have benefits if you have the scale and commitments. How else can you explain the shale attraction to the likes of Shell and BP.

Blimey Londoner, couldn't you find anything longer? I'll file it with the Mueller Report. It does appear that the US have turned the taps full on but the economics are a bit different (and the oil) to other fields like in Saudi where it almost jumps out of the ground and refines itself.
I think what's confusing all of us is that much of shale is uneconomic so why keep pumping? Unless it's part of an isolationist agenda? I give up - I'll let the clever ones argue it.

Just to add that I suspect that as gas is almost all methane there isn't a lot left over to add to the butter mountain.

*I couldn't think of what to call the mountain of C5's, perhaps wine lake; both terms used by EU.

Hi E121 - that appears to be the confusion. The EIA (which is erratic to say the least) records surpluses in 'crude oil inventories'. Is gas included? Gas may be running at a loss but the likes of Ineos are quite happy to have the producers almost paying them to take it away. Is there a large gas surplus? If I am right and trying to zero in on shale oil production only then my earlier post makes a bit of sense. Our interest in gas at EnQuest isn't so high and I'm trying to cancel out shale gas which may or may not be easy.

I can't understand it either HIS but the equity here is very similar to the remaining debt in value (fag packet calcs. only allowed). Talking of a debt of $500mio is a paper debt. How many cents in the dollar could you trade this debt for? It must have some value but I imagine the market for used satellites is quite specialised. So if H4 has any value that will be close to the debt. The equity exists only by the gift of the debt holders as their earlier debt is now equity. Another question might be as to why they keep the shares on life support. it could be that they are a useful vehicle for holding tax losses or some other arcane reason but I'm not an international tax lawyer. There is an AGM on the 24th but don't expect to learn anything although an RNS around the 24th might be released as the board will be together.

Hi E121- a good answer (10.59) and after each cycle they're weaker. The banks know this and maybe it's because in total the shale industry is too big to fail. A bit like the death throes of Debenhams and the Green Empire. They close bits down and fiddle with the rents but eventually they run out of runway. Back to my JB video I'm afraid. Listen at 05.50
https://www.fca.org.uk/search-results?search_term=short%20positions%20daily
He says "the increase in US production is shale liquids and the World doesn't use C5's." He added that condensates were c.$30 a barrel when crude was above $90. Obviously it is a percentages game in what he said and there I am lost. C5 covers C1 - C5 and with gas it isn't such a problem as it is mainly made up of C1 (methane) 93-96% [feel free to criticise as I have no qualifications in oil]. My view is that the stock piling we are seeing has value under normal circumstances but is exacerbated by what E121 writes. They have to run fast to stand still and selling at a loss might still head off an interest payment. You could even make a case to say that shale oilers wouldn't mind the Straits of Hormuz being closed for a few months.
I cannot profess to know enough about shale but I suspect we here on this board conflate shale gas and shale oil. Shale gas is bountiful and valuable but is that the case for oil? Somebody wrote that they might collect the water produced from shale production in vast reservoirs to avoid polluting the aquifiers. I suspect something similar is happening to the unwanted condensates. Produce too much of anything and you can only depress the price. If the US shale production was good quality then you'd see a much lower oil price. I think that this oversupply will sadly be shipped off to third world countries to dispose of via the back-door. It isn't exactly rubbish but it does kinda need recycling. I also have a sneaky feeling that Carl Icahn agrees with me (Occidental/Andarko) although certain Permian plays still seem desirable; maybe because they are gas and easily turned into LNG.

There is a bid for a property company Helical that is lower than its net asset value (NAV). Owners/bosses have traditionally been reluctant to sell below NAV. the 3 biggest British companies are trading at an average discount of 47% to the official value of their portfolios. OK, they're not a commodity whilst Brexit and the retail sector weigh heavily on them. So, why mention them? Because I feel we suffer from the same disease.
Naturally the NAV way of valuing could easily be flawed and it is human nature to cling to higher prices. There are two forces here. A negative overall sentiment on commercial property with holders believing they're undervalued and sellers thinking they have lower to go; bit like oil really. The NAV is in many ways irrelevant and indices are only guides anyway. It is only during an actual sale or merger that the true value is ascertained. It can also be argued that valuation is as much an art as a science. Warren Buffet uses his own system and looks for undervalued assets/companies.
I imagine that most oil companies are at a discount to NAV, even BP and Shell but at least they pay a dividend. The impact of retail on commercial property is similar to the threat of renewables to oil whilst Brexit affects oil less imo but cannot help sentiment in the NS.
Imagine what that effect has on lower rated companies in oil if the likes Shell and BP can only tread water at best? Oil is unpopular in the same way that tobacco is. However, investing in tobacco has been rewarding and still is for a variety of reasons. Oil is the same. So why bother to complain and act like Canute with the tide.
EnQuest management is ignoring factors they cannot influence or control and getting on with the knitting. We are very close to a re-rate by just plodding on. There are risk factors but they are not EnQuest specific, recession fears being the most worrying. However, like tobacco the world is addicted to oil and that isn't gonna change any time soon. EnQuest isn't gonna be a 10 bagger or the like because it isn't a potential internet unicorn or bio company but is at the moment lumped in (sentiment wise) with companies like UKOG and Sound which is laughable. I'd suggest that RKH may never produce and HUR will face problems when potential has to be turned into production. EnQuest is a relatively simple company to understand being run by seasoned professionals. We are out of the limelight but not for much longer.

Build it and they will come.

*actually I can make an argument for us being a 10 bagger from these prices.