Member Info for romaron

On admission to AIM they were buying conventional wells but the latest addition of 107 wells were old shale by the looks of it. I'll shut up now as I'm out of my depth.

Here's the article:

https://www.thetimes.co.uk/article/rip-roaring-rusty-is-cooking-on-gas-wcxq6h7wk?shareToken=172f53dc5d0b88a0dc6cb04c1dbb4b99

It says they were buying assets from majors as they shed assets in a rush for shale (making me think they were conventional wells) but is then contradicted this comment by saying later "Most recently, it spent about $400m (£306m) on 107 mature shale gas wells." and here was me thinking that they depleted rapidly. Does it mean that there is money in old shale wells too? I thought it was drill, suck and move on!

A sloppy article in some ways or just me misunderstanding.

Hi VistaMan - I did read that but was only making a general comparison to EnQuest and they were out competing us at 70,000. I wish I'd bought some DGOC. I wasn't the only one making a comparison. From the article: "It has also its sights on the main market, which it hopes to join this year. DGO's market cap should propel it into the FTSE 250, where it would jostle with established names such as Premier Oil, EnQuest and Tullow."
It's possible to misread that paragraph as we are a long way from the FTSE 250 (464) with only Tullow in it (128) and Cairn outside (281) http://www.stockchallenge.co.uk/ftse.php
However, it shows how easy it is to slide up and down the rankings imo although we have some distance to go. The article also mentions the problems created by higher prices (Gas in DGO's) case which too low, they dent earnings and too high they make buying assets harder. Stating the bleedin' obvious really.
Not the best of articles but I believe it shows how some commentators conflate companies. The article suggests the market hasn't caught up with DGO's rapid growth. I feel the same way about the market's attitude towards EnQuest, vastly underrated. Are you researching EnQuest or are you aboard VistaMan?

DGOC - promoted in today's ST. Biggest producer on AIM (says 90,000 boed but I'm going with 70,000 from here:
https://d1io3yog0oux5.cloudfront.net/_3477d5f4c704cc45851f860c21f4f10d/dgoc/db/557/4296/pdf/DGOC+_IR+-+Earnings+Presentation+-+2018FY+Earnings+vFinal.pdf
It's never easy to compare but they've gone from a launch in 2017 of £50m to today's MC of £694m and $500mio debt. They also pay dividend. Their business plan has been to buy unwanted traditional assets from majors moving into shale in the US Appalachian basin. It is nearly all gas and the ST rate them a BUY with TP of 170p (house brokers).
I only posted because it cheered me up. They're realising something like $21 per boed. The numbers guys can play here but I think we come out well in comparison. It just goes to show what can be done.

Hi hitman, E121 - I hadn't thought of a Cairn offload but easily possible. The point is few of us really know the exact details of how the offloading/delivery and selling of production ties in with the contracts and hedges applied. The weather plays a large part and room at the inn isn't always available. Planning in advance as much as possible helps but we don't live in a perfect world (real world, not BB world). I tried to understand oil swaps but soon gave up. One thing I do know is that they aren't a world away from FX swaps and I had 27 years of them. There are specialists, agents and companies for each and every stage of oil production and refining. It is virtually impossible to match delivery to a 6 month contract exactly with physical movements. The swaps and futures have to match up but the vast majority of these are speculation and dwarf the actual trades relating to oil production and delivery. There will be costs for storage and short dated funding etc. but this is a mature market and can accommodate most eventualities [the short dated swap market will be huge]. To go into the detail required is a huge undertaking and you would really need to work in the industry to understand fully. Luckily we only have 13 working days until the next update on 23 May when we'll have 4 months of 2019 production figures.

I'd imagine that different crudes can be taken in one load if they are separated into sealed holds? As regards the short collection time of the last visit could it be anything to do with availability/unavailabilty to take it in one go. The logistics must get quite complicated at different times so you may kinda hitch a ride on a passing tanker.

Just looked at McDaniels forecasts for Brent at April 1 2019 mcdan.com Although always a wet finger in the air exercise it's still better than anything we can do. Interestingly there doesn't appear to be any change from Jan 1 2019.

No idea about Venezuela but keep going back to the US invasion of Grenada. They get paranoid about Cuban interference and I doubt Trump is averse to a bit of bullying.

Hi Tom – I think the problem is that we are amateurs and like to condense the oil business onto one page and that is impossible. We also conflate production and refining which will give an incomplete or just plain wrong conclusion. Here’s my additional thoughts.
Shale produces a lot of liquids and the world doesn’t run on C5’s (condensates). This produces a lot of varied products that are valued differently. I mean that you have at one end tar which has low value but is great for macadamising roads and at the other end nail varnish remover. They are all priced differently. The US shale is producing all manner of products and we’ve seen Ineos jump on the ethane production and invested huge amounts for this feedstock. What happens to the stuff not so useful? I don’t know; maybe it’s stockpiled or dumped?
Then you have the DUCs which are frozen when prices dip too much. Shale also varies a great deal and the better acreage is moving towards the majors who have all the commercial advantages. A personal view on Iran is that they will remain pariahs. I was shown a telex in the early 80’s from Iran to Bank of America ECU. It was a metre of hostile diatribe (lick spittling capitalist dogs etc.) finishing with instructions on renewals/roll-overs for 100’s of millions of dollars. The money was frozen Iranian assets and for all I know is still being rolled over. The geo-politics mean that US/Saudi/Israel make uncomfortable bedfellows but have a common enemy.
For me it’s too complicated which is why I’ve invested in a company already producing decent amounts and if we can get debt down the numbers will speak for themselves. In MC terms we were 11th in the top 25 Independent O&G producers. We are in the top 3 on production terms and it is clearly debt holding us back. With all the climate lobbying I wonder if Sea Lion or even Hurricane will reach production. Even if they do the problems may escalate as little goes smoothly unless you’re a major with scale to weather the ups and downs of oil.

Be Lucky

E121 - if you do make it we'll say hello. One thing to remember when posting. The company reads this BB before an AGM to be prepared. If anybody is thinking of throwing a googly then I suggest they keep it to themselves and ask on the day.

fixturelist - stop sugar coating it and say what you mean!

Hi Runner - I got my Letter of Representation back almost by return of post and I think it depends on other parties to respond. I use SelfTrade but got the letter back from Link Asset Services & mine are registered in the name of Wealth Nominees Ltd A/C Wrap.
You don't really learn anything at an AGM but I like to see the body language and some of the Directors are more relaxed in private conversations. Not everybody's cup of tea but at least they are troll free, You won't see itsaponzi, Krakenoil, L3Trader or squif there. You have to be a holder to attend.

Not really my area but thanks for that Auson. The attempt to wedge EnQuest into a pigeonhole with the assumption that the rules of accountancy are immutable [like gravity] is plain perverse imo. You get in a hole and use the best survival techniques available is my conclusion. You then get the clever dicks comparing us to the likes of BP when really these are our peers and the private companies entering the NS.https://www2.deloitte.com/uk/en/pages/energy-and-resources/articles/uk-upstream-independents.html
Our production is growing and we have a fair wind behind us now. The accounts still look messy and debt too high but it is what it is. I think there's not much to say until the AGM now. It seems that the company is getting on with it's day job instead of worrying about placating the bond holders and other lenders. Look at what's happening around us. SXX isn't a bad company but getting to production is expensive and cost overruns are fairly common. Just look at what we've come through and at the same time increasing reserves and production.

Build it and they will come.

That was weird. They've posted the RNS's on the NSF site. Talk about rubbing salt in. Kuffeler sounds like a self promoting narcissist who believes his own hyperbole. It's over for NSF and they'll be bought in a fire sale imo. Still doesn't explain the actions of the two largest shareholders in supporting the deal though. Let the recovery begin.

Good spot hitman - more colour here https://www.ft.com/content/f423e548-6b9f-11e9-80c7-60ee53e6681d

It helps explain the hoops that EnQuest has had to go through and the demands of lenders. The effect on ratings is ultra important for a company just one grade away from junk. Buffet doesn't think it's over for oil and is a good sign.

Too much terminology for me: EBIT, EBITDA, FCF, NPV etc.. but I see where Harry is coming from and at least he uses terms I understand. FCF is the real world but I don't see a ratio for that. The thing with leases is that they are the first thing an asset stripper uses to make a profit and then when business turns sour they are the proverbial lead weight (Debenhams for example). They are also useful if you're starved of cash, which we were. After what we've been through it's no wonder we leased the FPSO. I cannot be bothered to read through the FID/FDP to see what the original plan was but assume it was always a lease? All companies put a gloss on figures and accountancy/bookkeeping is, let's say, flexible.

I like your style Harry.

hitman 18.15 - "Hi Pelle.. money is still very tight.. so I don't expect dividends for a few years yet..(post 2021). but you should be compensated with capital growth".

Agree. In many ways it's a numbers game now and providing demand and POO don't collapse it's one or the other. Capital growth now with the possibility of further capital growth or dividend in a few years.

.

Times article today. A survey of 39 fund managers with $10.2 trillion under management found that 24 want the oil industry "to wind down their business and return cash to shareholders". 37 said that oil stocks would not be attractive investments within 10 years if they failed to respond to climate risk.
86 percent want the industry to align with the Paris goal and nearly half were aiming for the ambitious 1.5C above pre-industrial temperatures. Only 18 percent believed oil companies were good investments if they focused on fossil fuels in 5 years time but 68 percent said they would be if they aligned with the Paris accord. "Just under a quarter of all respondents do not see oil companies as attractive on any time horizon".

All very PC and predictably following the media narrative. My case is that EnQuest is already in control of its destiny and is well placed for a managed run down of its NS assets and decommissioning. I don't see the UK giving up commercial advantage to slavishly follow the climate parties; not when you see the state of the NHS and care in the UK. There'll be token policies like the diesel ban in central London which can afford it. Perhaps the idea of a dividend is not so silly? I wonder if we'll farm out Kraken? There is plenty of private interest in the NS.

*Busy week with trading statements from BP (tomorrow) and Shell (Thursday).

Regulations and standards in the NS are much more rigorous in the NS than elsewhere:

https://www.facebook.com/watch/?v=456350271241205&t=101

sorry - c. 08.15 he mentions share allotment as best way to incentivise management. I agree.
This video always makes me think and in some ways it gives clues to the thinking at EnQuest. Although technology never ceases to amaze and improve there are certain facts/factors that never change. You need the right rocks and well to win. The fields in 2013 aren't any different today.

Source Jim Buckee video which although from 2013 is relevant to the current conversations: https://www.youtube.com/watch?v=WdjTi-uhoqI
He likens shares to lottery tickets (08.50) as they have little bearing towards reserves and earning per share as in the US. If it were true in the UK EnQuest sp would be a lot higher. He also says that once a company stops growing it starts to pay dividends. Apart from the fact that we couldn't afford them we are (imo) still on a growth trajectory.
Earlier he had mentioned that you need "moose pasture" to make shale work so in many ways shale is a US phenomenon. I think the attraction of shale to majors is that it can be turned ON/OFF similar to a manufacturing process and can be a swing producer for their specific strategies and reaction to POO. In fact E121's 23.56 post points out that shale is moving away from smaller, riskier companies and being subsumed into major's plans where economies of scale work best; and they're being very choosy over acreage.

Good posts today. It proves things don't happen overnight in oil and a longer view is needed.

Hi Pelle, E121 - I hope they make a fortune and drag me with them. Pelle - your point about votes for authority to allot shares being less than for other resolutions is a good spot but nothing to worry about. There are Institutions and Funds that make it a policy to always vote against Directors allotting themselves shares as it is open to abuse. It happens to other companies in the UK regularly. I think EnQuest are at the better end of good governance and I have no problems with sensible targets and rewards. There was something in the press last week about Tullow Directors digging too deep into the trough and I don't think you can accuse our directors of being as greedy. Incidentally, a few years ago a very polite lady accused the Board of killing the planet etc at an AGM.. She gave her speech and left. She wasn't in attendance last year. Perhaps she'll return this year?

E121 - Ignore the trolls and don't engage. Bung 'em in the filter bin. Their agendas are confusing and distracting whilst adding little to our knowledge.