Member Info for romaron

Hi hitman - I can't compete with you on the numbers but Kraken did hit the target 50,000 bopd early last year when only DC3 was working. They had a hit from the beast in the east and prioritised production over water injection (WI). That was as much (imo) a financial decision as we faced existential threats at the time and a CEO is never willingly gonna say that. It meant we suffered reservoir voidage and that is where my knowledge ends. The WI has been rectified and they are recapturing lost voidage. Does this take a long time? Is it impossible to rush and you have to adjust the choke for instance, reducing production rates? The NS is a harsh environment and with big money involved gung-ho approaches will not be allowed. I believe we have to leave it to the experts (sorry, Mr. Gove). We talk about OIL production but Kraken has had to deal with WI from day one unlike many other fields. Some of the reaction here have been because people do not understand the complexity but I expect the company to overcome the problems. DC4 can only increase the plateau target so I think your suggestion of 66k bopd is optimistic for sure but not nonsense.

*If ProdOpt is reading this I'd appreciate your comments?

chilting 10.25 wrote "The thing is though - who is the large seller??"

I don't think there is one. You don't have to be large if there are no buyers. Most PI's are up to their gunnels in shares so you won't get much support there. If you aren't already in EnQuest you might pause. The broker's notes are correct in stating the high debt and under performance which dissuades funds from buying. You could then throw in a kinda arbitrage trade. You can go long/short Brent v WTI for example and it is possible that a trade is on the books of a hedge fund/investment bank that simply requires shorting a stock or group of stocks and being long of another stock or group of stocks (say) refiners. The complexity is beyond me but possible. Until certain factors change or come into line why cancel the trade? I doubt it is personal to EnQuest and they could be targeting other companies with high debt and low profitability. We are mainly long only here but don't for one minute underestimate the number of individuals and companies that make their money by shorting companies with weaknesses, real or perceived. Predators have been doing it since time immemorial and select the weakest in the herd (or the whole herd). I don't dismiss the arguments of any on this board except to say we are making profit and chipping away at the debt. POO is steady now whilst world trade has yet to fall off a cliff. Investment in new oil is at an all time low which has even resulted in the formation of a new idea/company SeaPulse. Oil is in a managed decline seems to be the consensus and you've even seen the Norwegian sovereign wealth fund take a step away from oil. [reported rather excitedly by the media but is actually only prospecting companies though why that includes CNE & PMO escapes me.]

I have an antipathy towards the obesiance shown to derivative traders and the like. If you change their title from predator to parasite you might adjust your views. Parasites tend not to kill the host and I think we have parasites. The City is full of them and it is a state of mind almost. I worked there and not one of them got it right all the time. I think that part of what is holding us back is a kinda speed governor and our board is working towards removing it.

But CNE's debt is below 10% EV whilst ours is a whopping 85% (subject to the numbers guys correcting me). The knife edge (for us) is the solution to the FPSO and the POO. The brokers don't like variable factors.

Expect some news tomorrow from the CNE FYR. Their last update on 22 Jan had this to say:

Production
Ø Combined production net to Cairn from the Catcher and Kraken fields in 2018 averaged ~17,500* boepd
Ø Catcher (Cairn 20% WI) averaged 43,000 boepd (gross) in 2018
Ø Kraken (Cairn 29.5% WI) averaged 30,300 boepd (gross) in 2018
Ø Full year production, net to Cairn, for 2019 is estimated to be 19,000 to 22,000* boepd

From an earlier post/link by Pelle.

"We also understand that Armada Kraken currently has some operational issues hence lower availability is expected moving forward. The performance is only expected to improve in 2H2019." and

"The impairment made earlier was due to Kraken having produce crude that had not met the quality standards required, which resulted in a potential contingent liability required in the future. This latest impairment was to reflect the lower uptime throughout the firm contract period. Management guided that they adopted a prudent approach to assess the impairment, and as such there’s a probability of a partial write back."

In the first quote you can have fun by moving 'only' around or adding a comma. I suppose you could argue that it could 'only' improve as the present position is extremely dire. Compared to earlier hopes the FPSO is undeniably limping along but both companies involved are focused on higher production.
The second quote is confusing. This suggests there may be two problems. Not getting the oil out in planned volumes and a problem with the 'P' in FPSO, Is it production or is it processing?

It does help explain the farewell to Richard Hall. I note his replacement Andrew Duncanson worked for Maersk and may be a link in the Seapulse chain.

I would suggest all the negatives are now in the price and it is clear the broker's assessment was better than ours. They deal with the here and now whilst the larger risk takers look further ahead. At least that's what I'm telling myself.

Ah well, back to the omphaloskepsis until the update.

Retail bond closing today 85.00. On 20 Dec it was 69.025 and the stock was 18.90. Brent was $55.00.

Does anything make sense?

Hi hitman, you're mixing gambling odds with annuities now, whatever next? Not criticising because that's how oil development/discovery works. You're right about the bigger risk with frontier stuff so we can to an extent ignore those odds (1:20 according to Jim Buckee) and refer more to what he described as appraisal wells. Some of the EnQuest prospects will fall between the two imo. Neil McCulloch (ex EnQuest COO) did say that the best place to find oil was "in an oil field". EnQuest has the expertise in squeezing the oil out of the rag on mature fields but also suspects that other reservoirs are close by. The improvements in seismic and other technological advances makes prospecting in existing areas less risky by greatly improving the odds. The bonus is that when you find oil there is infrastructure, finance and labour to develop it close by.
The analogy for me is that as much as builders would like to concrete over and build on farm or parkland they are much more likely to develop a brownfield site because the lowest cherries have gone and you play the hand you're dealt. Plus, you'e much more likely to get planning permission. I think our portfolio of 'brownfield sites' has a lot of potential and I'd say that is part of the reason we are seeing a growth in private 'smart' money investors investing in the NS.

Agree chilting. It is hard to find an industry or function that doesn't have seasonal influences or maintenance requirements plus unplanned shutdowns. Facts of life are just that; facts. Another point when doing a major alteration or refit would be bed space. I remember Richard Hall mentioning that bed space is an important restriction because of limitations on a FPSO together with regulations. You mentioning Bumi engineers means the ship is probably fully booked at the moment if that is the case.

A useful video Memo. I would also suggest watching at c..40 and 3.40 regarding comments about oiip. I think the friendly interviewers were stressing the amount, not AB. Another interview here addresses exploration:
https://www.youtube.com/watch?v=WdjTi-uhoqI if you watch at 6.30 JB suggests that exploration risk for 'commercial' new field exploration is more like 1:20. The tie up with Seapulse could be more to do with the PR company that advises Seapulse but it is encouraging all the same. Seapulse have deals with Maersk Drilling (not the oil company as that was sold to Total in 2017) and a similar model is followed by BP (thanks hitman). It reinforces that the oil industry always looks years ahead. Markets look days and sometimes months.

*AB video. 'Smart money' likes the NS and there are plenty of private companies looking for entry.

Spot on ProdOpt about spin. It's over 5 years so sounds better than £100m a year and reality is that it cost £250m in 2017 so it was in what estate agents describe as "some need of modernisation". A new poster often moves quickly to sow fears through spin but you pass the initial 'sniff' test with flying colours. I never knew AB changed his name from Besaisow to Bseisu?
Like you I don't want to see EnQuest hoovered up by an opportunist company seizing our potential. You sound as if you've got a background in this stuff so hope you will continue to post. Welcome aboard. You can safely ignore most of what I post but I have a decent holding here and attend AGMs. The real world is scary but the rewards of getting this right will make the pain a distant memory.

E121- another factor with the USA shale pipelines is that they won't be free and savings will not immediately go to bottom line. It won't save shale imo. For me the whole shale industry (apart from the very best) are a kinda bubble. Maybe bought with bitcoin profits.

Build it and they will come.

Um - bit confused. Ineos are pumping £500 million into modernising the Forties pipeline system (announced yesterday) but we also know they are keen on fracking and are building a fleet of ships to take USA shale gas to Europe. He's covering his bets and an "Investment of this scale in the Forties pipeline system is a vote of confidence in the potential of the North Sea" say Oil & Gas UK.

*makes you wonder what plans AB has for SVT?

.....and whose to say that the counterparty to the Schroder's buy (in part) is most likely Woodford? I think we all that Woodford was 'toppy' in this stock and it works for both parties. One reduces and helps fill an order whilst the other gets an amount at an agreed price. Both parties are old hands at this and get more right than wrong over a period.

A tad counter-intuitive for such a large holder. I can imagine the pundits having a rethink. Traditional thinking is that buying is an indication of faith. I read it as Woodford now thinks it safe to come out and confidence in PFG is strong enough to shuffle some cash out of the stock. He probably had more invested than he would normally like after publicly supporting the stock by increasing his stake and is going back to normalcy. I read it as a good sign. Buying when a stock is dropping is sometimes called 'catching a falling knife' and is often ignored anyway.

Good find riskingit. I did wonder about the majors investing in shale and I think there is an element of 'just in case' behind it. If the hype over shale was true then they could not afford to be left behind. Shareholder and market reaction has to be taken into account. A bit like tobacco companies and vaping. Majors, like governments are not immune from lobbying and expediency.

EnQuest is not that different from shale companies in living hand to mouth but we are further along the curve than them and the dynamics and cycles of our assets are well understood. The over production by Saudi Arabia did mortally wound some shale companies imo but not a quick death. I'm interested in the comment about declines:
"That's because investor returns or not, high distress or low level pain, $35-plus crude prices can keep many, especially those with viable U.S. shale acreages, in the game. That game is likely to continue till natural rates of decline – pegged in a 5 to 7 year-range – kick-in."
So, with projects needing several years planning in traditional production the money in shale has a shelf life of less than 5-7 years. If I held shale stock I'd be nervous.

A chunky UT trade and you can read different things into it. Here's mine. It signifies that the price is resilient enough to absorb the amount without moving the price violently. That is encouraging. Moving in and out of stocks can be for a variety of reasons and this indicates that an auction is a useful vehicle to move largish amounts. In FX clients liked them because they were a fairer more open process that avoided the claim of being ripped off during the day by their bank/s. A clearing house type of transaction with a fair middle dealing rate/price. To paraphrase a famous politician. We're'strong and stable'; markets like that.

heardy you devil - 666 posts

I like your phrase 'pissy WTI' but I think you're referring more to the shale or tight oil which certainly 'pissy' or more C5. I wish I knew more but feel there is something of a 'bubble' in shale and people are wary of it. Itr's fine for the US to be anti-Trust and use it as leverage to promote their product which is of course backed by the biggest military in the world. It ain't only Iraq that they invaded. When threatened they act just like the worst colonialists and their gunships. Remember when they thought that Grenada was a threat and illegally invaded a sovereign country. Talk about double standards. The US acts principled but is no better than Russi when it feels threatened or wants its own way.

Thanks for nothing guys. You forced me to investigate the numbers and I've got myself into a right old two and eight. I only do broad strokes so no nasty point scoring from you lot. I've ended up thinking that it's an impossible task anyway to try and get a meaningful across the board valuation that we can use as a pointer/guideline from this deal.
The bulletin board of Rockrose were wetting themselves on the announcement and I almost posted a be careful what you wish for post there because these type of deals can seriously damage your wealth.

At first glance RRE look a healthy little company with few share, no debt and a valuation of £126m. It is though almost a shell company in that this is very close to the cash balance (I've included the escrow amount). 2P reserves seem to be valued at either close to zero or you hold a wet finger in the air. Talk about subjective! I think the comment regarding this deal is "move along, there's nothing to see here". It's probably not that simple as dividing $140m by reserves of $35m and saying its $4 a barrel for 2P. I tried working from our reserves backwards but gave up as it looked horrible. Once debt rears its ugly head the EV value has to be taken into account (I suppose). RRE doesn't have any debt but will now be entering our world.

*flat old day - sterling strengthening and FTSE weakening. It isn't about us today.

Another NS deal. A major divesting in the basin. Smaller than ours (c.13,000 boe/d and c.35 mmboe 2P reserves) but maybe some of the numbers guys can extrapolate some meaning to EnQuest. As per Magnus it isn't simple and the shares for now are suspended so possibly a waste of time until more detail is available.
They're paying Marathon $140m but as always the devil will be in the detail.
The FT points out that it is the first deal since Brent crude slumped more than 30 per cent in Q4 so we may garner some figures and valuations.

You could be right chilting. It is here to stay by the looks of it but depends on how much low hanging fruit they can find.
I read the shale negative stories but then you have to ask why the Majors are investing?

on my part perhaps. I was reading an article by Danny Fortson about US start-ups and casualties, he wrote: "My fear is that venture capitalists will wake up one day, realise that many vaguely useful businesses, which exist solely because of their largesse, are no longer worth the trouble and pull the money."
The biggest loss-maker of them all is Uber (half the cost of the average ride is subsidised, indirectly, by investors who have ploughed billions into the company).
I immediately thought 'fracking' hence the wishful thinking. A lot of these apps and businesses are forcing us to think we need them when we existed quite well without them for decades. I'm still a traditionalist at heart or maybe it's my age. One thing I do know is that a couple of taxi driver friends have a different opinion towards Uber than that espoused by the Carriage Office. They've adopted the apps and can pick up journeys to and from work that was a matter of chance before and have far less empty cab driving. The Uber drivers meanwhile squabble and are marginal at best. They rely on fast turn around and customer experience is not good.

I like tried and tested which is what EnQuest does!