Member Info for romaron

Hi DK 11.18 - I read the article and whilst Philip Verleger is an expert and I am not, I think that for us the better indicator is the movement in oil in 2008; it went from $145 in July to $30 in December. It created havoc and was of course caused by those marvelous people from the US who get extremely nasty when their investment is threatened due to their greed. These are the same people inflicting pain on any company that is heavily indebted which if you follow the price of oil since 2014 was pretty much unavoidable. Survival came first and unless you were a major with huge cash reserves it hasn't been an enjoyable couple of years. I think that the current unpopularity of EnQuest is more to do with the credit markets and algos that are aimed at the weak members of the herd.
Ineos bonds were worth 10 cents in the dollar in 2009. They didn't have to worry about a stock quote but there are many similarities between us and them imo. The US lenders were aggressively 'gouging' the company (Jim Ratcliffen's words) and it is credit to JR that he faced them down. We are much smaller but AB is also no pushover imo. In Jan 2009 the EBITDA of Ineos was ZERO.

*Interestingly, a long standing dispute with a US company over IP came to court. It was held in Alabama (famed for its fairness) and Ineos lost (you have to knock 'em out to get a draw). The award threatened the existence of Ineos and the plaintiff (probably his lawyers) wanted blood. A quick settlement was arrived at though because 'luckily' a timely newspaper article on the morning of of the mediation predicting the bankruptcy of Ineos was published. What a coincidence! Could you imagine it happening in the UK?

Holders (I realise that doesn't apply to all on here) cannot be happy with the price but we are where we are. I think there are a lot of positives to be taken. The value of our tax losses and capital allowances have been highlighted by the weekend Premier Oil article. It seems clear that to get creditor blessing or vendor loans you need to put up money which is what a Rights Issue provides. If we'd come after the Chevron auction and potential Premier involvement requiring a RI we wouldn't have got out of the starting blocks imo. The comments on Kraken are getting a little hysterical as the field has hardly been producing for a year. The oil industry is not short of technology or innovation and the field should improve output this year. The field is 'running in' and safety measures kick in too ensure that nothing essential gets broken. The POO isn't under the company's control and even oil company CEO's cannot foresee the price of oil 6-12 months ahead. We are dictated to by world trade and the POO. Blaming the management for everything is rather puerile. The world is and remains imperfect.

Give it a rest Kraken Oil. You make squif on a bad day look like a Pollyanna. Go troll hunting or perhaps you are one? I noticed on Sunday that if we miss a troll you'll draw our attention to the post, even if its on a different board. If you just can't help yourself and it is a condition then there is treatment for ADHD.

....and capital allowances. Perhaps somebody should remind our friends at RBC and Barclays that we have them as well. We also have a few fields in the North Sea. Responses to the PMO RNS

RBC "Premier is an established UK operator with a sizeable operation in
Aberdeen, and the acquisition of a package of producing assets would
enable it to unlock value tied up in its $4.1bn of UK tax losses and capital
allowances. Given these synergies any acquisitions at fair prices should
be value accretive."

Barclays "Increasing Premier’s focus on the UK makes sense from the perspective of accelerating the use of its $4.1bn in UK tax losses. The sale of non-UK assets may be part of a plan to fund North Sea acquisitions, but we think time constraints mean it is unlikely to be part of the initial funding solution for the Chevron package."

My reading is that the tax credits give PMO an advantage and providing they can get the finance then they should win the auction. Whatever the outcome it does endorse the action of our board with Magnus. I'm still wondering where DF got his information from. Was it a carefully placed leak? Who would it benefit? The RNS this morning from PMO suggests that the article was a tad unwelcome but they would say that wouldn't they. If it upsets the shareholders then it gives advantage to other bidders. As I don't hold PMO I only have to concern myself with how it reflects on EnQuest.

It does, a resounding endorsement of the Magnus acquisition!

An important article. It stresses that many companies don't see the NS as a dead duck but a basin of opportunity. I wouldn't include Delek, Ineos or Chrysaor among any list of companies in decline. The link that DD gave didn't have a couple of things that drew me from the article that are very important in relation to EnQuest. The first was this bit "the Chevron package would allow it to transform its sprawling portfolio into one more centred on the North Sea - where it has a huge reserve of tax credits - and chart a quicker path out from under its $2.3 bn debt mountain."
The fact that Premier are even in the running suggests there is a commercial benefit and attraction in the deal but would clearly mean they'd have to sell some assets. I would say from an EnQuest perspective: "been there, done that". This is a massive positive vote on our board's recent decisions. It does emphasise the advantage past losses (tax credits) give to a company still with a pulse.
The second point may mean nothing to some but intrigues me deeply. The article was written by Danny Fortson and Rachel Millard. DF is the West Coast Correspondent for the ST and was previously the City Editor at the ST. He is a heavyweight with impressive contacts. He's saved me money in the past and I'd say that anything with his name on it has been reliably sourced at the highest level. RM has only been with the ST a few months and is clearly outranked by DF. It is her story but I'd say his contacts.
This is a good article for holders of EnQuest.

Most of us have a lay man's understanding of cognitive dissonance and fear of regret leading to not selling a bad investment. I'm guilty of both on occasion but it's pointless blaming a broker's note or an algorithm for our own actions. The predictability of each of us is well understood by certain companies and organisations (facebook, Cambridge Analytica, google etc...) so when an expert in the field describes most communications companies as "populated by bullsshittin charlatans" I pay attention. I make a leap by including broker analysts amongst communication companies. This isn't to make me feel better or denigrate them but that I believe it is true.
See: https://www.youtube.com/watch?v=CDbRxH9Kiy4
This is a compelling video of the man who (imo) won the Brexit Leave campaign almost single handed, Dominic Cummings.
He approached the referendum from a totally different perspective to traditional methods (some dating from 1930's) and employed physicists and science who by and large came without preconceived ways of doing things. They found that the Establishment and Politics was perceived differently inside the London 'bubble' but was completely different outside the M25. Their findings coincided with what was found on doorsteps and algorithms (like facebook's) meant they could target efficiently certain groups. That's the background so why post a 32 minute video?
I believe that a lot of sentiment around EnQuest is driven by the b/s charlatans and the algorithms take advantage. that's why quant guys and programmers get paid so much at hedge funds.
Our reactions are predictable to an extent by AI. It is quite simple then to programme a brokers view into a complex algorithm. It is a bit like bookmakers making a book on a race/match. They are predictable to a point and in the long run the casino always wins.
I think this is also a weakness and forecasting the future has never been more complicated, partly because of these algorithms giving advantages until the other side builds a defence or counter attack. Barclays is effectively polishing the railings whilst SS EnQuest sails amongs the icebergs of Trump, Iran, POO etc...
I'm from the Nicholas Taleb school of prediction and don't accept the infallibility of these masters of the Universe.
Until we get an update from EnQuest or a dramatic move in POO (which will be fed straight into the algo's) the machines have a free play.

*I voted Remain but then, I live in the bubble.

Is the FPSO still under warranty?

Brokers accept that prices go down almost as often as they go up. Favourites don't always win which is why bookmakers survive but they are generally involved in the finish. On that basis Barclays had a result. The months following their September note had a weakening oil price so their view was reinforced and proven. If the price of oil had held or risen they would have left the target unchanged or maybe raised it. Anybody want to bet on the 2019 oil price?
If oil rises Barclays will be wrong but they have been right more than they've been wrong. If I was broking I'd probably go along with Barclays. They aren't prop traders or speculators. Hence their views are weighted and depend on a lot of factors of which the price of oil and world trade are most important. I think most here are aware that EnQuest has questions over its management and level of debt.. I'm happy with my position but obviously not the price. I expect a good year for us relating to the price of oil which will mean debt reduction speeds up.

I agree chilting. If you want some growth in your portfolio you do need to take more risk and of course that can backfire. I feel we have exhausted that risk with EnQuest and from now on it's a waiting game. Trying to find some info on Barclays' opinion I found their September 2018 note illuminating (60>45). They described EnQuest as an ‘overly complicated’ business. On Magnus they said this: “However, the fact that it was necessary despite our prior estimates indicating otherwise highlights the sub-optimal nature of EnQuest's disclosures around what has become a complex operating and financial structure,” Barclays analysts said.
“Simplistically, EnQuest is a debt-levered North Sea oil producer that should be quickly paying down debt in the current macro environment.
“In reality, we forecast end-18E net debt being flat year-on-year at c$2.0bn as annual EBITDAX growth of c160% fails to translate into free cash flow.”

That is a fairly accurate assessment I'd say.

*couple of observations. Trump isn't going to Davos later this month. AB usually goes and sometimes gives an interview. The FPM takeover by DNO resulted in a £53mio pay day for employees of FPM from share holdings and options. That included £12.5m to the CEO and £13.5m split between 7 other directors. Directors have as much incentive to succeed as any of us.

Traders and algorithms take notice of results, broker's notes and obviously POO amongst other signals. They mainly ignore bulletin boards because there is so much division and trolling on them. The exception is Trump twitter but that is a populism voting system where veracity isn't compulsory. The anonymity of bulletin boards also works against them and we have to make our own judgement of posters. Some are of a much higher standard than others but most is after all just opinion. I am not trained in accountancy so I particularly welcome the posts from Fernan, E121 and a few others whilst chilts has stood in for the much missed MO. EnQuest is still fragile in the eyes of the market and on a negative day will go with the wind. We need a decent trading and operations update and we'll fly. PMO has done OK today on better results. It's the uncertainty that makes us fragile.

That is why China is picking up the slack in Africa. They really do think long term. We are to tied up with worries of neocolonialism and a broken political system that is being dragged into referendum chaos. Where ignorance has the same value as knowledge. There is value in our satellites but the debt cancels it out; or does it? We'll find out in 2019!

In the 90's there was a Swedish restaurant called Anna's Place in N. London. I was single at the time and a contact had asked if I'd entertain some Swedish friends who were visiting London. As they were two young women I reluctantly agreed (sight unseen) but was rewarded with two delightful and fun seeking young women. I took a friend along who needed little persuading to even up the numbers. The lunch went well even though the food was a bit 'fishy' and we started to hit the drink. At their suggestion we soon went on to a delicacy called Aquavit which slipped down rather too easily. All I can remember of that afternoon is my friend and I both speaking down the porcelain telephone together (only one toilet). The two girls were fine.

*The restaurant was by Newington Green and is no longer there. I did though go to Perilla which is there a few months ago. It was the first time I'd ever paid £14 for half a Jersey Royal.

- or maybe not? CNE having a good day but that could be a reaction to takeover possibilities (FPM). I doubt EnQuest is on the smörgåsbord of potential acquisitions due to a large family holding. The Retail Bond has dealt at above 80 for the first time since November.

I'm always as nervous as a small nun in a penguin shoot when I try and get technical so bear with me and don't laugh. This 60p party.

Was it mooted before the R$I. If so then surely it is a 48.3p party?

*Pelle - we'll have the £1 party in Sweden! We couldn't afford the booze at anything less.

They've taken FPM over for £1.60 a share. Anybody care to have a stab at using the EV/EBITDA metrics to use the £1.60 valuation as an imperfect comparator to EnQuest?

Hi Inner-Harmony - I like the subject title and will nick it. Enquestrian sounds like a real noun and quite romantic, definitely worth using again. You credit RBC for 'fessing up' but they hardly did it with good grace and even Alphaville pointed out the clumsy backward engineering to validate their 'analysis'. They hardly had a choice when an amateur mistake was highlighted and presented to them. I'm pretty sure that our number guys could put emphasis on certain factors and come to a suggested target if challenged. I mean they do it on Countdown most days. Time to ignore individual analysts but accept that they are a fact of life and not always wrong.

The events of the past 2 days has got me thinking though. Practically all oil companies will do well if oil settles around $80 but I think EnQuest will outperform them all. As RBC helpfully pointed out the downside dangers they are too blinkered into what the upside might be. I'm a great believer in water finding its own level and once existential threats are overcome, stocks that survive a downturn can catch up on missed stock appreciation and dividends. If you think of EnQuest as a kinda growth company (Ocado, Uber etc...) then the graph direction of increased production and reserves since our inception means we are grossly undervalued.

Build it and they will come.

Hi Fernan - 11.29 Don't be silly. They're like politicians. Never say sorry or apologise. They've emphasised the stress testing down to $50 to manufacture a scenario where they might be right. Even I can do that. At $20 oil EnQuest is bust but then so is the whole NS.
RBC have taken a painful hit imo. Alphaville have covered themselves by being a bit sniffy and condescending about 'retail' investors but make no mistake this is the Establishment covering each other. Alphaville need analyst contacts so will not be completely impartial imo. Did they get a tsunami of emails yesterday? They definitely got one along with your assessment.

Be Lucky

https://ftalphaville.ft.com/marketslive/2019-01-08/

The weaselly back engineering of RBC was mentioned too. Fernan and E121 could probably rip that to pieces too.