Member Info for romaron

https://www.thisismoney.co.uk/money/markets/article-6499863/Hostile-bidders-UK-oil-firm-told-stump-900m.html

Some call shorters parasites but that is inaccurate. It is in a parasite's interest to keep the host alive so perhaps a better term is 'selective slaughterers'. Some companies are so badly run it is actually a mercy killing whilst others are subject to Darwinism and evolution. Hyenas are mothers and have cubs too. The common factor is that they look for weak or younger, smaller prey. Most oil stocks have suffered of late but here's one that is holding up; Faroe Petroleum.
Yes I know DNO is bidding for them but I use it to point out that a positive interest supports the price. It doesn't take a lot of skill to jump on a bandwagon and the hyenas will quickly move on to weaker prey if the company proves to be strengthening. I still go back to my EV/EBIT ratio which indicates EnQuest compares favourably to FPM.

*I asked my analyst his view on EV/EBIT. He'd never heard of it (only been doing the job close to 40 years) and is Cambridge educated. He uses EV/EBITDA but says it's only a rough measure. He says forecasting more than the next year is very difficult but as a snapshot has its uses. I didn't get the impression he was a fan of the ratio.

an analyst yesterday. Possibly in an even more depressed sector than Oil. Non-food retail. Even that darling ASOS has dumped today and it's more a tech company that sells clothes on the side. He is a veteran and was pretty miserable about the whole stock market and mentioned the inverted yield curve being a harbinger of recession. Far from upsetting me it kinda reinforced my current thinking. What we're seeing isn't only oil or more importantly EnQuest directed but another cycle and if you look at the graphs you'll see that the recessions are relatively short and are followed by a strong bull market. Here's a pretty graph https://www.forbes.com/sites/jessecolombo/2018/09/19/should-stock-market-investors-fear-the-coming-yield-curve-inversion/

The other thing is that a stock market truism is "the trend's your friend". With all the uncertainty around the world there is currently a lack of buyers, full stop! No surprises there and even a scatter gun choice of sells would bring impressive returns over the past months. Most here are long only (me too) and need to make decisions now. I've made sure I need to do nothing for another year and I'd expect that by this time next year fresh shoots will be showing. That is really a worst case scenario as we've had little but bad news for some time now regarding most stocks. Get through the next year and you'll be fine. I lived through ERM and in 1980 I changed jobs left a subsidised bank mortgage of 3% and went to base plus 4 which was 18%. A few years down the road the world will be a different place. Markets always overshoot. There is little wrong with EnQuest and I suspect there is a lot of behind the scenes positioning by Russia, SA and the US affecting the POO. I doubt the current shenanigans will encourage a rush of FDP's. There are always periods of exceptional rises and falls and to quote Rudyard Kipling: "If you can keep your head when all about you are losing theirs, If you can meet with Triumph and Disaster and treat those two impostors just the same."

Bah humbug!

Hi E121- I met two pals today for Christmas lunch expecting light banter and no concentration required. I've known them both for close to 30 years (one longer) and within 5 minutes they were talking options. It could easily have been Swahili as far as I was concerned. One is an ex futures trader who has a retainer with a hedge fund (went to school with hitman on iii) and the other runs an FX advisory service in that hotbed of financial services, Wimbledon. Both have worked extensively for major banks, funds and media outlets. I gained zero knowledge but watched them argue over choices in protection or speculation in sterling. Both had positions. One was hedging his portfolio which like any diverse UK stock portfolio is heavily exposed to dollar/sterling. He decided that sterling was oversold and was a buyer. It also worked as a hedge against his portfolio which has done well in the recent sterling sell off. The other just trades. No sentiment just greed, he doesn't need the money. I wish I'd understood more as there was a disagreement over the most efficient and cheap way to trade sterling. Sells, calls, puts etc..leave me stranded and I would need google translator to even attempt to join in.

The conversation thankfully moved away and we discussed starting our own political party. The other two had some years ago a very successful financial newsletter. It was always treading a tightrope and its content was often scurrilous and many legal (and physical) threats were made. It was a kinda financial popbitch.

Watching what has been going on in Westminster over the past few months and the fact that elderly snowflakes make quite a good living out of their punditry we are knocking around the idea of reviving the brand as a political party. It won't have any real policy or manifesto to change the world but we can make that up as we go along; just like the existing parties.

Perhaps when I sober up it won't seem such a good idea!

Hi F_AHL - All bets are on reduced demand and renewables picking up any slack (judging by oil stock prices; esp. EnQuest). With the focus on spot oil price and politicians wanting re-election it isn't really a surprise that everybody concentrates on the front end. I am betting on the opposite with a scepticism of what gap shale can fill. It pays sometimes to have a horizon further than next week or the next RNS. Oil is decidedly not on trend and out of fashion. However, oil is a commodity and it doesn't actually follow what next year's colour or fabric is.

Thanks for that Pelle. The shenanigans of geopolitics are never far away. At least there is no longer a downward drift and this could be the beginning of a steady rise.

I would expect that after the OPEC announcement there has been an uplift in the forward swaps, options etc. as there will be a reduction in productions. Spot will only be affected by sentiment and tweets plus trade settlements and erratic eia data etc.. It seems that we are being judged by the current POO when in fact it will be quite a bit higher when OPEC cuts come into play.

That's what I expected to happen but confused by Brent futures.
https://www.cmegroup.com/trading/energy/crude-oil/brent-crude-oil-last-day_quotes_globex.html
They're flat for next year? Oil in December 2019 at $61.69 indicates that reduced demand cancels out the reduced production.

Thoughts?

Hi E121 - 12.44 If only I read the small print I wouldn't have posted my 11.31 post because it is there in black and white. However, I am not the only person here who doesn't read the small print so we are doubly grateful to you. It is confusing for some when you say hedging is not trading when that is exactly what many hedge funds do! Throwing around terms can easily disguise what actually happens and some posters might like to label EnQuest management as inveterate gamblers when there is no evidence and restrictions in place to prevent them anyway. Our creditors scrutinise everything and that combined with company discipline makes this a well run company imo.

There is some flexibility whereby they can hedge up to 3 years [interesting point is this basically how far out prices go?] with the proviso that hedges are to a maximum e.g. 75% first year. They could decide not to hedge anything and that I would consider imprudent. As always it is in the timing and if you thought the price was going through a $100 you would greatly reduce your hedge. I still don't know why they prefer options to swaps but I trust their choices. I might ask at next AGM after the meeting. It is not the most important information but strike prices on a volatile market do matter. Whether it's futures, options, swaps or even a fixed bilateral deal they are all related. Even the OZ deal. It does get complicated and I'm glad there are a few here that can have a stab at unwinding the trades and translating them into layman's (bulletin board) words.

I learn from other's posts and only throw stuff into the mix that helps me see through the mist.

Be lucky

Hi E121 - With the lenders breathing down the neck of EnQuest it is obvious to me that they [Creditors] would not look kindly on EnQuest using financial trading as a way to reduce debts. EnQuest is an oil and gas production and development company, not a financial trading company. All their finances will be scrutinised and AB has to be prepared to explain the decision behind the company's actions. "I was having a punt" would not be an acceptable reply. All trades have to reflect back to the company's underlying business.

I'm looking at the McDaniel site mcdan.com last forecast for October 1 2018. The spot price of 1st Oct 2018 was c.$84.
McDan have front end forecasts as 3m 2018 78.00, 2019 $74.00, 2020 $73.10, 2021 $72.30. I think that is long enough for EnQuest holders. It does show that like oil tankers it takes a lot to move the forward price. You can have fun looking at past forecasts and for example in the Jan1 2018 one the spot was c.$66 and the 2021 was $70.10
July 1 2017 spot $c. $48 2021 $71.50.
Commodity swaps have esoteric terminologies and I tried reading how they work but it is aimed at people who love mathematical formulae but the gist is it is the spot price of oil and the forward part is the cost of storage of oil, refinery demand etc....and can move higher or lower for quite long periods (contango, backwardisation). I was something of an expert in FX forward interest rate swaps (27 years) and can tell you that they were quite simple in the same way that fitting a boiler is simple. Could the fitter explain a pcb. He just connects colours and numbers when putting a new one in. Do them long enough and they become second nature. I knew some oil traders and I doubt their swaps were any more complicated. Most don't understand the next stage behind them which is why investment banks and algorithm writers can make so much money. Swaps are huge in FX and the biggest commodity swap is Oil. I'm sure that EnQuest look at all options when deciding on future sales. I don't know how long oil swaps go but I'd be surprised if much was done beyond a year whilst the heaviest period would be 3 months. There may be restrictions on what EnQuest can do within covenants? Like banking it could be dangerous giving a license to trade to a small oil company that then trades amounts like BP. there will be credit limits extended to participants in the swap markets and I dare say the UK oil authorities want financial returns from companies in their jurisdiction. The company is prudent most of the time and maybe they're full on swap limits. Unlikely I'll admit but we're not gonna be told anyway. Criticisising them for not selling all their output when spot was $80 is probably not simple. Was it heading for $100 in their opinion or were they restrained by financial limits relating to production or balance sheet? Maybe they do enter swaps. I'd certainly expect them to but TBF whether it is an option, a future or a swap there won't be a massive difference. They all interconnect.

squif - you really are a broken record. You think you're smart by writing "So you are completely happy and comfortable with how everything is going romaron?"

Of course I'm not happy with the price but I am a realist and accept that certain factors are outside the control of any executive. Price of oil and interest rates for example. I have zero interest in having a conversation with somebody like you and your puerile attempt to draw me by hinting that I am somehow completely happy with the situation is similar to your other attempts by suggesting that someone supports you. They then have to post to deny or correct your assertion. I will now filter you so there is no need to reply to my posts because I won't see them.

I don't think Pelle said anything of the sort. You write such tosh squif. There is a high percentage of institutional investors in EnQuest. You've been reading too much conspiracist stuff. This is not a David Lenigas AIM stock. What you are suggesting (apart from being libelous) does not make any sense. Have you taken your medication today?

Thanks for the response F_AHL. This fact "US were the worlds largest ($) exporter of refined products in 2017" helps illustrate their manipulation and bullying of smaller countries. The US preaches democracy but outspends every country in the world in military spending. Their actions always come back to US hegemony and the rewards it brings their citizens. It is in their interest to continue interfering and bluffing. Shale is another factor but its effect is as much tactical as it is strategic imo. There is plenty of life left in oil yet.

It's not a good time for investors but the likes of Warren Buffet, Terry Smith, Neil Woodford, Baillie Gifford etc.. haven't sold all their stocks and only hold cash. If you've chosen a well run company with growth in it you'll eventually be proven right according to history. The Brexit debate is casting a pallor over the UK stockmarket. I've just spent a depressing couple of hours listening to James O'Brien on LBC. The only way things can get worse imo is a Brexit without a deal. It does worry me that a majority of the UK voters voted for self-harm but one hopes that self-interest and common sense wins out in the sense that most people don't wish to be poorer.

Squif, I won't purposely ignore you at the 60p party but I don't want to spend time talking to a person who makes considering cutting my wrists seem a better choice.

Just for Jan.

Build it and they will come (eventually).

We're tracking Shell and BP. Their graphs for the last year aren't a lot different. Who do you think will rise fastest when demand is steady and poo is higher? The stock market is weak. Certain sectors are unpopular. Our existential worries are in the past. What's not to like?

Yeah, I know. Our share price!

Hi F_AHL Mon 22.44 - I had a quick glance and happy that we have another poster who can follow stats. I won't try and decipher them as there are people here who have the knack and can do it in a fraction of the time I can. I've kept the links and although I'm sure they're useful my ability to get the full benefit is limited. I have a question or perhaps more of a gap in my knowledge or even plain simple ignorance. Sorry to go back to my 5 year old video reference https://www.youtube.com/watch?v=WdjTi-uhoqI but you only have to listen around 6.00 and 18.75

I went to US Petroleum balance sheet on the eia.gov link and there is a list of all the oil products e.g.Kerosene, ethanol, distillate fuel oil. We are following gross figures and not getting so much into detail of the oils produced and I am obviously concentrating on shale which (unless I've misinterpreted the video) are predominantly C5's. I have failed to understand the economics of US shale and wonder if we are giving it too much respect? The US on balance wants cheap oil. The total oil that they require/produce is varied and gets even more complicated with refinery requirements. I'm just wondering whether the US is importing less of the products they have in abundance. If that is the case then, as oil importation is not collapsing in the US maybe a better way of reading figures is the value of the crude which is decided largely by its physical properties. An analogy might be the beef market. The finished product v grain which fattens them. They have a surplus of grain (which is cheaper) whilst parts of the world can supply beef more cheaply. My point is that the US doesn't want to pay an inflated price but conflate the oil production of the world and part of their armoury is to inflate the importance of shale. In short I'm wondering if the cost of their oil imports has risen whilst the volume has decreased?

Use an "Executive Decision Maker". They are pretty simple to use but it is left to the individual to choose whether heads is Buy or Sell. Once selected tails is the opposite. I can send you a manual if that isn't clear enough.

Seriously, stocks have become toxic and oil companies weren't very popular before that. For a long view of EnQuest BUY; to sleep better - SELL. Personally I am a buyer.

Build it and they will come.

Hi E121 - I think I understood 80 percent of what you wrote and that is probably more than my oil knowledge. I quickly looked at your link, shuddered and closed it. I suppose you could measure volume of options against futures to compare and if there are swaps to back up spot oil trades then that is another measure but you begin to drift away from the main drivers and you run the danger of looking (for instance) at the wholesale market in electricity when you only want to plug in your toaster. Same with production. Facts are that declines exist and new fields take time to bed in and understand. Being able to forecast the future price of oil and world demand can only be an estimate and taking credit for getting that right is the equivalent of taking credit for your bingo win. Glad that somebody on here can offer decent comment on options and I thank you. I've never doubted EnQuest's understanding of them and the company seems to exercise prudence over what it can manage. The price of oil and world production/demand along with geopolitical forces is outside their control.

Thanks for the comprehensive reply.