Member Info for romaron

Best wishes MO. I hope you return at some stage. It wasn't your tanker watching but your understanding of all the paraphernalia that comes with North Sea oil activity that I valued most. Wells active/inactive, percentages, spudding, decomm etc...it is in there somewhere but I cannot wade through the detail like you can. It takes a special skill which some have and some don't. I don't.

There is a danger that one gets too deep into a stock but that is only considered wrong when they go down. Wasn't it WB who answered when asked how long to hold a winning stock replied "forever"? I have a portfolio and EnQuest is in there because I expect them to pull through and I imagine we'll be having a different discussion in December 2019. I need some growth and I expect them to supply it.

Have a rest and enjoy Christmas.

Be Lucky

Hi E121 00.34 - I wish you hadn't posted that as I try to ignore those elements in the updates as they are so headache inducing. I never traded options but basically understand them. I was involved in forward FX and although that market was far bigger than the option market in FX options had their fans and was considered specialised. I'm no expert here but I'd imagine that most oil is pretty much vanilla trading in futures and direct trades. Options are where you see a financial opportunity or want to take out insurance. What you haven't made clear is that there are costs involved and not much comes free in life (bulletin board advice does but is usually worth what it costs). If we knew the costs then we would be able to make a better valued opinion but that isn't gonna happen.
I once spent an afternoon with the option desk for my currency and once premiums were involved there was no benefit in prices but that doesn't mean they don't crop up during trading and a spread without interests in it soon closes when a few bets are placed. Warren Buffet famously likes to write long dated put options but isn't a trader in them which is a potential niggle at the back of my mind with EnQuest. After all we wouldn't want them to be derivative dealers with a side line in oil. [Don't laugh - Porsche was once described as a hedge fund with a carmaker attached.]
I doubt there is anything amiss with what EnQuest does and they are not alone. They will almost always have an interest in different dates and it pays to be willing to trade on both sides to prevent market makers ripping you off. I imagine EnQuest has the facility to write options and even be a market maker. Is that right? I'm not an expert and don't know how the option market works in oil. For a company as large as EnQuest you would have to have a trading arm/room and it might just be Jonathan Swinney and an assistant or something larger. There can be steady money made by EnQuest trading but it needs to be closely monitored as over trading can lead to big losses. Against that expertise can make big savings over the year and then their is the prudence in taking out insurance. EnQuest at the bare minimum will have an interest on one side and can cross the spread by writing or acting as a market maker/broker.

Do you or did you trade in options?

Away from this board there is a consensus that EnQuest is a growth company and that AB is unlikely to resist bargain assets that this cycle has produced. I hope there is something planned for Malaysia as I feel that it is another hub where a strategy for mature fields and decommissioning is what EnQuest was formed for. I expect (and hope) AB to go for more 'equity release'. The company is not sitting still in these exciting times.

Go AB, Go!

Chuck BTW works in heavy oil in Canada. He lost money on Xcite too. I do talk to people about oil away from this board. What got me started was the Times article yesterday. No, not that one! There was another about Faroe doing a deal with Equinor as part of a defence against the hostile bid from DNO (You know I think that Faroe is a kinda marker for our value.) This got me thinking about another comparator. Equinor is Statoil and their Mariner field is due to start producing in H1 2019. It has many similarities with Kraken.
Kraken 78-161 cp API 14 reserves 240m
Mariner -Maureen 67cp API 14.2 reserves 300m
-Heimdal 508 cp API 12.1
Lets see what happens when they start production? I'll stick my neck out here and say they'll run into problems. That is what fields do until they are fully understood but that isn't my main point. At a later AGM I met Nigel Hares (ex BP like Jim Buckee) and again brought up Xcite and mentioned the Bentley field. He merely said that they had looked at it and passed. I reduced my holding of Xcite after that and finally exited (ouch). At that time Statoil was run by Helge Lund who left for BG and is now Chairman of BP. They deferred another field (Bressay) but what I'm saying is that they are not deterred by the challenges of heavy oil in the North Sea so perhaps have a longer view than some posters here.

(cont) 5 heavy oil fields in the NS. Alba/Captain – Kraken – Bressay – Mariner – Bentley. Alba/Captain and Kraken flow unaided; the others do not. He said that Statoil haven’t yet managed to get their fields to their economic requirements (confused here because I thought Mariner was sanctioned but I may have misheard). The $15mio for data sold by Xcite to Statoil was pooh-pooed. I got the impression Statoil bought it cheap and for peanuts. He said that EOR is irrelevant for now. After primary extraction you consider it but that is like 10-15 years away.
When I said break-even at $35 he didn’t scoff but thought that possibly it was using an Early Development Plan (EDP) which is a short term (cheap) plan and not suitable for the lifetime (kinda throws a spanner in the works of the “do it like a major” quote by Xcite for Bentley. I retrieved my credibility by producing the MER UK Activity Plan which he avidly read and understood in about a minute. He used to work with Andy Samuels and said this was clearly his work. When I asked if OGA was “tokenism” he said decidedly not. The Industry had asked for this and it had powers and ambitions.
He is such a knowledgeable and polite chap he would have talked all evening but had to get a flight to Aberdeen. He said that c. $50.00 was their cost of production at Kraken.
I sat next to the Aberdeen Asset manager at the AGM. Nice chap and a PI as well as running the fund which has 5% of Enquest. He was there to ask about Ophir. He uses my system of asking other companies about competitors. You get more info that way. He said they aren’t allowed to tell you more about their companies than is in the public domain anyway (insider trading). My overall impression was that Xcite and Enquest are not comparable and it is in Xcite’s interest to conflate them and suggest that their position is better. It is the other way around. Enquest are profitable, a producer and know what they are doing and where they’re going. The CEO is cool and fierce. NM also said that the reduction in costs by contractors and availability of equipment sooner meant that Enquest is “vastly ahead of schedule”.
My overall impression is that Enquest are open and have little to hide. With Xcite its smoke and mirrors with the convenient non-disclosure always at hand. Andrew thinks sell Xcite buy Enquest.

This forms the background for following posts.

This may interest a few who have a slightly longer view and not those who only search for negatives and attempt to dress them up as research and post with a bias. Most holders wouldn't be here if they didn't have faith in the company.
I'll warn you it may need some thought and imagination so not for those who can only project from the latest movement of the stock or Brent.
2015 EnQuest AGM (my first AGM and I had a very small investment. I was researching Xcite)

I attended the Enquest AGM today and it was an eye-opener. I had communicated with Chuck and had my cunning, curved ball question ready. “Why was it that Xcite released an RNS for collaboration with Statoil and Enquest last September whilst we were greeted with silence by Enquest. Was it sour grapes that first mover advantage that Enquest had was lost because of the spot movement of oil and that Xcite were now reaping the benefit of lower contractor costs?”

I aimed it at the Chairman Jim Buckee who is known for his combative nature and instead got bemusement back. They honestly hadn’t thought about it and I’d even go as far as to say that Xcite wasn’t on their radar. They treated me with respect but I felt as dopey as the next two doddery old guys who got lost in asking about dividends (there were only 3 questions) out of the 12 PI’s attending. I think they tried to help me but in all honesty they were prepared to answer but didn’t understand the question. In fact JB tried to help when I said that Xcite was also in heavy oil he said “I worked in Canada and this [EnQuest oil] is “champagne”. The CEO also tried to help and said it was to help with gas import but we knew that anyway, it was in the RNS. It did get better at coffee and cakes.
I spoke with their CFO and another Director and as soon as politely possible I brought the subject around to Xcite. I tried to restore some credibility following my question and said that Xcite were capable of getting oil out at a breakeven of $35.00. I was met with incredulity. They were aware it required diluents and once again I was treated with kindness but was clearly a dope as they assumed I had misread the RAR. I mentioned that I was a “groupie” and had come along as a long-time fan of JM.
He was outside and I walked over to him. He lives for oil and is not a humorous man. He doesn’t really care what people think of him imo. He is clearly liked and respected by his colleagues. He tolerated me and said that I was wrong about using API’s as a measure and that you need to know the “centipoises”. He has a bet going with the CEO that oil will be above $80.00 by September. He began to realise my education was incomplete and said I need to talk to Neil McCulloch their “go to man for this sort of thing” and I was introduced. If you get the impression I was being passed along you’re probably right. By now I was joined by Andrew another Xcite investor.
Neil McCulloch knew everything. He explained that there are

L3 12.31
Pelle and Squif.
I suggest you read the write-up of yesterday's OU in today's The Times. I picked up a paper copy on my way to Exeter Airport, and I can only say that it does not make pleasant reading.

Spindok 12.43
There are lots of different articles on Google News. I have read quite a few and even I cannot see why the ''Times'' makes unpleasant reading.

L3 – 14.51
The title of the article is "Kraken delays apply brake to Enquest in North Sea". (the paper provides the name of the person writing it.)
==========
It was a short article that added nothing new. I agree with spindok. Even the sub-editor struggled to spice it up with 'Kraken delays apply brake' but that didn't stop L3 from repetition. I don't know if he posts under other names but he seems to have an interest in sowing perturbation at the slightest opportunity. We can all read reports and make arguments for both sides of a debate but I don't believe he has the honesty or integrity of a valued independent poster. Others can read his posts but I have filtered him. Half truths and twisting of statements don't impress me or add to my knowledge. I have no idea of his agenda but I want no part of it.

I'm off out now to lunch. If I get a chance I'll get a copy of the Times.

Maybe this makes better reading - https://www.offshore-mag.com/articles/2018/12/water-injection-upgrades-lift-enquest-s-uk-north-sea-fields.html

*sent to me by another investor, ex-Shell, adding that the extensive well tests will give the team a lot of useful data about the Kraken issues adding that there is nothing a nerdy engineer likes more than to resolve a problem via a technical solution. He is confident that Kraken will be optimised.

Good spot L3 - "Malaysia and South East Asia are seen as core areas for EnQuest and the Group continues to review growth opportunities." The importance of Asia is often missed by concentrating on the NS (guilty). Malaysia surrounds Brunei and they haven't done badly out of oil whilst Malaysia has shipbuilding abilities and is geographically well placed.
I hope they do have plans for the area and having a Muslim CEO cannot be a bad thing. I was thinking about the Oz deal. Och-Ziff aren't mugs and wouldn't lend to a basket-case but I was more interested in EnQuest not letting a tight debt market hinder their expansion plans. In some ways it is like the equity-release growth over here in home ownership. I spent a day with a pal looking at property and he ridiculed me for ignoring the wealth tied up in my home. He sees it as idle money and I suppose he's right but I've an aversion to personal debt even though my head tells me that he has a point. That money could be working elsewhere.

*I once visited Rolls Royce in Crewe. Nothing there was cheap and you see a lot of customised cars, many of which are destined for the Middle-East. It oozes luxury and expense and I asked a factory salesman about requests. The conversation moved on and I asked whether he had become blasé and became inimpressible. He said he had been impressed when the Sultan of Brunei ordered 50 (maybe a discount?) but not by the purchase. What did impress him was that he then had a motorway built to drive them.

I would imagine US investors are getting as weary of the fluctuations caused by Trump as we are by Brexit. BP and Shell not liking it either today. If North Korea can stand up to Trump I imagine MBS with a word of support in his ear from Vladimir will not want to publicly bow to the US. Arabs are renowned for flexible allegiances. One of their big buddies is Pakistan who have a nuclear arsenal. They have even more flexible policies. Sure the US Empire is powerful but there are alternatives. The world sure ain't safe and oil is a strategic necessity. Nothing surprises me lately.

There are no carnal or dogging connections. Shag means mate or geezer. The normal greeting in a pub was 'alright shag'. I never heard it outside the City.

Hi Jan - No significance but it wasn't clear to me what you meant when you wrote "Maybe even romaron giving us a recital". I realised it was jocular and no offence taken whatever it means? I can dish it out so I accept returns. Mostly it is good humour and the really offensive ones never attend AGM's or drink ups anyway in my experience. O/T a guy I've met at a few AGM's tried to get me to invest in Sound Energy. I didn't invest but it had social attractions. It has been a roller coaster and he had enormous fun on oversea jaunts and boozy presentations. Hopefully we'll have something to celebrate soon.

Also no significance in my sign off. A mate always finishes with Be Lucky whilst I nicked the Build it from James O'Brien on LBC. They both resonate with me though as I consider AB a lucky general and the mouse trap analogy works for me too. I'll finish tonight with a money brokers salute from the 90's.

See you shag!

16.03 - I'd imagine if you were down to 10 barrels a day efficiency would be irrelevant as economics would have meant the well had been closed down long before then. My point and E121 was that the FDP is, if nothing else, a plan and we all know about them. The military says they work until the first shot is fired whilst Mike Tyson put it even more eloquently saying "everyone has a plan until they get punched in the mouth". Sometimes flexibility is required and there are inbuilt tolerances to allow for tinkering.

There are obviously differences in costs between initial, peak and declines. I'm guessing here but you probably always need a H&S guy but less roustabouts at the tail end. Reduced costs as less diluent required etc... but no getting away from the fact that at this moment in time higher production would be welcomed but our threats are no longer existential and although share turnover was modest we made a small gain today. The FTSE, BP and Shell all fell. Tomorrow might give a better picture with a bit of reflection thrown in and maybe some broker comment. We already have considerable scale and the picture looks pretty good from where I'm sitting.

Be lucky

"The OPEX cost on the boat is high and as the production declines this means a higher opex per barrel and less cash."

Nobody disputes that triplecombo. I'm sure this situation occurs in other fields and we are not unique. We also aren't a Shell or BP that can lose it in the footnotes. Kraken has a disproportionate effect on our debt repayments. I do wonder in mitigation if there is a future benefit here as the decline will be less steep so the opex (compared to what is in the FDP) means that the FPSO is more efficient further out? That makes little difference as we are judged mainly by our high level of debt, today. As for god-like management skills I am an atheist. In the real world we all try our best and I've never come across an omnipotent manager though Trump (in his mind) comes close.
We were hoping for a mini miracle in this update and the result kinda supports your opinion of AB.

Fernan 10.05 wrote "this is just another attempt by management in order to somehow hide the fact that debt is not going down significantly".
Translation "A company will always sugar-coat an RNS - it isn't a crime in the UK. I doubt you could find any company saying anything very different when issuing an RNS. Practically all start with 'Highlights'. A CEO who describes his product in pejorative terms (Ratner) or has the bailiffs knocking on the door may be more truthful and are remarkably rare in RNS terms." Perhaps it's different in Fernan's neck of the woods.

============
There seems to be a suggestion that the company is being disingenuous when I feel it is Fernan doing just that. We are robust enough to withstand criticism but accusing a company of being less than perfect would be an attack on the whole market. Declines and problems are a fact of life and most intelligent investors accept that. Today the FTSE is down 1 percent. BP and Shell are faring worse. All of us would like debt to go down faster but to a large extent it's not in our or the board's hands. I believe recent management actions will accelerate the process subject to POO and Brexit shenanigans.

Pelle 9.41 - it's a mixed bag for sure. Some encouraging stuff in there. Hopefully there'll be some consensus on where the debt shuffling will be at end of year and forecast into 2019. The analysts (and others) have an almost unhealthy obsession with our debt. I'm always amazed at how people throw around terms like $100 mio or even $1bn. They're both a hell of a lot of money and not much amount of room for mistakes. Get it right though and the rewards are commensurate. It ain't meant to be easy and I think we are slowly coming through. Nearly there.

"a small number of system outages and equipment repairs continues to limit performance"
Translation - it just ain't working right. We got rid of Richard Hall and Neil McCulloch and their replacements are scratching their heads. No solution in sight and DC4 will only keep us at this disappointing level.
" additional production from DC4, where first oil is now expected around the end of the first quarter, and the Group's conservative assumptions regarding vessel uptime and underlying natural declines."
We'll throw this in to keep the investors happy. Hope has a value too and LTH's can become LT believers.

One thing I do accept at face value is "the Group's conservative assumptions" AB has never gone for the hyperbole or half-truths that are regularly thrown around on AIM (Gatwick Gusher for instance). I think he is fully aware that it's a waste of time trying to deceive the analysts who by and large have called the share performance right. I think few here were expecting anything more from Kraken. MO's tanker calcs. told us that. The question is "can Kraken ever produce 50,000 bopd for several months?". At the moment it is the equivalent of a 500 room hotel only 65 percent full. Many costs are based on 95 percent occupancy so this is clearly a problem.

The fact is that this problem/under-performance with Kraken is now public but I suspect many were aware so damage to the sp is unlikely. The company does expect it not to get any worse and there are contingencies (I suppose) to adjust running costs for the FPSO as natural declines mean the hotel eventually goes down to a 100 rooms and even lower so there are cost savings available. Using a squif analogy. Not winning the Champions League doesn't suddenly make you a bad team.

Nothings really changed imo. Bit disappointed but still confident. Obviously we cannot foresee POO or UK Government actions.

Build it and they will come.

Hi redetin - Many here have followed your example (I plead guilty). Being in profit and watching the sp slowly sink into the red. I think 60p is a modest target. You are definitely not cut out for AIM if these movements cause you palpitations. We are not on AIM. Go on AIM and you will bump into the likes of David Lenigas and if you ever shake hands with any involved a tip is to count your fingers afterwards. We are on the main market (FTSE small cap) but getting into the FTSE 250 is also a modest target and achievable next year imo.

I found this http://www.stockchallenge.co.uk/ftse.php

It shows PMO as a FTSE 250 member in a position of 366. Your comment got me here so thank you for explaining some of the price disparity between them and us. Certain funds will not invest in companies outside the FTSE 250/350 and have mandates preventing this. We are at 439 whilst Faroe would be at 358 if it was on the main market. If we entered the FTSE 250 the world would look a very different place.

January - I'm a bit confused. What do you mean by recital? I'm coming anyway.

Are we missing it? Jim Buckee (Chairman from inception until 2016) said 'debt is your friend'. He then added 'explore out of equity, develop out of debt'. There was a rider 'but not too much debt'.
There is a problem with this quote though. We don't explore! We didn't discover Kraken. We do very little exploration but our ex COO Neil McCulloch did say that 'the best place to find oil is in an oil field.'
From the EnQuest front page:
"EnQuest is an oil and gas development and production company focused on turning opportunities into value by targeting maturing assets and undeveloped oil fields."

Our raison d'être is covered in that short EnQuest sentence. Exploration is exciting and has elements of winning the lottery so we miss out on that exciting element for those looking for exceptional growth. So our 'explore' is basically cherry picking what the management see as the best potential in mature fields. We've largely done the first part and are now developing out of debt. Simples.

This does help explain our lack of glamour but might help us reset in out minds what the company was formed for. If nothing else it gives us something else to discuss in these groundhog days until we get the update.