Member Info for romaron

It is wise to stress test your investments but there is also the danger of listening to the Eeyores who are as predictable in their analysis as are the pollyannas in theirs. We'll have a 'phoney war' situation until the partly paids are tradeable with a fall in the 'older' stock which is a kinda going ex-dividend. What we'd all like to know is what the blended price will be on 26 October (I think). My own personal target before Christmas is 42p. Easily achievable imo and that would fit nicely with a 100 per cent return on the RI.

If you overlay Enquest's share price chart with the Brent oil chart their is almost complete symmetry. On a recovery we will always lag as damage has to be repaired and unavoidable cash restraints worked through. It requires co-operation from our creditors and early signs are encouraging. This RI also brings into the light a clearer picture of what we have gone through. We have a better idea of major shareholders and one of them is the Employees benefit Trust 4.35 and AB 8.70. You then have two Edinburgh based Investment funds Aberforth 8.88 and Baillie Gifford 5.90. The two funds have held and increased throughout. I'll follow their lead.

I'm not blaming the EnQuest management for failing to foresee the oil price movements. It has been close but I think
we are heading for decent profitability. Recovery doesn't happen overnight.

L3 - I read it as 2 bio barrels of oil which was the original STOIIP. I didn't dig deeper because the dregs of the wells and water cut make the last barrels marginal. I was using it to compare to the dodgier end of the market who intimate that you can extract almost all the STOIIP that is in a well which is why I have mentioned Lenigas (the Gatwick Gusher has been extended to Bognor Regis and is a play on STOIIP). They like to mention EHR and tertiary recovery which makes marginal returns even more marginal and you're getting towards wringing out oily rags. I mention it because EnQuest and GCA think it's reasonable and so do I. I'm not gonna read the reports again but most fields seem to extract about 50-57% of STOIIP and the rest gets left in the ground. If oil goes to $120 then it is a different story. I'm no oil expert but if I've misread I apologise but hopefully there are some individuals who do know how fields react. I was trying to reinforce the fact that EnQuest is a serious company and not into hyperbole.

Whilst here I was thinking again about the tax credit/losses we hold, some £3bio I think. That is a bit of a war chest. It does make the company super competitive imo. A bit like devaluing and having a weaker currency. It never hurt China to have a weak currency.

KO - Adjust to 50p and use it as a prelim to arrange £1 party and venue for early next year.

Before I forget. With the Rights Issue does the 60p party become the 50p party?

I had a message from a fellow investor who has worked for Shell. He wrote about Friday's announcement 'Excellent. Similar to the arrangement Chrysaor came up with Shell' and have decided to answer here to get more debate and info going. For a start I think the companies are different. Crysaor is closer to a SPV and has a special relationship with Shell (Linda Cook)https://www.theguardian.com/business/2017/jan/31/shell-sells-north-sea-oil-gas-fields-chrysaor-linda-cook
Chrysaor is private equity backed company with a registered office in the Grand Caymans - Enquest is a public company with the registered office in London
Chrysaor call themselves the UK's leading independent E&P company - EnQuest is an oil and gas production and development company
Similarities may be a willing seller meets a willing buyer but the Shell sale includes (for example) Bressay which I doubt will ever be developed. Enquest is more at the used end of the market.
Details of the deals may be similar (vendor loans etc..) but I wonder if Chrysaor has the tax losses/credits to compete with Enquest over certain deals or whether they would be considered anyway? (something for the number guys (Fernan, L3, E121)

I was going to post this but as usual got distracted. From the announcement "EnQuest believes that the innovative net cash flow sharing structure of the Magnus Transaction could become a template for transferring maturing assets"

They [EnQuest] also go into deals with a discount voucher in the form of tax credits/losses. We could have a very exciting couple of years going forward.

One last thought. Sometimes it's better to under-promise and overproduce in business. Especially if you have new targets/deals that are easier to push trough if your creditors and shareholders see you performing well. Record production with a new deal goes down better and we all know how much the market likes growth. Reading AB is not easy.

An important thread this and the good old matrix retrieved the Alma/Galia numbers to save me looking them up (15.40). I cannot be the only person who was dying to know the result of the overhaul of the 3 broken ESPs (I'm relying on memory) but do recall Neil McCulloch saying that sorting the problem was like doing an 'autopsy without a corpse'. The 'autopsy' required rigs and they may really have not known what they'd find but I think it was more a case of PRIORITIES. The Alma Galia will take time to build up (I'd imagine) and relatively happy that they'll get back towards FDP production. My personal opinion is that the company was facing an almost perfect storm with low oil price, heavy capex outflows with Kraken and the Alma Galia pump problems; you can also throw into the mix that the company couldn't afford to arrest the declines in older fields. They couldn't do anything about the price of oil and were left with a decision. Sacrifice Alma/Galia and expect a suit from KUFPEC or delay Kraken and get a suit from BUMI with the potential to crater the company. It really was a choice between a rock and a hard place.
We are now repairing the damage caused by a lack of cash and I think we all know that without the oil price rise we'c be dead.

I expected a question about the pump problem at QA and perhaps the absence of one was because of a tacit acknowledgement that lack of cash and even bigger commitments meant there were few options available. The analysts considered the subject closed. I expect we'll see a settlement with KUFPEC in the near future. Knowing AB he'll probably let them have a bigger share of the production until equilibrium returns or some other complicated solution (not that I'm knocking his creativeness).

Got there eventually. I put in anonfile.com and they didn't like the site and I had to override it. My interest is because the CPR is basically a survey with a stab at valuation. Surveys are basically insurance policies imo. They have an impartial approach and are potentially liable for a negligence claim if they are not up to the job. The financiers like them when assessing the risk as well. You can even make a case that the CPR can throw cold water over the deal and provides an element of scepticism which all investors require.

I picked out some sentences.
"The overall quality and robustness of Enquest’s data and representations is high and GCA has not identified any material inconsistences or anomalies."
Nuff said.
"2.0 MMBbl suggests an incremental recovery factor of approximately 2%. This is viewed by GCA as a reasonable target."
STOIIP, EHR and tertiary recovery are not cheap and mainly uncommercial. Not like the 'Gatwick Gusher'.
"Unlike many other mature North Sea fields, Magnus is not therefore constrained by bed availability, and the Operator is able respond to requirements for planned or unplanned maintenance activity."
Which translates into faster working.
"The field has had recent, comprehensive, structural surveys in 2017, and each pipeline was surveyed in 2017, with only minor issues identified."
Not ready for the knackers yard yet then.

There was a mention of tax losses/credits we have. That is a result of our expenditure exceeding our income and previous development costs. It means that we were in a strong position to take on Magnus. For other companies it wasn't so attractive. Every cloud and all that!

The first new well planned at Magnus is "Canute". Aptly named as they won't be able to hold the oil back (I hope).

I wonder whose decision it was to call for a CPR because it doesn't really tell us anything new? Was it necessary even? I feel it was a good idea for several reasons. It is an independent opinion and shows the market what a prudent and proactive company Enquest is.

Chocks away!

I cannot get access (desktop & lap top) so it's a computer issue which basically locks me out. I am neanderthal in computer terms and you'd waste your time trying to help me. Thanks for help.

Hi E121 - I'm no expert on oil but do understand surveyor's reports. They are provided by impartial experts and they risk their reputation and a potential negligence action if they breach their duties. I cannot see the CPR but imagine the detail is impressive. Equally (as in building surveyors which we all tend to understand) they are conservative in conclusions and valuations. On top of that Gaffney are a large, international company that is long established.

The valuations are most important. They won't go overboard that's for sure. As in residential surveyor's reports the biggest risk is not so much subsidence, leaky roof, damp etc... which are usually reasonably easy and cheap to correct but an action around valuation could cripple a small company. This is why surveyors always come in under the selling price. It is also why surveyor's professional indemnity is so high.

The CPR tells more than any company brochure can.

which company did the CPR?

E121 - thanks, I'm not at the level of yourself and matrix with computers. A good excuse not to read through it. Is the CPR in there somewhere?

E121, Matrix - The links don't work for me but I can access via the tablet the link that DD gave. Do your links provide different documentation to the DD link?

I get this message on the desktop using the link DD gave -

Exception occured in Disclaimer. Error Message:Input string was not in a correct format.

Hi Matrix - I couldn't access the link via the company link on my desktop but it worked fine on an Amazon Fire tablet. It does say on the link "You are advised to read this announcement and the Prospectus (once published) in its entirety etc...." so the link isn't the prospectus although it does explain it. It doesn't have the CPR either. Am I doing something wrong?

Just out of interest. If the share price doubles in (say) 6 months will the naysayers and conspiracists accuse AB of manipulating the shares for him and his family's benefit?

Cassius - I'm going by the number of trades and the amounts. Perhaps I should say irrelevant in respect of these. Until we get larger interests or knock out news (good or bad) I see the price as a wet finger in the air guess that tells us little.
Look at it another way - why isn't it moving? I'd say lack of interest is a factor. Much of the stock is lock up paper anyway with 92.5 % in the hands of ex bond holders. The remaining amount is too tiny for other institutions or speculators to get a worthwhile interest. I doubt c 5p is accurate. It's what the bond holders decide to do with the company and if there is any interest in it if it cannot become a going concern. We'll know eventually.

I was gonna put subject as reflection 4 because this stock never ceases to surprise, sometimes in a good way, and I read others posts and sleep on them. The next day my opinions are nudged and I'm either more defensive or looking forward to the open. Today I'm looking forward to the open and what analysts think about our future.
I've never held shares in a Lenigas company but know his style. He opines about 'death spiral financiers' and then has Rights Issues that are funded by anonymous 'high net worth individuals'. To me it seems that they get a heavily discounted allotment of shares and the construct is that they can then sell them in tranches to the basic detriment of LTH who are fed a diet of 'good news' from the companies he promotes. The only benefit I see is that the gravy train continues supported by evangelical LTH's. You might say this is bllks but Trump has had some success with something similar.
I only mention this because this isn't anywhere near what Enquest are doing and the recent midge attack may be because they scented a wounded company. They are wrong.
Och-Ziff are not anonymous or dsf's. BP doesn't deal with tiddlers or weaklings. The RI is for LTH's and a chance to get extra shares at a discount. The knee-jerk was Friday. RI's are often for companies that have had big expensive problems and just need cash to survive. These are often good prospects to short and the direction is usually downwards (in fact it has to be mathematically) and momentum can cause overshoot. We need cash to expand and grow. You often read of private start-ups that have called on share holders to invest more because of cash burn before profits. They can become unicorns (Uber) and it is not always a mark of shame to have a RI. Mind you, I'm not convinced about Tesla.
I'm happy to cough up for this one and TBF to the company they have given us first crack. That is an openness you don't receive from the likes of Lenigas companies because the only prospectus they worry about is the initial one. Secondly, we are not an AIM company and therefore subject to stiffer rules.

I'm not overly concerned because the share price has been irrelevant for several months imo. It's gone nowhere since April. My best shares have the quietest bulletin boards so I'd enjoy the peace. The pace of satellite take-up relies on a lot of things and I'd imagine discussions continue and contracts get negotiated. I prefer this to the RNS's during Williams time that were produced seemingly because an enquiry had been made. How many turned into decent orders?

I doubt (for example) that a new hotel has full bookings in the first months and also has to sort out the staff, restaurant, laundry etc.... We are no different. Be nice to have some news though.

Firstly L3's post 11.43 " But that is not a problem as long as ENQ finds a way to reduce cash outflow on finance charges and exceptional items (there are so many of them, that they are no longer exceptional) It did make me chuckle. I also liked this from Bob Davenport on a Kraken question "I'm not going to comment on specific commercial arrangements, but we have an arrangement in place to set targets on a monthly basis. And there's a sliding scale impact based on our achievement of those targets." Anybody clearer?

I appreciate the level of expertise and knowledge of posters here that far exceeds mine and sometimes clears up some questions so to avoid repeating these are general views of a lower standard but sometimes out of the mouths of babes etc..., here goes.

I cannot dowmload the prospectus but the Magnus CPR interests me. Who did it and why wasn't there one for the 25%? Or was there. I think it's dated 31 July 2018.
The NPV10 confuses me as at one stage you have AB say $500m for $125m and then there is $500m for $300m. Is it jumping around from IRR-NPV-DCF or is it answering the same question different ways and interchanging terminology? (I actually think they should use NPV8 as Jim Buckee used at Talisman).
OZ management are blue chip and as far away from mugs as you can get. They know the oil business well and as it looks like they haven't gouged Enquest. The interest rate tells us that (it's lower than existing debt). I read the transcript (thanks DD) and it is clear (to me) that Kraken had problems during the cold weather and rather than sort out water voidage they carried on pumping at a lower rate than anticipated, they had to. "The biggest issue we've had is we had to prioritize. After that period, we had to prioritize the production and rather than the water injections.".
We now know why they did this, to create a breathing space. They would have breached covenants and cash flow was priority. Could you imagine the fall out if we had lower revenue/production in H1? It appears that it hasn't caused long term damage but would have influenced bids for the 20% farm-out. The market would have been aware of this and I think this has been a lead weight on the sp this year. I think it was an act of defiance and confidence by Enquest to tell the bidders to sod off and get a temporary loan. A lot of posts have had a negative slant but there is an enormous amount of good stuff. I liked the small print that says "SVT reduction benefitting all shippers". They will pass savings on and hopefully increasing traffic. I still think they will become the go to company for decomm and end of life fields.

Next week will be interesting. I wonder how the analysts will read this. I imagine there were further chats after the meeting closed.

Be Lucky