Member Info for Sekforde

Well it looks like the Triton problems are finally behind us just as both gas and Brent prices surge forward. The company will easily make more than its market cap in the next 30 months. It has done some fantastic deals and is in a position to do a few more. Looking forward to the update.

I think we will have to wait till the results for 2025 are posted on 5th March 2026. But assuming $1.2bn FCF forecast I suspect we will see $400m on dividends, $400m on share buybacks and $400m on debt reduction. I am just not worried about the level of debt. It is really not large in view of the after tax margins and the low interest rates. The debt can be eliminated when the LLOG investment starts producing on its own around $1bn a year after 2028.

Automatic promotion to the FTSE 100 occurs when (not if!) Hbr becomes the 90th largest company by market cap. (We are currently 134) At today's close we would need a market cap of £4.55bn. After the new shares are issued, there will be 1.582 bn in circulation. So we have an adjusted market cap of £3.132 bn. A 50% increase to £3 a share would see us safely over the threshold assuming of course the present constituents of the FTSE do not also rise. It could easily happen. Happy days.

And also companies are always able to report net debt. I am not sure what you mean when you say the figures have not been received.

Oilviking. I am intrigued. Which of my calculations re Enquest are you referring to that are all wrong? I really relied upon Stevo's analysis and switched mainly to Serica (going well) and Harbour (less well.)

Harbour will create in March 175m new shares as part of the consideration for LLOG. At current prices those are worth (191 x 1.34 x 175m) which is $447m. So I am not sure where $700m - 1000m comes from. But shares are not the same as debt anyway.

How do you arrive at $55 a barrel? What figures have you used for opex, capex, leasing, finance, tax, decommissioning?

Yes I think there is a good chance Enquest will go under. The net debt of Harbour is presently $4.2bn not $7bn. Post acquisition of LLOG it will rise to just over $6bn with an average interest rate of around 6%. The minimum FCF for Harbour in 2026 will be $1.2bn using the forward curves. Enquest will have FCF of below zero using the current forward curves. It requires around $65 brent to break even. Its failure to reveal its net debt position in its latest update is alarming. It will survive only if commodity prices improve. It will not be able to meet its liabilities if prices do not improve. Its debt is large and expensive to service - around 10% . It has horrendous leasing costs. It must find $60 per annum for decommissioning costs. Enquest is now just a call option on oil prices.

Or more particularly look at Goldman's Sachs forecast for 2025 in January 2025 - brent would average $76 for the year. Out by $8. Huge. Forecasts absolutely worthless.

Dan 222 I think it is not enough simply to look at production. BP does have its refining and retail business as well. The real comparison is to look at forward FCF. Being much larger there are loads of forecasts around for BP. The consensus is that it will make around $10bn a year in FCF for 2026 2027 and 2028. Unfortunately being much smaller there are no proper forecasts for HBR. But a conservative esimation would be around $1.2bn for the years 2026 2027 and 2028. So roughly one eigth of BP. BP has a market cap of just under $90bn. HBR's (after the issue issue of the 175m of new shares) is just $4bn. BP is itself very undervalued compared to the US majors. A fair valuation of HBR against BP would be around 11bn. In fact may be more is justified. HBR benefits from much greater organic growth opportunies in the gulf of Mexico and elsewhere which should be reflected in rather higher than suggested FCF for 2027 and 2028.

Well who would have thought it? Since HBR did the LLOG and Waldorf deal oil prices have risen by almost $4 a barrel. Given the promised (Nigel Hearne) compound growth rate of 25% per annum on LLOG current 2026 production should now be 34k x 125/100 or 42,500. In 2026 the old portfolio, allowing for some limited natural decline, we should produce about 460k per annum. So including the Waldorf 20k we should now be producing 522k boe per annum.

Neversell you are missing nothing. The $100ms of dollars of tax losses have a net present value of around $900m. Of course we have to spend $350m decommissioning in the distant future - so kicked far into the long long grass of County Donegal.

Navyrret of course well spotted. My error. £3.50 it is.

And Stevo to your point on capex, I would slash that mightily this year other than for really short term quick payback projects where the effective tax rate is below 40%. Mexico can be slow walked whilst LLOG is accelerated. There will come a time when the apparent surplus of world production is corrected and prices start to rise. But for the time being $60 Brent is fine. We can live with it.

You can make a case that we over paid for Wintershall Dea. But I just do not think we did. We mainly paid for it in our own shares which were given an artificial valuation of £3.60. The cash element was said to be $2.15bn but even that was largely paid for by "adjustments" since the commencement date of the deal and Wintershall's own cash. About $1bn was real money. We did take on the Wintershall bonds but these were largely low interest and quite long dated. It was largely due to Wintershall that we collected $1.36bn (more than covering the cash element) in FCF in the 1st six months of 2025. And we have also (largely due to Wintershall) magically created an extra $400m from the first two December deals (to say nothing of the $900m acquired tax losses.) Finally we were obliged to hedge forward and thereby we locked in the then high prices for both oil and gas. So we are sitting on a marvellous cash cow which in the currency that matters (cash) has been paid for in cash that has already been returned. Happy days when Mr Market comes to his senses.

Good work Neversellshell. We have picked up a gem with huge potential in a very low tax jurisdiction. OK we need to pay an extra $120m a year in interest on the $2bn of additional debt but that is chump change by comparison with the cash inflows. Incidentally the cash component payable in March 2026 will be much less than $2.7bn because the deal is structured so that the effective date is 1st January 2025 which means that there will be a substantial reduction to take account of earnings in the 15 months up to the end of March.

Y11 I have looked in vain. What do calculate FCF to be in the years 2026 to 2030 as a result of the LLOG purchase using the forward curve prices for oil and using the $12 stated opex, the $300m a year stated capex, 24% tax, and the projected 25% compound production growth rate (Nigel Hearne's presentation remarks) from 1st half of 2025?

Y11. Opex is $12 a barrel. So why is $70 required to make it work? Have you done the maths on any of this? Do you say the board has miscalculated when it suggests FCF will rise by 60% as a result of the purchase based on the current forward curves?

Yes it would still have the debt. But the debt (about $6bn) would be easily serviceable from the existing portfolio. And the company would not after paying a dividend of 150p be worth nothing at all since it would still remain capable of at least paying an annual dividend of $380m a year even with the additional debt.

Anything is possible. But HBR at 150p would imply a valuation for the entire company of just $3bn. Given the LLOG investment could easily be sold to Shell (who wanted it very badly) for more than that, 150p just does not look feasible without a huge fall in oil and gas prices. Nothing in fact to prevent HBR selling to Shell in April 2026 for at least $3bn and paying a special dividend of 150p to each shareholder!

I am afraid I definitely do not think you learn any thing from a chart. If a chart could predict anything then investing would be a lot easier. Past movement is down to many factors particular commodity prices which jump around in response to global events which are themselves unpredictable.

Stupmy. I do not disagree. Everyone adopts their own approach to investing. But there truly is only one rational approach which is to attempt to calculate and then place a value on FCF over time. I have not read any posts (part from one from STEVO) where any one has even attempted to produce hard numbers for 2026 or 2027 or 2028. Yet future opex, capex, production volumes, the hedging book, tax rates are all known quantities. (Y11 for example produces these completely arbitrary predictions based on nothing but tea leaves. He may as well toss a coin.) If the market as a whole does not really interest itself in the relevant numbers then it is true that the sp can move all over the place, until the results are published or the company starts producing its own forecasts. But of course if for example FCF were to be more than $1.5bn in 2026, 2027, 2028, 2029 and 2030 then a current post dilution valuation of $4bn is just plain wrong and, whilst it may remain plain wrong for a while, it cannot remain wrong for five years. The effect of buying say $400m of the company's shares could not happen without eventually driving up the price . This has been an awful investment so far. Many just give up after this amount of anguish and torture. But each and every decision made by the board has been highly rational and the three deals in December look brilliant. So I remain absolutely convinced that better times are coming and am looking to buy even more ahead of the trading update. There are two related facts that the trading update will reveal (i) production very close to 475k boe a day (ii) FCF significantly above the forecast $1bn. I am hoping but not predicting that that is the start of the long journey to sanity.