Member Info for Sekforde

Yes. That was the big headline in the Times this morning. The trouble is that I suspect one way or the other Russia will sell its oil and evade sanctions. It can always increase the discount offered and tempt back India and China. I think this spike will be short lived. No matter Habour is well hedged and can cope with $60 Brent.

And what is your answer to Stupmy's question? What price do you intend to buy back "later today"? 220p?

I also think selling before the trading update is a mistake. I am expecting three announcements which the market as whole (as opposed to the 1% who read these posts) may not expect: 1. Production right at the top of the forecast range 2. FCF for 2025 at least $1.1bn (as opposed to $1bn) 3. Capex lowered to $1.5bn for 2026. I am also beginning to be more hopeful about the budget. So best to wait until the end of November at least.

Can't see how anyone could think 209p is time to buy and 216p time to sell. Sounds like random decision making. Harbour chronically undervalued at 219p, Snatching tiny profits and forfeiting the spread and paying the dealing costs does not to me make much sense.

I take all forecasts about oil with a huge digger of salt. Not long ago I think JP Morgan were predicting $100 Brent. Low prices are cured by a reduction in supply and some increase in demand - particularly highly price sensitive countries such as India. However, it is very odd that Trump threatening two Russian companies forces up Brent by over $4 just like that. Just cannot see the mechanism for stopping that oil getting into the market. So I would take $63.60 for all unhedged production for 2026 and 2027. Then the bonds can probably be refinanced and all is fine.

IEA!

But what if the OEA is right? Also I wonder how sanctioning two Russian companies will work. They both produce in Russia. How does that oil not get to China or India? I fear that this spike today will not last. Hedge now and it does not matter.

Neversellshell. Keep the faith. There is a trading update coming. This will be freakishly good! The buybacks are beginning to work wonders any way.

Yes I would. The first responsibility of the board is to ensure the company survives. By hedging at $65 and then cutting costs that will happen. If the price of brent falls back to $60 it may not. At $55 it certainly will not. There have been several spikes such as when Israel struck Iran but they have not lasted. And at the moment world production is higher than world consumption by at least two million barrels a day.

Hunbah I agree that nothing is set in stone and I never suggested otherwise. When spot prices rise then so do all the forward prices and vice versa. If you are making a judgment call on valuation you have to use the current forward curve which may of course rise or fall. It has risen sharply today thanks to Trump's threats and perhaps also other factors. No one can predict Trump. I do however think that at $60 Brent for 2026 Enquest would have been in real trouble. But it can I think just about cope with Brent at $65 and Gas at 82p a therm. If I were AB I would hedge forward now and be sure of the company's survival rather than gamble that prices may rise to $80. If is all still looking very tight given a consensus that true cost per barrel is around $70.

Krakenoil. Just filter my posts if they trigger you so much.

Have closed my small short at a loss! $65 Brent makes a huge difference to Enquest's prospects of survival. All the forward prices have of course risen as well. May not last as Trump often fails to follow through on his threats - TACO. I still think FCF will be negative in 2025 but if Enquest cuts OPEX and CAPEX it can make some headway in 2026. Craig Baxter is convinced that EPL will be reformed and if he is right that will help.

At £2.40 the dividend yield would be 8%. It would be still way more than any of the oil majors. Bp for example is currently around 5.6%. It has a proportionately similar level of debt. In contrast to Harbour, BP lacks a clear growth strategy. Harbour is unquestionably better value. Could easily be worth $15bn by the end of the decade if Mexico and Argentina deliver. Update should be sensational. Two weeks to wait.

Neversellshell It can easily afford not only to pay the current dividend but also buy more shares and pay down debt. The dividend (including the non voting shares) is less than 50% of the FCF. This year I think FCF will be at least $1.1bn. The dividend is just $455m (if you include the non-voting shares) Buybacks will be $100m. Next year is the golden goose. We will see the effects of (i) costs savings (ii) lower capex (iii) very smart hedging (iv) lower interest payments. I see $1.3bn as being possible. £2.15 today as a result of Brent rising and £3 by March 2026 as the market wakes up.

The Wintershall Dea deal was clever. Harbour paid the cash element essentially with their own money. And then they gave them less than 50% of the combined company as shares. There is plenty of gearing if you think oil prices will recover. But if not then we can manage the low interest debt until they do.

Enquest is not the same as other companies in relation to its debt. It is all due for refinance in 2027 which in practical terms means 2026. And the gross debt is huge in relation to the current market cap. The interest rate already is very punishing - 10% plus. It is bound to be worse - even if the bond holders will play ball at all. And there will also be large fees to be paid. Enquest at just 10p is potentially very valuable call option. It does depend on at least $75 Brent and no Triton like mishaps. Could happen. But I think quite unlikely.

I am all for numbers Hunbah. I am interested in proper modelling at $60 Brent and 80p a therm gas for 2026 and for both Serica and Enquest. It is high time Auctus Advisers provided analysis at $60 Brent rather than $70 if they want to be at all helpful. They will however do that when the BP deal is finalised.

Hunbah I agree at $80 Enquest is worth at least 30p or 40p a share. At that level it makes serious money and much of it is protected from tax by its past losses. But you have to use the forward graph when making an assessment of the future. Prices could rise to $80 or fall to $40 but the forward graph is the market's consensus future prices. If for the time being Enquest is losing $350,000 a day FCF then you are gambling on something that seems unlikely to happen given the apparent glut of oil developing. Enquest just cannot make much use of all its tax losses when it just cannot generate a profit.

Oil Viking, If the BP deal goes through (and it is subject to certain pre-emption rights) the net debt of Serica will rise BUT by the end of 2026 Serica will have very little net debt even at $60 brent. This is to do with the FCF it will generate in 2026. If it does not do the BP deal then it will end 2026 with net cash of around $200m. I do however make the assumption that Triton will not fail yet again. In contradistinction Enquest just cannot generate any FCF unless Brent recovers to $70 or thereabouts. Romaron I think that even this government must be horrified by the loss of jobs and investment. But they are losing support from their left wing to the Green party and just cannot be seen to be bailing out fossil fuel companies. I think that the Reform Party will be elected in 2029 and will pursue different policies but by then it will too late. I was invested very heavily in Enquest and hated Stevo's analysis of its FCF at $70 Brent and for a while pushed back. He is an accountant and really had researched and understood the issue properly and forecast FCF for 2024 very accurately. The non deductibility of interest payments when calculating EPL is the real killer. We have a situation where a well run company is losing money every day and yet still having to pay insane levels of tax. But this is I am afraid is a reason to sell up and not imagine that there is any real hope left.

Serica has had production issues at Triton which appear to have been fixed. But it has the advantage of having no net debt. It is able to generate tremendous FCF in 2026 - even at $61 Brent. If you concede that FCF for Enquest is presently negative $350k a day (which it is) I just do not see how it can survive for long. The money will just run out. But all very different if prices return to something like $80 a barrel.