Member Info for Sekforde

Each day, at present brent prices, Enquest has negative FCF of around $350k. It will not be able to either pay or re-finance its debts in early 2027 when they become due without a sharp rebound of oil and gas prices. The shares have no real intrinsic value now. The only hope is a tie up with Serica which will enable the latter to exploit Enquest's main asset - its tax losses. But Serica would expect such a deal to be on a ratio of 1 to 10 shares or something of that order. There is no chance that the budget will offer anything significant to help.

Mommur do you understand the flaring issue problem reported? Is that something likely to be fixable soon? The company's line has always been that Triton is good into the 2030s and that the problems result from an inadequate attention to maintenance. But that is becoming a harder line to hold.

So there is not much to disagree about. If you concede that with the tax overlay then $70 Brent is required to turn FCF positive then at $62 Brent the company is losing serious money. None of the optimists has addressed the question of how the maturing debt is to be refinanced and on what terms. Even if similar high rates of interest could be negotiated there are usually all manner of fees to pay. I am sorry to say it looks really dismal.

Linda Cook's explanation for Harbour ditching its Vietnam interests was that it was producing at the highest cost per barrel in the Wintershall Dea portfolio. Payment was made for that in July so again that reduces Enquest's available cash. As Brent has steadily fallen Enquest may have been forced to hedge more which may have helped somewhat. It did survive 2020 with much higher levels of debt. Budget all important.

Hunbah. This is insane. I have just posted pure facts and explained why AT $62 BRENT and NO CHANGE to EPL Enquest will have negative FCF. Stevo thinks Enquest will survive at these levels. I think it will go under. I may be wrong. But is there anything offensive about expressing a modest view and informing a well informed board what you think?

Nothing twisted about my numbers and I accept that there was a drop in leasing costs from April. The EPL is set to last until the end of 2029 and the UK Government cannot afford to lose any revenue from an unpopular sector so I do not hold out much hope there. But FCF will be negative for the full year and negative for 2026 IF Brent remains at the current levels and the EPL remains in place. The tax losses help but not enough to turn FCF positive at current prices.

FCF was $32.7m in the 1st half. However that was at a realised price of $71 per barrel. $104m EPL was deferred into the 2nd half. Had that been paid then FCF would have been negative in the 1st half despite brent averaging $9 higher than it is now. I do think it perhaps has value as a call option. Of course a return to $90 Brent would send the price soaring to may be 35p.

Krakenoil. I think you sound a tad desperate and quite unable to provide anything to show Enquest can generate FCF with Brent at $62. Stevo is indeed a smart guy and I sold my Enquest because of his detailed analysis which turned out to be dead right. You would do well to have a look at it before you descend into your vulgar abuse.

We are hugely hedged at high prices to the end of 2026. And there is some ok hedging in 2027. But we have to hedge more. We can still make money at $60 Brent and current UK and European gas prices. But the effect of low commodity prices is an increase in demand and an uptick in economic activity which turns the tanker round.

Fog. No infatuation just an observation. Yield is an important metric when looking for value. I am more interested in FCF and am looking forward to the board's projections for 2026 given the plunge in Brent. I am still just about above water overall on my positions in Serica and Harbour having bailed on Enquest. As night follows day that company will not survive beyond 2026 without a substantial and unlikely oil rebound. It just cannot service its debt or meet its decommissioning liabilities given the current and forward price of Brent. It is finished.

At the end of the current share buyback there will be 1.4bn ordinary shares remaining. Market cap therefore is therefore 1.4bn x 198.5 x 1.3275 = $3.689bn. Dividend is $380m. 380/3689 = 10.3%. Even with Brent at $62 and gas at 80p a therm that is highly sustainable. No other company manages anything like this yield. I would however like to see capex slashed for 2026 to less than $1.5bn.

Stupmy. The real expert is Stevo 12. I have followed and checked his analysis of Enquest over the years. He has proved that Enquest needs around $70 Brent to breakeven in terms of FCF. Because it cannot deduct its high interest on bonds when calculating the EPL, it will suffer seriously negative FCF if Brent remains at the current level. This is all despite its huge tax advantage. It seemed to get a good deal when it purchased a few assets in Vietnam from Harbour but even that deal now looks quite expensive and has eaten up precious cash. I used to have over 4m shares and sold them all at a huge loss and switched to the much safer and lower geared Serica Energy and Harbour. I hope that Enquest find a way out. It should have done a deal with Serica when it could. That ship has sailed.

Assuming that with the completion of the buyback at the end of the year there will be 1.4 bn shares, the forward dividend yield has just hit 10% (almost) 1,400.000,000 x 203p x 1.34 = $3.8082 bn (market cap) Dividend $380m. $380m/$3808m = 9.97%. And paying that dividend is consistent with maintaining the buybacks at $100m per half annum and paying down debt. The buybacks (I contemplate) amount to eliminating more than 5% of the company's share capital per annum at today's level. In effect the real dividend is now above 15% as anyone is free to sell shares into the buyback and maintain his stake in the company at the same percentage. One day this insanity will end.

Well it does prove one of two things (i) we paid too much for Wintershall or (ii) the market is just insane. I think the latter. I think we got a bargain from a desperate seller and the merger has been a dream. But people seem to prefer to pay insane sums to the ponsi scheme that is Tesla or the ponsi scheme that is Bitcoin. So far they have done well and value investors have been trounced. Our time will come.

Or another thing BASF might do is buy the company. The cash element they received just over a year ago is more than enough to buy the 53.5% they do not own at current prices. The net effect would be is they would acquire the Wintershall which they used to own for the cash already received plus the old Harbour for zero. And that is after receiving a couple of juicy dividends and interest on the money they received and of course about $15m in share sales.

By selling in parallel with the company's buying they figure they are keeping the same stake in the company. It is like an extra dividend on top of the near 10% pure dividend yield. Of course the very best time for us to invest or stay invested is when the whole world is sick of a share sliding down for no apparent reason. We have to remind ourselves that the opex costs are so low that we can cope with a further slump in oil and gas. But I would trim capex to $1.5bn for next year and only pursue the absolute quick kill investments. We should also dump everything that is outside Norway UK Mexico and Argentina. Four jurisdictions is enough for 67 year old LC to be coping with.

Nacho99. Not quite. The company is buying on the exchange. So BASF must be doing the same.

Neversellshell. You missed nothing. It was a very boring disappointing on line meeting which lasted 30 minutes. It was Elizabeth Brooks rattling through stuff we all knew already. The questions were extremely tame and answered in the most general way. The only new information was (i) that BASF were already selling (ii) the CAPEX in the Uk planned for 2026 is only $500m down from $700m for this year and $1000 in 2024. So what better evidence of the foolishness of the current UK policy?

At least it means they will never become a majority shareholder. Also I did not think they would be prepared to sell at these levels. This should mean that they are susceptible to an offer for a decent chunk at current prices. I wish we would do that. It makes sense. Lose 5% interest on cash save 9.75% dividend. Lovely.

On BASF Brooks said that they are maintaining their holding at 46.5%. To do that they will have to sell 46.5% of whatever is bought back by Harbour. And on dividends the policy is $455m a year of which $75 is paid on the non voting shares. So the dividend per share will steadily rise as the number of share is reduced.