Member Info for Sekforde

Not really worried about 2029. We will be a completely different company by then. No debt. Still with tax losses to use. High earnings from carbon capture. Higher oil and gas production as Bressay delivers. Nothing to worry about. Stolen Labour's clothes. Election result not in doubt.

3dart, I agree. The target of 0.5 debt to EBITDA is really unimportant. But it implies a very low actual level of indebtedness and I think we have reached or almost reached it. Some cash is required to be kept in segregated accounts. But any that is not should be used to either pay down expensive debt or distributed by share buybacks. I am sure the company knows that and will use its capital efficiently.

Tommo, the capex covers the drilling etc. FCF is at the moment just being used to pay down debt. I think it is time to start using at least 30% of FCF to buy shares. The debt is quite expensive to service. But the shares are so cheap in terms of forward FCF to market cap that I now think we should pay down the debt at a slower rate. Even spending around $100m a year on share buybacks is consistent with a steady reduction of debt. Quite obviously the market cap cannot stay at $325m with $100m being spent each year on buybacks. AB has not bought any more shares because he has a huge stake already and has made huge losses. He may or may not have spare funds. But there comes a point when you think "I have enough already no matter how much of a bargain they are". Good news I am sure is coming this month. Stay positive with Brent above $83 and money pouring in.

A mixture of buybacks and dividends is inefficient. Dividends are taxed. Buybacks are not. We do not need more investors coming in if the company is buying its own shares. Some large investors however will anticipate the effect of the buybacks and buy any way.

The market cap is now about $327m - less than likely FCF for 2025. With brent at $83 the company could easily afford to commence immediately a programme of $60m per annum in buybacks. Afterall the gross additional income arising from Brent being $83 rather than say $78 is more than $60m - even allowing for the additional payments to BP. Or looked at another way, we paid $50m for the contingent payment on golden eagle in 2023 yet we paid off $236m in debt in a year when Brent prices realised were lower. There are no such contingent payments in the future. Paying to long suffering investors $60m this year in buybacks is consistent with continued rapid deleveraging. The buybacks could in fact be increased in 2025 to more like $120m. Again this is consistent with continued deleveraging. Of course the effect would be to drive up the price quite rapidly as most investors are long term holders and would not be tempted to sell at 20p or 25p. I strongly favour buybacks over dividends. They are simple to do and more tax efficient than paying a taxable dividend. The formal results and announcement or buybacks should spell out to the market once and for all that these shares are grossly undervalued.

Do not worry about either. None has proposed to take away our tax losses and both parties recognise that oil and gas are needed for "decades to come". But Enquest will be making hundreds of millions from carbon capture in 10 years time and will no longer attract the present level of hatred.

Have been tracking Brent. At $83 money is pouring in every day. Not long before debt is truly under control and the company starts buying shares. This will be announced in three weeks.

Romaron if they have said that, then it does not look like the company buying. The company has in fact bought bonds in the market before and I do not think it needs any special shareholder resolution to do that. The RBL is expensive in terms of interest and so it would make sense to keep paying it down unless of course a complete bargain with a 12 months payback emerges.

I suspect that it is the company buying back its bonds at a discount to the price payable on maturity.

The issue is whether you can look at a graph and make a prediction from the graph itself as to what will happen next. You can't. The graph tells you nothing about future valuation by the market. It simply represents an historical record of how the market valued a share or commodity. The sort of claims that I think are silly are "now we have broken 14p we will go to 15.8p". Or "now we have fallen to 11p the next stop is 8.6p".

Stupmy I am sure all participants in the market look for value and movement is not random.

However, the claim that that any guidance at all can be gleaned from past movements is false. There is absolutely no serious academic research that supports this approach to investing. If it were otherwise a computer programme could be developed to make buy and sell decisions based on graphs and would regularly out perform. No such programme exists.

I do not think graphs of past performance are any use at at all in determining future prices of shares or anything else. It is no significance at all what the 200 day moving average was or is. What matters it the market's perception of future FCF and the likelihood and scale of share buybacks or dividends. The single most important factor is the price of Brent and it is anyone's guess what that will do.

Well Stevo you have proved right in switching to the bonds and keeping stakes in the majors as well. I do not know how many investors or potential investors follow this board or your prescient comments. But if you are right about FCF for 2025 being significantly higher than the entire current market cap (and I think you are) then you may not get the chance to twist at these levels. It is incredibly unusual for a company to trade at a forward PE of 1 or less. To my certain knowledge the board is working on several deals to accelerate the use of the tax losses. I do not of course know the details. But these could be announced at any time and could be transformative of value and market perception of value with immediate effect. The other factor is Brent. I suggested you did some modelling at $80 for 2024 and you kindly obliged. But it is now at almost $83. That is quite a bit higher than when AB was purchasing at 21p in December 2022.

Stevo you say the company estimated its EPL for the first half of 2023 at $76m. I cannot find that estimate. Where is it? Thanks for your analysis for 2024. I see a clever strategy being pursued. Heavy capex is being made in 2024 to take advantage of the present capital allowances. In 2025 we should enjoy (i) lower capex; (ii) lower opex (iii) lower interest (iv)lower leasing costs (v) lower epl (vi) higher production. Your calculation of EBITDA for 2023 at $800m means that with debt at $481m as of 31st December and the $44m paid for Bressay/EP in January 2024, we are already at or very close indeed to the fabled ratio of 0.5 debt to ebitda. I do not know what the FCF has been for the first seven weeks of this year but it may not be far off, $37m which the sum required to reach a net debt of $400m. Happy Days.

Even if you deduct the $40m it is still a reduction of more than $60m in 2 months.

I was so astonished by the net debt position that I began to wonder if in fact it included the $44m paid for the 15% stake for Bressay/Enquest Producer and sought reassurance: Here is the reply:

"Good morning D....

Many thanks for your feed back, it is much appreciated.

You are correct that the cash impact of the Bressay/Enquest Producer FPSO farm-down was realised in January 2024, with the net debt being neutral in terms terms of our 2023 out-turn of $481m."

In response to my whinging about the absence of a net debt figure for January 2024,

"On the net debt figure at 31 January, we provided key component updates ...to help guide the reasonable investor to a view of net debt. We will provide a further update at the end of March alongside our 2023 results and, as we have noted in our previous discussions, monthly net debt movements can be impacted by working capital, given that a single cargo can generate $50m."

What we do know is that net debt has come down from $592m on 30th June 2023 to $481m AND we have paid during that half the Eagle contingency and the EPL which comes to a further $110m. It all looks perfectly possible that the debt will come down by a similar amount in the first six months of 2024 PLUS the $44m from the 15% deal. A $250m reduction in net debt by the end of June 2024! And this is all in the context of our heading to 2025 in which year there will be a collapsing of interest and leasing costs. Even after today's rise we are worth just $312m.

Salman Malik is speaking to 400 of the great and the good of Scotland tonight.

Stevo, I look forward to your analysis this evening. You have the numbers for capex opex and decom for 2024 and I think you have previously worked out the leasing and finance costs. May be assume 43000 barrels a day and an average realised Brent of $80? It would be good if you could approximate the EPL in October 24.

A net debt of $481m without including the proceeds from the sale of 15% in Bressay and Enquest Producer ($44m up front) implies a true net debt at $437m as of the end of December 2023. Assuming further reductions in January and the first half of February, we should now be about $400m net debt. This is staggeringly good progress. The confirmation of maintained production and a clearly signalled golden year for both production and costs in 2025 is just excellent.

If we pay $150m in tax for 6 years we will be retaining $200m in cash for 6 years. That is $1.2bn against a market cap of less than $300m. Tomorrow will be good. There is 19 minutes left in the trading day.

Net Debt 31st December 2023 $480m. Net debt 31st January 2024 $460M. Guidance 42,000 - 46000 boe per day. Capex: $200m. Decom $65m. Opex $420m. EPL $120m (October 2024.)