Member Info for Sekforde

The $77 come from their latest viability report. The tax rate for Enquest is only 35%.

The finances are far too tight at the moment to contemplate share buybacks. We need to average $77 per barrel in 2023 to stay withing our covenants. After today's falls that is not certain. They need to do a merger with harbour. That is the answer.

Guys honestly stop worrying about Labour or even the present EPL. Enquest will pay tax at 35% on its profits until at least 2030. FCF over the next 30 months is more than its market cap. $360M is an absolute joke. And all this is assuming no takeover bid.

Terry if you look at my earlier post, you will see my calculations which result in a FCF of above $100m for this year and include the repayment of the October bond. Stevo (who is a genuine expert) has done a similar exercise elsewhere. I do assume 45000 a day average and $79 average Brent. Next year there is no bond to pay and the deferred consideration costs fall substantially. In 25 leasing costs fall off a cliff. So it is quite possible to envisage $200m a year FCF for 24, 25 and 26 with an effective tax rate of 35%. So we should not have a market cap of around $360m. The time to buy is when everyone has given up.

The modest debt reduction recorded in the first three months will really just reflect timing of opex and capex payments. The underlying rate of decline will have been much faster than the $39 recorded. We need to average for the year $77 a barrel to meet our contractual obligations which include paying down the October bond. So far this year Brent has averaged around $81 and a disproportionate amount of production was secured in the first (almost) five months of the year. There is one good reason to buy and that is that these shares are scandalously cheap if you assume merely that Brent rises with the general rate of inflation over the next 24 months.

K I did mean $600m. But I would prefer a merger with new shares being issued.

And one little interesting point was the sheer scale of FCF in the first three months of this year. $700M. Admittedly not sustainable for the whole year but a glimpse at the cash generating potential of a company worth less than $2.4bn.

At the rusk of boring everyone senseless (and expecting to receive several filtered green lines which gives me some satisfaction), with 813,209,051 shares left and at 236p a share, and with the promised $200m a year maintained we have a forward dividend yield of 8.45%. We have a true dividend yield of 16.9% if you include the $200m a year share buyback program. If like me you are into property, then you will know that in London the gross yields are less than 5% and there is plenty of risk and hassle involved to get less than 5%. Is 16.8% sustainable? Of course it is. The company should always be able to produce a FCF of at least $400m a year. The key reason is the capex of $1bn every year, or $800m a year if you exclude decommissioning. That billion spent every year should ultimately come back to shareholders in one form or other. FCF of $400m a year is very conservative against a background of that level of investment. What a terrible ordeal we have had but all could come right in the end.

AB may value independence plus his $2m salary (a snip compared to LC's $6m plus)but he has to act in the best interest of the company's shareholders. I would envisage something like a 5 to 1 split of new shares in the combined company, the expensive Enquest debt being paid off using Harbour's cash and superior borrowing terms, at least $100m a year from synergy, and up to a billion saved in tax in 2024/2025. All this is achievable whilst continuing to pivot towards other lower taxing jurisdictions. Another model would be a simple purchase of Enquest for about $600M in cash. I think it would have to be done by means of an agreement rather than any form of hostile takeover. There is a model and it is called Premier Oil. The difference is that Premier was bust Enquest is not, and because of its tax position is extremely attractive to Harbour.

Dumbly you may be right. But the tax losses do keep the overall tax at 35% rather than 75% and that gives Enquest a great advantage.

Stevo I would settle for $100m FCF for 2023 and $200m for 2024 against a present market cap of $360M. You are right to highlight how sensitive the company is to price and production levels. I see 2023 as a year which we have to get through without breaching any covenant. But most important of all is to use the tax losses. My second question was about "leveraging" these in 2023 and 2024 and was answered very positively. As was stated these are in fact $3.5bn and not $2,5bn and have a potential present value of over $1bn if used now or in short order. I just cannot understand why Harbour and Enquest do not merge which will achieve this objective in the most straightforward way and greatly enhance the value of both companies.

I do not think so. I do not think there is any manipulation. The sp seems to track Brent and Gas. The shorters have made lot of money on the back of the EPL and the much lower oil and especially gas prices. But their positions are getting larger every day as the buybacks continue and one day they will have to close them. May be hard to do in a thin market especially if sentiment changes and everyone wants to keep their shares. I expect to hear about M and A soon. Enquest is a steal and a perfect fit. Keep the faith.

There was an absolutely excoriating article in the Times this morning saying how completely misconceived the EPL is and that ministers privately acknowledge the same. I am very optimistic that this will al come right and soon. I think the EPL will be modified, Labour will change its stance, there will be some excellent M and A very soon to use the $3.5bn of tax losses.

I sent two questions into the April presentation both of which were answered. The first was on FCF for 23 and 24. The question was not answered directly but the following were listed as outgoings for 2023: Opex $425M Capex $160M Decommissioning $60m Golden eagle payment $50m BP payment $80m. October bond payment $135 and EPL $35M which comes to $935M. What appears to have been omitted is debt interest payments which I will estimate at $70M (10% of net debt) and lease payments of $152m. This all comes to a grand total of $1167m. Allowing for slightly disadvantageous hedging on some production, I think we have achieved around $79 a barrel so far this year. I am going to assume that that is achievable for the rest of the year on average we are very slightly below that at the moment but it is reasonable to assume some very modest increase in the second half of the year. I am also going to assume based on production for the first four months that production for the year averages 45,000 a day (towards the upper end of the range forecast). This would give us receipts of 45000 x 79 x 365 or $1297.575 M. This would mean a FCF of $130M for 2023. For 2024 the position should be much better because absent is the bond repayment of $135M and contingent payments fall by around $65M and interest payment should also fall by about $20m. Even allowing for some modest fall in production, I do think we could see return to shareholders in 2024 of the order of $100m mainly in the form of share buybacks. Very difficult to understand a market cap of $370M.

In an interview given in September 2022 (on you tube) AB stated that £4bn had been invested in the last decade. Incredible that the market cap should be just over £300M. Either the investments have been terrible or the market has got it all wrong.

Whisper who dares?

Christopher Robin is saying his prayers.

We could soon be at $85 dollars again and then everything looks very different.

Windfall tax is not really the issue for Enquest. Its effective tax rate is just 35% till the end of the decade. And we are ok on the covenants with Brent recovering to above $77 a barrel. But the key thing is to do a deal very soon that bring forward the use of the tax losses. The obvious solution is a tie up with cash rich Harbour. Plenty of scope for Enquest to be (again) a $1bn company. But it requires ingenuity.

NAV-Mike. Yes of course you are right.

Outofideas. "If oil (were) to drop to $60" we would not be paying "75% tax on the $45 dollar profit". The $15 refers only to opex. You have to include capex, abex, finance cost, leasing costs before you arrive at profit. If only profit were $45 a barrel I would be happy to pay tax at 75%! May be sell your shares if you think the dividend of $200m a year is not sustainable or you think that the buybacks are a bad idea. I think myself that both will continue and I am happy to see the company take out shares at around £2.40.

Nav Mike. Where did your $64.4M come from? if they had spent $64.4M on 20,376,079 shares then the average price paid would have been 64,400,000 / 20,376,079 or £3.16. The SP has been well below this level since March.