Member Info for Sipp10

I suspect Aloj is likely right. My guess is a deal was done with BP in relation to Foinaven. Then Sunak put his foot in it and both parties are trying to work out the costs adjustments in relation to it. As this Government has not got a clue as to what it is doing, the accountants are still unable to crunch the figures. This will give a minimum 3 months delay. The weather window and daylight hours will be closing which might delay by a total of 9 months or more. The good news for Enquest is that what ever deal is eventually done it will be at a better price to us than it would have been if concluded by 25 05 2022

I have been away with no wifi-bliss- but have now read the posts since the AGM. The reason I bought into Enquest was that from the publication of the 2018 figures with debt at £1.95Bn it was all about getting debt down. The 1.71 Bn shares were then at 19p valuing the company at £325m and I reasoned that without debt the company should be worth £2.275Bn or £1.33 a share. I came on board to se a gradual rise over the period to October 2023 or May 2024 when I calculated with production at 67K BOEPD we would be debt free with relatively stable oil prices. Then comes covid and Brent is close to zero. less profitable wells closed and production reduced to circa 50 BOEPD. On the basis of decline in production the company worth £2.275Bn is worth £1.75Bn the debt would have been about £1.75bn. The share as at April 2020 which went to 9p should have been worthless. AB steered the ship magnificently at that time. We survived.
At the end of H1 2022 net debt should be down to around £850m? Which for a company debt free valued at £1.75Bn means Enquest's value should be circa £900m now. The rights issue means there are now 1.9Bn shares which gives a share value presently of 47p.
This is an arbitrary calculation in that who is to say the shares had a value of 19 p in April 2019?
Until the windfall tax the shares were heading towards 47p. The windfall tax at worst only effects the last 7 months production in this financial year. Enquest will be able to set off 91% due to capex.If the profit this year is £700.00m then the tax will be at worst £37m which I think AB mentioned at around £40m?
The market has over reacted.
AB turns 60 in November 2023 he has alluded to dividends about then, my fag packet calculation 3 years ago was May 2024. If we can reach a 6p dividend in November 2023 then based on a 6% return the shares should be at £1.00.Over 17 months from a share price of 25p today to £1.00 in November 2023 the shares need to rise by 4.41p a month. A smooth straight line growth on this basis would be lovely.
As the last month has shown the real world is never like this. It will follow a saw-tooth wave form. In the case of Enquest it is a sore-tooth wave form!
The 60p party will come. Our tax losses will be becoming useful.

I disagree with mrc. Conocco relinquished its license 30 years ago. Due to the heavy nature of the oil it drill attempts failed. Kraken nearly broke us and this could do the same. This to my mind, and it must be to other peoples minds, after all Bentley may have 900m barrels of recoverable oil, it was discovered 45 years ago yet no one has developed it. This is not a development on borrowed money certainly not borrowings of $1bn as you suggest doubly so with tax at 65% presently. By the time we are on stream if all goes well our tax credits will have been used up.
To my mind presently life extension and new wells on existing fields- yes new field development-no
The discussion on Bressay development also highlights the awfulness of the new tax. If developed at $1bn and comes on stream oil is at $71 do we pay tax at 65%? If oil is at $69 40% tax. Will they index link the $70 to inflation?
How does Sunak arrive at his $70 figure.
This not a one off tax it is kicked into the long grass and is an issue post the next General Election. Income tax introduced in the 18th Century was not meant to be permanent. For the time being new field development in the North Sea has been killed off by a Chancellor talking "tripe" and AB should be looking elsewhere away from UK for further developments.
Bressay and Bentley are nice to have but must be kept in the bottom draw until we have sensible governance.

hi Therapist,
I have resolved not to buy my single share until I have to pay 60p for it. I shall enjoy the nibbles at the 60p party!

I cannot attend the AGM as I do not own any shares. I suppose my discretionary trustees could who own them at my request.
The issue I would like to see addressed at the AGM, and I accept that some may be for the H2 results in late September are as follows:
1 An overview of our financial position particularly net debt based on the 5 months to the end of May.
2 As the 16 month capex expenditure on Magnus commenced in September 2021 an account of the topside development and as we near the end of Q2 the position with regard to the 3 wells that are or have been drilled presently and the anticipated output from them. Who knows one or more already may be tied back and into production.
3 The results and costs of works on the FPSO and the wells drilled or to be drilled and anticipated production
4 An update and any proposed capex on Golden Eagle proposed by the operators.
5 An update on the on Malaysia.
6 Enquest's view and approach to Government on the Windfall Tax. (Described as "Tripe" by Conservative MP Craig Mackinlay in Parliament.
7 Enquest's proposals for any JV arrangements in the North Sea or indeed in any other jurisdiction.
8 Any proposed development of either Bressay and or Bentley and if so at what estimated cost and time scale. For what it is worth, and my view may be worth nothing, after 26th May this should be put on indefinite hold.
9 Is AB still on course to pay off the pik loan by the 23rd October 2023? Might it be paid off earlier? What is AB's view on future borrowing? My view is Gross debt should never be above £500m and net debt above £250m
10 (For Chilt's benefit more than for me) to set out our green agenda for the next 2-5 years.
11 AB's overview for the direction we will be heading for a 3 or 5 year plan.
12 Returns for shareholders? Where does AB stand on this? My worthless view stated before is to get net debt to £250m by late October 2023, then to build up a war chest to May 24 when capex on existing projects is a third, new acquisitions athird, one sixth for share buy backs and one sixth for dividends.
No doubt others can add to this list but surely this is what we want to hear.
Will a deal with BP be announced on Foinaven?

It is highly unlikely that at Christmas and thereafter AB decided to put his feet up and decided to watch the world go by.
I am pretty sure there are deals to be done and the Windfall Tax has played into his hand. Kamrat reinforces my view on Foinaven. I would have thought it unlikely that on a 25 year old field BP will want to hire in another FPSO, nor will anyone else. Provided EP is more or less suitable then AB is in a bargaining position of 1. A strong hand has become stronger. I endorse Voiceofreasons post. I think epiphany121 is wrong. I take the view that the Windfall Tax although retrograde will be to our advantage. We will be able to acquire end of life assets more cheaply. I think as is happening now that capex on existing fields will continue but developments of new fields such as Bressay will be on hold.
It is 7 working days until the AGM and AB will no doubt set out his plans and views. Progress on the wells being drilled presently will be a focus together with the outline for the next 12 months.
The most disappointing aspect of this new tax is that it is likely to continue. Where is the Government support if oil prices dropped below $50? I can understand why he wants "jam today rather than jam tomorrow" by short circuiting capital losses for Corporation Tax. Taxation at 65% is unconscionable and presently Corporation tax should be lowered to 15% to compensate. At 65% Bressay and all new fields should be on hold. One day the penny should drop. For Enquest Malaysian expansion will beckon.

I invested hear rather than with companies such as Tullow with its West African assets or Capricorn with its assets in Egypt. I thought I was safe with The North Sea and Her Majesty's Government. How wrong I was. I think Romaron's latest post dealing with today's Times article explains our fall today. In previous posts Romaron has made the point that this tax will not generate the £5bn tax revenue estimated. Today's decline and that of the previous 5 days is overdone.
The tax though is impractical. Take a quite likely scenario. BP had to retire its FPSO on Foinaven for safety reasons. The field has been in production since 1997 and has up to 200m barrels of recoverable oil. Our spare FPSO the EP may be suitable. It is likely that Looney and AB are in negotiations and may have been close to an agreement. Then Rishi Sunak announces this tax so they call in the accountants to advise. Their response is that the tax requires primary legislation and until they see the small print in the Finance Bill and ultimately the Act they can't advise. So Looney and AB approach the Treasury for guidance. The obvious questions would be that if a new FPSO were brought in would the Treasury agre the Capex cost of the FPSO could be set off against the tax along with other capex expenditure. The answer would presumably be yes. Can then the Current capex cost of the EP be set against the tax if not then why not? Could the EP be transferred to Enquest EP Ltd and hired in at a commercial rate as a deductible opex cost? I suspect the Treasury has not got a clue. This makes doing deals in NS very difficult presently. HMG is behaving like a Banana Republic presently.

Romaron is right the pik bonds preclude dividends and share buybacks. Two years ago we would never have been able to modify covenants now with the bonds at or above par , if he wanted to, AB could easily now approach the bond holders to agree covenant modification. I flew this kite at the weekend but on reflection think such a course very unlikely.
But what has been happening today? In the 3 years I have been here I have never seen anything like this. With my meagre shareholding there have been days where the total volume has been less than half my holding. Volumes have been much much higher over the last 3 months but today's trades at 81m+ are even greater than the previous recent highs by a factor of 6.
We can all speculate, but something is a foot and it ain't small. It has to be big.
Our $3bn tax credits are very attractive but anyone with a basic Knowledge of taxation should know that they are personal to the recipient and possibly tied into particular infrastructure projects.
These are very interesting times for Enquest and my money is on Black Rock or whoever having done their sums and decided that our share price presently is a one way bet. Or is an RNS due tomorrow advising of increased Magnus production of over 5kboepd?

I forgot to add in my last post that this is a new tax and therefore require primary legislation in a Finance Bill which if passed will on Royal Assent become an Act.

The battle for the soul of the Conservative party is only just beginning on this one. All shareholders should write to their MP. Keep it short and simple. Aggregate tax (potentially) for Enquest is 65%. This is robber baron territory. I have also written to a second MP at greater length. He has the ear of Rishi and is vocal in his opposition. I have sent a copy to AB.
One of the great problems created by Sunak will be future JV arrangements. How do you get a JV partner when Corporation Tax is 40% and the windfall tax an additional 25%?

The revenue that this tax will generate will be less than the Treasury anticipates and the amount Enquest has to pay will not be thatgreat.
Sentiment may well be against us on Monday and will be lack lustre during next week’s 3 day trading.
Might it not be a bad idea forAB to have a share buy back of 200m shares at say 28.5p- £57m.? The cash should be available.

I take mrc's point that North Sea deals will become more likely. I go one step further. If, for example a deal is being negotiated with BP for EP to go to Fionaven on terms, then AB will be able to negotiate terms more favorable to us tomorrow than he could yesterday. There will be a little wobble over the next week or two pending an announcement or the AGM but in the medium term it makes us more investable. A new buyer of shares will appreciate that we are making profits to pay the tax but also satisfy their conscience that Enquest firstly has green credentials and secondly is paying tax to mitigate financial distress. It will be for AB to set out implications for us either by RNS or more likely at the AGM 3 weeks tomorrow. Due to the double bank holiday this is only 12 working days away.
The panic sell off by some is misplaced and way over done.

Thanks TARMAK, understood. My fantasy is you will be having to include a column for EP production on Fionaven!

TARMAK
Thank you for all your hard work. I am sure we all greatly appreciate it. I like the SP at 57p at year end. In the Romaron challenge I had 32.8p as a pessimist to avoid disappointment. You have 43,437 BOEPD for H1 whereas the OP has 50,361 BOEPD to 30th April. Natural decline I understand but 5 wells fingers crossed should be coming on stream. I was rather hoping allowing for planned shut downs a tad under 55 BOEPD for H2. Where am I going wrong?

Nearly 17 million traded today. Day traders taking their 2p profits and move on. Many shares changed hands at nearer 37p and we are heading to 40p. JP Morgan are not wrong with a 47p guide.

So we are in the red. Worry not this is a share for the bottom drawer until at least late September. The figures will speak for themselves.
I very much take mrc’s point that BP only makes money out of large projects. Fionaven is insignificant by BP’s standards. Is a profit share deal being put in place for Fionaven to go to Enquest? As part of the deal are facilities to be made at SVT for green hydrogen production and storage, use of pipelines carbon capture storage for BP to develop?
Something, for sure is a cooking and all will become clearer at the AGM.
I cannot be there. I hold no shares. My pension trustees could but obviously will not be attending.

mrc,
Your stance makes sense, it is the complete change in sentiment that may have resulted in BP reflecting on its position. It is after all British Petroleum, a few years ago it was thinking of dropping the british bit. A JV is more likely in my view. This though will still benefit us hugely. Harbour or another who knows but quite possible.

Frac, your "Compliant" analysis is spot on. It has to be BP, although we could of course have more than one suitor. The update was very carefully crafted.

BlueRun, Spot on await Q3 results, if they ever come, BP might own us by then. I may be off on a frolic of my own. There are a host of reasons why in the new present climate that BP would want us not only that it needs us.
Romaron, we are throttling up nicely, I have already extended your runway!

Today’s RNS gives figures towards the top end of expectations and reflects two years lack of capex expenditure. This is industry wide and even without Putin would have resulted in higher oil prices.
This is all being addressed presently-it already has in Malaysia- and wells at both Magnusand Kracken are being drilled presently which I guess if successful will in aggregate push production to over 60 thousand boepd. There is a lot else going on with Enquest presently Q2 and Q3 will be key. Take off is approaching.