Member Info for Squif

I was reading in the Premier Oil annual report that the maturity of all Premier’s facilities was May 2021. I am not sure how much was remaining but appears to be around 1.5BN. Naturally with the time remaining there was little that could be done. I agree that the sentiment has spilled over to Enquest but we do not seem to be in the same panic situation. I tried to also work out the average price of oil they got removing the effects of hedging (they had hedged 40% of H1 at $64) and the realised price was $51.5 which gave me around $45.5 which hopefully reflects what Enquest got for non-hedged production during H1.

Hi Twallby. I think it was me and I believe his average purchase price is around 50p and he has invested therefore around £90m that is now worth £19m. Not bad! Joke aside I would be killing myself so hats off to AB for staying upright. I just hope that he has a plan.

I have always taken it for granted that Enquest was focused on creating shareholder value but I became worried that maybe this was an assumption on my behalf given that this is a stocklisted company with the caveat controlled by one individual. I went to the annual report and low and behold the term shareholder value is splashed throughout the document. Nevertheless, this may mean different things to different people particuarly given ABs origins. For me this means returns in the form of dividends or share price increases but sadly we have had none of either and instead have pumped in even more money to Enquest. Does anyone have a differing opinion?

Hopefully this is a good sign. Maybe awaiting to be stationed somewhere and some buyer to be announced.

Does Anyone have figures relating to what has been invested in bressay thusfar?

I do think that this deal with Equinor appears to be a good piece of business. As you write Romaron it raises our reserves and this deal would not have been approved without the consent of the lenders. The original development plan probably included an FPSO and this is now AK. If I am not incorrect AK has capacity for 80k barrels a day so it could potentially handle Kraken and Bressay together. I agree with Hitman that they may well develop it in the same way as they are developing the Western Flank. Bressay did not seem to be moving until this point so AK was indeed the missing piece

Romaron - appreciate your insights on the convenants tests. The timing of the press release could as you indicate be a gentle nod from AB to shareholders. I do hope that EP finds a new home. Whatever the sale of that brings in would be used towards debt reduction and be a big leap towards getting the monkey off our backs.

Looks very promising. Hopefully that will translate into a sp uptick today. The fact that it can be tied back to Kraken is wonderful.

To be honest I wouldn't be surprised whatever was to happen. The world is so f**ked up at the moment and their is huge politics at play here. Talked to an American colleague today who believed that this is part of the US China end game. To be honest I don't think that any of the figures or stock market behaviours add up any longer. There is also a green agenda being pushed as reflected in the stock prices of EVs. They still represent 0.04% of global auto sales! Oil is being absolutely destroyed short term not to mention the travel and airlines industries. Regardless once the world gets back on its feet there is going to be a huge shortage in the oil supplies given the cuts in capex. The big question appears to be when can the vaccine be made available? Maybe this is also a game to shift Trump out of office? I think the media is having a field day at present.

Hi Chilts. Are you referring to Premier oil? I haven't the inside on the Andrew and Shearwater assets but what is your position on that deal?

Krak - i have come to the conclusion that the stock market is completely rigged and flawed. I will Watch dirty Money on netflix tonite

Hi L7,
Yeah I probably did not develop my ideas sufficiently. Overall profitability will be lower as production is lower but I meant that the cash free break point is $7 lower. The elements that comprise the BE as I understand are: 2019 opex ($516.6M or $20.6 a barrel), capex ($237M), leasing ($135.1M), Magnus ($74.1M) and Sculptor ($55.6M). Production was 25M barrels. This equates to $40.7. This year BE is $33 which in effect means that fcf per barrel is the same at $43 as it was at $50.6 last year. The SP is significantly lower this year but I think that has more to do with short term outlook.
The lack of hedging is a huge disappointment but the cost savings are impressive.

I looked at the corresponding figures for 2019 and added them to the opex of 20.6 I get a break-even of $41. That means that at $43 Enquest is as profitable now as it was at $50 last year and $53 the year before when opex was $23. I don't think the market has updated their metrics.

With all misinformation abound it is important to remember what was contained in the annual report. As part of their going concern analysis they state that as part of their base case they use an average price of $40 to end Q1 2021 and $45 for the rest of 2021 with a longer term assumption of $60. As part of this they are covenant compliant. The average Brent price this year has been $42 and from the publication of the annual report $40. Moody's used $35 and found $120M missing (1/3 of the remaining payment). If they had used the above that would have found an additional $180. I think that Moodys was conservative but that is their job. As long as we keep in line with the base case I am confident that Enquest will do well. They also discuss the enormous opportunities at the 3 hubs (Kraken, Magnus and Malaysia) or selective strategic acquisitions. There will not be another Alma Galia as I read it.

Do thats 11 days since last load? Kraken is purring

Feels like it might be time for an email to IR. Pmo and tullow have jumped greatly in the last few weeks. The moodys sucker punch did not help.

Good pick up Chilts. BTW - how is the next load coming along. Kraken is purring and again I have to say that I think this is down to Bob who really has helped bring nouse from Strategic to Operational level. Pity he cant also be in charge of hedging.

I follow Art Berman but I have to say I think that he is a sensationalist and guns for headlines. Dont really rate him.

Just looked at the assumptions in the AR on page 37.
"The Group’s going concern Base case also underpins this assessment and takes account of the Group’s principal risks and uncertainties. The viability assessment uses the same oil price assumptions as for the going concern assessment, $45/bbl for the remainder of 2021, with a longer term price assumption of $60/bbl based on recent research analyst projections for the period. The Base case has been sensitised by considering the impact of the following plausible downside risks on a
combined basis:
• a 10% discount to the Base case oil price assumptions; and
• a 5% decrease in 2020 and 2021 production.
The Base case and sensitised case indicate that the Company is covenant compliant and able to operate within the headroom of its existing borrowing facilities during the three-year viability period from the date of approval of the
Annual Report and Accounts. "

So my reading there is 10% down from $45 which is $40.5 and 5% down from 57 - 63 which is 54 - 60k would still see Enquest meet their financial commitments that is to say repayment of the SFA. The repayment of the bonds obviously falls outside this period (October 2023). Nevertheless, if the assumption holds of $60 for Brent during 2022 and 2023 the FCF is significantly higher.

I do respect the analyses that Moody's do. They are a lot more thorough than the trite that Stanton obviously dreams up at RBC. Certainly they take the cautious view of $35. I went back to the annual report again to scour the details. They do simplify somewhat when the write that the notes are due 2022. This is not completely true as Enquest can push the maturity of them out to October 2023
"The maturity of the new high yield notes was extended to 15 April 2022 and the Company has the option to extend the maturity date of the new high yield notes to 15 April 2023. Further, the maturity date of the new high yield notes will be automatically extended to 15 October 2023 if the credit facility is not repaid or refinanced in full prior to 15 October 2020." The combined value at present of these is $971M as of December 2019.

Again reverting to simple maths, if Brent were to average at $40 rather than $35 as is Moody's base case would a FCF of $300M from now until end september 2021 (assuming BE of $35 during 2020 and $27 during 2021 with production at 60k). Obviously the current Brent price puts pressure on all and highlights the overall poor hedging job that Enquest has done.