Member Info for Squif

Hi Pelle. Well then we are quite close for q2. Lets See. Agreed it was poor with the hedging. Something to raise at the agm. The person in charge should be sent home

Too true

Agreed romaron. I believe that everyone is assuming a cataclysmic scenario. The world Will get back to work and as you write the lenders Will be supportive of healthy businesses. Enquest is healthy with an overall ebitda:net debt of < 1.5. In the us shale Patch this is over 5. In some parts of the world such as us and Canada barrels of oil are fetching less than $5 at this point in time. Chad is paying sovereign debt with Cattle - there is a world of pain and according to my calcs enquest has approximately 290m at present after using all 65 hedges. Most capex is frontloaded (Magnus is Done and kraken ongoing).

Difficult to See in detail but for example at june 30 they had cash available of 248m and in the balance sheet there was 180m cash and cash equivalents and 20m of financial instruments so i would say all but 50m is cash on the ready. I assume this has been improved by about 20m since end of feb through the hedges in place.

Hi Pelle - yes Will Do so and please Do your stress test as well.

Thanks Therapist. Kudos to you too! I spend a lot of time crunching numbers which I am sure JS and AB are doing on a daily basis. Naturally disappointing that the $65 hedges are for Q1 only but maybe AB has cut a deal. Not sure what motivated that decision however I was thinking it may not turn out to be too bad. Q2 is going to be ugly and that was looking that way end of last year even before Corona as many warned of a supply overhang. Now it looks like many won't be able to even sell their products. There are warnings of Brent hitting $10 but if we assume an average of $20 then that is a $18 per barrel cash loss @60k boepd over 91 days = $100M. I also assumed that during March Enquest has used 1/3 of their $65 hedges and with Brent averaging $35 and @60K gives a fcf of +$23.4. Obviously the truth is somewhere around these numbers but the net effect is a cash loss of $77M. Given that cash on hand was $268M Enquest will have somewhere around $200M cash available.

Now if there is one thing I have learnt over the years with Enquest AB will not let this company fall over. He has too much financially and personally invested and I guess in the end that is why I invested. He will not forward sell oil but he could still do a deal with the Enquest Producer FPSO. It must be worth something. Personally I believe by July things will start up again and we will definitely see the bigger players do something. Prices will need to be over $40 again. It is necessary to do these stress tests. Of course we could put the Brent average at $15 and that would mean an additional 28M cash loss but I just can't see that being sustainable. Many will have to stop producing and the market will balance. What is then the value of hedges but of course they may be settled at a financial gain.

All told Enquest would have cash on hand of $200M and $425M remaining on the SFA (however I believe that is now at $360M) and 15 months remaining to pay that off. At 58K boepd and a be of $38 (although that may be $35 next year) that requires $28M per month with 435M remaining fcf and an average Brent of $54. I still think this is doable and as others have written the lenders would not close if Enquest came up a little short.

What is interesting was that we first speculated that this could last until year end however with this violent sell-off I find it hard to see that there would not be a sharp rebound in Q3. This is the quarter of pain and in my opinion Enquest has the financial resources to survive.

Hi Romaron - I agree if I understand your logic. It is now very interesting to read efforts to put together an Opec++ deal. Enquest is by far the only one suffering here and the suffering that the US shale companies are going through is on a much greater scale and Trump needs votes from Texas so he will be really motivated.

The question of AB not hedging production on any greater scale is an intriguing one. An interesting question is also if there are production shut-ins how does hedges help in that case? AB may have sold unused hedges at a profit we just don't know. As I calculated this morning since the 9th March Enquest has had negative fcf of $8.5M given an average Brent of $30 and that is not taking any regard for use of Hedges and any Kraken premium (if at all). From the 1st March to 8th March Brent averaged $51 dollars so with be at $38 and production at 65K the fcf was $6.7M so the net effect on fcf up until the 26th March has been $2M roughly. In my opinion Enquest is still fcf positive for the month of March. I am betting there will be some sort of deal with shut-ins to get the price of Brent and WTI as close to $40 as possible. No clue how the markets will react on that though.

Hi Pelle - got your point.

Did some thinking this morning regarding the Break-even of $38.
First thought - does this include or not include the effect of hedging? If production is 60k boepd that means annual production of 21.96 M. Removing 4M barrels hedged as 2.9 @ $65 and 1.1 @ $52 would give a remaining b-e of $32.8.
Secondly, in the update it stated that new revised capex was $150 M and the majority had already been spent. Could we conclude that the liquidity as per end of February reflected that or is that too early?

Prior to the Brent price fall Brent averaged $59 and since the 9th (18 days) has averaged $30. Not making any assumptions on Kraken premium and knowing that remaining north sea barrels attract somewhat less then Enquest has lost on average $500k per day prior to hedging ($9 M). The hedges can last approximately 67 days if used all in one go but I assume they will be spread over time.

Hi Chilts - what size did you make the Kraken offload to be and how many days including interruption?

Who knows what will happen in the next few days but we seem to be set up for a deal between the US and SA - maybe Russia can tag on. This will be the important first step in returning stability to the oil price. I think people have speculated that this could get Brent back into the $30 - $40 bracket which does not seem unreasonable. In addition I have been noticing positive statements coming from New York, London and Italy regarding Corona Virus. I must admit that the world of stock markets is corrupt and now it feels that they are using the media as their channel of communication. Lots of articles about $10 or negative oil but as soon as this changes the rhetoric will change as well to something like oil not available or something like that. often best to sit still in the boat.

Good find hitman. This should mean that this will be an important topic tomorrow. Russia, US and SA present so should give an opportunity for those countries representing 40-50% of supply the important topic.

I can also understand why AB wants to wait with presenting the results. The G20 will definitely have focus on the question of Oil supply. It is in no one's interest for the Price of Oil to be at these levels. Much better for Enquest to wait and present their report for last year which by all accounts should be good against the backdrop of a more ordered oil supply situation leaving the question of Demand (Corona virus) to be managed.

Hi Hitman. I can agree on $54 as a long term break-even for everything to be rosy. Donald has sent a special envoy to SA to deal with Opec and now he has got the Corona package in place he can focus on fixing the oil price.

Very sorry to hear spin. Hope your family recovers soon.

Thanks monkey. I have focused on the facts and the facts look good. It is the idiot analysts who have no clue.

Btfath - agree on Boris and cummings. I believe there Will be a dela between opec+ and us. There Will be financial armageddon in us in april if this does not occur as many oilers Will See their lives of credit cut.

I would disagree amu. Enquest challenge is the c grade analysts from rbc who write plain bull**** and have no clue. The 268 Will last enquest 413 days with brent at 27. Not many actors Will last that long

Hi btfath - Agree with your post but i disagree that it needs to be a depression. Depends how long it takes to handle Corona and ensure that we dont have a repeat. I think who was wrong to say that international Travel should continue to china after the situation arise on 20th january. We should have shut off all air traffic at that time. Anyway - something for next time

Agreed chilts and hitman - agreed on your point yesterday. With cash on hand We Will make the rcf next year with a lower brent than i stated

Interesting if one reads the OUs of the 3. Enquest has fcf at $38, Premier at under $50 and Tullow $45. Enquest has net debt of 1.36 BN, Premier 1.99 BN and Tullow 2.8 BN. Enquest Capex 150m, Premier $300M and Tullow $350M. Enquest cash available $268M, Premier $465M ($330M RCF) and Tullow $700M.

A lot of metrics but the one that stands out is Enquest's be will be significantly lower than the others as updated in the last week. For every $5 movement Premier will have fcf of 50M -according to my calcs it will be higher for Enquest.