Member Info for Squif

Btw Osaka - what aliases do you use? 14 posts. How long you been around? 1 month?

Osaka - i have no problem with the sp soaring. I would jump for joy if AB could deliver something that is close to pmos report and debt paid down by 180m. Bring it on!

Definitely pelle. Looking forward to the hockey stick trajectory that i agree can occur with enquest

Hi Pelle,
Yes I am a holder. Jumped on this share in October 2014 when brent headed south and despite booking a profit in may 2015 jumped in again and have regretted it but that's life. Did I understand Enquest when I invested then - no not at all. I have learnt an awful lot. I have been incredibly frustrated at times and did not realise how close the company was to going belly up in september 2016 and probably glad with hindsight that I didnt know how bad things really were. I think that I have a much better handle on the numbers now after lot of trial and error but this is a minefield of debts at a fairly high rate imo average 9%. My frustration with AB is driven by the fact that he is the largest owner so what the company can and can't achieve is entirely up to him. I believe that he has made some big mistakes that we as share holders are paying the price for but he has also made some good decisions obviously. Nevertheless, in the cold light of day we have injected close to 250M USD, as Epic writes they made a profit of 250M on hedging in 2016, they have got Magnus at a steal and still we are languishing with a sp below both rights issues and a market cap of 350M USD: That in my opinion is gross incompetence given where Enquest was 7 years ago (of course times have changed). It is large scale capital destruction and debtors have laughed all the way to the bank. We have been outperformed by our peers (PMO, TLW) who have a much better P/E (6 v 2) and in any other company the CEO would be gone. Enough ranting. AB is at the healm, Kraken appears to be firing on as many cylinders as possible and touch wood, all going to plan we should be in a very good position at the end of next year. So my 1 year sure fire bet has turned out to be a 7 year long term investment. This was not the plan obviously.

Hi Londoner - interesting pick-up. Hopefully JS will clarify on the 5th september.

I don't know where opex will end up but in their attempt to provide "clarity" by stating 600M I do think it opened up questions.

Hi Pelle,
Fully agreed. AB has the best insight and I think that he sees something that is not fully transparent for us now. I think he has invested £70M or thereabouts so he will not want to throw it away of course. Although he does not know where Brent is going I suspect that Kraken issues are under control and I agree he will probably buy more. But they need to reduce financial complexity.

Hi L3 and Londoner,
I came to those numbers and opex and this needs to be further followed up in the H1 report. I believe that PiK arises automatically if brent average is below $65 which I believe it will be.

My take on the 144 is that that is the NPV at 31/12/2018 of the 93 + 55.

Anyway, I was quite glad that I did the mathematics exercise last week. What I got from it was that we are at a critical point in time. I suspect that Enquest needs $59 brent to meet financial commitments this year with an average production of 70k a day - opex, capex, finance, lease and debt repayments. I do think this is achievable and I think that Enquest has got hold of Kraken issues and this has prompted AB to but more shares. I think that once Enquest gets through the next 18 months it is a completely different situation and that next year the average brent price needed is closer to $50.

Anyway, good to have a clean layer of conversation and been honest about the current situation.

Hi Londoner, I would be more than happy if the 93 million was included in the 600m opex. The thing is that AB is never crystal clear in his comments. The one thing that would not incidcate this is if you look at page 3 (:-) of the annual report. There it states opex +28%. This I believe is the difference between 600 and 454 which was the opex including transportation last year for production excluding kraken. But lets see. You may be right on the bond interest. I think that the average brent price will be higher than the 61 but that I am assuming on annual basis - who knows what happens in the next 4 months! Thanks for the feedback londoner

Pelle - you could be right re Kraken. Indeed ABs buying campaign seems to have coincided with much more stable production so most likely.

Good points pelle re BP and I agree. Yes I might be a little off here and there and I agree hopefully average brent price is higher but it was a funny coincidence that it landed at 59 where the price of brent has been swinging around. The past is the past re that hedge loss but 77M was significant in the grand scheme of things and had that not happened I feel we may have avoided the cash call last year of 113 M. But anyway, I think that if we are to get through the next 12 months then it is a completely different prospect and I think once net debt hits 1.1 BN then as they have declared they will not pay down any more and be prudent with capex although they need to acquire some more 2P reserves...

The next thing of course is to try and understand the future and what AB sees. For 2020 if we make it simple and assume production of 70k boepd and the same opex and kraken financing, lower capex (175M I have seen pelle mention), slightly lower financing costs of 200M and borrowing repayments of 300M then we need brent at (693+175+200+300)//70K x 365 = BE of 53.5 USD. Then our net debt should be 1544 - 300 + 56 (bond capitalisation) = 1.3 BN. If however brent averages 60 then net debt would be 1.3 BN less 70K x 365 X 6.5 = 1.13 BN which is my base case. Then I believe enquest will not pay down any more debt but refinance and that level of debt is comfortable. Thereafter in 2021 again assuming 70K and brent at 60 the break-even is (again for simplicity) 693 + 175 + 180 (slightly lower finance costs). Then Enquests BE is 42 USD roughly and I get cash over and above commitments of 18 x 70k x 365 = 460M. Obviously the above is somewhat simplified but given that analysts talking about brent oscilating around the 60 mark and with the benefit of hedging it is not beyond the realms of belief. So my feeling is that we will need to wait to the second half of 2020 to see a turn around all things being equal. The analysts still see a company with financial issues and one can now understand why the sp went south in march with all the kraken issues. If enquest had not sorted that out the company would have been in big strife right now. Maybe that explains why AB has bought shares heavily a few weeks ago. Although he doesnt know what will happen with brent or the markets he at least saw that Kraken was sorted and that despite all the talk of diversification with Magnus and so forth is key.

I spent some time the last couple of days trying to work out why Enquest is under what I perceive to be more pressure than most shares around these levels of Brent. I have always found the Enquest accounts to be very complicated and in my opinion drives some of the somewhat fleeting and evasive answers from AB. The truth is in the accounts - it just takes a while to find. Anyway, what we know is that opex is 600m usd this year and last year this was 464m (note 5b). I always asked myself does this include Kraken and the answer is of course no. This is the Kraken is the finance lease payment in addition which this year is 93169M (point 23 under Current Liabilities - Obligation under Financial Leases). So the more correct opex in my opinion is 693M usd. Then we have interest payments which again are loan, bond and finance lease payments in the main and under note 6 this was 213.5 M USD during last year. I anticipate something similar but should be a little less. Then we have capex of 275M and loan repayment obligations of 311.2M during 2019 under note 19 Borrowings. The grand total of all of this is 1492M USD. Now if I divide this by 365 and 69000 boepd I get 59.2 USD a barrel. This in my opinion is what Enquest needs to break-even this year. Of course there are break-evens and break-evens. Enquest is cash positive on barrels of oil at 693M which at 69000 boepd is 27.5 USD. But then none of the interest is getting paid so if we add that back in (213.3 M) again at 69000 boepd we get 36 USD. Anyway, I also noticed (and remembered) last year H1 we had a hedge loss of 77M usd so we can see what devastation that caused in the grand scheme of things so hopefully that individual is now fired. This probably caused a lot of the need for the reverse dividend as L3 called it yesterday. So then the next question is what will our net debt be at the end of the year if we have 69000 boepd a day and an average price of 59. Well, and this was the next discovery, given that Enquest has current borrowings of 311M to be paid this year it would be the borrowings of 735470 and the bonds of 990282. However I suspect that the bonds will go up as the interest will accrue given that the average price of oil is below 65 for the most part. Last year it went up from 934 to 990 so if we say the same increase then we have 1046. So subtracting the cash equivalents at the end of 2018 which again assuming for the purposes of the above will be roughly the same I get 735470 + 1046000 - 237000 = 1544470. Rolling ahead to 2020 and hopefully production will increase somewhat say to 75000 boepd the break even will hopefully move down but we will still be somewhat around 26 I would imagine. Anyway, capex will be lower next year say 175M. I am sure that the borrowings to be repaid next year are somewhat visible. Finally, the other interesting point is the average interest rate being paid. Roughly this is 213/(735+990+615) = 9%.

Hi monkeyface,
Im here. Yes incredibly disappointing. Look I understand that this is sectorial and Brent has suffered but as usual we are suffering more than others. Disappointing. Is this the responsibility of management. Well we disagree there so I won't even elaborate but this is just diabolical.

In my opinion the sp is at this level regardless of what AB has bought or not. The market appears to have decided that Enquest is worth 19p regardless of what Brent is or what profit we will turn. It is ridiculous to be at a PE of 2 when peers are at least at 6. It is like all logic is thrown out the window

yeah - we are hit badly but hopefully the numbers will prove that things are going in the right direction. Bring on 5th september

Good points pelle. We will just have to wait and see. My gut feeling at present is that by end of next year the sp should be significantly higher and that will align with a much lower net debt position. I just hope that P-E can adjust to a more reasonable ratio soon.

Thanks Chilts. You are a goldmine and appreciate your posts

Hi HMH
My numbers are the following: They may be somewhat off but I think they are conservative. If the net enterprise value is constant then yes we should hit 60p by end of next year. The big problem I feel is that our P/E is hovering around 2.6 whereas peers are 6 and above. Why this is so (distrust by market towards management or lack of exploration I dont know). Seapulse should address the second point. That P7E makes it very hard to lift the SP.

2019
Prod: 70k boepd
Ave realised price: 63
Opex: 24
Depletion: 24
Capex: 275M
Year end Net Debt: 1.525Bn (After adjustment)

2020:
Prod: 72k boepd
Ave realised price: 70
Opex: 24
Depletion: 24
Capex: 175M
Year end Net Debt: 1Bn

Hi Osaka - no i post about the same Both in ups and downs. But unlike you i try to be realistic. Look at the sp - it is in the gutter. There must be a reason for that. We just have to face the facts. Nevertheless i see that end if next year could be the start Of the upturn. And as others wrote it is only AB buying shares. I have questioned why JS is not buying if it is a no brainer.

I also see that we will probably bounce around. These levels until mid next year 18 - 23p. Thereafter if we are approaching net debt of 1.2bn and hopefully seapulse has found something and Magnus and kraken been developed we will start to lift in a proper way.