Member Info for Stevo12

Hunbah

AA2020 cash stack was my starting point and just to remind you that AA2020 included $30m for interest for the year (which you have stated should be over $70m), excluded any PSC and royalty payments to Malaysia (which i have estimated at $60m compared to $81m in 2024) and excluded any Magnus payments.

I have just added these omissions to AA2020’s cash stack.

At your requested I then reconciled to the actual 1/2 year FCF presented by Craig yesterday and added the key cash flow items that have been pushed into H2, principally EPL payments.

Yes I acknowledged that H1 FCF was $66.3/ barrel but that excludes any EPL payments and Magnus payments. EPL alone at $100m pa adds approx 98/barrel to Uk production costs. Management have told us what the EPL payment is in H2, why do you think it should be ignored? Also why do you think there will be no payments to BP for their 37% share of Magnus?

You accept that cash costs in H1 was $66.3/barrel excluding any EPL or Magnus payments to BP. You then state that cash costs for 2025 are in the mid to low $60s including EPL and Magnus without any basis or calculation apart from a flawed AA2020 cash stack.

I have offered Kraken a bet that FCF for 2025 will be negative and if you are so confident in your analysis I will offer you then same bet. £100 that 2025 FCF will be negative.

Hunbah

My analysis and commentary was in respect of the forecast cash costs of $907m projected by AA2020 not the half year results.

Take a look at his post.

If you want to project cash cost/FCF per barrel from actual half year results you would only need to adjust for the following to arrive at normalised cash cost per barrel

Volumes for H1 2025 7m barrels (38.2k BOPD)

Realised oil price H1 2025 - $71/barrel

FCF of $33m ( $4.70 per barrel), Cash Cost per barrel in H1 $66.3/barrel

Cash costs excluded from H1

EPL $52m (half of annual projection)

Equalisation of OPEX $17m (H125 $183 vs $400m forecast for full year exc Vietnam)

Magnus payment $20m ($40m for year)

CAPEX equalisation $12m ($83m in H125 vs $190 for year)

Adjusting for above cash costs related to H1 which will now fall in H2 the FCF for H125 would have been $101m lower resulting negative FCF of $68m.

The UK and Malaysia H2 Volumes are projected by management to be similar to H1 at 35-40kBOPD and lease costs should be $20m lower in H2. Vietnam should generate FCF in H2 (1m barrels with OPEX of $25 per barrel). I don’t know whether there is a PSC like Malaysia (where government take 40-50% of profit in addition to royalty and corporate tax). Assuming a very generous $20 FCF per barrel for Vietnam generates $20m in H2. In contrast realised oil price will likely be lower than H1 by approx $5/ barrel post hedges ($35m lower FCF).

Accordingly adjusted H2 FCF should be similar to adjusted H1 FCF.

Hunbah

Enquest publishes each year its PSC, Royalty and tax payments to Malaysia via RNS. The last RNS was on 19 June 2025 and details payments of a little over $81m for 2024. Check out RNS.

The $55m revenue reported from Malaysia for H1 is after offsetting the PSC and royalty payments. How do you think the 1.6m barrels for H1 only generated $55m in revenue.

The lease costs are not my estimates but what management have reported in the audit financial statements for 2025-2028 and reflect the decrease from Kraken in 2025 and 2026.

My observation was that AA2020 omitted Malaysian and Magnus payments and understated interest costs by $30m. I have posted a line by line previously but for simplicity taking AA2020 cash costs of $907m and adding $60m for Malaysia, $30m more interest, $40m for Magnus, $10m of understated lease costs and $30m of Vietnam PSC and tax gives total cash costs of $1,077m divided by 15.5m barrels results in $69.5/barrel breakeven. There are other overheads and around $70/barrel is in the ball park. As I have previously stated this is a reduction from 2024 cash cost per barrel of $80 as a result of lease savings and lower capex.

There are some estimates in the above re reduced Malaysia payments, Magnus payments and Vietnam PSC and tax the rest is as guided by management.

By the way i do not believe Enq is bust or going insolvent. However i do see a difficult refinancing in 2026 unless oil prices increase materially.

Hunbah’s analysis is correct Enq is a leveraged call option on oil price and tax reform. I just think there are lower risk ways of betting on oil price movements and tax reform.

AA2020

You are missing from your analysis the PSC, Royalty and tax payments to Malaysia which has been $80m per year for the last couple of years but may be reduced to $60m in 2025, The Magnus payments which have been deferred until H2 of approx $40m, the company is projecting lease payments of $66.1m in 2025 (see note 27 on page 176 of 2024 financial statements) increasing to $71.6m in 2026. Interest on the bonds is $69.1m and approx $3m on SVT facility. There is interest earned on cash deposits which may be in the $10m region in 2025 and declining in 2026.

The OPEX and CAPEX are both back half loaded and obviously EPL has been pushed into H2. Production in H1 was 38.2k BPD and forecast for year (exc Vietnam) is 35-40 BOPD - so no projected improvement in production in H2 excluding Vietnam. Vietnam will potentially contribute 1m barrels in 2025 but no idea on FCF say $20m as there is a PSC and tax payments.

Once you include the above cash costs excluded from your analysis, you arrive at a very different cash cost per barrel. You can triangulate this with 2024 when realised oil price was $81/barrel and effectively zero FCF excluding the Bressay/ Rockrose investment.

I thought long and hard at posting the above message but i am concerned that investors are being mislead by the incomplete information being posted as to Enq FCF breakeven. Please contest with evidence any of the information detailed above.

I don’t think HBR need to do anything radical. While oil price appear to be in a low trend through 2025 and 2026, beyond 2026 the supply demand balance starts to support higher oil prices in 2027 and beyond due to insufficient investment over the last decade. Even the IEA are calling for more investment and predicting peak oil now in the 2030s.

Bit worried about a short term surplus of LNG which might put downward pressure on European gas prices (much more important to HBR). However HBR is well hedged and other than tightening belt on CAPEX, it is a case of sitting 2026 out, generating a $0.5-1b of FCF and waiting for oil price to recover. It wasn’t that long ago that we thought $90 oil was here to stay.

Any changes to EPL in the meantime will be a huge bonus. I think even clarity on the successor regime will help.

Aberdee

No they don’t. Harbour has utilised its UK tax losses and has a market cap of £3b, so the value of HBR assets significantly exceeds the value of its liabilities. Net equity in the financial statements is $6.4b.

Although I would like to see debt $1-2b lower.

Kraken

Yes as a NED you can buy shares if you are not on the insider list and it isn’t a closed period However all directors will be on the inside list if they are aware of a potential acquisition or disposal (or any information which is price sensitive). All potential acquisitions will be discussed at Board and once the NED is aware of a potential acquisition he/she becomes an insider. The exec team will likely have some very early fishing trips to test the water before the Board is notified of a potential acquisition. However before any Due diligence is started or discussions progressed, Board approval will be required.

It is expected that NEDs will have a small holding and the NEDs buying shares were appointed 1-2 years ago. The most likely scenario is that they have not been able to purchase shares since their appointment due to closed periods and ongoing M&A activity. The fact this is the first time the new NEDs have purchased shares indicates there are no progressing acquisitions that the Board is aware of.

Kraken

I am 100% sure that directors cannot buy shares if they are aware from Board meetings that the company is progressing a material acquisition or disposal. The fact that an acquisition is discussed at Board automatically makes the director an insider.

Kraken

You are so deep into Enq you are unable to objectively analyse the facts.

Which observations are wrong? Did Enq generate FCF in 2024? - No. Will they generate FCF in 2025? - No, based on management guidance at current oil price. Do liabilities exceed the value of assets excluding tax losses? - Yes, based on market cap and financial statements. Will Enq have to refinance $650m of bonds in late 2026? - Yes to maintain going concern status. Has Enq been promising a transformational acquisition for last 2 years and not delivered? - Yes.

Will removal of EPL massively benefit Enq? Absolutely and my estimate is market cap will increase by 2-3x. However I cannot see EPL being removed anytime soon. Harbour, Serica and Ithaca can generate material FCF at current oil/gas prices. Enquest cannot and this is a dangerous place to be when you are heavily indebted.

It could all come good if oil returns to the $90s, EPL removed etc but this is too rich a bet for me.

Anyway this is a Harbour board and time to end this thread.

Agreement would not have got this far without BP consulting Total and Neo and they would have been given first option. The preemption period is a formality and Serica would not have completed the significant due diligence required without being confident that Total or Neo were not going to exercise their preemption rights.

What deals are Serica going to announce next week. A bid for Shell?

Wow. New management on a roll? What a difference from previous shower.

Agree with Flex, potential guidance for 2026 80-90k BOPD with potential of $1b+ of FCF before tax. The tax losses are going to help shield cash flow for a couple of years and hopefully by then EPL amended and we are in the £$0.5b+ annual FCF post tax.

Looking very bright for Serica and so glad I exited Enq and focussed on Serica, Harbour and Rockhopper.

Dumbly

The Enq monthly Board meeting will have a regular update on the status of potential acquisition opportunities and the Board will be required to approve the progression of any serious acquisition opportunity beyond early preliminary conversations. Enq is a small company and unlike the BP M&A dept which will will have significant delegated authority, the Enq M&A team will need to clear everything through the Board.

Accordingly all Board members will be briefed monthly on M&A opportunities and will be “insiders” once any discussions start. I think the reason that the director is not on an insider list is that there were no progressing M&A opportunities at the time he bought shares. However things progress quickly in NS and it does not mean they will not be in future or more recent M&A discussions, but Serica is making them look bad.

AB walked away from Serica deal and I fear it will cost his shareholder. Serica looking like a £1b market cap shortly if the BP acquisition goes through and Triton stabilises.

Stumpy

I share a similar view to Sekforde on Enquest. I had been invested in Enq for many years and exited my equity position earlier this year (at a loss) but i am still holding Enquest bonds.

To put a little flesh on the bones, Enq has the highest cash cost per barrel in the NS in the $70-75/ barrel region and at current oil prices has negative FCF which will most likely result in debt increasing in 2025. The half year net debt was “managed” by deferring the $100m EPL to July, not making a payment to BP for Magnus. Also OPEX and CAPEX are higher in H2 and, excluding the recent Vietnam acquisition, production in H2 will be similar to H1.

It appears oil is going to be in the $60 range for most of 2026 and so another very difficult year ahead for Enq. My greatest concern is that Enq will need to refinance $650m of bonds in Q2-Q3 2026 and I think that is going to be a real challenge given 3 years on no FCF (2014-2016). Now this could all change if oil prices head back to $90s or EPL removed in Nov (both highly unlikely) or a 25k BOPD acquisition similar to Serica’s announcement today (possible but Enq are running out of options and the recent director share purchase highlight they are not in a closed period ie close to a deal).

If Enq can secure a refinancing and make it through to 2027, I think they have a chance with oil prices improving and EPL possibly amended. I do believe the more likely outcome is that Bondholders will force them into a merger (possibly with Serica or Ithaca) at not very attractive terms for the equity holders. Hopefully not as bad as Premier Oil.

I do like some of the potential in Asia but not sure Enq can afford to fund the CAPEX required to develop new fields over there with UK sucking cash.

NSS

I can not see any realistic prospect of HBR having the slightest interest In acquiring Enq.

HBR would not be able to use Enq tax losses for 5 years and Magnus and Kraken are hardly going to get the HBR board excited. More important Enq comes with significant liabilities -$700m of debt, $750m of ABEX, $800m still to pay to BP for Magnus acquisition over the next decade plus, $107m repayable to Rockrose, reduced but still significant lease liabilities. These liabilities exceed the value of ENQ’s 2P/2C reserves and it’s a crazy world when tax losses are a primary asset.

HBR not interested in Vietnam and not sure Malaysia would have any great interest. If we see a major U turn from government on NS there would be the potential of a partnership on Bressay/Bentley.

Fantastic news from both a technical perspective and more importantly removes the final key uncertainty for approving the Sealion £1b loan. The banks may want to see sustained production for a few weeks, but the successful ramp up removes the key risk of Shenandoah not generating sufficient cash flows to funds Navitas’ equity contribution to Sealion.

I have been very nervous about a successful ramp up given the incredible pressures and i will sleep a lot easier tonight.

Major step forward to FID.

Dumbly

I agree that the mood music re EPL is changing fast and if the UK budget was not in such a mess, i think there would be a good chance EPL would be softened in Nov budget. Equally I do not think EPL will last until 2030. Anyone’s guess when a change will come but my gut feel is 2026/7 more likely than 2025.

Certainly any changes to EPL will float all NS boats and i keep my fingers crossed. I wish all NS producers success but the next 12 months with low oil price and EPL is going to stress all NS producers -some are in a better position than other to weather the storm.

Dumbly

Both the US and UK Bonds mature in October 27. However for the directors to be able to operate the business as a going concern and for the Auditors to sign off the financial statements, the company needs to demonstrate it has funds and facilities available for the next 12 months (18 months is the norm now for going concern statements). Accordingly, Enq will need to refinance its borrowings and loans at least 12 months before their maturity date. Enquest’s bonds are approaching $650m and refinancing of these will need to have been completed by Q3 2026 at the latest.

I agree an acquisition could make a material impact in utilising tax losses and benefiting FCF but management have been stating an imminent acquisition for the last 2 years and most of the natural opportunities have gone to others. Enquest’s Achilles heal is its high cash flow break even and substantial levels of debt (both on and off balance sheet) which are heavy weights in a low oil price environment.

Serica may be the only deal left in town next year if they are unable to pick up as big slice of Waldorf.

There have always been fantastic synergies for a merger of Enq and Serica. The Enq tax losses are not as valuable to Serica following the Prax acquisition but reducing Enquest interest costs of $70m pa by accessing Serica’s balance sheet/lower borrowing costs could add $35m pa to FCF alone. Many other operating synergies to access.

The challenge is that while Serica’s share price is up 60% over the last 6 months (even with the Triton fiasco), Enq share price has fallen and a no premium merger would only give Enq shareholder 20% of the enlarged group. This is probably too much for their Board to accept currently.

Enquest will be required to refinance its $600m+ of bonds at least 12 months before their maturity date which is Q2/Q3 2026 and if oil stays in the $60s and there is no change to EPL, then Enq are going to come under pressure during the refinancing and a merger may be their only solution.

In the meantime Serica can wait, fix Triton and get the market cap to £1b.

I concur with Buzz, the only real hurdle still to clear is the $1b finance package. FIG economically, commercially or legally cannot back down from the project and Equity in place.

We would not be where we are now if Navitas were not confident that debt could be raised but it is the remaining real risk to resolve. Looking forward to seeing the successful ramp up of Shenandoah which I believe will be a prerequisite of bank sign off as cash flow from Shenandoah is need to fund Navitas’s equity contribution and loan to RKH.