Member Info for Stevo12

Rom

I am holding UK retail bonds and I agree that the US Bonds are a better indicator of any concerns, although UK retail bonds will move in tandem. The bond market is always the “canary in the coal mine” as you have previously noted. I take the stable bond price as a positive sign. The remaining duration of the notes, which is effectively 12 months, indicates the bond holders have confidence that Enquest will be able to successfully refinance.

As i have noted, I do not see a debt equity swap or a rights issue as likely but i do not dismiss it as zero risk if oil falls into the $50’s in 2026. I think that bond holders might push for a merger with likes of Serica first.

As i noted, I am very happy with my Enq bond holding although i would prefer the US 13% to UK 9%

Kraken

Let’s see what the trading update reveals.

We can then have a debate with company provided data and guidance. Happy to have a bet now (for which ever charity you prefer) that net debt at half year will be $50m higher than year end. Shall we say £50.

I did not say that debt equity split is probable or even likely but that it is a downside risk. Enq has $600m+ of bonds to refinance next year and that is not going to be plain sailing in a low oil price environment.

I want to see in the upcoming update that Enq has reduced or has a plan to reduce its cash cost per barrel and can generate FCF at $60 oil and debt is not going to be higher at Dec25 than Dec24. If it can do that i am back in.

I am expecting debt at the half year to be higher than Dec24 due to the EPL payments relating to Bressay transaction last year. However backing that out a stable debt figure would in my mind be a positive indicator of the ability to generate FCF in a lower oil price environment.

I have maintained my bond holdings and I am very happy with the returns. I want Enq to be successful but it does not mean I should be blind to risks in a low oil price environment.

Tamovv

Good note. I am in FOMO mode re Enquest and will kick myself if transformational deal is announced while i am out of Enq equity. I think the big deal was Serica but hopefully something else in the pipeline.

I have concluded that i can wait until the upcoming announcement to decide whether to get back in. My key concern is whether Enq can generate positive FCF at current and prospective oil prices to facilitate the debt refinancing in Q3/Q4 2026. Enq Bond prices are holding up which is a positive sign but also reflects that there is effectively 12 months remaining to refinancing (debt is required to be refinanced at least 12 months ahead of maturity to allow the company to be classified s a going concern).

I believe that if ENQ can refinance for 3-5 years next year, alongside EPL changes and an improving oil price in 2027 onwards, together with overseas projects will see an Enq share price multiple times today. The downside risk is that the debt refinancing requires a sizeable debt for equity swap.

I agree Tincan. If for some reason the bank debt did not come through from international banks, Navitas could tap the bond market. This would however delay FID by 3+ months.

I note that Navitas SP has gone down by 10% over the same period so a common issue but understandably lower magnitude. My first thought is that Shenandoah may not be delivering quite as expected and Sealion needs approx $300-400m of cash flow from Shenandoah to fund the $800m shareholder contribution required by the banks ($300m of new equity raised by Navitas). If Shenandoah is not ramping up as expected, the banks will most likely delay approval until production is on target.

I may be seeing commies under the bed but there must be a driver for both Navitas and Rockhopper share price decrease.

I am tempted to buy back in as it is feeling increasingly likely that there will be a change to tax regime. My main concern is oil price in Q4 and 2026 and I have decided to wait until after the upcoming update. I will be looking to understand whether Enq has reduced its cash cost per barrel and the current and projected net debt at year end.

I still believe in the potential of Enq but I want to understand how debt will be repaid/refinanced in a $50-60 per barrel oil price environment.

Any one attended the GM this morning. Presume it will be a very short meeting to announce the results of the vote. RNS should follow shortly.

I am surprised with the level of share price move. I thought it might come off a little before hitting £1b on FID and kicking myself that i did not take some chips of the table. I am just hoping this decline is driven by sell orders being triggered as opposed to negative news on bank debt leaking out.

Not wanting to go too far down this particular rabbit hole, but there is a difference between a crown dependency (jersey and Isle of Man) and a British overseas territory. The relationship with a crown dependency lies with the queen/king, while a British Overseas Territory is the responsibility of Parliament. The various overseas treaties (such as ECT) signed up to be the UK government do not apply to Crown dependencies. However they do apply to Overseas territories.

You learn something everyday if you are lucky!

Agreed, if the ECT applies to FI, the 20 year sunset clause would apply to any licenses issued by FIG pre 22 Feb 2024.

Extract from chatgtp. Who knows the accuracy of this AI stuff

“As a British Overseas Territory, the Falkland Islands were not an independent party to the Energy Charter Treaty (ECT). Instead, they were covered by the United Kingdom's membership.

Here is a breakdown of the relationship between the Falkland Islands, the UK, and the ECT:

1. The UK's responsibility: The UK government has the power to extend international treaties to its Overseas Territories, like the Falkland Islands. It is responsible for the territory's foreign affairs.

2.UK's membership: The United Kingdom was a contracting party to the ECT until February 22, 2024, when it officially withdrew. For the duration of its membership, the ECT's provisions applied to its Overseas Territories, including the Falkland Islands, through the UK's ratification.

3. No independent membership: An Overseas Territory is not an independent state and cannot join international treaties in its own right.

UK withdrawal from the ECT: As a result of the UK's withdrawal in February 2024, the treaty's rules no longer apply to the Falkland Islands.”

I am not a lawyer and hopefully it never comes to this as FIG and RKH/Navitas interest are aligned. O&G revenues will secure the islands future and honour the sacrifices made by some many of our servicemen.

Mirasol

I have just taken a look back at the French ban on O&G. In 2017 the french parliament passed a new law to ban the issuing of new exploration licenses with a goal of ending O&G production by 2040. Existing licenses were not cancelled on the basis that it would result in expensive compensation.

It appears the French approach was very similar to Labour’s approach of not issuing new licenses for exploration but not withdrawing existing licenses.

Mirasol

There have been over 1,000 cases taken to the ICSID by companies that are seeking compensation from Governments for backtracking on consents and licenses which result in loss of investments. Rockhopper was successful in its claim against Italy and the annulment was based on a procedural error as we are all far too familiar.

Governments can and are are being sued through the ICSID and I understand that the Falklands Gov are party to the ICSID’s remit as a UK overseas territory. FIG have given licenses and approved all stages of appraisal and development to date and it is very, very unlikely they will pull the rug at this point. Loss of future revenues as well as the risk of a compensation claim will mean they will approve.

As i have stated previously, in my view the only real risk is securing the bank finance.

Lasson

There is a requirement to issue an RNS if there is a major event which impacts the company/share price. The approval of Sealion $1b bank facility is a key event and equally as significant as the $800m equity raise by Navitas/RKH and news will most probably leak with a resultant share price increase. This will further underpin the requirement to RNS.

Following bank sign off, FIG sign off should follow quickly and will be a formality. Any backtracking by FIG now will result in a claim for the $!.3b spent on exploration and appraisal to date which would bankrupt the Falklands Gov.

Much

I am not expecting Tuesday’s vote to have much of an impact on share price as approval is already baked in and RKH will already be sitting on proxy votes.

The real catalyst is approval of $1b bank funding and in my view this is where the residual risk lies. Debt funding has always been the challenge for sealion and while Sam and Navitas have had positive noises, it remains the last real hurdle to clear. The banks will be looking closely at Shenandoah production alongside Sealion specific risks and an RNS stating that senior debt has been approved should see a major share uplift.

Ovets

i always hoped an experienced third party would come in to both take over operatorship and bring funds. However if this was going to happen it would already have happened. I would have much preferred to have given 15% of our 35% and 30% of Navitas for something close to a free carry on Phase 1.

We have effectively given a third of Rockhopper equity away to the placees for $140m and I would not want to see further dilution of Sealion now we have the equity in place. Also any company taking over as Operator would want to do a full evaluation of the development plan (as Harbour and Navitas did) before committing to FID. This would delay FID by 4-6 months.

I think the die is cast and we are going alone on Sealion. What would be the point of bringing on an investor once you have raised the equity.

However I do think there is possibility of a new investor to explore/develop non Sealion opportunities.

NastyN

RKH/Premier/Navitas have spent approaching $1.5b on Sealion pre FID. Do you really think we can appraise Isobel for $75-180m.

It will certainly cost much less than Sealion to bring Isobel to FID but I doubt you would see much change from $0.5-.75b for a full appraisal campaign and cannot see it happening pre 2032-35 unless a third party come in

Ovets, I agree with you that FID is not priced in and I am hoping/expecting £1+ on FID. However you also have to accept that the reason FID is not fully priced in is because Mr market sees that there is a risk that FID will not happen. My personal view is the only real remaining risk is not getting the $1b senior debt signed off. I think it is a low risk but a risk none the less and could be due to a raft of reasons (Argentinian politics, Shenandoah production issues, global recession etc). Raising $1b debt for a new frontier investment by two companies that have never been operator will be an extraordinary achievement.

We all have our own strategies and i will be selling 50% of my holding on FID (before the placees’ receive their shares) and holding the balance to first oil.

Mr Market is a fickle fellow and small changes in supply and demand for RKH shares impact share price. Possibly some PI’s cashing in on some of their gains and the share price may have gotten a little ahead of itself pre FID.

FID is still going to be a major catalyst for the share price which senior debt sign off will unlock. I am sure the banks are looking for evidence that Shenandoah is going to deliver on projections and has only been producing for a little over a month and is probably not yet flowing at full potential. As Shenandoah cash flow will contribute approx $400m of the $800m equity needed for Sealion, you can understand why senior debt providers will want to be confident that Shenandoah is on target to deliver the $400m of cash for Sealion.

There is zero chance of the UK government having any involvement in approving final development. Yes various government depts will have provided advice to FIG but this is an autonomous decision and is also fully in line with Labour policy, namely to allow development of O&G licenses issued prior to 2024. FIG have also stated that they will contribute to the cost of their defence once the tax revenues are flowing.

The only real risk is the $1b of senior debt funding. RKH/Navitas have received very positive noises from the lead bankers but once all the due diligence is done the funding package with the approval of the relationship team will then go to Credit Committee for approval. The credit committee comprises senior employees who are independent of the relationship team and they will assess al elements of the funding application and the associated risks. Their sign off is critical and is unlikely to sit until post RKH EGM but will be in the diary.

I believe the approval and syndication of the senior debt will represent the next step up in share price as it removes the last real risk to FID.

Buzz

The raising of debt finance has always been the most uncertain step to FID and was the key reason Premier failed when UK gov pulled export credit guarantees for overseas O&G projects. However RKH and Navitas would not have proceeded with equity raise if banks were not onboard. Of course there can be black swan events, but the issue should now be around agreeing rates and terms.

The raising of equity element will be a precondition and Navitas should announce soon that the $300m has been secured with shareholder approval obtained. The performance of Shenandoah will also be under review by banks as FCF will fund $400m of Sealion development costs and i am sure banks will want to see a consistent plateau rate post first oil. This should be clear by end of September and for me October still looks most likely date for senior debt sign off and FID.

Yes there will be a temptation to sell some of the 53p placing shares but this will be needed to meet II demand post FID.