Member Info for Stevo12

NQM

The gas price of £77/MwH also includes a carbon tax of approximately £15/MwH, accordingly the comparator is closer to £60/MwH. Further the AR7 prices are inflation linked and will increase over the 20 years even though 80% of offshore wind costs are fixed.

Londoner

I have not taken a detailed look at BP aker since the time of the harbour WD announcement and i recall that in 2024 that tax payments in Norway were second half loaded. This timing was also highlighted in WD’s FCF which was dominated by Norway. I will take a more detailed look at their recent announcement.

I recall OPEX was $6 per barrel which is really low for primarily oil.

On EPL the $100m payable by Enquest included $50m related to the Bressay rig and parts deal. As a result of Enquest having tax losses, they are not subject to UK payment on account regime and so any taxes due for say Dec 24 are payable in October of the following year. Accordingly i do not understand why Enq would pay EPL in June. I have not seen any change in payment rules for EPL.

Harbour will be subject to POA rules and will most likely be paying EPL and core taxes on roughly a quarterly basis.

I do believe there is upside for HBR with a combination of improving oil prices (which might be 2027), debt repayments ($2b reduction would help) and UK Gov relaxing /replacing EPL pre 2030). Wish we had stuck with Falkland Islands which looks more attractive than Mexico.

SEK

I have not done a deep dive into BP Aker since the Harbour acquisition of WD but at this time the key differences were:

1. Aker are aggressively growing its 2P reserves and is spending over 2Xs Harbour on growing their production and accordingly dividends should continue to grow. Harbour is projecting production of 450k BPD from 2026-2028 while Aker is projecting production of over 500k BPD.

2. Aker is more oil than gas and its OPEX per barrel is around half of Harbour’s

3. Aker’s net debt is lower than Harbour. Remember Harbour has $1.7b of hybrid debt that is classified as equity but has to be repaid over next few years.

Akers FCF in H125 looks great at $3.3b but big tax bills to pay in H225 and full year 2025 will not likely be much higher than the $3.3b for first half. However, Aker is generating approx 3Xs FCF of Harbour and I would say HArbour is undervalued compared to Aker but in the £1 region not £4-6 per share.

And that is after spending over $6b on capex in 2025.

Also BP Aker committed to $1.6b dividend in 2025.

Thanks alma. There must also be a number of folks in the NS worried about their future. However $1.5b is a lot of cash to spend and collective knowledge and a team that knows and trusts each other are also valuable. How many folks came over from Murphy?

Really enjoying the ride and we are now in the highly likely space for FID and concur with other that FID should see 90p post a small dilution with £2 at first oil, if reservoir delivers volume and quality expected. Beyond sealion who knows, but I am looking forward to RKH/Navitas unlocking a new frontier.

My only concern is that while Navitas are clearly masters at finding great opportunities and raising funds, they have limited operator experience. Not sure if this has been discussed but i would certainly be more comfortable if we also had an experienced operator onboard - am i overly concerned?

Tamovv

I still keep an eye on Enq and I have a soft spot for the company, but I do not believe it is fair to comment while not holding shares.

The primary reason I sold was the lower oil price environment and Trump’s desire to keep oil prices down. If this macro environment changes I will be back as Enquest represents one of the best leverages to oil price - both up and down.

Keep well

Your logic is correct but is based on the assumption that debt can be refinanced and at reasonable interest levels. Harbour’s current credit rating is strong but we are carrying a lot of debt relative to equity and much of the acquired debt is at very low interest rates. The rates on this debt will increase as they fall to be refinanced.

We all have different risk tolerances and I would be much more comfortable with $2b less debt, but it is hard to turn down share buybacks at current share price. IF oil prices recover and European gas remains strong, I would like to see a mix of buy backs and debt repayment in 2025 and assuming we are north of £3/shares by Q1 2026, debt repayment in 2026 and 2027.

The board have a history of buying with debt and repaying debt as quickly as possible.

Really disapointed that Serica and Enquest have turned a win:win into a lose:lose.

While Enquest has some time to find another deal, there is going to be a lot of competetiton with Ithaca, Serica and others looking to add 2P reserves.

I have taken the difficult decision to sell my Enquest shares this afternoon at a loss. I have kept my bonds and accordingly this his will be my last Enquest post. I have always enjoyed the lively debate, challenge and the insights shared by many posters. There are very few BB as good as this Enquest Board and I truely wish you all well with your investments.

I do think there is a wind of change regarding Net Zero and NS O&G, but I am concerned that oil prices are going to stay low for longer. I have kept my shares in Serica, Harbour and Rockhopper and so will continue to follow developments in O&G companies.

Best wishes all and signing out.

It was an absolute scandal that wind and solar operators received the inflated wholesale electricity price in 2022 and 2023 driven by increased gas costs following Russia invasion, in addition to the subsidies. The windfall profits were taxed but nothing like O&G and only for a relatively brief period and windfall tax stopped in 2023/24.

There wss no reason to pass on the gas price spike to renewables which would have meant that 60-70% of UK electricity production would not have been subject to the gas driven price spike and electricity cost increases would have been approx 70% less.

Sheer Government incompetence. Tories could have suspended or removed the marginal cost pricing mechanism and they are as much to blame as mad Ed.

Very

While the interviewer drew the comparison between the UK and US he did not compare to Germany (50% cheaper than UK) who use coal and gas, along side their underperforming wind and solar. While Milliband is correct that gas sets the wholesale price of electricity 98% of the time, offshore windfarms receive the wholesale price £74/MWh plus a further £110/MWh subsidy if they receive ROCs (pre 2019 windfarms) or a guaranteed price under the CfD auction which is £85/MWh for the 2024 auction.

There is then the cost of backup and also the cost of building transmission lines from North Sea to UK population and industrial centres. The inconvenient truth is that the actual cost of electricty generation (set by gas and including carbon tax) is now between 25-30% of the cost charged to industrial and domestic consumers with subsidies, distributor and transmission costs making up the majority of the bill. Pre renewables the cost of generation was about 1/2 of the bill.

Uk uses the marginal cost pricing mechanism which means while gas provides less than 30% of UK electricty on average, it sets the price almost 100% and all providers get the highest price bid in each 30 minute auction. GAs has a low capital cost but high operating costs, renewables are the opposite. Why Milliband does not decouple renewables from the price of gas given the wind and solar operators get a fixed price for 15 years is beyond logic.

Wow! really surprised and pleased that Enquest is operator. A real vote of confidence from the JV partners and Indonesian government and reflects the good work in Malaysia.

It will be interesting to understand what the appraisal costs will be and ultimately development costs. This should strenghen Enquests hand in discussions with Serica.

Dickupham

I am sure you are correct that there are potential impacts of fracking that needs to be better understood and mitigated. However the reality is that there are always going to be environmental consequences to providing energy and food to an ever expanding global population.

Our farmers are leaching pesticides and fertilisers into rivers and waterways that is effecting both marine life and water quality. Our fisheries are being impacted by the millions of tonnes of concrete being poured into the oceans to build foundations for offshore wind farms. Wind farms are wiping out colonies of birds, particularly offshore and are driving whales and sea mammals crazy with the noise. Solar panels are made using minerals mined in diabolical conditions in Africa and assembled using slave labour being subjected to genocide. If nuclear goes wrong we are all going to be glowing in the dark.

I guess my point is that energy generation is a messy but essential business and an objective assessment of fracking is needed relative to other sources of energy generation. Also the benefits for our economy and society of reducing our energy bills by at least half need to be weighed into the mix.

Sasa

The impact of tremors from fracking has been hugely overstated by the anti-fossil fuel lobby.

I understand that ant tremors would be equivalent to dropping a melon on your kitchen floor and a fraction of the vibration caused by a passing bus.

However accept that there is a negative public sentiment and it is important that there is a proper scientific debate. Would you rather have a pylon at the bottom of your garden or an occasional knee trembler and energy costs a fraction of today’s costs.

I think mad Ed will resign rather than be sacked. It will need the cabinet to rollback on some of his Green destructive ideology which could include opening UK coal supplies for British Steel, rollback on gas boiler/heat pumps and EV vehicle mandate and reduction of carbon taxes on steel, chemicals, cement, refining etc to give UK companies a level playing field with foreign companies. It would be amazing if Uk decided to Frack to become energy independent but unlikely in short term.

I do not think EPL will be removed but a successor regime will be announced in 2025 which will be much more equitable and will restart NS investment in 2027/28. New licenses will also possible be issued in 2026 and this will all be too much for Ed to take.

It is going to be interesting to see the price guarantee the government provides to wind and solar developers in the summer auction . The 2024 price guarantee was about 30% higher than the cost of gas generated electricity before the cost of back up for wind and solar intermittence. I think there will be more scrutiny of the 2024 CFD guarantees and the true cost of offshore wind in particular will be revealed.

The good news is at these oil prices Enquest will not be incurring any EPL. Hopefully this is a short term shock but $90 oil seems along time ago.

It will be interesting to see what actions Enquest take in the face of falling oil price. CAPEX reduction is the only real variable and this cannot be cut in the short term. Although Enquest will likely be negative FCF at this oil price, the borrowing capacity and facilities will enable Enquest to sit this out for 12-18 months.

Value of 2P reserves will have fallen and RBL capacity will also fall. This will have made the merger and any 2P acquisitions more difficult but turmoil provides opportunity.

Enquest have told us what its cash cost per barrel is for 2025. Enquest will not be paying any EPL in 2026 at these oil prices

Very good. Heavy rock and heavy oil.

My logic for the 13-20p was no greater than that I estimated there is about $300m of synergies which will be split 50:50 and it looks like about 1/3 of that benefit is in both ENq’s and Serica’s share price. So about 5p to come if deal approved or 2.5p off if deal falls over.

Very much a guesstimate and I personally think that a merger is highly probably (75%+) as there is too much to lose for both sides unless Enq has a 2P acquisition on the back burner.

Could be a delay but have already set my alarm clock for tomorrow. Liberation day!