Member Info for Stevo12

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!

You’re a gent VOR. Please donate to Prostate Cancer. Had a scary moment myself last year and I must say NHS were first rate.

Kamrat

Apologies one further question. Are you assuming that realised oil prices in 2025 is consistent with the $80 per barrel achieved in 2024?

Kamrat

Thanks for sharing the analysis. Really helpful.

I have reviewed and my observations are as follows:

1. I confirmed with IR (Craig) that 2025 proforma guidance of 40-45k BOPD includes a full year of production from Vietnam (to illustrate what production would be with a full year of Vietnam, although only to included from completion date). Excluding Vietnam guidance is 35-40k BOPD as previously discussed.

Your projections of 30.2k BOPD UK and 10.4k BOPD Malaysia are marginally above the upper end of the management guidance and are achievable if there are no unexpected events or breakdowns, be they weather or mechanical. I have always assumed that management give a forecast production range of production to allow for unexpected disruptions in production.

2. On your FCF forecast you have not excluded the Bressay farm down proceeds in rolling forward FCF per barrel to 2025 and beyond. Equally while you have adjusted for the reduced lease cost you have not adjusted for the lower CAPEX in 2025. These pretty much balance each other out so we are very close on 2025 FCF with production at the upper end of management’s guided range of 40k BOPD.

Of course this is not a real dialogue it is just me reply to my own BB message. LOL!

SMOKIN

The whole point of these boards is for investors to give their views and interpretations (backed up with data and analysis) and for other to challenge and refine. Different people have different skills, experience and insight and hopefully collectively we all get a better understanding of the companies we are invested in.

However to think that comments on the BB move the market is delusional and to troll anyone who is not blindly ramping is just plain dangerous. I have always given my honest views of the positives and the negatives and sought others views on my assumptions.

My analysis is principally based on information provided by management or disclosed in the financial statements and I appreciate you or any ones challenge of the assumptions or calculations with considered counter-arguments like Londoner, Sekforde or Kamrat. I have learned quite a lot from them but you have yet to provide any meaningful contribution.

A good example was the recent discussion of whether the 2025 guidance of 40-45k BOPD include s12 months proforma production from Vietnam. Kamrat and I disagreed which is perfectly reasonable and it was subsequently confirmed in the year end announcement and by IR.

Kraken

I am an investor not a cheerleader and I look at my investments objectively to understand the positives and the negatives.

I am now 50% bonds and 50% equity having moved 25% from bonds to equity a few months ago in anticipation of a 2P acquisition. My preference would have been for Enquest to have acquired 2P reserves and retain 100% of the benefit of accelerating tax loss utilisation. However Serica deal is now on the table and both companies will be punished if the merger is not completed.

Kraken

Keep drinking the Coolaid my friend. Do you really believe the share price has not risen because of the potential merger announcement?

What did we learn from the year end announcement that was not in the Feb update?

Bearded dragon

My guesstimate is 20p if merger approved and 13p if it falls over. The challenge is then for AB to deliver a 2P acquisition quickly which could get share price back to 20p + depending on scale and price of deal.

At 20p that would be approximately a £100m uplift on pre announcement market Cap, I think Serica will rise by a smaller % on announcement - possibly 10-15%. Both companies SPs have already benefited from potential deal synergies.

TerryM1

On the positive side I would add that the FCF almost covered the generous dividend and share buy back costs. At least the business is kicking off cash before shareholder distributions, albeit less than last year.

2025 now critically dependent on Triton resolution which is now pushed back until June. I am anticipating the merger will go through and all the metrics you quote for Serica also apply to Enquest. It looks like it may be a “who’s got the ugliest baby” competition.

Thanks Sekforde. VOR are you ready to pay up! One bet I would have preferred to lose.

Londoner

I was expecting the $50m EPL payment on Bressay farm down to be paid in October 2024 but Enquest have managed to defer it until 2025. As a result EPL payment in 2025 is projected by management at $100m, which includes the Bressay Farm down EPL payment.

Management have adjusted for this delayed tax payment in the disclosed $53m FCF which is detailed in the notes to the financial statements.

The only real risk is that if Bressay does not proceed we will have to repay Rockrose but we will get a tax reduction of $58m - so $8m net benefit and an interest free loan from Rockrose for a couple of years. Only real risk is HMRC challenge the original transaction but that risk is with Rockrose. The transaction was really a leverage of the additional allowance for EPL.

Don’t I wish. So far underwater on my original investment I need to grow gills.

Kamrat

I have not done the deep dive into production that you have. I have taken management’s guidance that 2025 production will be between 2 -14% lower than 2024 excluding any acquisitions in 2025 (Vietnam and other). I certainly hope it will be closer to the 2% than the 14%.

I believe it is prudent to understand the impact of both the upper and low ends of the guidance. 2025 has started pretty positively with production only 3.5% below Jan/Feb 2024 levels, but we will have a better idea at the half year.

Kamrat

All I have done is taken what management told us yesterday as to the 2025 range of expected production of 35-40k (excluding Vietnam). I take the view that they are in the best position to project production and I hope they are in the upper end of their guidance range.

I understand your calculations and hope volumes are as you project. I would however be cautious in using a couple of months production as the base for your forecast. Using both the upper and lower end of managements forecast helps understand the impact of both.

smokin aces

it is ******* down here. just got soaked taking dogs for walk. my forecast for 2024 fcf (debt reduction) of $0-50m excluding asset sales was i would say spot on. my forecast are based on information provided by management and at times management has got their production or cost forecasts wrong.

if you feel it is unhelpful to understand the company’s cost per barrel and the oil price breakeven then fine. we all use different ways to assess our investments.

as krakenoil notes and we have discussed many times, the big opportunity for 2025 is purchasing producing reserves and using our tax losses. while i can see the synergistic benefits of the merger, i would rather this happen after enquest has picked up 20k bopd of production from waldorf or others and share price is in 20-30p range. however there have been a number of mergers over the last 6 months and the pool of opportunity is shrinking and so the serica merger looks like it will come first.

i do think the presentation yesterday was excellent, particularly from the finance and operations directors. enquest has a much larger and deeper team than serica and i can see ab as chair with enquest team taking many of the senior positions. i think c.cox will get ceo role.

Oilviking

Lease costs are not includes in OPEX. They are finance leases (on balance sheet liabilities) and not operating leases. Please take a look at the company’s presentations of FCF. The presentation of opening to closing net debt in yesterday’s management presentation was particularly useful.

These are not my forecasts. These are the numbers management has presented. I have just added them up and divided by the production guidance. Oil price realised in 2024 was $80 per barrel and FCF was zero from operations . The debt reduction was solely related to the proceeds from the farm down.

Please provide your calculation of how you get $55 or $40 per barrel cash cost so we can comment. Just plucking a number helps no one.

Sekforde

I was trying to remember who I had a bet with that the 2024 FCF (excluding disposals or business acquisitions) would be less than £100m. Was it you?

Had a good read through the financials statements and watched the management presentation this morning and my thoughts are as follows. These are an objective assessment and while I am sure Krakenoil will not be happy I am a trying to be as objective as possible.

What I Liked

1. The commencement of Dividends is a watershed moment

2. Really interesting opportunities in Malaysia and Vietnam should be a 12 month payback

3. Tax losses available higher than I was expecting.

4. Opportunities to sustain UK legacy production in the 28-30K BOPD range and potentially grow it with Bressay and Bentley as and when tax regime changes.

5. $0.5b+ of borrowing capacity to acquire UK producing assets and expect Kraken MI to be acquired from Waldorf. Possibly Catcher as well.

What is Concerning me

1. Enquest generated minimal FCF from operations in 2024 with the approx $100m debt reduction a result $107m Bressay farm down proceeds with the $50m EPL on the farm down payable in 2025.

2. Despite over $200m of NS CAPEX in both 2024 and 2023, there was no additions to NS 2P reserves.

3. Production guidance of 35-40K BOPD in 2025 excluding Vietnam. Based on Management’s cost forecasts this puts our FCF break even at $64-73 per barrel. Accordingly 2025 is not going to be the bumper FCF year I was hoping for and oil needs to be in the $80s to generate $150m+ FCF in 2025.

Ps for other to check I have used the following assumptions for 2025 FCF (excluding Vietnam) : production 12.8m-14.6m Barrels, OPEX $400m, CAPEX 190m, ABEX $60m, Lease $66m, Magnus $50m, Interest $70m, Tax $100m. Total cash outflows $936m.

I have assumed Vietnam will generate $35m FCF per annum.

I look forward to the abuse!

Kraken

I am reviewing the full financial statements and will comment later today. Dividend was a nice surprise though.

Tamovv

The company forecasts UK tax payments of $100m in 2025. Need to add on Malaysian tax payments.

Production Guidance figures confirmed as including 12 months of Vietnam production