Member Info for Stevo12

Profitaker

I would view this as a strong bond issuance with credit rating improved from B to B+ (thanks to The Donald) and a 10% yield is a positive step forward. The $675m raised will enable the retail bonds to be repaid and their current small premium above par reflects the interest rate margin until likely redemption.

It will interesting to understand fees on the issuance. I would estimate £20-30m.

I presume you accept that you have lost our bet that the Bonds will be financed above 9%.

I believe HBR is the most vulnerable of UK O&G to takeover. The current EV of $15.5b ($9.5b debt and $6b equity) for 500k BPD is pretty cheap on global benchmarks. The LLOG acquisition at $3.2b was perfectly timed and is probably now worth more than $5b with long run oil price of $70-80/barrel. The WD business is certainly worth less than the headline purchase price of $11.2b - say $8-9b. The remaining core UK business of approx 150k BOPD is probably worth $3-4b with EPL in place and probably double without EPL.

A 50% premium to current share price would only increase EV by $3b to $18.5b and at something close to £4- 4.50, I think BASF et al will take the cash in a heart beat. If oil price settles in a new paradigm (high $70s, low $80s) after gulf war is concluded then HBR share price rerates or almost certain they will be taken out.

Obviously this was a great investment at £1.70 per share but IMO HBR remains a pretty solid, low risk bet at £3.00. Repayment of additional $1b of debt from current elevated oil price should add 50p to the share price alone by end of 2026.

The NSTA fined Enquest $16.5m for ongoing delays in completing decommissioning of 33 wells. Serica has 2 wells which are late being decommissioned (see article) and potentially subject to $1m fine. However its sounds like Enq has been delaying and deferring the decommissioning from 2020/21 and have been warned on multiple occasions.

The cost of ABEX per well is, on average, in the $6-10m range and with EPL payments, it looks like Enq simply could not afford to incur $200-300m of ABEX in addition to the $60m they have spent per annum for last few years. The other significant offender is NeoNext who have not yet been fined.

It feels a bit harsh but the NSTA are clearly concerned that delaying decommissioning threatens the retention of the supply chain needed for the wall of future decommissioning projects which will result in higher costs.

https://www.offshore-energy.biz/13-uk-operators-fall-behind-on-their-decom-duty-with-153-wells-in-arrears/

Dan

Only takes 70 days of 10m barrel of lost ME production to generate 700m barrel of global reserve depletion.

I have estimated that of the 20m barrels a day previously flowing via SofH , approx 10m is findings a way out of ME via pipelines.

Toku

The formula provided by Harbour re base case assumptions for oil and gas and the impact on FCF of increased oil and gas prices are very helpful.

My understanding is that the formula is based on increases in averaged realised prices as compared to average market price for oil and gas. Accordingly, as a result of hedges, the average realised price for 2026 will be below the averaged market price and, as an example, if the average Brent price for 2026 was $90 per barrel, the average Harbour realised price would be $80/barrel and 2026 FCF would be $510m higher (3x$170m) than projected. Similar for gas.

Who knows what oil and gas will average for rest of 2026 but, as noted by NSS, it is going to be higher than $65 oil and $11 gas assumption. So the only debate is how good, the good news will be. I think we will have a clearer idea over the next couple of months and even with a swift end to the conflict, there could be 700m barrels of strategic reserves to replace. Given a possible 2m barrels per day of current surplus production, this could take up to 12 months leaving a tight market in 2026 and 2027 and supporting oil over $75 well into 2027. Beyond 2027, the current surplus of supply of oil starts to evaporate very quickly.

I am less bullish on gas prices in 2027 and beyond with so many LNG projects coming on stream, including Harbour’s Argentina. $11 mcf is approx 80p/therm which is a pretty fair price given the average of 50-55p for most of last decade.

Harbour is definitely a share to tuck away, reinvest the dividend and enjoy the ride.

SEK

That does not feel right. In the presentation, Alex guided that 2026 FCF would be $1.4b based on forward curves at 5 March 26. Yes oil and gas prices have been bouncing around but not that much for Q3 and Q4.

I think the fact that 50% of production is hedged will dampen your estimated FCF benefit for 2026.

As an example if oil averages $80 for year, with 50% hedged at $70, this averages to $75 which will increase revenue by $912m from $65/ barrel assumption. Assuming an effective tax rate of 65% results in increased FCF $320m for 2026 (compared to $340m per company formula).

$16 mscf gas will result in post hedge of approx $14 realised generating additional FCF of $450m. Total additional fcf of $770m-$800m and total of approx $1.4b as guided.

I would use the $1.4m FCF guidance for 2026 as new base case and any more upside would be very welcome.

I would take the $1.4m guidance as closer to the upgraded expectation for 2026 but I do not understand the

SEK

I fully agree and while today feels painful, it is in Serica and other O&G companies interests for oil to return to a long-term run rate of $80-85/ barrel and gas at 90p/ therm. While prices of $150+ would have given a short term boost, it would have impacted medium and long term demand levels through recession and increased substitution. Far better a new base rate in the high $70s or low 80s with an inflation plus 3-5% growth in prices for next decade.

We were so close to replacing EPL pre conflict and it has certainly helped the debate around use of own energy rather than importing. I am not sure Labour will grant new exploration licenses but there are plenty already issued that just need the right fiscal conditions to progress. If oil and gas comes down to above levels, I believe we will see EPL replaced in Autumn statement with Rosebank and Jackdaw approved this summer.

At $75 oil, Serica will be kicking off $400m of FCF in 2026 if it hits its production targets of mid 40k/BEPD. That should see the share price materially ahead of today and if exiting 2026 at 65k BOEP, then another boost will be coming.

Hunbah

I think it is a well balanced bet, a $20 difference in FCF per barrel (approx $300m higher cash generation for Serica) is substantial and I fear it is going to come down to whether rusty old Triton can stay on line for most of year.

I am logging off from Enq BB now until the half year results are in and we can see how the year is progressing.

Best of luck to all NS O&G

What’s the point of a Brent 2026 oil price when we don't start production until 2028

Am I missing something? Great day through.

Hunbah

You are on. I am just hoping the string holding Triton together does not snap again. Fingers crossed they have used gorilla tape this time.

Ok Hunbah. If you want an outcome based bet how about serica will generate $20/barrel more FCF than Enq in 2026. £50 to charity of winners choice.

This bet removes oil price volatility and focuses on what both companies can control.

We had a bet on 23 December. Your forecast was $58/ barrel FCF breakeven and mine was $62.5m - that is the bet. Yes as further information has been released with Feb update and March full year results, I believe it will be higher but the original bet is the bet. You stated 2 days ago you think breakeven is now $52/barrel. That is fine but it does not change the original bet.

Lucifer

I agree the overhang is going to take 12-24 months to clear. Possibly quicker if HBR enters FTSE100 and patience is needs for full value to be realised.

The risk is that one of the super majors, who are now focussed on building reserves and production, take Harbour out at a modest premium. Given the BASF holding, a sneaky bid of £3.60- £3.80 would probably get their support and be accepted. I really want the Harbour story to fully play out but being taken out sub £4 is the biggest risk.

OILV

Lest we forget, I just wanted to gently remind you of the £200 bet to charity we had in December. You had FCF break even of $58/barrel and I was at $62.5/ barrel.

Let’s revisit at half year when we have 6 months trading.

Kraken

Can you share your forecast of 2026 Lease costs, interest cost, PSC and Royalty costs, UK EPL and Malaysian and Vietnamese’s corp tax.

Genuinely interested to see how you have calculated your FCF break even of $59.3/barrel. OPEX,CAPEX and ABEX are $43/ barrel at 43k BOEPD. Management have disclosed next year’s lease costs, including $15.8m payable on Vietnamese FPSO lease, of $86.3m. I see no reason why interest costs will be materially down from net $92m in 2025 ($97m interest paid and $5m received on cash balances) which is principally bond interest of $69.9m.

Hunbah

I just don’t bet on oil prices - it is pure gambling. They are also totally outside of both Serica and Enquest’s control and I offered a bet that removed the impact of oil prices uncertainty and focussed on cost of delivery.

Overall a worthwhile and interesting comparison of the two companies and I agree that at $80 realised oil, Enq is generating around $100m of FCF and Serica approx $400m. However due to hedges, oil need to average $90/barrel for remainder of year to yield an $80 realised price. All down to Donald.

Profitaker

My language was a bit casual and i meant to say they had spent $60m on Magnus acquisition. How it has been funded I do not currently know - RBL or from cash reserves.

It was interesting reading the full financial statements in that the new $400m LOC facility is almost fully used and has allowed the restricted cash (previously held separately for ABEX spend) to be released for general purposes. This is good news for Enq. I would however take the reported cash balance with a pinch of salt. Like most companies the year end and interim cash balances is managed to present an improved cash position relative to the monthly average.

UKBBBBB

I am also a little confused following the companies latest disclosures. We know SEA production in 2025 was 9.2k BOPD Malaysia and 2.6k Vietnam (11.8k per day). New Segeli gas is projected by management to add 6k/day and full year Vietnam adds 2.6k BOPD. The totals 20.4K BOPD. Yes there might be some depletion of original Malaysia say 2k per day, but that still leaves over 18k BOPD.

I have used mid-range of management forecast of 43k which leaves 25k for UK vs 32k for 2025. Even at the top of range of 45k BOPD, UK is 27k BPD. I think this is a question for Craig at next presentation.

VOR

Agreed let’s enjoy the ride. Everyone can have different views and by explaining them, I hope it expands all our understanding, even if we don’t agree.

Profitaker - we are in the same ball park re break even cost per barrel - you are in the $60-70 /barrel range and i am at the top end of that range. Time will tell and agreed if oil averages $100/barrel (resulting in averaged realised of $85/barrel) it will be a great year for all NS O&G

OILV

Management disclose 2026 lease payments (Note 23, page 53 of 2025 financial statements) as $86.3m. This number is audited and is potentially higher than you expected due to the Vietnamese FPSO lease.

Interest cash costs were $91m in 2025. We are starting 2026 with a higher debt figure than 2025 and enq have borrowed a further $60m. How do you think debt interest will go down by $30m?

You are also excluding EPL cost and most importantly Malaysian PSC payment, Royalties and corp tax in Malaysia and Vietnam which will increase substantially from the $60m paid in 2025 due to full year Vietnam and additional $6k BPD in Malaysia.

Please explain why these will be £zero in 2026.