Member Info for Stevo12

A small step closer to FTSE100 but needs share price in £3.50-3.75 range to get back in FTSE100.

Let’s hope all NS O&G companies have a great 2026 and beyond and I agree that Harbour’s debt is at a high point and, as acknowledged by management, reducing leverage will be a key focus over next few years - $1.6b of FCF pa should help. I think LLOG was just to juicy an opportunity to pass up and ticks so many boxes for Harbour.

Looking forward to the Harbour, Serica and Enquest trading updates which should give a real insight into 2026.

The big difference between Harbour’s and Enq’s debt is both the interest rate and the maturity. Enquest’s $630m of Bonds mature in October 2027 and have to be refinance at least 12 months in advance of maturity. Enq will pay close to $80m of net interest in 2025 ($40m at half year) which incredibly is going to be slightly higher than Harbour’s 2025 net interest bill due to the very low interest rates on WD bonds (approx $30m of net interest expense on bonds and bank debt at 1/2 year).

I am not as negative on Enq’s solvency as Sekforde but the 2026 Bond refinancing is going to be a major milestone particularly if oil prices remain weak in H2 26. As noted by SEK, Enq will know its net debt with days of the month end and the non disclosure of November month end net debt via the December update was management’s choice.

We will know the Enq cash cost per barrel for 2025 and projections for 2026 shortly. What we know is Brent averaged $68-69 in 2025 and Enq will likely be broadly FCF neutral in 2025. Enq Management guidance for 2026 costs and production will be forthcoming shortly and I will wait for their guidance before further speculating on 2026 FCF/ Breakeven cost per barrel.

I don’t think

Dumbly. Agree that a good fit M&A would have the biggest immediate impact on share price. I am sure AB has some irons in the fire but needs to get at least one over the line. Either being very picky or just out mussled by bigger players.

BT

I don’t disagree with you that Enq is massively undervalued if EPL did not exist or if oil was $80 plus and one day it will come to pass. The question as ever is when and while we all have our own views and opinions, Mr Market is valuing the shares reflecting the upside potential and relevant risks which, in essence, is just the average view of value from all buyers and seller. Naturally there will be those who think the value is higher than current share price (buyers or holders) and those that think it is lower (sellers). My view is that current share price reflects a medium term oil price expectation of approx $70, which translates to approx $50-100m of annual FCF (with EPL still in place) based on a cash cost per barrel of $60-65. I might be wrong and I have explained my logic and we will know more with the next update. If i thought oil was going to stay in the $55-60 range for the long term, I would sell my Enq Bond investment.

I hear what you are saying regarding dividend yield and bond yields being similar. I am probably more conservative than most on this Board and I place a high value on preservation of capital. I will revisit Enq equity in H2 26 but i first want to see that Enq has maintained dividend, Bonds have been refinanced and outlook for oil is looking more positive.

Kamrat

In H1 Malaysia production was 5.7k BOPD oil and 2.7k BOEPD for associated gas, for which Enq are paid lifting and handling fee (no idea how much but possibly $3-5/ BOE). I have assumed that 6k BOEPD from the new gas only well is in addition to the associated gas from Segali oil. My assumption was based on management guidance of 15k BOEPD in 2026 from Malaysia - 6K oil, 2.7 associated gas and 6k new standalone gas.

Overall i think your $8/ barrel FCF for Malaysia oil is very close. I have no idea what the lifting fee is for associated gas but as noted above might be $3-5/ BOE. On new Segali gas with a market price of $40/ BOE and OPEX of $15/ barrel (guestimate), FCF might be slightly lower in the $6-8 range.

Cutting through the detail, I think your $27.5m projected PAT for 2025 is pretty close. I have $23m but the difference is in the rounding given unknowns.

I would grade an Enquest insolvency as a low probability even at current oil prices. The refinancing of their $600m of bond debt in H2 2026 will be a pivotal moment and the current bond prices (trading at par) does not show any signs of distress (unlike Premier back in the day).

I think that there is a possibility that Harbour and Enq could partner on Bressay/ Bentley development once UKNS becomes investable again. Whether this takes a change of Government or for Labour to open their eyes to economic reality is anyone’s guess - but it will happen. In the meantime more likely that Enq will merge with the likes of Serica than Harbour.

BTFaith

The reason for the current market value/share price is not that complicated. Pre Covid UKNS 2P reserves were selling at up to $20/ barrel and recent transactions indicates a market value of approximately $7/ barrel. This reduction is primarily EPL driven (EPL reduced FCF/barrel for companies without tax losses by 2/3rd) and the Down cycle in oil prices. As each year rolls by, the impact of EPL on 2P reserves should lessen but a sustainable up cycle for oil prices is needed to move SP in next 12-18 months (together with the illusive transformational acquisition).

In respect of Enq, the impact on its NS 2P reserves (excluding BP Magnus share) is a value reduction of approx $1.3b (based on estimated 100m 2P at 31/12/25) resulting in a current UKNS 2P value pre tax asset of $700m and with tax losses closer to $1.1b. The end of EPL and oil returning to the $80-90 range should see the value loss per barrel reverse. The question is when.

I truly believe Enq is a class company but given the impact its legacy liabilities has on cash cost/ barrel, I am prepared to sit on equity side lines until oil price turns and I’ll stick with the 9% yield on Enq Bonds. I will most likely miss out on the initial share price increase but happy to trade this for being risk off.

Kamrat

I was not intending to criticise, I was reaching out to the community to see whether there was any information/knowledge on the new gas production in Malaysia. Malaysia should be approx 15k/BOEPD in 2026 and 9K will be gas - 6K from new Segali gas well and approx 3k of associated gas from the existing oil well.

Accordingly to model Malaysia it is key to understand the revenue per BOE (local market rates etc) and whether we continue to receive a lifting fee only on the associated gas of 3K PD from the oil producer. Did you get any guidance from Craig on the route to market for new gas production?

Sittingduck

Very well put. As eggs is eggs, the oil market will return to a normal, inflation adjusted rate and on its was there will likely overshot on the upside. The medium term, macro factors are undeniable - there has not been sufficient investment over the last decade and demand is proving more robust than projected. The only counter feature is that technology (including AI) is making exploration more efficient and improving productivity.

The acquisitions are bold and yes we had to pay a price that looks toppy at $60 oil, but at $80-90 oil and gas around 90p/therm the FCF will be very strong. The only real question i ask myself is does HBR have the funding/facilities in place to wait out a 1-2 year low oil price environment of $50-60 oil. I was very comfortable pre LLOG that it did and while LLOG has certainly increased leverage and increased risk, it has low OPEX/ barrel (and low tax) and will more than cover the interest bill on the additional debt.

I am a little concerned on the CAPEX requirements in Mexico and I would like to see much stronger oil prices before developing Zama etc to allow HArbour to finance from FCF rather than borrowing - the reality is it will take another year at least to get to FID. Overall very happy to hold for next 2-3 years and wait for the sun to rise as it surely will.

Karat

On lifting fee, I was referring to the approx 2.5k BOEPD of gas produced from the current Segali oil producer. For this gas Enq receives purely a lifting fee.

The new Segali field is a gas field which I assume will operate under normal PSC arrangements as you note. My question was whether Enq had provided any info on the end customer and whether gas sales prices were based on local market rates in Malaysia.

Hunbah/ Rom

While we are probably wasting too much time on this point, not much else to pontificate on. Hunbah observation is exactly the point I have been trying to make, namely that CEO/ Chair has authority to pursue preliminary M&A discussions, but once discussions progress the NEDs are required to be informed to provide Board approval. I am in no doubt there there are always early stage discussions ongoing led by CEO which the NEDs will not be aware until the opportunities mature and there were probably numerous early stage M&A discussion ongoing in October 25 when NEDs purchased shares. My bet was based on my view that there was not enough time to move from prelim discussions to completed deal in 2 months. I could easily have been wrong and with the number of deals announced in December I was sweating a little. I thought Waldorf was most likely transaction which would also have been cash 1 day positive for Enq as new RBL facilities and LOCs would likely have allowed $300m ABEX cash to be released. I can only assume that AB had another M&A opportunity up his sleeve which is maturing, most likely where the target does not have its own significant pool of tax losses. We will see, I think Serica merger was Plan A and still might happen.

Rom

The role of a Non-Executive Director comes with significant legal obligations and the Exec Directors have an obligation to comply with corporate governance requirement, irrespective of the CEO’s shareholding. There are many listed groups (particularly on AIM) where the CEO has a very significant shareholding but they are still required to comply with a Corporate Governance or risk being struck off. It is a very different world for Listed and private Companies and a Listed Company NED would (or at least should) resign if a CEO was abusing his Board approved authority. Even on AIM the Nomad is required to ensure there is a functioning and experience Board.

I am surprised you know that the BP NED’s were not informed of the Ineos deal. Also, Ineos was and is a private company and as such is not subject to stringent Corporate Governance obligations and, within reason, Sir Jim can do whatever he likes. In all seriousness, The Board of Shell/BP et al will have defined the size or other threshold of acquisition/disposals requiring Board approval and this will be relative to size of group. A £0.5b deal for Shell would possibly be below Board threshold. A relatively small acquisition for Enq would likely be above threshold and, as described in the 2024 Financial Statements, the Vietnam acquisition was subject to Enq Board approval (but probably not Harbour’s Board due to relative size).

We are probably overthinking this. My observation was simply that the recently joined NED’s had waited 18 month prior to buying their first shares and I surmised that this was because they were restricted due to closed period and progressing M&A and were not allowed to purchase shares until October 2025 (as the deals they were aware of had gone to other buyers). My logic was that if they had been aware of material progressing acquisition prior to October 2025, why would they not be aware of material acquisitions progressing at or immediately after October 2025.

Kraken

NED’s (at UK listed Groups) do not have a department or a role (other than chairing Remco, Audit Committee, Nomco) and are appointed by the shareholders. It is generally a 1-2 day a month role to represent shareholders interest and most NED’s sit on several company’s Boards. Their principal role is to attend monthly Board meetings and provide constructive challenge to the CEO and Exec Directors and approve matters reserved for the Board. Corporate Governance requirement stipulate the role of the Board and the matters that are reserved for Board approval should be detailed in a listed Group’s financial statements. Please take a look at pages 93-97 of the 2024 financial statements which defines the role of their Board and the matters which require Board discussion and approval. I have extracted the following from page 94 of Enq’s 2024 financial statements.

“The Board is responsible for:

• The Group’s overall purpose and strategy;

• Health, safety and environmental performance;

• Review of business plans and trading performance;

• Approval of major capital investment projects;

• Acquisition and divestment opportunities;

• Review of significant financial and operational issues;

• Review and approval of the Group’s financial statements;

• Oversight of control and risk management systems;

• Succession planning and appointments;”

There will be a standing agenda each month for the Exec Directors to brief the NEDs on the above matters and seek Board approval to progress any acquisitions beyond preliminary discussions.

Kraken

Nor sure what you asked Craig. I don’t think they would have lied.

My rationale was that to progress an acquisition opportunity beyond preliminary discussions requires due diligence, lawyers etc to be involved and this would require Board notification and approval (due to corporate governance rules). Once the non-exec becomes aware of a potential material acquisition they can not acquire shares until announced. Accordingly my logic was that when the non-execs purchased shares in late October it was not a closed period and they could not have been aware of a progressing material acquisition. I did not think there was enough time to progress a material acquisition from preliminary or no discussions to completion in 2 months and this is what i based my bet on.

The new non-execs had not purchased shares for the previous 18 months indicating that there had been numerous potential deals being progressed, together with the normal year end reporting closed period. October 2025 was their first opportunity to purchase shares. The discussion at the time was that AB and Chair could have been progressing major acquisitions but had not informed other directors - it just does not work that way in a relatively small company where AB will need Board approval before committing funds for due diligence, lawyers etc.

Interesting to see the new large shareholder and I was a little disappointed as these 4 shareholders have taken up the vast majority of the Placing. I was hoping that large existing share holder would have taken up a significant percentage of the Placing and would thus be excluded from the OO, allowing us PI to pick up additional shares above our allocation. Of course the notification only relates to exceeding the 3% threshold and they may have already held a smaller holding pre placement.

I am hoping that if the above 4 are excluded from OO and there are other IIs below the 3% threshold, that PIs will get to at least double their allocation. We will see.

I am not particularly phased that these 4 Israeli shareholders control approx 25% of RKH and I am sure they have a relationship with Navitas/Gideon. I think it Is highly unlikely that Navitas will make a play for RKH as they would not want 100% exposure and RKH, being a British company, helps with political dynamics in FI. They could however be influential if another O&G company is interested in FI and taking RKH out which i do not think is likely until post first oil.

I had a more detailed look at the NPV10 valuation at $1.8m which i did not appreciate includes all phases of Sealion (phase1 being approx 20% of Sealion 2C) and the CAPEX requirements for Phase2-4 is a further $6b which will be funded from operational FCF. Looking at the current share price we look about fair value for Phase 1 NPV10 with the upside coming in anticipation of FID for phase 2 (likely 2027) and removal of risk after first oil from phase 1 (2-28). Accordingly I am struggling to see any key drivers of share price in 2026 beyond sentiment and removal of discount to first oil (10% increase in SP) - Am i missing something? If not 80p by end of year looks more realistic.

I was updating my modelling for Enq and other Oilers over Christmas and does any one have any insight into the arrangement for new Sengali gas production. I know that the we are paid a lifting fee for the ancillary gas from Segali oil production (not sure what the lifting fee is per BOE), however Enq is the operator for the new gas focused production. Are we selling the gas on the open market in Malaysia or are we required to sell to Malaysian government/Petronas and is it at set price? I do not recall any guidance from management on this but I may have missed it. I have previously largely ignored Malaysia and SEA (on the basis that it generated approx $20m of FCF at $70 oil) but with the acquisition of Vietnam and new Segali gas production it is going to be increasingly important to Enq valuation.

Just to be clear to everyone why I bother with Enq as I do not currently hold equity. The reason is I hold a six figure amount of Enq bonds and I need to understand the business fundamental and sustainability to protect my Bond investment.

Hunbah - to your query on bets. The first bet was that based on the recent non-exec share purchase and the closed period rules, there would not be a material acquisition by year end.

Best wishes to all for the New Year and hopefully a rising oil market in H2 2026. H1 Brent price looks pretty well set in low $60s.

Kraken - Can I nominate Prostate Cancer UK as the Charity to benefit from our first bet.

Cheers all.

SEK

Alex Keane stated an average of $300m per year for next 5 years + but that it would be front loaded in the short term to double BOPD. He did not quantify how much extra CAPEX in short term but both Alex and Linda that FCF per share will not grow in 2026 but would start to increase substantially in 2027 and beyond with 60% growth over the period to 2030.

SO my conclusion is that FCF will remain in the $1-1.2b range in 2026 at current commodity prices. On your forecast, you need to split oil and gas and with Argentina in particular gas prices are very low.

SEK

I’ll have a look but I am not sure acquisitions are going to add much to 2026 FCF as I understand there is a significant 2026 drilling campaign at LLOG to bring production up to 70k+ BOPD. So i think it will be 2027/28 before FCF benefits are felt, which will be material.