Fair enough but shame i think. I have learnt over the years to let winners run and run and run. Today's announcement just declared this a winner and MATERIALLY reduced the risk of ENQ's prospects as a business. If you were fortunate to get in at 10p (i wasnt). Thats where money is made in investing. I am not saying im Buffett but i have been lucky to have some 5-10 baggers that have covered up my sins elsewhere and there have been many. With EnQuest, AB has laid out simple maths by providing investors a cash break even of 25-30 bucks. If you believe; there will be mean reversion (whateverthatmeans) in the POO, decommissioning liabilities are not materially mistated, and Kraken and Magnus have legs...... you do the fag packet math in terms of a current MCAP of $244m and those barrels over the next 10 years at a cash profit over $20 . 10 bagger perfectly feasible
$25p/b cash breakeven for an off-shore oil project is not easy for any of those who truly understand of the economics of this industry. One of the reasons I have stayed with ENQ is AB's 10% holding and significant amount of net worth in the company. $25 cash breakeven is the result of a man working for the owners and eating his own cooking. Alignment of interests is so important. His net worth changes with ours :-)
If you believe the share price is determined by earnings over time, nil cost options should be tied to the management's ability to effectively allocate those earnings or do you simply think management should be automatically rewarded for an increasing share price notwithstanding the level of retained earnings, capital owned by shareholders, they reinvest back into the business on your behalf?
Or are you just going to call me a 'nutter' again. Damn, i lost that exchange....
Not happy. Don't like getting diluted when compensation incentives are not aligned Mr Flegg and Mr Walker are being compensated for share price increases irrespective what they do with retained earnings?? Take a savings account and call it a business. Assumed the savings account offers 4% per year and the business has 2 shares. You put £10,000 in on day 1. If you leave the £400 of earnings in the saving accounts the earnings (interest), the value of per share is £5200 after year one. In year two, earnings will increase to £416 valuing the business at £10,816 and each share at £5,408. Would you pay the clerk on the phone a nil cost options for increasing the share price for doing absolutely nothing.
Its the same with Serica. Happy to compensate Mr Flegg and Mr Walker with nil cost options if they commit to a 100% payout of retained earnings to shareholders. But if they plan on not paying out 100% why should they be rewarded for share price increases as a result of simply retaining earnings? Not happy and i know other shareholders aren't either. We will be taking this up with the company.
Dont have more time to respond. You are comparing an oil company versus and oil and gas company (RRE). Economics different so your EV/barrel wrong calculation. Opex p/b and cash breakeven p/b different things. Good luck and nice exchanging debate
Here you go luck from rockrose....seriously, if you want to make valid short arguments on here, you have to be more detailed. You will get taken apart as people understand the oil and gas business without having to make sweeping short term macro predictions.
On a proforma basis unit opex costs were
$39/bbl for oil and $14/boe for gas in 2019.
The oil number was adversely affected by
low production efficiency on certain key
assets, notably Foinaven where there was an
extended shutdown. Current production
efficiency is considerably better and is
expected to lead to lower unit opex costs for
oil in 2020.
Thanks for explaining what enterprise value is. RRE is 40% gas and has its oil component has opex per barrel costs of > $40 p/barrel and cash breakeven per barrel even higher still. Next question? Your numbers all over the place dude
Luck why do we care what oil is going to be next quarter? And why would i care what analysts think? Do they bet their house on these convictions? If we believed oil would be in the $20s or $30s over the medium to long term we obviously would not be invested. You need to revisit your definition of high lifting costs per barrel. Sorry i am genuinely not being harsh but if you look across US shale, Gulf, Canda, your statement is just factually incorrect. Opex per barrel of $20 and cash breakeven of $30 is upper quartile
LuckCounts....Enterprise value per barrel is simply a market appraisal of the company divided by the number of barrels. You are basing you investment decision based on the market appraisal? It would be easier for you to invest in an index fund and be a passive recipient of market returns. The correct metric would be finding costs per barrel or lifting costs per barrel. Let the oil price be what it be. You cant predict it
I am a value investor and never make macro predictions on oil. I have spent a significant amount of time the past three weeks unpicking financials across my current energy holdings and new opportunities. A key metric i focus on is finding costs per barrel or lifting costs per barrel and management's shareholding %. EnQuest's operating performance is one of the best i have seen. The CEO has outperformed his peers in terms of tenaciously driving down costs. The reason is simple. He is eats his own cooking. London analysts and salary-men often do not understand this.
The advantages of CEOs eating what they cook and AB having a significant portion of his net worth tied up in ENQ came to light in the recent RNS. This company will survive. It has been unlucky and lucky at the same time, having the bulk of its maturities pushed out. Anyone who understands basic commodity cycles will know, POO in 2021 onwards will look rosey. I have been investing a long long time and admittedly got caught out with the virus. I still sleep easy at night, and ENQ SP is likely to be a great return for me over the next 2-5 years
It doesnt appear that way. Just as a refresher. If all companies were expected to repay their debt at maturity with cash and refinancing was not an option, which is what you are implying.....you are effectively saying corporate debt will cease to exist by 2023.
The maturity of the bonds being April 2023, is lucky timing and great news for the equity. There is a high probability net debt to EBIT and DSCR conditions in 2023, three years from now, are substantially better based price of oil improvement, disciplined run-rate maintenance capex and credit providers looking for yield given real interest rates are negative. Bonds have a great chance of being re-financed that far out.
The RCF can be refinanced in October 2021 and does not have to be repaid if you read the prospectus. Refinancing is basic to get your head around. Just like you don't have to pay a mortgage back after a 5 year term. There is a strong chance POO will look a lot different in H2 2021 improving the financing capability of the company. The bond maturities can be pushed back to April 2023 (3 years away from now). Assuming we free up cash via trimming capex, PIK interest on the bonds and pay at least 50% of the RCF, our DSCR at POO conditions in H2 to 2021 will be very attractive to lenders again when interest rates remain close to 0%.
Premier and Tullow in very different situations.
Combed through bond prospectus again in detail this morning. Retail and HY bonds are the bulk of our net debt and maturity/re-fi can be pushed out until April 2023, three years away. Cash interest does not need to be paid on bonds in the meantime and can be PIK'd (they have being paying cash in 2019). The free cash be re-directed into RCF paydown. The scheduled capex of $230m in 2020 and 2021 can also be trimmed. Along with our cash balance as at 31st of December 2019 (ex-restricted). RCF outstanding balance of $450m (inc. PIK) as at 31st of December 2019 can be repaid comfortably by 1st of October 2021 with oil taking a beating. The RCF cam can also be refinanced per the terms in the restructuring (so no Neil, it doesnt need to come from shareholders or asset sales). There are no other maturities or required until April 2023 save for small SVT loan of $17m in November 2020. Neil, your crude on free cash flow per your earlier posts makes no sense. Sorry.