The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
I appreciate there's still 2 weeks to go but who will be dialling into the AGM?
Under normal circumstances I'd also ask what Q's people would be bringing up during the Q&A (so that we're all on the same page) but so much could happen between now and then that it''s worth waiting to see what news we get/don't get between now and then.
hitman - a good summary thank you as I hadn't yet looked at the analysis.
I appreciate there will be a number of other factors which will influence Jefferies' target price but based on the points you make a target price of 17p for ENQ and 68p for PMO feels very disproportionate - either we're too low or they're too high. Would you agree?
Stampfli - I think that HUR is on a lot of companies radar's with regards to acquisition. The potential here is enormous but the problem is capital and finding the resource to unlock the potential. I don't want to speculate as to who may be interested but I am sure at least one company will have been sniffing around in recent times, particularly as the market cap is so low!
Anybody care to update their spreadsheets based on McDaniels price forecasts? Where does that leave us end of 2021?
If we're assuming 60k production and $25 break-even for 2020 and $27 break-even for 2021 then:
2020 (6 months) = 60k x (365/2) x (43-25) = c.£200m
2021 = 60k x 365 x (49-27) = c.£480m
This excludes a number of variable such as hedging, Kraken premium etc but does give a nice indication that based on the above there will be sufficient monies to pay the RCF due in October 2021. Please comment and pick holes as you see fit - it is intended to be back of fag packet stuff at this stage.
I agree Squif. Although we are in a low-price oil environment, which may be around for a LOT longer than we hope, the company has positioned itself to survive (and hopefully still profit of it). If for one am currently putting ENQ more and more into the 'safe and boring' basket as opposed to 'risky and speculative'. Yes there is still debt outstanding and we have the payment due in October 2021 but we are in a decent place.
Just remember, based on what the report says then we are making profit at the current POO levels so every little helps. Anybody spoken to IR recently regarding premium on Kraken crude? Would like to see a further uptick there also.
I haven't given too much consideration to possible acquisitions or ventures in the short to medium term, but what are people's thoughts? Or do we think wait until dust has settled and the October 2021 payment secured and then consider.
GLA
Testpack3 - thank you, that is very informative. Particularly that the coupon payment is c.7% of minimum guaranteed income. To me that still feels very high, though I guess as you say helps provide capital with the ultimate aim of exploring more gas.
What are your thoughts on the plan going forward - i.e. next drill and further exploration plays?
Hi all
Had Sound Energy on the radar for a number of years but not currently invested. I've read the RNS today and wanted to understand what your thoughts are - particularly those that have followed the Company more closely in recent years. To me it reads that they have a guaranteed buyer for a number of years, which is great, but the price is fixed (can be a positive or negative depending on how prices move over time). The one thing that I was drawn to was the commercial loan - whilst great to have funding in place to help things move forward I did find the 11.5% coupon a little alarming. Thoughts? Though the fact it's over a 12-year term highlights the confidence that the lender has in the company.
Has anybody yet done calculations (albeit rough at this stage) to quantify the value of the guaranteed gas sales agreement? Would be interested to know what you get and then share views/figures down the line.
GLA
Tom8080 - I agree, permanent correction is what is needed here, otherwise we will find ourselves in a pretty situation for a short period, only for it to reverse down the line. I'm sure that is what will happen anyway as everything works in cycles but if we're able to remove some of the majorly over-speculative/poorly run companies in the meantime then so be it
Very well put northernmonkey2. Whilst the recent falls have impacted the portfolio (on paper), it has provided an opportunity of buying more at a very low price (my opinion).
Let's hope for a steady remainder of the year both in terms of production and POO. I for one am comfortable with where the company sits, particularly the decisions made to reduce or remove any high-cost producing assets. Leaner and meaner going into 2021 I hope
Chilting - I agree. The problem comes if they decide to over-hedge and find themselves with limited gains if POO were to spike in 2021. But given they have not hedged in the past and been caught out as a result then I would prefer a scenario where we can guarantee income at a certain level and find ourselves in a much more secure position financially
Hi all
Apologies if I am missing something blatantly obvious here but can somebody explain the clear disparity between the mcap and assets available? The company has net cash of more than $300m and no debt and yet the mcap is half this amount?
Thank you in advance
Mystic
ENQ's SP is very much correlated with the price of oil so if you do think that it has topped off and will reverse then you may be able to find a slightly lower entry point. Although if (and in my opinion when) the price of oil does rise again then I would expect the ENQ SP to rise considerably.
One thing about this BB is that there are a number of LTH's here who have a good understanding of the company. If you ask nicely then they may be willing to share their forecasts with you based on the latest figures. My forecasts are more back of the fag packet stuff. By looking at those numbers you'll get an idea of what could happen to the SP.
Whilst some will scoff at this and ask why we decided to take out additional hedging at such a low level ($33/bbl), I see it as the company seeking additional downside protection, ensuring absolute survival and then allowing room for FCF to grow if the price of oil does move on upwards. Given my gripes re. hedging in the past I was at least encouraged by this.
I wasn't able to listen in on the AGM due to work commitments but would be happy to hear comments off the back of it, particularly around hedging and future M&A activity, if questioned.
Overall a very solid update. Not surprised to see the SP/market cap move in line with the cash reserve - I am getting this to be around 15.2p a share so still a little way to go yet.
- Production figures look solid - interesting that we did not amend our guidance, but we've never been ones to play around with this during the year so am comfortable with keeping this where it is
- Pleased to see a reduction in the overall debt over the period. Thoughts on what this would have been? Unless I've missed it then I'm thinking SVT and part of OZ
- Interesting that additional hedging put in place - even if it is at $33/bbl. Coincidentally in line with our break-even for the year. Whilst I could regurgitate about times where they should have hedged (and we would find ourselves in an even better position) it is nice to seem at least pro-activity and offering a bit of downside protection, should POO drop back
Whilst it wasn't the most comprehensive update I was pleased. Interesting to hear others thoughts. And also who is joining the AGM later on? Questions to be asked?
I agree, I think the timescales would have thrown people off. No doubt they would had to bake in the assumption that people are unable to travel for a couple more months, which pushes things back a little, although it would have been nice to get more clarification on this. Has anybody emailed IR to ask why it is expected to not be until Q1 2021?