Member Info for Voiceofreason1

Bberg analysis showing 41.5k expectation next year for production - i think anything north of this is super positive

44 ultimately would be out of this world

I base this on simple dramatic improvement in debt position

Should be noted on that 41.5k production the bberg analysis then says net debt end of year of 329m net debt

Steve you are killing me here - its moot point not mute point ;)

As to the ever bearish outlook on bonds going up when you can repay debt - well the proof of that is fact we are deleveraging fairly aggressively - down from circa 717 to probably arount 550 year end?? Thats over 23% of the 717 and over 30% of the 550m starting point of 2024 (lets see where it comes in and if the 44m from bressay 15% is included.) The HY notes are at 95p and the 9% retails are around 92p so you could make a dent definitely

As to the 9.2% effective rate - the bloomberg analysis was updated in Dec - its an effective rate as over the year as i explained - so start of year would be lower and more heavily weighted due to higher debt at start.

I dont doubt it starts higher in 2024 but then we all will see sofr decreasing as expected interest rate cuts come in over year (and nominals will be much smaller by definition)

Over course of 1 year yes - actually also saves you interest/coupon going forward as well - its actually more as you are buying the interest of 11.625 for 95 so its worth an extra kicker (small)

But essentially you save 5% right away on purchase and then clearly should see great reduction in interedt payments

Although this being said i still think they’d rather kill the rbl for choice

Not really but if meaningful they’d have to put note in accounts - i actually suspect its not even triggered as we are so inside the limits. Plus if we combine fact that analyst coverage is saying net 9.2% realised rate then clearly its not super meaningful

The realisation we can buy the high yield notes at 95p in pound and save 11.625% to boot has made me pretty bullish to be fair - although i know enquest are actually much more driven by lowering rbl due to the requirements it puts on hedging

I was unaware how axed we were to sofr actually which interestingly means our interest rates (granted with lag) will decrease as interest rates come down in 2024 - especially that 150m term loan - although we clearly also gain from simply paying doen rbl aggressively as we are well on schedule to do - and buying back the high yield notes if any extra cash lying around

Steve - Right i think i understand now - the rbl is based on sofr (basically us libor equiv) plus 4% - so while its 5.3% now it started year at 4.3 (and rbl actually started life in oct 22 when rates were 3% - and its paid in arrears) then went up as year progressed - so the actual weighted interest is prob quite a bit sub 9 - might even be 8ish ) and the highest interest rate quarter will be the one due next year (offset somewhat as they’ve been smashing it down so they have more freedom) - clearly this also lowers weighted interest as rbl amount was at highest when sofr+4 was in the 7’s

Re the redemption clauses - clearly this doesnt matter as they just buy back bonds on open market because they then actually benefit from it trading below par (redemption penalties only matter if they want to actually force redeem - which would only ever happen if bonds were in massive premium)

Btw - how much would i like to buy the 11.625% bond (at sub 95p) but for slight issue of the million lot size……

Mrc - to be fair if the repayments accelerate as debt comes down i think they just retire as opposed to refinance debt

I dont know repayment terms to be honest but given the 11.625% high yield debt is trading at 95p in pound i assume they buy some of this back in market and retire it - as well as the agreed schedule they have to decrease the rbl

Mrc - bloomberg official analysis is pretty clear the blended rate is 9.2% - i know they cross read and to be honest if an oils analyst was wrong on something as simple as this (i mean they get it from the firm itself) then i’d be non plussed. But hey ho!!!

I hope you are right Sek but fact is its the 2024 number that we should care about as thats stunning if close to true

Looking at bloomberg analyst breakdown of ENQ - average interest expense for 2023 is seen as 9.2%

What is much punchier is the forecast for 2024 - net debt ending year of $329m with ebita of 851m so bring on the returns!!!!! (For record their stats for end of 2023 are net debt 540 and ebita of 813)

Few points from steve’s message earlier i am going to have to mention

1. Epl being closer to 50% due to decom and interest charges?? I am sorry but not a fan of double negative counting - the epl is 35% max (we clearly will pay less as we do have some allowable deductions) - the interest and decom costs are completely seperately related. Otherwise you get weird situation where you can agree with Steves 50% but then discount the decom costs or interest costs (which neither he nor anyone else does). So in reality we pay 35% minus whatever allowable investment we have made.

2. Then to the point on how you allocate divi or buy backs (or not) from income. Now i agree you have to compare returns or costs of investment and debt repayments against returns to shareholders. But we need to keep some comparable here first of all - our net debt to ebita is actually pretty low - the aim for 0.5 ratio is platinum standard and should be noted a lot of companies have higher debt to ebita than us and pay dividends (and buy backs) so its just rudimentary to claim its and either/or situation.

Another point to raise is its clearly an important point that a dividend policy would alter the investment outlook from asset managers who are income related (and even retail investors) in a positive way - and you cant get away from fact to AB as a major shareholder (and no doubt listening to other major shareholders) that dividends and or buy backs are positively smiled upon

Finally regarding the investment in production etc against returns - our figs on bberg (which in fairness tend to lag) shows out cash generated against cash required is at an industry high standard - so i just think people thinking its a binary situation of investment/debt repayment or returns is not really looking at it in enough detail

Saying all this - its in the hands of AB - so we’ll just have to see

Mrc - i am keeping my old strategy of just keeping adding and literally trying to wait out the market

Its managed to get my average down but its not helping my risk metrics on my portfolio!!

As to the whole conspiracy theory on jef price target cut - i donno - he raised the price on harbour and they are down today so in fairness they basically just cut their target as they were getting horrific performance so he went negative - if you attribute too much intelligence to analysts i think you are on a loser there (open secret that any analyst who is actually any good becomes a Portfolio manager so it tells you something when they stay where they are for so long)

He basically did it on basis of no shareholder distributions and in fairness we kinda stand out there - so lets hope with regard my earlier post that we can make more that Steve thinks (and prob less than sek thinks) but get close enough to 0.5 to start to make people believe

I think this whole jv discussion on ringfencing is kinda superfluous- yes i get its included in fcf but fact is we paid down 125m in net debt in first 6 months (jv payment was listed in liability after all) - and then (even with epl and golden eagle payments) another 10m in the ‘tough period’ of july to oct - which also saw a fairly sizeable drop off in oil production (av for h1 was 45.5k a day and then by end oct it was a ytd average of 43.9k) to 41.5k a day over those 4 months.

So given this and the slightly better production you’d hope for in the last 2 months and the lock-in of $88 dollars for circa half of it - you’d hope fcf/debt repayment (whatever) is decent into year end but we’ll see soon enough

I do have a question tho - epl calculation for 2024 payment - calculated off 2023 figures - should be lower than previous payment no? I know rate went up to 35% but the realised price of oil in 2022 was around 89 bucks for the year - so clearly the ‘p’ in epl will be much lower no? Add that to the decrease in production of 2022 to 2023 - i just cant get my head around it to be honest. I realise Enquest do beat the drum on EPL and clearly you estimate up to make point and be safe in your figs but maybe someone can explain it to me?

Enq cut to 14p price target but oil strong - will be an interesting day

Hi Sek, and HNY all!

I love your figs even if i think a touch bullish (but i am super long ENQ so i hope you are bang on!)

The important figure is really $400m debt as thats going to be pretty much guaranteed 50% debt to ebita - that then allows buy backs and/or divis which even with a months fcf are sizeable on a % basis

So i might not be quite so bullish but you leave plenty of room to downside with it still clearing that hurdle

So roll on 2024!!!!

3dart - they openly admitted they were open to selling EP for right price but issue is its almost like knives and forks - you kinda need one for the other - and therefore its worth more as part of a specific project - like Bressay - so its basically synergy in action - sum of parts being worth less than the whole etc etc

Harsh reality is we’ve seen a circa 10% bump which is basically the money we received in cash. Market simply isnt going us any ‘credit’ for rest of bressay or even enquest producer. So until we print debt down and have concrete success i dont feel we’ll see any forward ‘credit’ given. Now i am bullish and pretty long term so i am happy to wait and also add to holdings as cash becomes available but its also a little annoying nonetheless

Does surprise me that ENQ bonds didnt budge at all today