Member Info for Voiceofreason1

Chilts the ‘MAIN STREAM’ opinion also wants price of oil to come down, buys oil on daily basis and quite frankly will say one thing but fundamentally act differently when in their own interests

Lets remember the issue that is raised consistantly is the profit from oil not getting ploughed back into more oil drilling to decrease prices going forward

I realise theres a lot of anger on this chat about the bias in media but fact is its always there - blasting the rich/powerful/profitable/‘other people’ just ties into the human tribal instinct of wanting to blame someone else for stuff we all take part in (cue people protesting about oil then using cars/planes etc)

As to earlier comment on a costed aproach to net zero carbon - i mean if that ever happens i’ll faint - like costing brexit/snp costing scottish indy/ any opposition ever costing their pledges when they get into power

Additionally macro headwinds aside - weekly congestion indicators (just out) show growth across every global region - asia ex china 20%, north america up 3.2, europe sub 1, but china up (drum roll) 64%

So Jeff i think short term clearly oil caught up in the whole recession hysteria gripping markets but china is iopening up, oil investment is at pretty much all time low, and we’ve proven beyond all doubt that oil is still needed for the medium term future - could we see sub 20’s for Enq? Maybe but its another buying opportunity imo
Oil on a more fundamental analysis is only heading up dnot down based on what i have said above

Sadly changing index is just a pipe dream - its simply not feasible- we could move office to another jurisiction but would still pay tax on uk oil drilling - its a nice idea but just not realistic

Its like many people on this chat thinking the ‘algos’ are out to get Enquest but fact is algos just trade in a way the end investor wants

We’re just in a funk - picked on industry and historically high debt/risk - hence our general discount and even within sector our discount to peers

But as has been mentioned - we are decreasing debt at a fast pace - we need a positive update and should blow away seme of the doubters - thats the dream scenario for 2023

The fundamental problem in all of this is you can ask any number of questions but the answers conflict - example ‘should we use less oil’ and ‘do you feel happy to pay more for energy’ - now the first is a clear ‘Yes’ but the second is ‘depends on how much more’

We all want a better health care but the tough issue is we struggle to pay for it - same for pensions and organic food etc etc etc

Now the key issue is when will oil/gas be only a little cheaper than alternatives on an industrial scale - thats the BIG question - and Russia kind of proved it was WAY off that. So ultimately Starmer will be hoist by his own policy when bills start to rise or we are suddenly forced to spool up coal reactors because we simply dont have the infrastructure for anything else

The tough issue for starmer is his voters more than tory ones are going to feel the pinch more on petrol/congestion/food etc for his ideals on a percentage basis - i just dont know how he squares that circle in real life

I am a decent to big holder of ENQ but the reality is the EPL is here to stay - Governments simply dont think in the timescale of oil investments - they just care about populism and winning elections and the harsh fact is if any gov pulls the EPL they will get run over in main press (maybe not FT).

I realise there’s a definite desire to be a bit negative from some posters - i suppose its the same with the positive ones that always look for the upside news (guilty) but AB’s purchase really is stonking news - this is the CEO of the company spending his familys future on ENQ because he is so sure of it and lets be honest he’s a lot more in the know that even the best of all of us pocket experts put together. Shares fluxuate with the whims of the market but figures are figures - we’re a profitable firm that has hit a minor bump in EPL which at worst is a 15-20% (35 minus allowables) hit to an otherwise untaxed profit generator so when people start talking about windfall tax being 200m a year i conversely get very bullish as thats 4-6 times more in clear profit and even more FCF. This seems to be pretty clearly ABs take - Lets just see where it takes us and wherher the positives outweigh the negatives on the opinion front

AIM

I suppose its an opinion game but to your points

1. FCF needed - we’ve paid a staggering amount of debt off this year alone - granted we cant clear our entire debt this year but lets be clear here we are an incredibly profitable and FCF producing company and no real debt repayments due for a very long time

2. Shareholder value - well this is the point i make on termism - if you want returns right NOW then fine but we’ve a 12.64% return in last 12months (source bberg) apple is down 20%, legal and general are down 9%- share markets are always under and overvaluing firms - i’d argue we’re undervalued but a knee jerk response just to satisfy people NOW isnt necessarily in the best interests of the company or the shareholders in a longer term view

Again its my opinion on longer term game - i could be wrong!!

Stevo12

Some points i find worth mentioning - if epl for enq is 35% then the absolute worst case is we are making pretty mich twice that in clean profits and that ignores and deductables

Gov estimates of tax raised have pretty much never been accurate imo

And if oil price falls then epl falls and if hedges are at lower price then again epl falls

I dont like epl - but its a political reality and its here whatever we think - but thinking a tax rate of 35 on profits (worst case scenario) will break ENQ is just another chance to invest as its just short termist deppresive nonsense (imo)

We generate more FCF than we ‘need’ and the momentum of this is actually postive as debt is being reduced hence freeing up ever more cash from interest charges

So i dont really agree that buy backs are actually needed - i mean wanted? Definitely! I have a lot of ENQ so on a short termist outlook I would love to see buy backs or divis but are they actually needed? I dont see that personally

We’re always getting sucked into short term conversations on this chatroom - it simply doesnt matter (if you are buy and hold) if they buy back now or later when they have an even stronger balance sheet

To be clear i am still adding when price is weak and keen to keep doing so as a PE of sub 1, a FCF that is 160% of our share price, and a market that may be short term bearish but with news like hsbc leads to a hige bull case for present producers who can fund themselves is just too good to miss

4 issues with future SPR releases

1. Opec will just match them - they have clearly shown they are not going to be bullied by US SPR (especially when its at 40 year lows)

2. Republicans dont like it and now they have congress its much more key what they think, even Biden has issues with it given his green aims

3. The amount they’d have to release would be huge (way over 50m) - they are releasing 1.6m a week right now and the drawdowns are swamping them

4. SPR is so low the ‘easy’ releases are done - what is left isnt optimal (ie what the majors want) and we have already seen that with 204m released in 2022 it leads to degradation in facilities and that doesnt get better

Its a game of fundamentals in my opinion - we know that short term we have demand concerns but we equally know medium term there are supply concerns - the bizarre state of world is we have Biden - who openly stated he wants to lower reliance on fossil fuels - then berating oil companies for not plowing money into more production. Oil companies can see that this just sets them up to danger so they are not doing it (nor are a lot of OPEC)

On the Russian front we have the price cap hitting quicksand but there seems to be clear political desire to stop funding them - devil is in the details tho - i am not hopeful here - nonetheless as we hit winter in Ukraine and the Russian policy of freezing the Ukrainians (kids and old people first sadly) to surrender or death i dont see people suddenly becoming more accomodating to them

Then we have the SPR - at the moment exhausting the last 15m tranche of releases - i see most is placed already from their own web release - with a GOP congress more SPR releases dont look as likely - with this the real key figs are the next 2 weeks inventory figs in US and how much SPR is left

As to EPL - well thats interesting - we have to pay more given 10% increase but for minimum 2 years we max out tax-wise at 35% - that is including zero tax writeoffs - its not great for ENQ but hardly a game killer

So in a way it is boring - you buy on dips and wait - what will be will be

Enjoy the show :)

I struggle a little to understand market on oil and by pass through ENQ - i mean spr release was 4m barrels and yet draw was still over 5m barrels so the net decrease in stocks was over 9m - yet oil drops on demand worries????? and the druzbha pipeline restarting??

I mean one fig is concrete number and the other is just blah blah

Roll on the Ops update and hopefully a bit of realism on the effect of any windfall tax on the otherwise taxless ENQ (due to loss provision on ‘normal’ 40% tax)

Quest - you’re a brave man - i kinda agree on 200 (long term anyway) but 120 oil is actually being predicted by GS if china ends covid policy and to be honest with the spr being low and in 2023 being even lower political priority for dems its only a super brave person ruling out 120 imo - if inflation comes into control in 2023 (almost likely now) you could see a full bull market kick in

But the market is what it is - makes fools of us all - i just think people grabbing levels and saying with any semblance of authority is setting up a big fall

On the other topics i think minus the emotive responses we have hunt and present tory gov enacting an epl they dont believe in but politically not to do it would be suicide - the harsh reality is that oil companies cant claim that raising taxes will raise tax payers bills - as they sell their oil at market rate whatever - banks and energy firms always fall back on ‘if you raise our taxes we’ll charge your voters more’

As to non-dom - its one of those taxes - it absolutely makes money for the uk - we want rich people here - they employ people and still pay uk tax on uk earnings (as well as payroll taxes and vat on their lavish lifestyles) but morally you always get the ‘they are evading tax’ emotional line (but if i had an income that was hugely nowt to do with uk maybe i would be the same)

Theres much clearer tax dodges out there that we continue to allow well off people to do in much greater numbers than non-dom would ever pull in - company vehicles for personal income, iht dodges for landed gentry etc etc

Right lets all step back a little here

We have 3bn in tax losses so thats no 40% tax for foreeeable future

So all we have is windfall levy - which is 25% right now and of that we only pay a percentage of this (be super interested to see this percentage at year end) - so we’re an ultra low taxed firm - thats the facts as they stand

Then they possibly move tax ip to 35% (which i personally doubt but lets look at it as a worst case scenario) - again you have investment write-offs - we’ll pay a percentage of this only

IF we use our tax losses we’ll have made 3bn in profit so i dont mind so much on this

And EPL is still not the oil killer (for ENQ) that the doomsday set are claiming

Then we have share price movement - we’ve chatted about this before - we’re a retail investor stock - prone to panic - but it doesnt affect the company at all so for the brave its a buying op and for the steady intelligent ones its an ‘ignore and wait’ event

Switch off you’re computers and have a walk - fundamentals will come good in time

Few points to make -

1 I think safe to say average oil price forcast is higher than even here - eia is 95 - goldmans is over 110 (russian cut are a basic reality and post mid terms political spr releases not so key (biden the green trying to keep oil cheap isnt long term feasible) - BUT even if massively wrong then the next 2 points are still key

2. In sep where average oil was in the 89’s we paid back 67m of debt - i mean thats staggering

3. And those with longer memories will remember that the NAV of ENQ at oil price of 70/75/80/ and above (from basically every oils analyst) was much much higher than todays price (and at that time dollar was weaker by 15% to sterling which actually makes it much more profitable at those levels today (ref point 2)

Market is short term negative - thats just fact - and clearly we cant tell the future but the signs are at least very positive

Quest - i dont know if that is right on the spr - i think they are basically dont with the 180m so they have to make a new release - which is neither easy given republicans will block and even less likely given prety low state of spr - pretty much every analyst has future spr releases being contingent on oil prices being way out of current range (most commonly quoted figs 120+ for spr to have support)

Add to this that the current market price is based on full chinese covid zero and also no russian oil ban i think the bull case has at least as much legs as the bear case or even current pricing.

Spr was always based on political grounds - namely the mid terms - the political will now is gone

Now i am not saying oil cant go down but if anything the desire to build back oil reserves in 2023 are actually a support level any time oil hits 70’s (which even the bear analysts dont see)

How this plays for ENQ? Who knows! But cant be long term bad as debt is reducing at sharp rate

I know it aint easy but you all have to switch off for a while - no one in markets professionally soends this amount of time analyzing stocks - would lead to massive burnout issues

Fcf is super healthy - we paid back over 60m in debt in Sep alone at low oil prices - we’ll keep making progress - as bad as rumours of windfall taxes are we still dont pay anything else tax wise and wont for quite a while so while it aint perfect it aint awful

We are on a great run - and it will come good - just everyone switch off for a while

Mrc on your last point i just think we’re going round in circles here

“So then we go to 25% epl - lets say you have profit of 300m - so 25% is 75m - but you have drilling costs of 100m - just use 80% write off potential for simpicity - thats 80m you can use to completely negate your epl of 75m“

We ONLY have epl tax - we dont have anything else so the only tax we have to pay is 75m ie the 25% - if we then put drilling costs in of 100m and claim the 80m tax allowance back thats net MINUS 5m (so it just goes to zero) thats the match up

We only have the levy to pay - we dont have anything else

Its friday - i give up at this point - if your conviction call is we have to be able to claim back more tax than we actually pay to get to zero then we’ll just have to wait to see the accounts but my conviction call is as i stated above

Disagree agreeably - my mantra for the weekend

I hold to my pint bet

And have a good weekend all!!