Enquest Live Discussion

romaron 01 Jul 2018

Lazarus I’ve just finished reading The Alchemist by Jim Ratcliffe and is the INEOS story which from humble beginnings in 1998 became the industrial petrochemical giant it is today. It is the size of McDonald’s and Facebook combined and in the Forbes top 100 (just) in Global profit (118 in sales). In 2008 during the crash you could have bought $100 of INEOS debt for $10! (Enquest Retail Bond went down to 30% in the oil price collapse). Their secret is to “take ageing and unloved assets from the hands of large players, vigoruously reduce costs, maximise their capacity and create great leaps in profitability”. Remind you of anyone? It is simple housekeeping. In a cyclical business if it can wash its face during a downturn the profits can be exceptional on upswings. Realising that bargains were getting fewer in the petrochemical world they turned their attention to the North Sea from 2014. After all, “oil rigs are basically are basically chemical plants on stilts whilst the machinery and equipment required is almost the same in both sectors – pumps, pipes, valves and steelwork”. This is all in the chapter headed ‘Against The Current’. One of their executives said that ‘if you stay in chemicals 10-15 years , you are always going to feel poor at some time, because it’s cyclical and your margins slim down’. He said this to criticise oil and gas where apparently ‘cost doesn’t matter’. They saw bargains and have built up. A hint was dropped imo “Rumours circulate that it [INEOS] is now in discussions over a fourth energy acquisition , which could be larger than the first three”. [ DEA, Dong & Forties pipeline.] Why put that in the chapter? Another thing I got from this book is the importance of the Finance man in all of this. It is good that AB and JS are still together and I feel that AB’s Petrofac experience gives a better rounded CEO and hopefully comparisons with the INEOS story aren’t that fanciful. INEOS are a private company and the fact that AB has such a large shareholding can be advantageous at certain times. There is no guarantee that INEOS will get it right or their luck will eventually run out but they’ve been winners up till now and the time to enter a market and build a presence is when there have been hard times and losses in an industry. Get through it and the rewards can be disproportionate.

Diesel 27 Jun 2018

Update Cheers for that hitman. I’m still building up my general knowledge on ENQ, it seems a tad more volatile on the downside than PMO, but hopefully with the new poo it will do some catching up.

hitman1 27 Jun 2018

Update Yes, I agree next official update in August. LSE website good for updates on tankers… will be useful in Q3, when Alma fixed and Magnus second well complete. Ship movements will confirm work completion only. Shame we haven’t had Kraken sign off yet… but the impression I got from the AGM was they weren’t too bothered if the certificate was issued in late 2Q or 3Q. Indeed when it is issued, AB told me not to expect anything significant on the SP… Earnings are very important… and we won’t see these better numbers until next year, but I still expect 50p in October, once the debt instalment has been paid. AB did confirm Enquest would be paying down the mountain of debt when I raised my concerns… I do get the impression Enquest would spend another $1b if the bank gave it to them… and given the lengthy payback periods, shareholders would see nothing for many years. So, let’s get the balance sheet repaired and Brent seems to be helping in this respect quite a lot… SP now 36.25p possible RNS in the system for tomorrow am. guessing kracking news ?

Diesel 27 Jun 2018

Update I’m assuming next update end August. Shame that currently so few posts, hope at some point old crew revisit. Personally I don’t have any problem with the ii update

Diesel 27 Jun 2018

Update Anyone know date of next update. Thanks D

Shotry 27 Jun 2018

Added Not sure what the news is, but this just leapt to 36. WTI trading up overnight too, perhaps it’s just that.

gk10 22 Jun 2018

Took a few at 31.65 Hitman, Unfortunately I didn’t get back in as I had no intention of holding any oil stocks today but I don’t begrudge any of the long-term holders a well deserved rise today. It will be good to see a bit more detail on today’s deal which will probably be released after the meeting with Russia. Oil price stability somewhere around the $75 mark should help EnQuest and others get to a position where the debt is no longer a burden and in turn should create confidence for potential investors to commit. If OPEC are, as they suggest, looking to create a stable long term oil price that suits consumers and producers then that can only be a good thing for EnQuest. Good luck to you and all the others out there who have been put through the ringer these last few years.

hitman1 22 Jun 2018

It ain't fair Thanks GB8, I guess now Opec and friends seem more reliable and saner than the USA, our 2018 numbers are expected to be a lot better than 2017… your 80p would appear to be more realistic than 51p once the year has be completed.

gassy_bloke8 22 Jun 2018

It ain't fair For 2017 Profit before tax = -$243 million DD&A = $229 million Interest = $137 million EBITDA = $123 million My fave EBITDA Multiple is x6.5 which equates to a valuation of $800 million Which converts to £607 million Divided by shares outstanding (1.2 billion) = 51p per share Indeed it ain’t fair, but not a million miles off. I always thought i’d sell at about 80p or so, just in case anyone cares.

hitman1 22 Jun 2018

Took a few at 31.65 Today 33.35/ 5 % from 31.65 Hopefully you got back in. Looks like Brent will trade in the $75 plus range, post Opec meeting

hitman1 22 Jun 2018

Credit where it's due I still think I made a mistake in overvaluing the older NS assets. Last year in Jan 2017 when the sp was 55p , and Kraken was just about to be hooked up. I thought 65p was a sure thing… The older assets were struggling and I made another mistake in thinking Alma and Crathes/Scolty were fantastic… Indeed the initial numbers were… but in the end the whole historic asset base was much weaker. Add in problems with Kraken which have lasted a year longer than I first thought, and you lose a lot of shareholder equity interest, and encourage more shorters who gain in confidence. It’s hard to ignore the extra revenue from Kraken… but it all goes to the bank for sometime. But it looks like Enquest will enter 2018 Q4 with 70,000 bopd on a good day. (64k/average/yr 2019), if you allow for a month off each year for maintenance. This story adds value to equity holders and supports a 50p valuation sometime soon.

hitman1 22 Jun 2018

Credit where it's due looks good today… 33.45p … maybe the bank owns all the assets now… but the tide is turning a little in favour of the equity holders… Wouldn’t be surprised to see it jump to 50p pretty sharpish in Q3. but not much more.

romaron 21 Jun 2018

Credit where it's due Hi hitman, if there was a financial mistake with Alma/Galia it was either a flawed FDP (unlikely imo) or lack of funds to correct early problems (Kraken has had and until sign-off its own problems). We are recovering from a pretty weak position but the oil price has ensured survival. Once the analysts are ‘shown the money’ the real climb will begin. I have a suspicion that this project was involved in the resignation of McCulloch. We’ll never know but some out there do and this could be a reason for the poor share performance. It’s all speculation by PIs but surely things can only get better with this field from here on in. If it’s money then we can now afford the work-over. I’m hoping it’s not a fundamental flaw and it is not uncommon for ESPs to break down. Most fields require artificial lift and ESP’s are a technology that is well understood. “ESP systems are very susceptible to failures caused by 1) Sand 2) Electric spike 3) Frequent on/off of the pumps / motors. On average, ESP pumps have higher failure rates, followed by motors and cables.” source: [link]

hitman1 20 Jun 2018

Credit where it's due Afternoon R… re Alma… I’m sure 5k/day production once fully repaired is all Enquest are after. It’s hard to believe Enquest actually signed off on this project… I agree Enquest take on older fields and make them last longer , but I think this one was a financial mistake… there must be a cut off point when they are just not worth taking on… so now they are making the best of a weak situation. Kraken : hard to see 3 tankers/mth … but maybe 5 every 2 months. The BOD seem to be happy with the cashflow coming in . so 2019 should be a much better year for the SP, subject to Brent. I think we will only see a positive re-rate after Oct 18 debt repayment made.

romaron 20 Jun 2018

Credit where it's due The company has had a difficult time and has spent the past few years reducing huge debts amassed in 2016. Dilution benefits have yet to materialise with the company citing the need for more progress in reducing the debts. With oil above $70 this should hasten debt reduction sooner rather than later. The company is leaner and more efficient and will remain profitable at a lower level of oil than before. The company is executing “capital discipline” and not getting carried away. Source The Times yesterday. The sharper amongst you will realise it is an article about Shell and the advice is BUY. I’m posting the article to show that even the majors have had a difficult time and Shell’s share price hasn’t soared off the back of a higher oil price. BP is in a similar position to Shell and is expected to start generating a lot of free cashflow. The Enquest focus has been on Kraken and this is an example of “capital discipline”. I was looking at the delay in repairing/replacing the ESP’s in Alma/Galia. My figures are rough and if you want more granularity you’ll have to wait for hitman or MHB to post (or Fernan). Just before he resigned, Neil McCulloch said that it was difficult to know the exact problem as until a rig was available they were doing an “autopsy without a body.” Clever words but disingenuous. What he should have said was “we cannot afford to lose the production or the cost of a rig.” That is not what company spokesmen say. They have worked the field hard and I have divided up the production from the start Nov15-Oct16 Ave 9728 bpd Nov16-Oct17 Ave 4880 bpd Nov17-Feb18 Ave 1748 bpd I suggest the gross income (65%) for the first 2 periods of c. $92 mio and $58 mio were essential in keeping the company afloat. The pumps are now wheezing and production is pitiful. The 3rd period and its average means that gross income is down to $74,000 a day or $27 mio. There is also a KUFPEC penalty clause that has a negative effect at current levels I believe. The fact that we are now about to get the field back on target says that we are in a much better financial position. We usually talk about AB but I think that as the oil industry is all about finance we should appreciate the work that Jonathan Swinney has contributed and he’s been at the company as long as AB. The cost for Alma/Galia is a loss of (low) production and the hire of a rig. I’m putting a wet finger in the air and suggesting $400,000 a day for lost production and rig hire. I don’t if KUFPEC contributes to the rig hire? *for the 3 periods I used $40, $50 and $65.