hitman1
19 Nov 2018
I'm out Fair enough GK10 Russia only wants to sign an agreement in early Dec, any action won’t come into play until Jan… so at least 7 weeks of overproduction… Hence no snap back on Brent until late Dec/early Jan. Saudi cutting 500k/day because it’s own clients don’t want it… it will need to do more imv. Enquest… Moody’s numbers for 2019 look good… I was thinking of buying more, for a snap back to 26p from 24p… but i will wait now. let me know when you get back in.
gk10
19 Nov 2018
I'm out Will watch again for now
hitman1
19 Nov 2018
Took a few We were at 36k gross on Kraken at end of August 18… if they have reduced water pressure by 25%, then they have lost 5k/day in gross production… but anticipate getting 9k gross back… so plus 4k for same effort. Well capacity hasn’t changed, so it will all be extracted out over 10/15/25 years anyway.
hitman1
19 Nov 2018
Took a few Hello Fernan, yes i saw that… and agree it’s far too high… I think Moody’s might have got confused with current cash/ cash equivalents in bank… assumed it was zero, and think it might be $285m as of 31 Dec 2018. The $285m might be correct in terms of cash as of 31 Dec 2018., but described incorrectly as FCF. From Sep 18 (with cash and available bank facilities of $256.8 million as of June 2018), so perhaps only $30m improvement in FCF until 31 Dec 2018 for 2H, which makes more sense to me as regards OZ debt rollover and rushed RI… As to regards current tanker production from Kraken, now that TL is on site… i think they must have decided to reduce injector pressure by 25% over the last month, and have tested DC1, DC2 and DC3 on what they anticipate might be available once DC4 takes its slice early next year… so if we are getting 31k now, then add DC4 (say 9k) and we get to 40k early next year and just a small amount of tweaking / efficiency adjustments… to follow over the colder winter months.
gl375647
19 Nov 2018
Took a few Hi Hitman. Yesterday I wrote an analysis of Moody´s numbers for the 2H 2018 in the LSE board. Without taking into account the 75% of Magnus, there is no way ENQ can achieve a US$ 285 million free cash flow in 2018, as stated by Moody´s. Regards Fernan
hitman1
18 Nov 2018
Took a few The only way Moody’s 2H 2018 FCF numbers can be right is if Enquest hedged the remaining 2018 barrels at say $80 in early Sep 18 just after the earnings call… so $20m extra /mth for last 4 months of 2018. This news would certainly exceed market expectations at the Nov Ops update… Maybe Enquest let Moody’s have a bit of extra data. I don’t think they would make a mistake, unless its just down to interpretation of confusing Magnus cashflow treatment.
hitman1
18 Nov 2018
Took a few DC4:. Say TL drills 3 wells. One injector, 2 output… We originally planned 3 output, but you may remember the decision was also delayed… I think I heard first from Cairn that DC4 was going ahead… Why were they deliberating when the Rig was already leased. Partly due to cash, but also because the injector pressure has to be shared, or borrowed from DC1,2 or 3. We already know it produces 50k /day and this was confirmed again in the earnings call on 7th Sep 18, page. 23. Seeking alpha… But this is well capacity, NOT seamless production, with no trip outs… Once we get output levels from DC4, and see how much energy it takes to get them performing at peak , EnQuest will decide what to do…, bearing in mind the distance it is from the FPSO… the further away it is, the more energy it takes. The only way to test this, is to borrow the injector pressure from other wells, which is why Cairn confirmed that average Kraken production for the rest of the year would be similar… This was at a time when TL was expected in October 18, so we are a couple of months behind now. Reducing available output wells from DC4 increases pressure output per well at the DC4 hub… rather than relying on taking more from others at the FPSO source. You can’t reduce any further as if it gets blocked, you have no output well… so that’s the only thing you can do to increase pressure and it also saved $23m in drilling costs. Once EnQuest has the details and if the output / energy/ well is calculated… if better than the 2 weakest wells from DC1,2 or 3, then action will be taken, to bring these online which increases the daily average total output… so yes add DC4 x 2 new wells, but reduce to min/take out the two weakest ones. I know from my garden that nozzles can be adjusted for angle and outflow, so similar tweaks are being made on all well equipment… at all DC hubs… but the distance DC4 is from the FPSO is important , but at least the average plateau of say 36k/38k plus is stable for many years… DC4 adds additional well capacity, as per the earning call notes page 13. , let’s not think this increases total daily average production, unless the tankers confirm. Enquest are only concentrating on Kraken efficiency, in light of limited injector pressure imv. Moody’s We know $175m repayment is due in April 2019, so EnQuest does have to generate $44m/mth FCF . Moody’s seem to think 2019 FCF is $450m, with debt maturities and other term loan amortization of $430 over the same period, so only $20m spare based on Brent $65 and production same as 54k, magnus extra 11k. total 65k… Moody’s seem to think at the end of 2018 there will be $285m, but I can’t see this . Seems a lot… 1. Maybe $40m/mth generated in Oct/Nov/Dec 18. $50m SVT, but how do you get to $285m… if so , why have a Rights issue for a measly $138m. only needed $100m. Maybe Enquest panicked a bit in June and thought,. We got problems …we have to find someone like OZ to rollover the Oct 18 debt repayment… with weak Q2 Kraken performance, we might miss out on the remaining part of Magnus. We might not have the cash. Anyway I would increase Brent average to at least $70 for 2019… and average production to 70k/day, Moody’s also seem to think this is likely, but has to be confirmed by EnQuest. Unfortunately with very wide production estimates like 50k to 58k for 2018… it’s wait and see what they say for 2019… We are already at 70k(total) on a good day. With DC4 and 2 new Magnus wells next year to keep the average as high as possible. Note none of the wells have been drilled to date… So will the SP improve with significant debt repayment and higher average production and higher realised prices in 2019 ? the last RNS would indicate a private equity/ hedge fund is averaging down, or increasing… but average daily volume is very low… We don’t have a massive amount of shorts to close, so the SP can only go up when these types of funds are prepared to pay more and want more… At the moment, they put in an order for X at 24p and the market accommodates them. But I think they will want a lot more after the Opec meeting… it’s all about Saudi tightening supply… Also glad to read 2 out of 3 new wells in 2 large Shale areas are child wells, rather than parent… …so a lot weaker performance and same 70% to 90% decline rate over 3 years. On the plus side i think i’m underestimating the value of Magnus. it’s only potential, but it’s a very large field… As mentioned in the earnings report… it has 2B barrels of hydrocarbon in place… 50% recovery so far… but if you can improve this to 57% like Thistle, then that’s a massive improvement in total recoverable mb and cash to shareholders. Will Mark Wilson from Jefferies read the Moody’s report and adjust his 25p target. ?
hitman1
16 Nov 2018
Took a few Must admit Moody’s new analysis looks very good going forward. I would even expect average production and Brent to be higher than their estimates. Baffled why we are at 24p. I’m sure Moody’s must sit down with Enquest before they release their report which normally is very good on specifics like capex spend and debt, but conservative on Brent price and average production. Cashpoint looks like it’s just about ready.
hitman1
16 Nov 2018
Took a few When i installed a watering system underneath the grass, i saw when one sprinkler was connected, the jet from the sprinker was far more impressive than when 3 were connected… all 3 shared the same water input source in series, so adding more sprinkers didn’t increase the output…The water was just shared, albeit jet 1 performs better than jet 2. …the further away you get, the weaker the performance, until you get to the end of line where there is a stop… in my case it’s jet 3 which performs a little better than jet 2, as the water has nowhere to go , but out. I can cover the garden with 3, albeit more would be nicer to look at and be more even coverage. I just wonder if Kraken has the same issue… all lines serviced from one source. all in series… asking the injectors to carry more oil out from DC1, 2 or 3 , can’t happen because the pressure is maxed out. I can understand why they are tinkering around with lines, to see if it makes any difference, as each well is different… but when TL completes another 3 lines… it may not result in more output, unless they can create more injector pressure in different ways from the same source… quite a puzzle.
hitman1
16 Nov 2018
Took a few Holdings RNS 3% . first of many ? haven’t seen these in a while.
hitman1
16 Nov 2018
Took a few Brent at $68 now… not surprised the SP is still in the 24p range as it won’t come to life until we are in the $70s. Far too many AT trades and the volume is hardly 1m, very small based on 1.7b issued shares… Saw a Bloomberg headline the other day which said ConocoPhillips were marketing for sale some North Sea Assets … They had already received one offer. Production from 8 sites varies between 10k to 30k/day each. So plenty of choice if we want to add another 20k/day. We know it’s cheaper this way , than going through the pain and expense of Kraken or Producer. I’m thinking AB should approach them with a Magnus type deal… cash neutral for us, as all our future cash is ring fenced and allocated for the next few years, unless we refinance it all in 12 mths time… But what price?. I’m sure at the AGM I got the impression AB wants to do one more BIG deal… but the Chairman stopped him from talking… I guess they must have discussed it in detail at board level earlier on…so the Chairman sort of knew what he was going to say. Dear Conoco, Here’s one we have done before… and it works very well for all parties. Interested?.. Call me. Kind regards
gk10
15 Nov 2018
Took a few The cash point is working but is only paying out fivers at the moment! Bit of an odd day today, not surprising given the political situation and possibly PMO’s poor update having an effect. Let’s hope for a better one tomorrow.
hitman1
15 Nov 2018
Took a few SP still stuck in 24p range, but Brent now above $67 and on it’s way back to $70… Didn’t realise Wall street momentum trading was to blame for the $5 fall off the $70 perch the other day, but the financial metrics which the Enquest BOD are looking at using Fernan’s excel spreadsheet must appear ok… We have seen 2 Directors buy stock recently… both of whom I saw at the AGM and appear to be of sound mind… I’m actually impressed OPEC have been tested, as it reveals more about their intentions and resolve to match demand and supply, which gives confidence. I think a trading range of $75/$77 is where we will end up, and the finances for Enquest entering 2019 would look fine, so long as we hit say 62k average production. … This would enable $50m to be repaid everything month… We have the following to look forward to: 1. Nov Ops update, 2. Brent recovery and Opec meeting on 6th Dec, and TL returning to finish DC4. Cashpoint almost finished… dispensing soon… but we won’t see 30p again until Brent gets to $74, unless the Ops update beats expectations… ( very unlikely) , I don’t see any debt reduction starting until Jan 2019, otherwise why have a rushed RI.
gk10
14 Nov 2018
Took a few Hit man, Thanks for the well done but it’s not my buy in price you should be congratulating me on, the only price that counts is what I sell for. 23.1p would appear cheap but if oil doesn’t open around the $66 Mark it may not seem so cheap come the morning. Anybody who writes shale off does so at their own peril, it’s worth noting the increase in US conventional oil in both Texas and the GoM, also non-OPEC global production. The lack of investment will eventually bite but not as soon as some are suggesting as projects are currently coming online that were sanctioned in the days of $100 oil, Kraken for example, how many krakens are there globally? Yesterday’s near 7% drop in the price of Brent was not justified and was based on news that has been around for months. $85 oil is not sustainable and probably won’t be for the foreseeable, I’ve said for months now $72 is what the global economy needs and can afford, this will suit both the consumers and the producers, it is also the historic neutral figure for US GDP although that has probably gone up slightly now given their record production. I love the tanker watching and the facts and figures trying to work out Enquest’s balance sheet posted on the other board but historically none of that counts, what counts is the oil price in the day to day share price movement. You then have the extraordinary events, a rights issue and an open offer, both of which I have been fortunate enough to dodge and then there are the payday loans. If we see $70 oil soon I will do well, if we see $64 oil I won’t. Good luck in the morning.
hitman1
14 Nov 2018
Took a few Well done at 23p… exceptional return to be expected when Brent goes back above $70 in late Dec, even if you just get the rump placing price of 28p. I did read that a Permian shale player would lose about 50% of production over the year without new wells… to replace the production, so 2018 has been a fantastic year cashflow wise to enable this to happen. But if you look at WTI now at $55 and subtract the $10 shale discount… $45 isn’t so great… in fact as more Shale comes online in 2019, I’d expect the discount to increase… the headline WTI rate may stay at $55 and Brent just above $70, but Shale may be getting $40 in 2019… Canadian producers are getting a lot less now already. US Shale producers will find it hard to find the cash to reinvest over 2H 2019, leaving a rather large revision in expected US production growth… They will run out of cash at net $40… it’s happened before. Enquest on the other hand with be pretty much finished after DC4 in Jan 2019, and should even at $70 begin the deleveraging journey… interest savings and no heavy capex are massive savings each year which add enormous value to equity… We have OPEC + to provide a floor of $70 and market stability… but even Brent $70 pretty much means most new large projects are going to be delayed/cancelled.
