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Out again

lse:enq

#1

Good luck.


#2

Don’t blame you… plenty of washed out longs won’t re-enter Oil unless they see OPEC cuts over and above that required to balance…

Also think Russia anticipates Shale production has peaked and shale natural declines will become much more noticeable in Q2 next year, hence the reluctance to agree to larger cuts than it thinks necessary.

We can relax a little with our current hedging in place, but if we get another RNS in Jan, with more early repayments, say another $40m, then the market can extrapolate forward to give better value to our future cashflow… which at the moment, isn’t in the SP.

RE Times article , no point criticising delay of TL… it broke down earlier… , …we managed to get a better lease rate due to the delay… $$$. worked out well.


#3

Looks like 1m cut for OPEC based on Sep or Oct, which has more meaning than based on Nov.
Plus Russia cut 150k to 250K… will know tomorrow.
Main thing is that Opec has capped 2019 production… perhaps 6 mths.

Plus Canada cut… Libya production issues, Iran decreasing a little…

All bodes well for $65 to $70 in Jan 19. A little higher when Shale finds it more difficult to offset natural declines… And of course… this price range doesn’t exactly leave much left over for massive capex investment…

The only thing about the Enquest Rights issue is I still can’t understand why we needed it… The Magnus drill money won’t be needed until next year, and we have plenty of cash as confirmed by the last ops update as of Oct 18. Perhaps our solicitors didn’t want to work in Dec… gave us a cut off point and somehow the risk of not completing in time was mitigated by the RI… ?


#4

Hitman,
It’s a tough market to trade, I’ve made 9%, less stamp duty in the three trades. I could have made that in my last trade had I of sold yesterday but I never have regrets. Managed to call the bottom or thereabouts on each trade but not the top.

All indices got hammered today, oil got hammered, we had the arrest of the Chinese mobile phone CFO potentially re-igniting the trade wars, Brexit and indecision at the OPEC meeting.
Let’s hope the Russians play ball tomorrow or it could be another day of carnage.

Another chance at 22.5p would be nice.

Good luck tomorrow.


#5

Afternoon Gk10. Congrats on your return… I also thought about selling my 23.3p batch at 24.7p the other day when Brent was around $63… but didn’t. It would have been a decent amount of cash.

Having watched the OPEC live stream, I’m rather impressed by the membership/attendees and it portrays a completely different picture from the retail media. Given we started from such a low price today( sub $60), …$63 today is very good… so 24.5p close. depending on which time the OPEC press release arrives…

If positive… I’d say it would take a week to get to $65… so that should get us to 26p… In Jan 19, Iran sanctions of a much more diluted kind… lower active rigs in US and US finding it hard to main production where it is, …helps steer Brent towards $69. ( Enquest 30p). Then it’s up to the deleveraging process to add 1p/mth or more.

GL. hope you got in early again this am, … I’d say Trump was largely irrelevant now… and arresting the CEO of Huawei was the last straw for those pulling the strings sitting behind the front line in various countries… as well as China.


#6

Hitman,
No didn’t get in earlier and am not convinced yet that $63 will hold.
I’ll see what happens tonight with a view of getting back in next week.
I probably won’t get 22.5p again but suspect I will get a little lower than the 23.85 I sold for.
Good luck.


#7

Right again… $63 hasn’t held… but I thought that was an excellent OPEC meeting and Q& A. The SP looks ok at 24p…

Still overproducing in Dec, but enough action to prevent a collapse like Canada…

Nothing they could have done about overproducing in 2H 2018, but the info they got about sanctions was incorrect. Can’t see them falling for that trick again next year.

GL. Moody’s 2019 analysis seems conservative/fine at the moment : 65k at $65


#8

Hitman,
It had a feel of the decision 18 months ago where it looked enough but turned out not to be.
Have a good weekend.


#9

I believe every member of OPEC wants prices higher than Brent $65 . Perhaps Saudi wants more than $70… and has now accepted $80 is too high for other economies like India…etc

If we say most oil wholesalers have enough stock for 1 month… then we won’t see any improvement in demand until the cuts start to begin… so really looking at sometime in Feb 19 when analysts see some concrete data and revise forecasts. In any event we have our hedge for $70 on say half so our average today is about $65 until end of Q1 2019… all in accordance with Moody’s analysis… We should see $65 plus from Q2 2019, although I am expecting it much earlier in early Jan 19.

What we need to see from Enquest is monthly RNS re debt repayments in the $40m/range range…

Brent $70 combined with production nearer 70K rather than 65k gets our FCF nearer the $700m/annum mark. Not that hard to do. 2020 nearer $950m if you cut most capex and save something on interest… 2019 and 2020 use up 50Mb , leaving about 180Mb for equity etc… and balance 250m debt. peanuts really. Q for 2091 AGM : how much capex for 2020… imv has to be less than $50m… Non-execs should discipline the company to not exceed imv…


#10

Hitman,
This is worth a read if you get five minutes, It’s not as optimistic as your numbers.
I’m still sitting it out for the time being.

https://www.eia.gov/outlooks/steo/

Good luck.


#11

Thanks for that… certainly looks somber for 1H 2019… for both shale and Brent. Brent $61 isn’t enough…

  1. US Producers seem ok with devaluing the whole business just to produce a few extra barrels. Investors can’t seem to keep them in check… so large US funds are doing it for them by not going long… It’s here at this level until things calm down, rigs decrease and the price will only go up if there is genuine extra demand. But i still believe Opec + efforts with drag Brent to $65, showing a $15 spread in Q1 2019. mainly due to demand for the difference in grades… There are however some Shale producers which are cashflow positive at WTI $40 so some of them won’t slow down.

2, Thankfully all our projects are now done… I can’t see any small/medium ones starting many more at this level… which leaves only the ones like BP to take on mega projects.

  1. Our capex in 2020 and 2021 will be almost nothing apart from 2 drills at Magnus and 1 at Dons East, so that releases alot of cash to further develeraging.

  2. At these rates, AB is probably asking BP what else can i have, on a Magnus type deal to complete in mid/late 2020.

  3. Most news articles never discuss natural declines … oil is too easy to produce… so this is omitted from most equations… but it still costs $ to stay as you are… which hits the cashflow hard.