Enq 23 �pik Tog Discussion Threads

[hpcg] 29/4/2016 09:31

Thanks for the clarification lonrho, I didn't look at the banking covenant RNS and took leverage ratio for its conventional meaning.

Whilst the hedges are in place EBITDA, which obviously does not include impairments, will probably be fine even as the debt increases. Very low prices for the non-hedged in the first few months of this years may make this a bit questionable.

The "Reference Date" (use that as the search term) for the tests is in the appendix of the original prospectus and are 30 June and 31 December. The annual report states hedging is in place for 10 million barrels across 2016. I imagine they are using those to ensure that they keep within the covenants for both periods this year.

The period most at risk of breaching covenants is probably the first half of 2017, when they have tightened and the hedges have finished. Having said that, the strip on CME for months Jan-Jun 2017 is 50c either side of $50 so they might start to build in some protection for that period.

[my retirement fund] 29/4/2016 09:08

Not sure how to overlay ENQ and ENQ1 but all things being equal ENQ1 now needs to be close to 70p than 60. Still seriously undervalued.

[lonrho] 28/4/2016 20:34

hpcg

The leverage ratio refers to net debt to ebitda. The changes to the bond covenants mirrored those on the main banking covenants where the change from 3 to 5 in net debt to ebitda was clearly stated in the news release dated 23rd january 2015.Even if it did refer to debt to equity that will probably be over three at the half year with a large increase in debt and possible further asset impairments.

[hpcg] 28/4/2016 19:31

From April / May last year





(a) to amend the financial covenants such that, in respect of any Reference Date falling during a limited period from the date on which the Supplemental Trust Deed is duly executed to (and including) 31 December 2016 (the "Covenant Amendment End Date"):

(i) the Leverage Ratio shall be less than 5.0:1.0 (currently 3.0:1.0); and

(ii) the ratio of EBITDA to Finance Charges shall be not less than 3.0:1.0 (currently 4.0:1.0),

after which time such financial covenants will revert to the current levels, which shall remain in effect until the date on which the Supplemental Trust Deed shall have been duly executed; and

(b) to amend the Rate of Interest for a limited period of time such that if the Company delivers to the Trustee a compliance certificate in respect of any Reference Date occurring after the date on which the Supplemental Trust Deed is duly executed to (and including) the Covenant Amendment End Date certifying that the Leverage Ratio was more than 3.0:1.0, the Rate of Interest for the immediate next following Interest Period commencing after the date of such compliance certificate shall be 7.00 per cent. per annum.


So net debt / EBITDA is not one of the relevant ratios; those being debt to equity and interest (plus related charges) to EBITDA.

[edwardt] 28/4/2016 16:02

good spot eastwind - suspect the covenant has been altered post the prospectus which I assume you copied this from?

[my retirement fund] 21/4/2016 12:37

Seems most of the large sellers have pretty much done here, 50p to buy now and moving up

[spittingbarrel] 12/4/2016 14:57

Amazed these are still offered below 50p with the oil price where it is and the rally in the equity over the last few days. They must be far better value than the equity.

[my retirement fund] 08/4/2016 14:52

47p now being paid for the first time this year, yay.

Next leg up to 60p does not look that far away now.

[hpcg] 31/3/2016 11:14

Leeson - yes, pretty much my view.

[leeson31] 31/3/2016 09:46

in regards to my point on wider markets and china:



goo.gl/LIAoS1

extract:

"Headlines crossed the wires from China's State Administration Of Foreign Exchange (SAFE) - PBOC’s foreign exchange regulatory agency:

Current account surplus to continue in 2016

Capital and financial account to see deficit

Cross border capital flow risks under control

China’s forex reserves still ample

External payment risk lower after 2 yr deleverage

Economy to inevitably slow down during rebalancing

China banks net external liability $222.1 bln end-2015

Yuan accounts for 46% of banks' external liability

US dollar accounts for 24% of banks' external liability

Euro accounts for 3% of banks' external liability"

--

chinas growth in last 7 yrs has fueled global growth. its now contracting with capital outflows...... i think the ftse being subdued, is warranted, and imo will be back down to the recent low at 5500 level...

are we really out of the woods? i dont think so... but i do think in due course there'l be some great opportunities; just a case of being patient.

cheers

[leeson31] 31/3/2016 09:42

i agree hpcg. granted, enquest is being de-risked on the back of their recent FY results, showing what a great mgmt team is in place, and there being some crathes/well news today giving share price uplift, but for me, Id need oil to be on the up, and the wider markets to have at least gained some composure, but my view is that the china issues, central bank cyc wars, and commodity volatility is no where near over as yet. Id be looking to buy enquest as a brilliant recovery play, on both the bonds and equity, at whatever price prevails at the time, but only once oil is firmly on the up. right now it looks like its on way back to ~34/b as at least a backtest to the break of downtrend line, depending on what oil contract you usually use. i use crude oil west texas cash contract..

and no body has mentioned that gap at 15p either! :-) #spoiler_alert be it a breakaway gap or other, but for enquest to be firmly in recovery mode i reckon that 15p gap will fill, and probly coincide with oil being back down to low 30's... that may present a buy 'em an d tuck 'em away opportunity...

just my opinion.

cheers

[hpcg] 31/3/2016 09:30

Oil heading back down, which I thought it should be. I didn't for the life of me understand the immediate reaction to the lower-than-expected-but-still-simply-enormous-inventory-build. However it unwound later in the day. In other words I don't think there is an urgency to buy here.

[badtime] 31/3/2016 09:11

Doh....still waiting for next week before I can add

[spittingbarrel] 30/3/2016 16:59

In their statement a couple of weeks ago, Enquest claimed they could operate on $30 and make money so I would hope they are putting some hedges in place with poo around $40. In which case the bonds are surely a buy at this level.

[cwa1] 30/3/2016 16:25

You guys are braver than me! A modest sized clip is enough for my portfolio....

[my retirement fund] 30/3/2016 16:04

Hoping yhe yield does not drop below 15% before I've a chance to top up the 2016/17 ISA and take a few more next week

[spittingbarrel] 30/3/2016 16:01

hpcg - Agree, I've already got a good few of these but may add some more

[hpcg] 30/3/2016 15:53

I did make a minor addition on 17 Mar and I have a lot of cash on my books now so very tempted to deploy a lot more here, tomorrow.

[my retirement fund] 30/3/2016 15:16

Moving upwards on good volume

[my retirement fund] 17/3/2016 10:20

Getting Kraken on stream all sounded fairly straightforward to me. Maintaining 50K BPD from it in the long term will obviously have its ups and downs as it requires on going work constantly drilling water injection wells throughout its life so there are bound to be down months in the longer term.

[hpcg] 17/3/2016 09:49

The statement about liquidity through to Kraken first oil was reassuring, but any problems there and the situation is less rosy. I do have a concern that oil prices are recovering too far too fast and that new supply will be bought on stream to an already over supplied market. Ultimately this leads to another new low.

Having said all this I am tempted to add here, but I would rather wait for next week's US inventory numbers as they were what kick started the mid week recovery, even if the fed has spurred it on.

[spittingbarrel] 17/3/2016 09:48

Equity up 25% now, if equity is worth as much as 1p these are with £1

[lonrho] 17/3/2016 09:44

prevailing price is $30 dollars for 2016 and $40 dollars for first half of 2017.

[my retirement fund] 17/3/2016 09:39

100,000+ BPD production target for H2 2017 and low $20 PB average production costs should be able to generate $1.5 - $2.0 free cash flow perday (at present prices). Many years of production reserves this company should easily be able to restructure its debts once Kraken is fully operational.