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ENQUEST 7% 15/04/22 Bond-ENQ1-ISIN-XS0880578728
Enquest PLC is an independent United Kingdom-based petroleum and production company which operates mainly in the United Kingdom Continental Shelf. The shares are included on the main list of the London Stock Exchange as are the bonds, the subject of this article.
The Company is one of the largest UK independent oil producers in the North Sea, and as at 31st December 2017, operated assets including Thistle/Deveron, Heather/Broom, the Dons area, Magnus, the Greater Kittiwake Area, Scolty/Crathes, Alma/Galia and Kraken.Enquest also had an interest in the non-operated Alba producing oil field.
On the 5th December 2018 the company issued a confident operating update,stating 2018 production was on target and 2019 production was expected to be in the range of 63000 Boepd to 70000 Boepd,an increase of about 20% on the mid-point. Acquisition of additional interest in Magnus, the Sullom Voe Terminal and associated infrastructure was completed with effect from 1st December 2018, and the successful rights issue had enabled the early repayment of some bank debt.
See http://www.enquest.com/media-centre/press-releases/2018/12-05-2018.aspx for more detail
The company has,in issue some corporate bonds ,ENQ1,for which details are explained in http://www.enquest.com/investors/retail-bond.aspx
These bonds trade freely on the LSE with live pricing, transparancy etc
Essentially, these bonds maturing in 15/04/22, have a 7% coupon on face value, payable in either cash or a further bond allocation, depending on the average level of the oil price over the previous period (see link above). Payments are made to bond holders in February and August. The last payment was made in cash ,and the imminent payment is also likely to be cash based on the average oil price over the qualifying period, with just two or three days to go.
At the current price of £80%, the annual yield is 7/80=approx 8.75%,and the yield to redemption, taking into account the capital uplift of the bond and the remaining coupon payments is approximately 20% p.a.
If held within a SIPP, the capital gain (25%), plus seven coupons (approx 31.5%) will be sheltered from tax.
The next “Cash payment conditional determination date” as explained in the bond notes will be around 15th January 2019 i.e. a few days time.This will officially confirm that the next coupon will be paid in cash
The next “record date” will be end January with the appropriate payment being made to bond holders on 15th February according to the company bond prospectus
At the current bond price of £80% ,this one coupon will be worth 3.5/80=4.4%, not a bad income return for one month. However the real value lies in the longer term maths!
As ever, normal health warnings apply !
Ken has over 35 years of investment management experience, working for two major City institutions between 1976 and 2002.
Since then he has been engaged as a self-employed investment consultant. He has worked with investment trusts, unit trusts, pension funds, charities, Life Fund,hedge fund and private clients. Individual asset managed have included direct equities and bonds pooled vehicles currencies, derivatives and commodities.
Projects undertaken in a number of areas including asset allocation, risk control, performance measurement, marketing, individual company research, legacy portfolios and portfolio construction. He has a BSc(Mathematics/Statistics) and is a Fellow Member of the UK Society of Investment Professionals.
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