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Oh wow, I can’t believe they issued that! At least they got the Record date and Announcement date correct.
The payment is deferred consideration for the purchase of your Hurricane shares. The clue is in the name – DCU – Deferred Consideration Unit. Prax clearly refer to it as a “Deferred Payment per DCU” on the statements they issue on their website – the word dividend does not appear anywhere on those statements.
They mention an Ex date (whatever that is) of 29/12 which is the same as the Record date – if it was a dividend (it’s not) then the ExDiv date would be the day before the Record date!
“Effective date” of 04/04/24 - I have no idea what that even means? Was that the date they decided to pay you? The payment date was 28/3, as required by the scheme Deed Poll, and some brokers credited accounts that day and cheques received by holders of paper certificates were dated and received that day.
No idea why they are quoting the payment to a zillion decimal places. That would be a very exact value you might get by dividing the total sum to be distributed by the number of DCUs in issue. The official Payment Calculation statement issued by Prax, and every other broker issued notification I know of, only quote the rounded value of £0.00617.
I looks to me like they are maybe trying to warp the payment details into a computer generated notification that is not fit for that purpose and has not been reviewed and edited by anyone who has actually read the scheme documents, e.g. perhaps someone in their legal team (not their corporate actions team).
All in my opinion of course, and I could be wrong, but then I have read the scheme docs in some detail, which anyone else can do as well. As I said before you could ask them for evidence (from Prax/Computershare), but that’s obviously up to you how far down the rabbit hole you want to go…
If you are with HL look under 'transaction history and you will see both DCI payments are described as 'Return OF Capital'
(note, not Return ON Capital'
Google 'investopaedia return of capital. look for 6th or 7th link down for 'Return Of Capital (ROC) - What It Is And How It Works'. It states that ROC is classed as return of funds originally invested and is NOT taxable. Link & excerpt below
https://www.investopedia.com/terms/r/returnofcapital.asp
'What Is Return of Capital (ROC)?
Return of capital (ROC) is a payment that an investor receives as a portion of their original investment and that is not considered income or capital gains from the investment. Note that a return of capital reduces an investor's adjusted cost basis. Once the stock's adjusted cost basis has been reduced to zero, any subsequent return will be taxable as a capital gain.
KEY TAKEAWAYS
Return of capital (ROC) is a payment, or return, received from an investment that is not considered a taxable event and is not taxed as income.
Capital is returned, for example, on retirement accounts and permanent life insurance policies; regular investment accounts return gains first.
Investments are composed of a principal that should generate a return; this amount is the cost basis. Return of capital is the return of the principal only, and it is not any gain or any loss as a result of the investment'
Thanks for your comments. Sounds like the hope for the 2nd DCU payment to got he way of the first and in to my ISA is a foolish one. PI lose again.
Below is copied directly from Barclays smart invester, corporate action section.
When I spoke to them they said they only treat it the way they have been told by Prax
Key dates
Respond byN/A
Record date29/12/2023
Announcement date28/03/2024
Ex date29/12/2023
Effective date04/04/2024
Event details
Prax Exploration & Production Deferred Consideration Units (PRAXD.XLON.GB) has declared a GBP 0.006169731 per share Return of Capital. Investors who held shares on 28 December 2023 are entitled to receive this dividend and it is expected to be paid on 4 April 2024.
“It appears the DCU payments are being treated as dividends, not delayed payment for the original ‘purchase’. - Is this expected?”
- They are not being treated as dividends by Prax or anyone else I am aware of so that looks like an issue between you and your Broker.
“Prax are declaring the DCUs as dividend payment to, in my case, Barclays”
- As above, it is not Prax that are declaring the DCUs as a dividend payment, that looks like a misinterpretation by Barclays. You could ask them for evidence of their claim…
“…and are stating ‘exDIV dates’ inline with the 6 month periods”
- again a matter for your broker to resolve. Prax are not stating exDiv dates anywhere, however, they are stating a “Payment Record Date” which is “the final day of the relevant Half-Year” * i.e. you need to hold the DCU on 30 June to receive the payment at end September, and hold on 31 December to receive the payment at end March. That is not the same as an exDiv date because the payments are not dividends.
Your final two points are in line with what most brokers now appear to be doing and there may be no way round them doing that as it broadly appears to be correct, if not actually proven to be (yet).
* quotes are direct from the Deed Poll governing the scheme.
It appears the DCU payments are being treated as dividends, not delayed payment for the original ‘purchase’. - Is this expected?
Prax are declaring the DCUs as dividend payment to, in my case, Barclays and are stating ‘exDIV dates’ inline with the 6 month periods.
It was possible for the first DCU payment to be paid in to an ISA because this is where the investment was held June 23. The second DCU payment is paid to where the ‘investment’ was held Dec 23.
Since the DCUs did not qualify an ISA investment it was moved to a standard investment account and this is where all future DCU payments will be made.
I’ve had payment into HL SIPP but nothing as yet in HSBC share account. I’ve chased with them and waiting for response.
Thanks for the info. Have chased IG - apparently they are having reconciliation issues…..
Ok its 0.617 and you probably need to chase them i had mine on the 28th
Have these as a result of original holding
Did you have them originally or purchased them separately through say jpjenkins if so there is a cut of point to qualify for payment . someone i am sure will confirm that time date the payment was about .6
I have DCUs with IG, who have yet to post the March payment. Can someone who has received their payment let me know what amount per DCU is being paid out this time?
I have DCUs with Barclays,Lloyds and Interactive Investor. fund managers
All the DCUs are now in trading accounts.
The March profit share has been received in all accounts with the exception of Barclays.At the moment they are investigating.
This is not unusual.Barclays al;ways seems to credit cash receipts 1-3 days after the other fund managers.
Of them all II is the most efficient,
Have received payment into my F&S account on HL. The last payment was made into my ISA account. So looks like all providers are aligning themselves in this manner.
Part 2 - putting aside the ISA issue for a moment to keep this point simple, so assuming all HUR shares were held in a regular non-ISA / trading account and were then replaced in that account with DCUs.
My questions is in relation to previous post (re: page 81) - what is “the market value of the Class II DCUs at the Effective Date” that is so vital to both sides of the CGT calculation? They state “i.e. the value of the UK Holder’s right to a future DCU Cash Amount” - but that “value” has to be determined by an NPV equivalent of the maximum 6.48p that each DCU gives entitlement to, not just the full (notional) 6.48p over time. And that “value” per DCU categorically has to be the exact same for every single taxpayer issued with DCUs at the effective date of the scheme, 8 June 2023, for HMRC purposes.
I can’t see anywhere in any document where that “market value” has been stated. In the absence of it, the only two figures we have to go on are:
a) the full 6.48p, and if that is the case then nobody is ever going to record a CGT gain on their DCU - all they will have is the initial CGT gain/loss on the original HUR shares (i.e. 0.83p + 6.48p minus the cost of each share held). I don’t consider this value to be valid as a “market value” for CGT; or
b) 1.65p being the very first value traded on Jenkins on 10 July 23. I’m not accepting that a trade totalling just £375 was indicative of “market value” for all DCUs at that time, and you would only ever know what the market value was by trying to actually trade once the Jenkins option became available on 22 June. And no I’m not accepting the later/current 1.77p as relevant either.
There has never been, to my knowledge, any public notification of a market value specific to the effective date which is when the original CGT calculation absolutely has to refer to. This is needed.
I hope I’m just missing something here that someone can point me to.
TIA
Part 1 - I’m just posting this here for ease of reference, I’ll post my point relating to this next to keep it cleaner.
CGT details copied from page 81 of the scheme document that I mentioned before (I have deleted references to Corporation tax that won’t apply to PIs to keep it simple):
“To the extent that a UK Holder receives Class II DCUs in exchange for their Hurricane Shares, that UK Holder will be treated as making a part disposal of Hurricane Shares for a consideration equal to the market value of the Class II DCUs at the Effective Date (i.e. the value of the UK Holder’s right to a future DCU Cash Amount).
This may, depending on the UK Holder’s individual circumstances (including the UK Holder’s base cost in their holding of Hurricane Shares, and the availability of any exemptions, reliefs or allowable losses), give rise to a liability to UK tax on capital gains.
When that UK Holder receives a payment pursuant to their Class II DCUs (or sells their Class II DCUs), this will be treated as a part (or whole) disposal of those Class II DCUs and may depending on the UK Holder’s individual circumstances (including the UK Holder’s base cost in their holding of the Class II DCUs, and the availability of any exemptions, reliefs or allowable losses), give rise to a liability to UK tax on capital gains. If the actual DCU Cash Amount received by the UK Holder pursuant to their Class II DCUs (or the amount for which they sell their Class II DCUs) is less than the market value of the Class II DCUs at the Effective Date which has been brought into account for tax purposes as part of the initial disposal proceeds of the Hurricane Shares, there may be a capital loss for capital gains purposes.”
If 330K smaller offload did occur 24 Feb to capture 'reasonable' oil price, then Prax got it wrong. Brent 24 Feb was $81-$82 and past few days when full offload would have occurred was $87. That's a 330k x $5 = $1.65 mill loss, so $290k DCU loss - not small, circa 0.015 per DCU.
Brent today just hit $89 so everything crossed that rise continues or at least does not retrace before circa 18 May. Full offload at $90 would add circa 0.325p to DCUs
Thanks DiveCentre , yes i can agree with that i had around 324000 on AM when AMUDSEN SPIRIT arrived so if it was all offloaded then and we start afresh around 18th May for shipwatch
2 days of Feb production 13000
31days of March production 204290
30 days of April production 197700
18 Days of May production 118620
78 DAYS TOTAL 533610
i will update when next tanker is spotted cheers Laser
Dive - sadly you'll get more sense talking with a penguin. The fool doesn't realise that with production exceeding projections by a fair margin, Dec 2006 economic end is likely to extend. Also if via a minor miracle Prax buy a producing asset they will use the AM capacity (already being paid for) so that the lesser producing asset P6 can produce economically well beyond 2026 at lower volumes as costs will proportionately be a fraction of current.
He's also forgotten that had HUR not been sold, it would by now have new management which would have bought or done a deal with a producing asset or sunk another producing well, and similarly by using the AM would have rendered P6 proportional costs a fraction of current hence it's extended it's economic life at lower volumes well beyond 2026. In those circs P6 cash would have totalled a healthy chunk more than 14p. Under no circs would new management have left AM underused as it currently is and P6 to remain HURs only producing asset.
Why not email Prax like I do regularly. I am am merely passing on what they tell me.
No I am not happy because there is no evidence to support your claim. If there is information in the public domain then you should be able to back up your claim with proof. Or is it just more false information?
There will be a Prax deal by July. Happy now ?
"The 12.5p is not from HUR stand alone only but has some contribution from Prax buying some assets to use the tax losses which they will soon"
How soon Kever.? How soon is soon? I have asked many times but you still refuse to answer. Are you a man or a mouse? Stand up like a man and answer the question.
"NB. So on Jan 1 2027 Prax will cease P6 production, decommission with all it's associated costs, and discard the valuable asset and gateway to riches they were gifted, eh? And also HUR had it stood alone would really have done this, eh? Not on your nelly, sonny boy! I must visit your planet some day"
By 1st Jan 2027 the P6 production will not be commercial. The licence asset then is worthless as no development work will be performed on the licence area by anybody.
"when as things stand DCU 12.5p will be reached via us receiving only 17.5% of net oil sale funds, less various costs?"
The 12.5p is not from HUR stand alone only but has some contribution from Prax buying some assets to use the tax losses which they will soon
Angry permanently discredited one might care to put on his comedian hat and explain to all a shrieking anomaly in his 'reasoning', namely:-
a) If DCUs are guaranteed sure-fire max 12.5p total (according to him), how come b) HUR standalone by end Dec 2026 would have failed to reach 13.5p/ 14p, when as things stand DCU 12.5p will be reached via us receiving only 17.5% of net oil sale funds, less various costs?
The forum awaits explanation of this anomaly, angry discredited one. Please, there is no need to be shy. PS. I stand by my 13.5p/14p HUR P6 standalone projection, first stated clearly at June 2023 sale-time.
NB. So on Jan 1 2027 Prax will cease P6 production, decommission with all it's associated costs, and discard the valuable asset and gateway to riches they were gifted, eh? And also HUR had it stood alone would really have done this, eh? Not on your nelly, sonny boy! I must visit your planet some day