Interesting to hear the presentation and q&a thereafter. Few points I noted for the ittle it's worth..
1. The mistake on the presentation, 30 months became 36 from Rupert, 3 years after FDP to production. He does not seem to know that the KFELS N Plus rig is going to be ready in Singapore 1Q '17, and KFELS, unlike XEL are pretty good on their delivery forecasts. That will put the rig into Dundee or whatever UK port selected, 2Q '17, hopefuly when she could then be positioned promptly this time in the good weather window.
Ditto for the platform, removing the accomodation will make fabrication quicker. What was intriguing here also was the comment could lead to potentially reducing the j/u rig time alongside. With this removal of the accommodation, thus adding to space, an MDR rig could be installed. Presumably the j/u rig could then head over to the phase 2 platform. One might assume the platform fabrication timeline could parallel that of the rig, mid 2017 NSea. So if they can fire up the FDP approval, still possible also for that.
The key to production startup date probably lies in the FSO. It's so big hard to see how that can be constructed and delivered in less than 3 years, unless the Chinese have something part fabricated that can be modified. Though guess they could lay the mooring system at the time the platform and rig go in, then while the rig was drilling and completing the first wells the FSO could slot in later. Anyway, useful to contemplate options to speed this up, as mention of 2018 somewhat depressing..
2. Again it was off the cuff, but interesting to hear his comment on interpretation of valuation. (excuse my simple arithmetic). As RC is cose to current negotiations, and he is still publicly putting out these figures, wonder if the following indicates the target price he is aiming for re any jv farm in participation.
250mm bbls at $2bn makes $8/bbl, not too startling. But add in the 50m 3P which was expected to be upgraded, (though sadly due to other work stated not a priority) gives $2.4bn, plus the EOR at conservative 100m bbls x 8 = $3.2bn. Divide that by say 320m shares thereby puts a value on Bentley of $10/share, or about £6.25.
Reducing tax year on year until he finds the correct level. The oil and gas boys are going to call for a tax cut but there was record investment last year. So that tell me the service companies are making too great a margin.
The oil co's need to start squeezing the supply chain who will be benefiting from low fuel costs like the rest if us.
The costs went up with the oil price, they need to come down again
Thanks, succinct article, let's hear Wood's comment on the Chancellor's inaction, also that Alexander gets the bums rush out of Aberdeen tomorrow. Too little too late sadly, all they can pray for is that Brent hikes back up over $!00 absolutely asap, there's no help from this Government, at this rate the hyped up new regulator going to have little to regulate other than decomissioning.
Mr Osborne could sensibly have said that the fall in prices could be temporary and could have promised radical change to match the new circumstances if the fall was confirmed by events over the winter. He could equally have said that many new fields will pay only limited amounts of tax and that what matters is a concerted attack on costs. He could have gone back to first principles and looked at what it would take to renew the industry for another decade. He did none of these things, instead preferring to tinker with an already over complicated fiscal system which benefits tax lawyers rather than producers. Many of the changes should in any case have been made a long time ago.
The issue will be back on the agenda for the Budget in March. By then some of the key decisions at the corporate level will have been taken. Investment flows will have slowed down and decommissioning will have begun. This was a wasted opportunity and another reminder that Whitehall and the business community are a million miles apart.
Too little, too late – minor tax changes will not stop the decline of the North Sea Nick Butler | Dec 03 16:57 | Comment | Share
As Martin Wolf has noted in the Financial Times, world oil prices have fallen 38 per cent since the end of June. A Martian listening to George Osborne’s Autumn Statement would have no idea of this. For consumers lower oil prices can have positive effects but for mature producing provinces they are very damaging and could be fatal.
Mr Osborne proposed a cut in the supplementary charge on oil company profits by 2 percentage points from 32 per cent to 30 per cent. There is to be a “cluster” area allowance to help the development of small fields which sit next to each other. The ringfence expenditure supplement is to extended from six years to 10. Wow! That will really keep the investment flowing.
One of the real underlying problems of the Treasury – not just under this government but for many decades – is the lack of understanding of business. Very few Treasury staff or ministers have dirtied their hands in the real world.
For the oil sector, which in the North Sea now means predominantly smaller independent companies, what matters at the moment is whether the UK is a decent place for long-term investment given a price which is at best volatile and at worse in structural decline. New smaller fields cost more to develop than the giant ones which are now close to the end of their working lives. There are still plenty of resources – up to 24bn barrels of oil and gas on some estimates – but development is marginal and hugely dependent on controlling costs, which includes tax costs. The Wood report last year showed what could be done with better organisation and regulation of the sector but as I am sure Sir Ian Wood would agree no amount of good organisation can override weak economics. There is nothing in the chancellor’s statements or tax changes which suggests that this is understood.
What will happen now? Companies are struggling to understand whether the price fall is just a game of bluff by the Saudis to make others blink first. We will see but a cut in production of 1m barrels a day seems unlikely to reverse the fall which has occurred. When the Saudi stance is clear, and that may take two to three months, the companies investing in marginal areas such as the North Sea will recalculate their numbers and assess whether any further development is viable. If it is not the sector will begin to shrink, perhaps quite rapidly, leaving a good proportion of the 24bn barrels undeveloped. The task of the new Oil and Gas Authority in Aberdeen will be to supervise the decline and to manage the process of decommissioning.
$450m pathetic, $100m more than XEL's spent in 6 years. Why does Osborne not just drop the 2011 tax hike back to 20%, perhaps simply loss of face, he got it wrong. Now many more, combined with the oil price drop will just head for more profitable overseas pastures, or simply delay or cut costs to the bone.
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