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Hi hitman - the more you research into this the wider you end up going. I was sent up several alleys and not all were blind. It seems that it is only share prices that are flat-lining whilst the oil industry continues to shuffle the pack. The "in" word is "transition" . I prefer the phrase "one man's meat is another man's poison".
Naturally I got myself in a muddle. Jan's pills can only take you so far.
This is partly to blame "“I think in the next five or ten years we can see quite a changed Sullom Voe Terminal from that which it is today" from Shetland news and is about wind power and this from Neo "For all new E&P investments, we will include a price of carbon of USD 75 per tonne CO2 eq. in our investment analyses."
Only the number guys will be able to translate this into cost per barrel and I'll throw in $3.50. I'm pretty sure we pay a carbon tax already but gord knows where it's hidden in the accounts. Then there is the point of what this relates to? I think it is solely extraction and transport. It doesn't make sense to load it all on to the producer when there are various uses for each barrel and tarmac doesn't produce as much CO2 as jet fuel. The green lobby enjoy watching the herd paying taxes at the pumps for instance.
It neatly brings me back to SVT which although we don't own it are a large shareholder and the operator. I think that using electricity via wind power will bring costs down considerably.
"On top of the EU ETS, operators on the NCS are subject to a national CO2 tax, which in 2019 was USD 52.5 per tonne CO2 . This national CO2 tax has been increasing by 5 percent per year in recent years, and is set to increase systematically by 5 percent annually over the coming years as well. Similarly, the UK has a price floor for carbon at around USD 24 per tonne."
I always suspected that SVT's value as a land mass would come to bear. We are currently shaving costs but once demand picks up the production will lag and next year's position will be "transitional".
Still building it. They will come. The pioneers are already here.
https://www.rigzone.com/news/wire/exxon_north_sea_retreat_could_yield_gain_for_sinopec-22-sep-2020-163362-article/
It does seem like Enquest are also interested.
Thanks, romaron. I don’t know much about the detail of Enquest’s tax position, but I do recall a news item that highlighted an element of ‘tax transference’ within the BP Magnus deal - I wasn’t an investor in Enquest at the time but for some reason the news registered.
The BP deal demonstrates there is flexibility in utilising tax losses across assets, which I believe is standard in any business, but I’m not sure about specific tax credits. Here I’m thinking of the two Heavy Oil Field credits awarded to Enquest for Kraken. Their use may be restricted to Kraken revenues. I don’t know.
Good post L7. I don't imagine the queue for these assets goes around the block and for Exxon the production (37k boe a day) is chickenfeed. The timing may seem unfortunate but whatever Exxon spends the proceeds on will be cheaper too. Ageing fields are hardly in fashion at present.
I'd love to know more about the tax implications. I'm assuming that within EnQuest they are interchangeable and can use their credits on a field that has never made a loss. I'm also assuming that to benefit deals have to be in the same industry otherwise we might have Mike Ashley checking out loss making oilies.
I fancy Vår Energi might be a front-runner as they bought Exxon's Norwegian assets last year (300k boe a day. The UK production is much lower but who knows what was said at the time of the earlier deal.
Whatever the outcome we'll smoke out some information that's relevant to us hopefully.
Exxon – cash versus vendor loan/ profit share structure.
An attraction to BP in accepting the vendor loan and profit share structure for Magnus is that it permits Enquest to utilise their tax position and offer a pricing to BP which includes a share of that tax position. Of course, we don’t know how attractive that pricing was over any competing cash offers.
But I suspect there are other factors to consider, key being decommissioning costs and a share of any upside potential in production.
A cash buyer will be playing down the returns from production and playing up the costs of decommissioning, particularly in terms of timing – the closer to decommission the higher the present- day costs assessment of decommissioning.
Enquest, could present a vastly different package, which may be more attractive to Exxon. Importantly, Enquest has the experience of the Magnus transaction to support their offer, and Exxon will have some insight into how advantageous it is proving to BP.
It could be that Exxon are hard set against anything but a cash offer. But if Enquest are the only bidder putting forward a ‘special structure’ offer against the other bidders putting in cash offers, perhaps there is something to play for.