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@epiphany121 exactly. its the covenant.
Chaps - lets get a basic fact right - UK Corporation tax for the O&G sector is NOT 19% - it's 40%. and FFS, they're repaying the Shell debt due next year with the longer dated new bond with no covenants attached. It's not like this 27.5 mill interest payment is net new. That covenant fact alone is good enough to do this refinancing.
Basically I'm i'm MM FFS you are just being an annoying Charlie Uniform November T - you know if Oil is +$85 invest INVEST INVEST when Opex is $17 - please stop being an repeating basic economic and accounting bull Terxxxx - you're dragging this BB down and Fiing me off.
Let’s say you have 100 of losses you can carry forward to offset against your tax bill
Scenario 1. You have no debt. Your annual earnings before interest and tax (EBIT) are 100. You have no debt and thus no interest charge on your pnl statement so earnings before tax, but after interest (ebt) are also 100. Assuming a hypothetical 20% tax rate your tax bill is 20 every year. You can therefore use your 100 losses to
Offset against your tax bill and for the next 5 years you pay no bill tax.
Scenario 2: you have debt and a cash interest bill of 25 per year. Your earnings before interest and tax (ebit)are still 100. But your earnings before tax are now 100-25=75. Tax rate at 20% means your annual tax bill is 0.2 x 75 =15. You can then offset your 100 loses against this tax bill for 6.67 years.
So by minimising your tax bill. Your tax losses last longer. And guess what you can do with money you borrow? Management it the company to create shareholder value via capex and capital projects that have a greater return (IRR) than the cost of the debt. Even my 5 year old can see that this is better for a shareholder than having no debt and just ****ing your earnings away on tax to the government which has an IRR of two fist fills of **** all. Next.
Popcorns ready ;-)
If you pay Usd 27.5 million in interest you lose usd 27.5 million less 19%
If you pay no interest you lose zero as you have tax losses
Again please explain using logic
Oh and it’s even more logical as the U.K. corporation tax rate is 19% versus the coupon on the bond at 5.5 percent. Logic. Logic. Everywhere.
It’s really not that hard. Or am I missing something?
Harbour will use debt to minimise the tax payable in any particular year…. then they will use a portion of their tax losses to offset the tax due. This increases the number of years those losses can be used for as you are minimising the tax due.
How is that not logical. It’s really rather basic.
I note the post on freedom to bid for new assets and escaping the hedging straight jacket
I would love to see this company work the assets and generate the cash flow to return it to shareholders. What you sat makes sense if you want to increase the bet. I was hopeing that harbour would work the assets and not make the same mistake as premier.
Point taken - look elsewhere
Can see where your coming from as PMO had plenty of Debt and they succeeded in losing Equity holders over 80% of their Investment .
My understanding is that premier had huge losses forward so tax should not be an issue for harbour
I understand the logic but simple mats says if you do not need to pay 5.5% of Usd 500 million or Usd 27.5 million per annum plus an arrangement fee and broker costs you do not pay it unless you like pain
I do not understand this and would really like to get a logical explanation for it. I am interested and see an opportunity but have a bad feeling on this point alone.
I really would appreciate a logical explanation
Hey Baysil nice to see you are back and on Point .
Yep, their streamlining their Institutional funding for an acquisition or new producing assets in line with their strategy, which can then take them out of the hedging straight jacket imposed by the banks. IMO DYOR - POO up +20% last 2 months, they need to take on M&A or the BP Shell Oil major throw off medium size plays at discount. The extra $100m helps accelerate the growth- whether M&A - grow Non hedged prod'n, if not new field - move forward drilling prog.
I can answer that. Optimal capital structure. Miller-Mogigliani….google it.
A company will pay tax off its earnings AFTER interest is paid on ita debt debt. As such having debt provides a significant tax shield and greatly improves the efficiency of any companies capital structure. More importantly for shareholders it boosts the return on EQUITY. Why do you think private equity want to put as little cash equity into a business and borrow as much money as they can when the buy a business? It’s a better cap structure for equity returns.
Sorry 500 million not 500k
The problem i have is why a company that is throwing off so much cash is borrowing Usd 500K
I ask because i am interested - can anyone explain this to me
Any help is greatly appreciated
Hi Miles44,
Another 1 million harbour shares lot appearing on the ADVFN as a SELL [O] trade share price traded at £3.65 at
17:48 bst late reported trade which I believe is part of the other 'P' protected portfolio lots but I'm awaiting for
the London Stock Exchange to confirm the trade above.
Take care. NoFear(*__*)
@Soder - exactly - broader market hastn realized HBRs valuation yet. But several funds (UBS, HSBC, e.g.) are slowly buying HBR shares for 3 months already. Smart money has used the last 4 months as a chance to get in here. Others start to follow now.
Let’s focus on unhedged upside for next year….
For 2021 I think guidance is 185-195k a day. Take mid point at 190k. However, we are currently in catch up mode after maintenance deferrals completed and drilling resumed on exiting fields. To be clear we are currently drilling the **** out of many of our assets!!! Drilling on assets where we are the operator is back to pre covid levels and several wells are due online in the very near term. As per the h1 presentation, current production is approx 210k per day. If we maintain that and add tolmount (which is net 20-25k a day) you are looking AT LEAST 230k per day production for next year. AT LEAST. We know tolmount is gassy and when you adjust for this the production split is 50/50 oil and gas.
So 2022 total production is: 360 x 230k a day = 82.8m boe a day. 41.4m will be oil and 41.4m boe will be gas.
We have hedged 19m bbl oil at $61. That is approx 46% of oil production.
We have hedged 25m boe of 2022 gas at 49p a therm. That is 60% of production.
On a combined basis only 53% of production is hedged next year. You can make your own assumptions as to what may be the realises prices on the unhedged portion. But if you take an oil price assumption of 80 a bbl and a gas price assumption of 90p a therm (this is equivalent to $73 boe) then you are talking north of $4bn of ebitdax next year.
Net debt is $2.6bn and the mkt cap in usd is approx $5bn. That gives an enterprise value of $7.6bn and an EV/EBITDAX multiple of 1.9x for 2022.
So you think there is upside? It will min double v v easily if gas and oil hold here.
Yes - they were forced by lenders to hedge a certain amount as a safety net - the rest of production is a market value
Nothing wrong with that policy - In fact If PMO had done similar - we may have staved off the takeover (sorry I mean merger)
Good point jw61.
it's true what you've said, but why did they go that way with their hedges when Pmo knew already that the energy gas & oil markets were tightening and could see the 2021 as being good for the energy markets as a whole?
Are we saying that Harbour shot themselves in the foot just to please their bankers conditions and therefore been now worse off. I just don't buy it but anyhow I willing to go back into my cave and reflect on what I posted and wait it out till we know more in November and then In December on capital day. Many thanks. (*__*).NoFear
Just to be clear Pmo had hedges and so did Chrysaor - you cant simply take the PMO figures and accuse HBR of understating.
The HBR combined hedge (based on the new company) is stated in the latest presentation
Discuss:
Did Harbour after the completed March 2021 acquisition of Premier oil actually continued with the hedges that were left in place by Pmo and we're left to believe that because of the banks conditions, they actually hedged a higher level of their oil and gas production at well below today energy prices? I don't believe them at all.
That Premier Oil Annual Report Financial Statements year to 31 December 2020 shows the real true picture of what are most probably the current ongoing hedges prices for oil & gas that harbour is producing across their world locations. This is just my opinion. Please feel free to discuss. (*__*).NoFear
Will get you the data. 10 mins. More important here though tbh is the 2022 hedge book. Also remember Harbour did not exist until the start of April.
I also think it’s worth reminding ourselves that no matter what you see for front month or spot gas prices that only about 5 percent of the entire gas market trades that way. Unlike oil which you can produce and store until it’s sold, gas is v different. It’s largely a market that operates on long term contracts. Harbour is not unique and n that way. It’s how the market works for gas.
Published on the 07 Jul 2021 by Harbour Energy Plc
[Group of companies accounts made up to 31 December 2020]
Premier Oil Annual Report Financial Statements year to 31 December 2020
See the Harbour report above by clicking the pdf file link below:
https://find-and-update.company-information.service.gov.uk/company/SC234781/filing-history/MzMwNjAxMjE5OGFkaXF6a2N4/document?format=pdf&download=0
See the image screenshot of the above pdf file in page 14. SEE IT--->>> https://ibb.co/nsWNnn9
[Harbour has hedged approximately 13% of oil production at an average price of US$54/bbl, and approximately 36% of its UK gas production at an average price of 42p/therm.]
It says the following in their:
[Opportunity]
For 2021, the Company has hedged approximately 13% of oil production at an average price of US$54/bbl, and approximately 36% of its UK gas production at an average price of 42p/therm.
So, why are we told that half of their oil is hedged at around $59usd and therefore missing the current high oil spot and gas prices too. Are we told the correct information or no? Is Harbour actually be making higher returns on their hedges since they said they have only got 13% hedged and therefore the rest is unhedged at assuming today prices.
Come on Soder? Where are you hiding! Work your magic and give us an update with what I just posted.
Where have all those claimed experts of the Oil & Gas industries gone lately.
Ps: DBNO & OBND & HarryCash & Sauk(OLIVIA) need not apply. By(*__*)NoFear