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@epiphany121 Thank you VERY much for your answer, for taking the time and also for your comparisons with other companies you own. That helped.
I agree that PBV is only one of many factors and at this point of time it might not be the best factor as - as you mention - higher oil & gas prices for longer might result in them writing back impairments.
What is good is the price to FCF ratio is around 4.2 which is good value (compared to around 7.2 for BP e.g.) plus FCF will rise in 2022.
I do agree with your opinion on management: every time I listen to Linda and Phil I have a very good impression of them being aware of good business opportunities. Plus they are aware of ESG and have a reasonable approach for it (Acorn/V Net Zero), but do not have any thought about rushing into alternative energies as that market isnt profitable anymore, but to buy cheap o&g assets/companies. Buy cheap and sell the oil and gas for a nice profit is what I definitely like.
You said you bought more shares in the last days... I did average down in July, being at 360p average, waiting for things to come now
Once again thanks for your informative answer
Miles - When you're doing stock fundamental analysis - BV is ALWAYS Total Assets Minus Total Liabilities, and that is the net equity number. We don't need complicated mathematical models required to figure net equity out as that number is clearly shown on the Balance Sheet in every quarterly/half-yearly/annual report. Page 23 of Harbour's HY report is the balance sheet page and you can see the Net Equity number of $1.736 billion.
You can't go cherry-picking what you assume to be BV just because it's an O&G company. HBR has $5.42 bill provisions on the balance sheet and most of this is the PV of future decomm liabilities for them, and this is what's pushing up liabilities/keeping equity down. If oil/gas prices stay high they may be able to write back impairments, but I haven't checked what the value of these are for HBR.
Price/BV is just one valuation metric though and I wouldn't be too hung up about that ratio in coming up with an investment case. One of m favoured investments is Devon Energy, an S&P 500 constituent, and they trade at a Price/BV of 2.67. What they do is though is have the most progressive dividend policy of any O&G company that I know of. They have a quarterly variable dividend component that's calculated on 50% of FCF after Capex/Abex spend. They've done this for 3 quarters now and it shows up in their SP. It's up 100% since they started this in February and it's a $20 bill market cap company now. If Harbour can do anything like this, that'll be phenomenal. Like Devon, Harbour's net debt/Ebitda ratio isn't too bad at around 1.5 and will keep falling into H2 this year. I believe HBR is well placed to ramp up dividends in the coming years and it'll be fantastic if they go down the Devon route and be UK's first variable dividend paying company.
To linger on the Price/BV topic for a minute, there are a few Canadian O&Gs I own (CPG/VET) who are valued at less than 1 on that metric, but they're not yet going all out with divs because of higher debt levels and this is where HBR is a positive, IMO. I've started adding after the results in the past couple of days as I do see the management as progressive and I do hope that this reasoning is vindicated in December.
Some expert opinions on here but are you not leaving some crucial factors out here.Ideal world your probably right.
So heres a possible scenario which baffles me that such highly intelligent people seem to be missing.
Winters upon us.
In parliament it was stated there will be around 40000 less carers for the elderly this yr due to the no experimental jab no job policy.
So that I mind and the gov fear ad as to keeping windows open during the winter.
Higher energy costs ie heating.
Then the normal flu season kicking in hospitals as normal filling up with the elderly and at risk and becoming over run as they do every year.
Now due to the lack of carers because of gov policy.Where will these hospitals discharge all the patients too.
Theres your next lockdown.All hypothetical of cause.But a bit of common sense applied seems to be heading that way.
And that's ignoring bubbles and distortion in the market
You keep ramping lads.You all should have been out in force yesterday when the sp bottomed out rather than the day b4 when it was tanking.
Its go up its goes down ;-)
Atb
@epiphany121 I agree that without hedges the company would already have a much better standing, but those were the conditions of the banks for the merger... what is good though is that for 2022 etc they are planning with the mininum % of hedges they re obliged to have so ... the upside mentioned by many here definitely exists.
As for the book value... so as @shal1000 tells me 0,5 is correct and we agree that IF you calcute with equity it is 2.5 and if you calculate with oil&gas value in the books its 0,5 the question remaining is.... which number does one normally take for the PBV calculation ?
Net equity (BV) on the balance sheet on 30/06 was $1.73 bill and the current market cap is £3.19 = $4.35 bill. Yes, Price to BV is circa 2.5. The $ 8.039 bill on the balance sheet is the net book value of Prop,Plant,Eqpt and that's not the same as net equity.
10p dividend is the most likely too, IMO. I'd suspect that the degree of their hedge losses over 2021/22 will constrain their handing larger divs at this time. The reality is that they probably could've wiped out the majority of their debt if they didn't need to book these hedge losses - their carried forward tax losses from PMO would've sheltered much of these gas windfall profits.
Hi Miles. Thanks for replying back on your view on dividends which seems reasonable. For the above I done the calcs and I also get 0.55 (I have a masters in maths and work in a very mathematical based role so pretty convinced with my calcs). I think the book value quoted hasn't updated on the websites. Its based on filings at 30 June - so guess they using book value of either Premier oil or chrysaor but not hbr as Harbour hasn't done any filings yet as far as I'm aware!
Otherwise simply wall street are showing that hbr is extremely undervalued and they are using a much higher discount rate of 9% than I would for a company like hbr.
Good morning
One question to the forum about current net book value... ycharts, simplywall.st, reuters are now all showing a price to book value of around 2.4 /2.5 - simplywall.st calculating with 1.88 USD of book value per share.
Looking at the recent presentation of HBR page 38 they sort out a net book value of 8,039 bn USD. With current market valuation that would be a price book value of around 0.55
Any comment on this? @Soder has already stated that I am terrible in maths, so I probably got that wrong again...