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Wow, nice timing! I swear I´ve visited ITHs IR section on yesterday and the calender was completely empty, however now they scheduled two meetings (first one on rather short notice...):
- this Thursday 15th Feb. Trading Update (I am so exicted!)
- 21st March FY23 financial results
Looking very much forward to it and talk to you guys on Thursday here I guess ;)
Hi Tamovv, I'm not looking at 2024 estimates or producing my own until after the next update - too many moving parts.
On the 5Kboepd drop due to the pullback from Harrier development: a portion of this drop relates to the loss from development with the balance from current production numbers. From memory, I think the decision followed the pullback in gas prices. By my numbers, gas accounts for c. 85% of Harrier/Stella production.
A key factor from mid 2024 is the performance of Captain with the new polymer injection in place.
Combined, these factors should increase the % of oil in the mix, which is positive given the recent pullback in gas prices. But the big numbers will be estimated production and CapEx. I'm not giving 2024 much thought until I know those numbers.
We could see a trading update and dates on the dividend payment before the end of Feb.
Thanks Londoner, appreciate!
Any thoughts on my 2024 production forecast and EBITDAX/CFFO assumptions? Think you guys had a more detailed look at the NSTA data (I can´t access / haven´t had a more sophisticated try yet). With my estimation, I have just followed comments from subject conference call, where it was told that decline from Q1 (75 kboe/d) to Q4 (70 kboe/d) can be assumed for 2024 - so a rather simplictic view how I got to my 65 kboe/d.
As a follow up.
I guess the point you are highlighting is that if 2024 Rosebank CapEx is say $200m, that $200m will come from current funds and only be reimbursed through the EPL allowance in 2025.
Yes, that is my understanding.
Tamovv, my understanding is that the schedule of cash tax payments in 2024 is now fixed, or will be once the 2023 accounts are closed. As tornado10 says, the 2023 Q4 CapEx may be higher than the original guidance, which was for CapEx in producing assets. There will be the first phase of CapEx on Rosebank - the higher the better. CapEx spending in 2024 reduces the cash payments in 2025.
I understand from comment on HBR that this phasing of payments changes when a company returns to the normal CT payment schedule. Although, Ithaca has c. $1,800m of tax losses from the 2022 acquisitions, I recall a comment that CT payments would be in the low single digits (I don't know if that's $m or % but if you have the transcript you might).
As I say, this is just my understanding. I'd guess we'll get clarity with the results, when the Rosebank payment schedule should be disclosed.
If you allow for one more question guys:
During the Q3 conference call, in the Q&A session, Iain Lewis was asked "as Rosebank CapEx ramps up next year with the investment allowance, that is going to be that shield that reduces your tax payment, as you just talked about for 2024 cash payments." and replied "Yeah. So, we're well shielded on the corporate tax side, on the EPL side, absolutely. It's capital investment that shields EPL, and we have some standard program, even despite some of the cancellations that we've taken off."
His answer wasn´t really helpful to me. It is clear that investment shields against EPL in general. But with regards to timing, I understood that 2023 deferred EPL taxes will become payable in 2024, so we will know the actual cash outflow soon, once Q4-23 figures are released. What about the timing of the EPL investment relief? I understood the analysts question that way, that he was supposing the 2024 EPL cash payment could benefit from 2024 Rosebank investment ramp-up. Is this true? Do we really have to pay EPL charges one period later (thus 2023 in 24), but can offset EPL investment relief from the same accounting period (thus 2024) to optimize cashflow?
Many thanks for your swift reply - apppreciate!
I managed to listen to the Q3 conference again this morning, Iain kinda confirmed what you´ve been explaining to me. Corporation tax asset is actually 1,8 bUSD, net tax asset lower because partially offset by EPL tax liabilities. Annual D&A charge should be around 730 mUSD, financing&lease like 200m USD. Thus, a 1,8 bUSD tax asset shields 4,5 bUSD profits before tax (at 40% corporation tax rate), with other words accumulated losses are 4,5 bUSD?!
Profit before tax 2024 should come in below 500 mUSD acc. to my model, thus the acc. losses could last for many many years to come - do you agree? This completely disagrees with my memory, I thought acc. losses were nearly exhausted.
I feel confident with my 65 kboe/d production estimate for 2024. Do you guys, who have reviewed the NSTA data, agree? Management, when asked during the Q3 call, replied we should look at production run rate difference of Q1-23 vs. Q4-23 (to be calculated by using mid range YE23 estimate, so I have taken 70 kboe/d) when assessing the natural decline for 2024.
I used to be slightly too optimistic with my EBITDAX forecasts, so 1,35-1,4 bUSD is maybe a more realistic range. However, after finetuning my tax model (also based on some comments management made during the call), CFFO after tax could come in at or slightly below 0,8 bUSD (equals 240 mUSD dividend, or like 2x 12c or 12+13c, so pretty similar to the current level). Would appreciate your thoughts/feedback regarding the dividend here as well.
Just added to my position at 1,28 GBP this morning. Expect it to yield close to 15% 2024 dividend.
@Tamovv - The picture is much brighter for Ithaca!
Q3 "Net cash value" of losses is $1,816,586 (see p.23 of trading update). Ithaca is not going to pay any corporation tax or SCT for years. That's the brilliance of the 2022 M&A deals. I honestly think the market misses this point, i.e. when comparing HBR/ENQ/SQZ to Ithaca. I think ppl do simplistic "price to sales" or EV/EBITDA comparison - and ignore this massive tax asset. This asset, together with lower EPL charge due to Rosebank/possible Cambo development make Ithaca much more attractive than others IMHO.
Re EPL - I suspect 23Q4 CAPEX was higher than previous quarters, so 2023 EPL charge may be less than 350.
Many thanks @tornada10 and londoner7, appreciate your kind efforts in putting all these things together!
@DN2024 Yes, the 0,13 USD dividend is confirmed. But in my opinion it´s all about the 2024 dividend guidance then.
In my opinion, the 2023 400m USD dividend is kinda "cheated", because its not solely related on 2023, but was payed from H2 2022 profits as well. From now on Management guides for 15-30% of CFFO after tax.
Could you guys (maybe Stevo is reading here too) help me to understand the tax effect on 2024 CFFO? I was shocked by HBRs 2024 CF guidance, which was completely wiped out by 2023 taxes payable in 2024 (EPL).
Q3-2023 shows YTD EBITDAX of 1,4 bUSD + approx. 370 mUSD for Q4-23, so 1,75 bUSD EBITDAX. EBITDAX to CFFO conversion was very strong with approx. 70%, so I expect further net debt. reduction and FY23 CFFO after tax of 1,2 bUSD.
This impressive 2023 number must have benefitted from two factors:
a) EPL payment date (at HBR, a significant amount of 2023 EPL becomes payable this year, so I expect the same for ITH)
b) Tax losses shileding against corporation tax (40%)
My 2024 model base case, taking favorable hedging and 65 kboe/d into account, forecasts 1,4 bUSD EBITDAX. Can you please help me to translate this into CFFO after tax for 2024? The EPL charge payable in 2024 must be known now (or soon). Q3-23 shows current EPL of 280m for YTD 09-23, so probably 350m for 2023 - is this reasonable?
Regarding corporation tax, page 21/33 of the trading update shows a remaining Net deferred tax asset of 625 mUSD. As you will have noticed by now, I am not an expert in corporation tax. I assume that this amounts stands for the "net cash value" of the forwarded losses. Thus, approx. 1,5 bUSD profits before tax can be made at a tax-rate of 40% before the net tax asset is consumed - is this correct?
I expected them to consume their forward tax losses by end of 2023, so I was surprised by the huge remaining net tax asset as of 30th Sept. last year.
In my mind this indicates there won´t be much corporation tax to be payed in 2024 as well. So from my 1,4 EBITDAX FC for 2024 only 350m EPL + maybe 100m current 2024 corporation tax have to be payed. Finance costs should be below 200 m USD as well. So in my mind, 0,75 bUSD CFFO after tax seems to be a realistic number for 2024, do you agree?
I expect management to choose a payout ratio at the top end of their guidance, so 30% (unless any major M&A suddenly comes up, parent company Delek also relies on ITH to pay or has to cut their dividend respectively). This would mean 225-250 mUSD 2024 annual dividend (similar bi-annual cash payments to the current dividend). After the IPO ITH yielded 11%, so assuming markets to require 12%, 1,875 bUSD equity value seems to be a reasonable, or 1,48-1,50 GBP per share. DYOR.
PS: Haven´t heard from Cambo recently. There is an upcoming due date end of March for submission of a development plan. Hope they can extend that deadlin
According to The Telegraph:
https://www.telegraph.co.uk/politics/2024/02/09/rishi-sunak-latest-news-labour-green-pledge-starmer-live/
I think we'll see some more U-turns on this. I don't think Labour will in fact scrap the investment allowance, when they get in some more touch with reality.
https://www.politico.eu/article/oil-gas-company-lash-labour-party-windfall-tax-plan/
Less green investment = less renewable energy = more need for O&G. Even Labour can do that math.
So politics notwithstanding, no one should and no one will - not even Labour - jeopardize UK's energy security. Right now they are appealing to their base and enjoy the luxury of dreaming of unicorns and rainbows. But if they get to Number 10 they'll have to face the cold reality (pun intended).
Let’s hope, as part of that, he ditches his proposal to cancel all new oilfield licences and allows the current ones issued but not yet up and running, to stay live.
I'm planning to pick up a good chunk this week...10% yield in Feb...am I missing something obvious? Please advice.
My price target was 103p, getting close now.
Thanks, Londoner. That's very helpful.
Re your list, I can only see you "missed" the MOST NEGLIGIBLE Carnoustie field (41.03%) which produced some 10-20 bbl/d until 08/2023 and of course does not explain anything.
I too was struggling to find an explanation to the mismatch between NSTA's data and Ithaca's. I once thought it might be connected to production in appraisal wells (such as Isabella, or Jade's new well before completion) which are not part of NSTA's data. But this fails to explain the 5% mismatch. Maybe selling stock explains something, but then it can't be three quarters in a row. So I really don't have an answer.
Thanks again for the important info.
I meant to add (from memory) that the Pierce FPSO had a mooring issue, which is expected to be sorted this half year.
Performance at Captain, following the polymer work, is key to Ithaca's near term performance. This is from the latest update:
Captain Enhanced Oil Recovery (EOR) Phase II project now ~80% complete,
supporting first Phase II polymer injection into the subsea wells in H1 2024, with
the following activities completed in the quarter:
Drilling: Completed drilling operations of all three Area E polymer injection wells
and the commencement of drilling operations in Area D
Subsea: Completed laying and trenching operations of all flowlines and umbilicals
Facilities: Turnaround successfully completed including facilities upgrades in
support of EOR II project
Tornado10, good to know I'm not the only saddo looking at this stuff ;-)
I download the csv file and sort it in Excel.
I've done a similar exercise to yours, working the numbers for each quarter, but come up c5% short of Ithaca reported numbers (Q1,Q2 & Q3).
My Q4 sum is 63.1K boepd, which I correct to 66K boepd, for Q4 EBITDAX $371m.
I suspect I'm missing non-operated fields. Can you add to my list?
(The % is working interest rounding number. I have the precise number in my work sheet.)
Abigail ITH 100%
Alba ITH 37%
Alder ITH 74%
Arbroath REP 41%
Arkwright REP 41%
Brechin REP 41%
Britania HBR 32%
Brodgar HBR 6%
Callanish HBR 17%
Captain ITH 85%
Cayley REP 41%
Columba BD CNR 6%
Columba E CNR 20%
Cook ITH 61%
Elgin Total 6%
Enochdhu HBR 50%
Erskine ITH 50%
Franklin Total 6%
Godwin REP 41%
Harrier ITH 100%
Jade HBR 26%
Mariner EQUIN 9%
Montrose REP 41%
Pierce BP 7%
Schiehallion BP 12%
Shaw REP 41%
Stella ITH 100%
Vorlich ITH 34%
Wood REP 41%
Based on NSTA open data source:
https://hub.arcgis.com/datasets/ba8b7b78d3a74edc88293011981ce2d7_0/explore?showTable=true
Oct 23: 58.2K BOE/d (35.2K oil, 23K gas)
Nov 23: 67.9K BOE/d (44.4K oil, 23.5K gas)
Dec 23: 65.7K BOE/d (42.3K oil, 23.4K gas)
Q4: 62K BOE/d (40.6K oil, 21.4K gas)
Pierce field did not produce the whole quarter. There seems to be a problem there.. Captain produced small amounts in October but returned to full production in Nov-Dec.
(There could be an error there, but that's my evaluation based on thar NSTA data)
I´m also sorry, kinda liked this guy...
Anything known? Delek Owner billionaire joined the board (Itzhak Tshuva) in the course of last. Delek might be disappointed by the development around Cambo and Rosebank (especially Cambo since 100% in ITH/Deleks ownership now).
So maybe shareholders opted against Alan...
Obviously they can´t be too satisfied by the aquisition of Siccar Point in retro perspective and developments since then, but it´s mainly the EPL effects rather than the management in my opinion (of course the public doesn´t have any detailed insights).
Hi,
Delek is my biggest single holding and the reason how I came to ITH. Delek used to have major problems with bondholders in 2020 when the corona oil-drop happened. In the aftermath they worked hard on improving credit rating, in order to meet set guidelines as a basis for i.e. dividend payment which Delek recently resumed.
As part of their aim to improve credit rating they decided to IPO ITH and sell just a minority stake (hence Delek wanted to remain in full control since they strongly believe in ITH in my opinion - of course EPL hitted hard and they didn´t expect). Thus one of their major assets (ITH and NewMed Energy where an IPO failed due to complex partnership structure and merger with Capricorn also failed due to shareholder activism) now is much more liquid given the successful ITH-IPO.
No need to wait.
There is substantial detail on individual field metrics in the Delek Group financial statements. These statements are released the same day as the Ithaca updates. Obviously, one of the perks of being a controlling shareholder is access to the detail. Perhaps these will appear in future Ithaca updates, but good to have a back-up source on Delek's website..
I'm sorry to see Alan Bruce leaving.
In calls I've felt Ithaca management have been more open and responsive to questions than I've seen with other companies.
On the recent call I picked up comment on the publication of detail on fields with the next results. I interpret that as a reveal on metrics beyond simply the production numbers. I hope that initiative hasn't left with Alan Bruce.
We'll soon find out.
Good afternoon, I was wondering does anyone know why delek listed such a small block of stock at ipo, what was the purpose? They could only have netted 250m or less?
I'm slightly baffled, interesting company of course
Thanks
Viewpoint: UK offshore faces crucial year
The coming year looks set to be a crunch one for the UK offshore industry, with ongoing discontent about the country's windfall tax on oil and gas profits.
And while the ruling Conservative government has moved to bolster investment in the UK' offshore and to partially offset the effect of its Energy Profits Levy windfall tax, a general election is due that threatens long-lasting consequences for the sector's future.
The government in November committed to holding yearly licensing rounds in an effort, it said, to support economic growth and protect the UK from volatility in international markets. But the opposition Labour Party has said that, if it forms the next government, it will end new North Sea oil and gas exploration. Meanwhile, oil and gas discoveries not yet approved for development are also at risk.
One of these is the controversial 170mn bl of oil equivalent (boe) Cambo oil field, which analysts at investment bank Stifel estimates its operator Ithaca Energy has until summer 2024 to get a final investment decision through. Ithaca "probably has the balance sheet to go it alone" at Cambo, Stifel said, but the independent's management insists it needs a partner to join the project before sanctioning it. An imminent election, which polls show carries a high probability of a change in government, means Ithaca will find it difficult to sign up a partner.
"It's unlikely to happen, at least ahead of some kind of political clarity because you have no idea… whether the development will be approved and, if so, what the tax rate is going to be on the asset," Stifel told Argus.
Ithaca, which already warned that its production in 2024 will be lower than that for 2023 because of the effect of the Energy Profits Levy on its projects, could decide to find an alternative home for the $1.4bn in capital it has allocated to Cambo, Stifel said. The bank suggests an acquisition in the US Gulf of Mexico, Brazil, Canada or west Africa might be an option for the company, which is wholly focused on the UK offshore.
Harbour Energy, the UK's biggest producer, bought Wintershall Dea's entire upstream portfolio in the last days of 2023 in a mammoth $11.2bn deal that takes its production up to around 500,000 boe from 190,000 boe.
https://www.argusmedia.com/en/news/2522606-viewpoint-uk-offshore-faces-crucial-year?amp=1