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Tamovv, Ref dividends on the figures you gave would mean 16c - 20c a share, a yield of 8 - 10% on the price I paid £1.45. Better then the average FTSE 250. I hold for the dividend or should I try selling and buy back when it dips 1.5% -2% from my sell price in between ex dividend dates
Kind thanks Tamovv
For detailed dividend 2024/25 assumptions please see my conversation with "londoner" on this forum.
At 1,27 GBP ITH market cap is at about 1,6 bUSD. I expect 2024 dividend to be in a 160-200 mUSD range. So for me it seems like they are yielding at least 10% at the moment, with huge additional potential for 2025, because 2024 should mark the bottom for a lot of North Sea O&G companies (HRB, ENQ, etc.).
Londoner,
Appreciate your swift and very comprehensive reply. Very very useful to me!
I will reply to your 2nd part of that post regarding potential strategic considerations behind the ENI UK Deal as per separate post here. I listened to the Q&A section of last weeks conference call several times and some analysts had some question in exactly that direction on got answers with some "management hints"
Many thanks again regarding clarifying on EPL. Just to ensure I got it right, because it differs from German taxation in that regard:
For EPL, it is not allowed to deduct "Standard DD&A" (excluding decom. etc.) from EBITDAX, but 100% of period capex expenes instead? This is why you have used 129% of period capex? I.e. 100% to "replace/substitute" normal DD&A and 29% "allowence" which effectively reduces profit before tax for EPL then.
This means, in a low Capex year, EPL will become an even heavier burden, because EBITDAX is neither lowered by DD&A nor by period Capex spend?
In Germany, for investment allowances, Standard annual DD&A keeps running and allowences add up on top (i.e. the 29% here).
However, your 2023 backwards calculation seems to fit the actual reported figures very well, so seems correct and logical to me.
For 2025 I have adapted your +236m to CFFO. I see additional CFFO resulting from increased production of about 10 kboe/d, so about 220 mUSD for 2025.
Starting from my 2024 EBITDAX assumption, I get to about 630 mUSD for 2024 (excl. working capital movements) at 61 kboe/d (management commented on Captain EOR II ramp-up during a.m. call and I understood between the lines that it could happen faster than as per official guidance). So potential for 190 mUSD dividend. Management really seemed like they care about their dividend capacity (and owner Delek certainly enjoys the ITH payments), so including some lucky working capital reversal from 2023 I wouldn´t be surprised if they aim for 200 mUSD "round dividend" for 2024.
For 2025 CFFO could be 1,0-1,1 bUSD, so 300+ mUSD dividend potential in my opinion. ENI UK effects not included. But having synergies, utilization of ITH tax losses for ENI.UK and the "low ENI.UK CAPEX profile compared to ITH" in mind, the aquisition should be accreditive on a CFFO per share basis for old ITH shareholder.
I am looking forward to getting more data for ENI UK (i.e. production costs per barrel profile) deal soon along the official deal announcement, management seemed very confident to bring the deal over the finishing line inside the 4 weeks period.
AND IT WENT EVEN LOWER .I KNOW we had the divi etc just wondering why . I think because of reduced profits and that would mean less divi
Timing doesn´t look that good anymore this time ;)
Strange...is todays movement based on the RNS stepdown of independent director? Doesn´t seem "too concerning" to me.
EV/FCF 2.25
Hi Tamovv,
Your EBITDAX number is close to mine.
In 2023 the net CFFO of $1,291m included a negative impact from movement in working capital of $210m. What will be the movement in working capital in 2024? Not knowing makes an estimate of CFFO difficult. But assuming a neutral movement in working capital I have a $163m dividend for the financial year 2024.
On your EPL question, let’s go back to the 2023 numbers:
Adjusted EBITDAX $1,723m.
As you say, decom and interest are not deductible before EPL, but other costs are. To keep the calculation simple, I’ll just deduct lease costs $42m and Admin $34m, for a combined $76m.
The investment allowance before EPL is applied is (1.29x(393+97)) =$630m.
Profit subject to EPL is 1723-76-630 = $1,017m.
EPL is 35%x$1,017m = $356m, which is close enough for me to the reported current EPL charge of $333m, and the estimated cash tax payment in 2024 of $345m-$355m.
Applying the EPL calculation to your EBITDAX number for 2024, same again lease and admin, and the higher Capex:
1160-76-(1.29x (365+210)) = $342m subject to EPL.
EPL is 35%x$342 = $120m.
A cash tax reduction due to EPL in 2025 (using my simplified calculations) of $356-$120m = $236m. Potentially adding $70m to the 2024 dividend, for 2025.
I suspect that most North Sea companies, (I’m thinking ITH, HBR & ENQ) will see similar cash flow profiles over the 2023-25 period, i.e. reduced CFFO in 2024 when EPL cash payments are at their highest, with a reversal in 2025. All three companies are also predicting higher production volumes in 2025 versus 2024.
On Ithaca's dividend yield, I find the reference to a $400m dividend payment for 2023 misleading. My interpretation is that only the 2nd and 3rd interim payments apply, i.e. a total of $267m. The 1st interim of £133m was effectively a dividend on 2022.
But my current focus wrt Ithaca is understanding the logic of the combination with ENI and the future impact on dividends. The ENI assets add to cash flow, with little or no ongoing capex. My initial assessment is that this combination supports the dividend alongside new investment in Cambo, Flota and Marigold, assuming Labour's adjustments to the EPL permit the investment. But would an adverse fiscal adjustment hold Ithaca back? I can imaging Labour calling the bluff of North Sea company executives, and winning - at least in the short term, and to a politician that's all that matters.
Hi guys,
as a non UK resident and on top of that not an expert in the field of taxation at all, I am still struggleing to fully model the EPL cash tax burden on ITH from 2024 going forward.
Phasing is more or less clear now since management provided clear guidance on 2024 cash tax charge solely based on 2023 EPL tax burden.
However, can someone explain the investment allowence to me please?
From gov.uk I got "These changes included a rate increase from 25% to 35%, extending the time that the tax applies to 31 March 2028 and reducing the rate of the investment allowance to 29% for all investment expenditure other than in decarbonisation. The reduction in the rate of the investment allowance maintains the overall cumulative cash value of the relief following the rate increase to 35%, reflecting that it will have more value against a higher levy rate. These changes were legislated for in the Finance Act 2023 and took effect from 1 January 2023."
For 2024 my model guides to about 1,16 bUSD EBITDAX and 180 mUSD and 700 mUSD DD&A. Thus, the "taxable profit" for the EPL shall be 1.160 - 700 mUSD = 460 mUSD (financing costs cannot be deducted for EPL). Thereof 35% are roughly 160 mUSD 2024 EPL tax (before investment allowence).
Management guides for 365 mUSD producing asset capex and 210 mUSD Rosebank Capex, all excluding exploration, decommissioning etc. which could not be offset against EPL. So total 2024 producing asset capex suitable for the EPL investment allowence to be approx. 575 mUSD (midpoint guidance). Thereof 29% investment allowence are roughly 166 mUSD (to be deducted from the 160 mUSD 2024 EPL tax charge I estimated above).
Thus, 2024 net EPL payable in 2025 should be (close to) zero, or am I missing / misinterpreting something?
Londoner, (perhaps Stevo if you are reading here as well) please help.
If so, in 2025 we should be experiencing a huge boost in CFFO (after tax) bringing us back close to 400 mUSD dividend (at 30% CFFO)...
Thanks! Interesting.
EV/EBITDA of 1,6 is what we´ve found on in the HBR area of this board as well. However, comparing ITH to HBR, ITH should be valued on a higher EV/EBITDA because of the massive carried forward tax losses shielding against EPL an thus higher capacity for shareholder returns.
So in my opinion EV/FCF 2024-2028+ is the only way to properly value ITH by taking the positive effect of the tax asset into account.
Fix:
"EV" Meaning: Enterprise Value
P/E - 7.9
P/OCF - 1.44 (price to operating cash flow ratio)
P/FCF - 2.64 (price to free cash flow ratio)
ROE - 8.80% (return on capital)
1.59 - EV/EBITDA (activity value ratio to operating profit + depreciation and amortization)
4.45 - EV/EBIT (value of activity to operating profit ratio)
0.79 - EV/Revenue (activity value ratio to sales)
The data was taken from the 2023 annual report + yahoo statistics
Asartara,
Many thanks for your follow-up. I have spent some time on my model during the long weekend and will issue an more extensive post later on.
Just to answer to your question below:
170 mUSD is my 2024 dividend forecast given the low production guidance (probably lower than people expected here, correct me if I´m wrong Tornado/londoner)
from 2025 production will increase again as per official management guidance (2025/26 positively impacted by Captain EOR II, 2026/ latest 2027 from Rosebank start of production)
Especially 2025 could benefit from a) increased production & b) lower 2024 EPL payable in 2025 (because of two reasons, lower production higher opex thus lower tax and Rosebank investment spent to additionaly shield against EPL) so 1 bUSD CFFO (after tax) and 300 mUSD 2025 dividend accordingly is not an unrealistic target in my opinion.
For more details I am glad to provide some insights on the work I´ve done as per separate post later today/tomorrow.
All these assumptions are related to standalone Ithaca prior deal, potential effects from ENI uk not considered yet.
Tamovv
You said that you expect the dividend to be reduced from $400m to $170m next year for a 9% forecast yield
But then you said that you expect the dividend to be reduced from $400m to $300m next year for a 16% forecast yield
So is $300m the correct forecast?
And why have you increased the forecast dividend from $170m to $300m?
And do you expect this $300m dividend to be maintained in future years?
Or do you expect it to be increased or reduced in future years?
Thanks
@Tamovv - congrats (again) on your timing.
I would wait for the updated CPR to be published. (currently they show EOY2022 report - https://www.ithacaenergy.com/operations/reserves) but they say they'll publish the updated version soon.
Interview excerpts here: https://fb.watch/r5-a_Qf8v5/
(It's Chairman Mayerson, not the CEO)
No, what was the jist of it ? good/bad ?
As I posted earlier , I am hoping this pushes Cambo over the line. Provides the necessary finance for FID . The race is on as After the election I can’t see it being awarded
Ex-div today $0.1321/ca.10.5p
On yesterday's analyst call, management seemed pretty confident that the ENI deal was a matter of crossing the 'T's and dotting the 'I's, but obviously nothing is guaranteed. Reading between the lines, I think that they hoped to get the deal completed to go out alongside the results, hence the delay in results release from 21st to 27th, but that was still not enough time to get the legal work over the line, so they went for a four week exclusivity period to complete the deal. Most analysts seemed to like the deal, so on completion, I expect some upward share price momentum. Definitely one to tuck away.
Anyone hear the interview with ith ceo this morning on Tmes radio?
Yes it should recoup over the next few weeks !
First of all thank you Tamovv and Stupmy for your input, I know we are down due to Divi, but if the deal does not materialize, will that hit the SP or are we valued as per the results ?
YES
Thanks forgot about Easter being in the way,still looks an attractive price though.
Yes hence the big drop in price