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Somehow need to challenge my own statement unfortunately. They didn´t explicitly mention to have spent the 97 mUSD on Rosebank during Q4 only. Thus, it´s possible that their 2023 CFFO was lower than my 1,2 bUSD estimate and the positive impact of the investment allowence could have been (partly) included in the 280 mUSD current EPL tax at 30.09.23 already.
Looking forward to any comments here regarding 2023 EPL burden payable in 2024.
Fully agree! Can´t wait to see their updated Hedge book end of March. Hope they logged-in some additional 80-82s $ for oil.
Balance sheet remains strong with further deleveraging in the period
o Adjusted net debt of $677.4 million at 30 September 2023 (31 December 2022: $971.2
million; 30 September 2022: $1,143.6 million)
o Group leverage position of 0.37x adjusted net debt to adjusted EBITDAX (30 September
2022: 0.61x)
• Second interim 2023 dividend of $133 million paid in September 2023, taking the total year-to-date
dividend payment to $266 million
• Significant build on hedging book during the quarter, with 10.3 million barrels of oil equivalent (68%
oil) hedged from Q4 2023 into 2025 at an average price floor of $77/bbl for oil and 140p/therm for
gas at 30 September 2023, with attractive winter collar ceilings of approx. $88/bbl for oil and over
300p/therm for gas for the six month period to 31 March 2024
• Building on the PROTECT arm of our Capital Allocation Policy, Foreign Exchange hedges of $200
million placed at an average rate of $1.23: £1 (of which $150 million was placed following period
COMPARED TO ENQ who hedged at 60
Solid figures, costs per barrel seem to be under control. Hope they can manage below 21 USD/boe for 2024 despite expected drop in production. Hope management will guide accordingly end of March.
Glad to see the 97 mUSD Rosebank investment in Q4. To the tax experts here, do you think thats sufficient to have avoided additional EPL tax burden for 2023? At the End of Q3 ITH was at 280 mUSD current tax (hope this will be the final EPL charge for 2023).
They didn´t disclose CFFO (after tax) for 2023 today, but I expect them to have achieved 1,2 bUSD (having the 100 mUSD Rosebank investment in mind plus further reduction of about 100 mUSD net debt. in Q4). Thus, 30% of 1,2 bUSD are close to the 400 mUSD dividend they´ve finally confirmed today.
Not a single word about Cambo today,...hoping for some good news soon. Nomination of new partner or at least extension of that end of March deadline to avoid a desaster.
I agree to Tornado when he was saying the market might value ITH based on sales or EBITDAX multiples, rather than dividend potential. I feel not uncomfortable with my 240-250 mUSD 2024 dividend FC. If management includes such a ballpark number in their official guidance end of March I see this approaching 1,50-1,60 GBP. DYOR.
Solid figures, costs per barrel seem to be under control. Hope they can manage
Https://www.cityam.com/ithaca-energy-scales-back-north-sea-investment-due-to-energy-windfall-tax/
I hope you mean 150!
Picked up a few more gla . IMO 1,50p by results
Dividend confirmed. Trading in line with previous expectations -
Let’s hope the market likes it!
It's going to be interesting today 😃
I'm especially keen to see if our estimation was correct. And wonder if they'll avise on 2024 divi.
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.