The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
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https://www.energyvoice.com/oilandgas/north-sea/485893/windfall-tax-north-sea-oeuk-david-whitehouse/
Price floor: ‘We’re delighted to say the Treasury have heard us’
Having met with the Chancellor, and written to him last month as part of Budget submissions, a key ask has been the industry wants the “windfall tax to be a windfall tax” so a price floor is implemented to stop the levy, should oil and gas prices fall.
Mr Whitehouse says government action is now underway on that issue.
“We’re delighted to say the Treasury have heard us on that and that kind of longer-term fiscal review will be kicking off in the course of the next few weeks.”
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Worth a read..... and note the extracted comments above..
DYOR - This may well be the key to the door!
My money is on a producer company announcement (March) timed with their results...
Depending on who, it could be anywhere between early and late March!!
I think if it's anything other than this, then Benitz has to go.. and as a collective we should call for that!
DYOR
DYOR
Robsroom... I'd point you to the share price in May/June 2019 just prior to the GBA licence award announcement, where it nearly quadrupled in short order (for something far less valuable - i.e. licence awards!). The share price looked equally depressed and on its way to oblivion at that point (despite speculation the licences were about to be awarded)..
I'm not buying the direction of travel argument on the current price.. Of course that doesn't mean I'm right ;-)
I do however think a T/O is most likely.. I just dont get why you would farm in and share the spoils (on the third largest pre FID project, the only one not owned by a large producer) when you can acquire this for a song and largely offset the acquisition cost..
DYOR / IMHO and all of that good stuff...
News soon please!!
Could take many by surprise IMO. market makers will take all my shares… very thin trading can mean oversized drops AND gains!
While I would like to remain optimistic on JOG, it is an awfully long , gut-wrenching delay since the RNS of 29/11.
I remind myself of part of that partially long-defunct RNS “…… we look forward to a successful conclusion if not by the end of the year then certainly in Q1 2023."
I think it’s about time for an update or explanation how and why the end of the year part of the statement became invalid and an update on current timing.
The first indication on timing did not eventuate, what confidence can we, or should we now have, on the ‘certainly in Q1’.
The lingering uncertainty, or doubt, must be the reason for the downward pressure on the share price.
Come on JOG Board, give us an update.
I understand that an RNS can and should only be released if there is news. I feel that investors are due an update on the reason for the 2 month delay from the first indicated date, together with an update on updated probable timing. I consider this to be worthy of an RNS.
Picked up another 939
Sitting comfortable with my holding . Definitely not selling . I’m here all the way , nothing has changed , weak holders jumping ship . If it drops any further I may surprise you all with my 3% !
I hope not, John!
you've deluded yourself, Trendz
Zero trades this morning! The recent fall is on low volume. Clearly the big shareholders are not selling (or buying) - some of them may be insiders on the FO. The risk reward looks incredibly screwed to the upside. Had a long think over the weekend and I’m holding out. If no FO by Q3 I will reassess. The bottom line is that this is one of a few ready made investments for the big boys to reduce their EPL tax bill. Barring a big surprise in the budget, the fair value is multiples of the current share price
...........strange world you inhabit, Robsroom..............
6 years surety, and one thing is for sure, this is not the chart of something about to farm out. TO maybe, but it’s rescue territory, my dreams of £9 long gone. Gla
Are those £5+ analyst share price targets at time of farm out announcement or first commercial oil revenues or something else?
I do my best Robsroom... hope its more £6+ personally!!
The trades are relatively small at the moment! I'm not particularly worried about the share price movement right now..
What do you really think Robsroom? You've been in for a while !?!
I'm pro JOG, I dont pretend not to be - but I try to be objective ;-)
In truth I struggle to see how the 3rd largest pre Fid development (the other 2 are owned by large producers like Equinor and Ithaca) doesn't get developed, or at least acquired, given the capital incentive on the table.. You might as well buy it, you're only going to pay the tax if you dont .. !?!
I think £5-£6 is more likely for a T/O.. You can offset the cost, the NPV even allowing for EPL at Jog's low opex and allowing for a capital intensive development (it wont be) is comfortably over £1bn at $80 for Brent (on my maths) on an NPV10 basis... that has to be worth a 'free' £150-180m for a TO..
Lets see..
DYOR / All in my 'positive' opinion....
Love the positive thinking surety, a take over at £3 a share would be a nice get out of jail free card with this decline. Fingers crossed.
matthew.weightman@hmrc.gov.uk or nicola.garrod@hmrc.gov.uk
https://www.gov.uk/government/publications/changes-to-the-energy-oil-and-gas-profits-levy/energy-oil-and-gas-profits-levy#:~:text=The%20Energy%20(Oil%20and%20Gas)%20Profits%20Levy%20was%20announced%20on,which%20is%20charged%20at%2010%25.
"oil and gas companies are benefiting from extraordinary profits".............they aren't any more. They might again in the future - who can tell? No-one in the industry would object to paying the higher rates on the profits resulting from excessively high commodity prices, so why not set a level (based on "normal prices over the last - say - 10 years) above which a properly constructed WFT would apply? No need to answer that one - the masses don't understand and want their bills paid by Government. Tell them it's coming out of a WFT on mobile phones (carbon intensive, plus the manufactuers have beneffitted from everyone working for home or not at all - Apple made $100bn last year) and you'd have riots.
"European and UK wholesale gas prices reached record highs this year and are expected to remain significantly elevated for the foreseeable future.".................err.............nope
"Oil and gas producers in the UK are making extraordinary profits and this is expected to continue"............indications are it won't
"These changes to the Energy Profits Levy are not expected to have a significant macroeconomic impact on the level of business investment.".............pinch yourselves on this one!! I'd suggest they look back and carefully consider the impact Brown's 60%, followed by Osborne's 62% tax heist on the UK O&G industry had on tax receipts from the NS by the Treasury. After drying up almost entirely for 3 years from about 2015, things were just starting to reecover, then along comes Mr Bouncy Big Ears and you know the rest.
"There are not expected to be impacts on individuals as this measure only affects businesses"............what about us? And the effect on people reliant on income from portfolios that include O&G cos (most?) and the price performance of the companies in the portfolios?
What about Britain's energy security, at a time when it needs to be at its most robust?
I could go on. It was a fait accompli from the outset. Nothing about the measures is either economically justifiable or fair.
We should all bombard the indiduals identified towards the end, with indigation based on common sense. How I hate political pygmies of the kind behind the 'sociopopular' direction measures like those discussed here are taking us. I will never again vote Conservative and I know a number of others who feel the same. I am close to joining the Reform Party, but am waiting to see if Trice has enough gumption to persuade a given number of Cons ERG group MPs and UKIP to throw their hat in the ring and see if a credible new political force might emerge. I suspect what will make it impossible is the reluctance of sitting Cons MPs to risk potentially losing their seats. Imv they're going to anyway. There's no coming back for the Cons this time.
They might do worse than look at what happened in Ukraine and ask Zelensky for advice!!''
FO or TO news this week or next, anyone?
dyor
Feast you eyes on this pile of c.rap from the useless and incompetent OBR:
"https://www.gov.uk/government/publications/changes-to-the-energy-oil-and-gas-profits-levy/energy-oil-and-gas-profits-levy#:~:text=The%20Energy%20(Oil%20and%20Gas)%20Profits%20Levy%20was%20announced%20on,which%20is%20charged%20at%2010%25."
The unfairness of it is startling - even by political standards. As is the fact it is already clear the OBR's assumptions are fundamentally flawed (as usual). (K)hunt has aready admitted the tax revenue flowing in to the Treasury so far is only half of what he expected it to be, no doubt after naively believing the nonsense put in front of him by the Whitehall wizards in the OBR, presumably working from home.
Consider the following:
" This measure increases the rate of the levy to 35% and extends the time that the levy applies to 31 March 2028. This measure also reduces the investment allowance from 80% to 29%. However, the investment allowance will remain at 80% for investment expenditure on upstream decarbonisation. This change in relation to the treatment of upstream decarbonisation investment expenditure will be legislated for in due course.
The government also confirms that it will no longer consider phasing out the levy before the end date".
That sounds fair. Even if oil & gas prices fall by 70% (as they did in 2020)???
So, no matter what the price of oil & gas, profits (to the extent there are any) will be taxed at 75%.
"The government introduced the Energy (Oil and Gas) Profits Levy in May 2022 to respond to exceptionally high prices that mean oil and gas companies are benefiting from extraordinary profits.
European and UK wholesale gas prices reached record highs this year and are expected to remain significantly elevated for the foreseeable future. This is driven by global circumstances, including resurgent demand for energy post COVID-19 and the invasion of Ukraine by Russia.
Oil and gas producers in the UK are making extraordinary profits and this is expected to continue. In response, the government is raising the rate of the levy from 25% to 35%, bringing the headline tax rate for the sector to 75%, and extending the duration of the levy. This ensures oil and gas companies that will benefit from the prolonged period of increased prices continue to pay their fair share of tax".
Brent Crude is significantly lower today than it was this time last year (when Russia invaded Ukraine). So is natural gas. There's no reason to suppose UK O&G cos profits this year will be anything like they were as a result in the price spikes to $120pb and 850pt
https://tradingeconomics.com/commodity/brent-crude-oil
https://www.theice.com/products/910/UK-NBP-Natural-Gas-Futures/data?marketId=5351152&span=2
Behaviour of the kind exhibited by Sunakhunt in their desperation to gain popularity would be unusual in a banana republic, typically in Africa. At least dictotors don't chop off the hand that feeds them.
A few more quotes f
Right interpretation Greener, it’s a guess from my side I’m afraid :-)
But … cash wise you have to pay the EPL, I assume 9 months after the books close. Last years EPL was only part year (and ratcheted half way through the part year as the government hiked it). I imagine there is also a timing piece on cash, no hurry last year, preserve the cash.. this year you have to account for the full EPL hit, so you lose the cash but one assumes 9 months after the books close .. You also have to tell your investors what you’re doing this year to mitigate the EPL..
In my mind the timing points to about now given the update timings..
But it’s a guess…
There are a lot of assumptions here about how the technical accounting works. I also made these in my own thoughts. It all seems plausible but is there anyone out there with the actual knowledge on this - ie and O&G finance background?
Surety - apologies if you know this for sure but your post comes across as very reasonable educated guess.
The timing is particularly relevant if you are buying JOG outright as you need the full year offset (otherwise you may not have been paying enough in tax to cover the cost and therefore don’t want to buy it early - because you had more profit and less tax to pay)
It’s a pretty neat part of your investor update if you think about it .. a strong story as you guide toward the impending tax hit as a producer!
My money is Harbour or Ithaca..
DYOR
Of note: Ithaca, Harbour and Cnooc - not to mention others, are due to update the market in March.. I think Harbour go first on or around the 8th…with Ithaca at the end ..
Also worth mentioning is that we are now into a full year of EPL at the high rate for most producers (financial year timings), or about to enter one. (Until now they have ‘relatively’ small part year EPL payments)..
From my simple interpretation of the bill (having re read it this morning) both acquisition of Jog or Farm Out (and associated costs) can be offset. The latter is obvious…
March makes sense in terms of timing and hopefully early .. if you consider that a producer wants a full year EPL bill (not a part one) against which offset costs (maximising tax offset) if you were going to acquire JOG or farm into it - now is the time to do it..
You then have enough time to start deploying capital meaningfully throughout the year to maximise the offset, especially if your development solution is a simple tie back ..
In my mind there is definitely something in terms of the market update timing and the timing of financial years. Greener was referencing this also yesterday ..
March is the month.. the question is who .. and what and when in March ?!?
This is about to get interesting…. And it may explain the timing and the drawn out wait!
DYOR
I’m of the view that you don’t show your hand before you’re across the line. Stating when a deadline for when deal would be completed sounds risky to me unless the CPs were completely unrelated to the SPA itself but totally related to external consents. The mid March budget is the pinch point I think. GLA
It’s an interesting one on the negotiating position.. they aren’t short on cash, and they have the largest pre fid asset not owned by a major in a world where existing producers need assets to claim capital relief - otherwise it’s sunk as tax. The deadline for acquiring such an asset is also shortening before tax is due ..
I think the negotiating hand is stronger than we think…
Dyor