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'Concerns over Global Warming' is honestly a joke. The UK currently contributes leas than 1% of man produced CO2 while China alone (whilst currently increasing coal burning in power stations) contributes 27%.
Lets tie ourselves up in enviromental knots and red tape whilst other countries like China do what they like and press on with their own agenda regardless.
Madness.
I'm tired of the rank mis-management in this country. You only have to look at the Migrant Crisis to see how utterly crap Government are in this country. Failed asylum seekers aren't even being deported, they are just left here in limbo wandering the streets living off charity handouts whilst they keep re-applying. It's honestly shocking.
Forgot to say that it might be good news if a buyer emerges for NEO (I mean the whole company, not its assets) because whoever was to buy it would presumably be reconciled to proceeding with the Buchan project, regardless of the insane levels of tax involved.
ITH is fav afaic but wdik? It's just a guess. Whatever happens JOG will end up a lot better off than it was when I first became a shareholder in 2015, having blown a stack buying 1% of TRAP that was worth sweet FA when AB and RL rode in with a bold plan but no chequebook. They won me over and I've somehow managed to keep the faith/ It's said you make your own luck in life and the shenanigans that went on as a result of stirring things up when it became clear certain people wanted TRAP buried would take some believing. I have it all in writing - just think it's best left in history. TRAP wasn't allowed to go bust and we know the rest.
It is a travesty that a risk that couldn't possibly have been foreseen (incompetent, morally bankrupt and downright dishonest politicians - from both main parties; the LibDems would be no different) deliberate scuttling one of Britain's most valuable industries, thus ending the hopes and aspirations of so many people who have put their all into this well-run company that has had so much thrown at it over the years, yet still fights on despite all the obstacles put in its way. Welcome to Britain in 2024.
What more can one say?
Contd:
Not only have Labour not backed off, but they have failed to make it clear that the disallowance of capital allowances will only apply to the EPL part of the overall tax charge, the same applying to interest cost and b/fwd losses, until now available for offset against ringfence profits. They have also threatened to backdate these draconian proposals to catch companies (perhaps like NEO and SQZ) who have the good sense and initiative to accelerate spend on the infrastructure, so that the major part of the overall spend is made before the Consevatives are kicked out.
My calculations show that the overall Buchan project has a negative NPV10 of £484m (I've taken the first 10 years of numbers - there's very little NPV effect after about year 7. In getting to this, I have applied what I think is the most likely approach Labour will take, which is to allow b/fwd losses at 40% and restrict decommissioning and interest cost allowances similarly - and not backdate the tax grab to whenever they had in mind - I'm pretty sure that would be illegal anyway - not that they would care).
It's the availability of the enhanced reinvestment relief that makes the difference. With it, the negative NPV10 reduces to £138m. But there's the FPSO to take into account. I'm talking about the whole project, so NEO's share is 50% and SQZ's 30%, although I can't quite get my head around whether this should be 62.5% and 32.5%, because NEO and SQZ are the ones spending all the money.
JOG's NPV10, by contrast, would give it a value per share of around 350p ps, the problem being it won't be able to lay its hands on any revenue from oil that's stuck about 11,000 ft below the surface because UK politicians want to buy in as much LNG and oil as possible to mitigate the shortfall in the oil and gas they've deliberately chosen to forfeit by making profitable NS extraction impossible.
All might not be lost, however, because there will still be organisations willing to pay the heinous taxes Labout has in store because they attach far more importance to the certianty of supply than how much tax they'll pay. ENI and VAR Energy (respectively owned or part owned by the Italian and Norwegian Governments) bought Neptune Energy (VC backed and 3rd biggest UKCS producer,)which sold out its UK UKCS assets pdq after Sunakhunt struck. It surprised me recently to learn that ITH had agreed to buy those same assets not two years later (they must have offered something tempting for ENI to sell). That was until I realised that ITH is 90% owned by Delek, which itself is owned by an Israeli outfit that has multiple interests across the board in Israel - one of its companies happens to be the biggest forecourt operator there. Is something happening there?
You might have heard of it, Einbert?
Someone seems to have the jitters and is unloading shares on an unreceptive market. Let's play "guess who".
"What are you? Man or mouse".
"Squeak, squeak"
Au revoir
dyor
Https://www.telegraph.co.uk/business/2024/04/14/britain-north-sea-oil-resources-protect-rising-fuel-prices/
....extract:
"As rising oil prices complicate the UK’s escape from this ghastly cost of living crisis, it was noteworthy a British energy company announced last week it is to start drilling at the biggest oil field discovered in the North Sea in at least 20 years.
EnQuest plans to bring two fields onstream with the potential to produce 500 million barrels of crude over coming decades. This reignites the political battle over the UK’s energy future, with the Tories having just extended the 75pc “windfall levy” on North Sea output and Labour threatening to block new production completely, citing environmental concerns.
This makes no sense. There are around 300 active North Sea oil and gas fields, over half of which will cease production by 2030. The North Sea currently delivers the equivalent of 83pc of UK oil demand and 54pc of our gas use. What are our plans to replace those supplies?
Even the Climate Change Committee, the official green watchdog, acknowledges fossil fuels will still account for around half of Britain’s energy needs by 2030 and a quarter by mid-century. And that’s if the proposed net zero 2050 transition to renewables is achieved, which looks pretty unlikely.
So if that’s the case, that we’ll be using oil and gas for at least the next three decades, why not drill our own? Even if such energy is exported, at least UK energy workers would keep their jobs and the Treasury would get the tax".
Returning to NEO and HitecVision, the later is a VC fund. It has $8bn under management from hi-rollers who demand better than average returns. HitechVision has under its umbrella a number of different entities, all looking to produce impressive IRRs. NEO is among them and (as far as I can tell) is the only one focused exclusively on the UKCS. Sunakhunt's EPL was already in place when NEO farmed into Buchan about 12 months ago. It must have been relying on either: (i) the Conservatives winning the next GE or (ii) much more likely, Labour coming to its senses and relaxing its punitive proposals, particularly those relating to the closure of so-called "loopholes" that allowed companies like NEO and SQZ to avoid 90% of the destructive EPL by investing in new infrastructure. This would have enabled NEO and SQZ to acquire infrastucture estimated to cost £900m for about 9p in the £ (£c.£80m - a saving of £820m.
tbc
Interesting article by Liam Halligan (economist) in last Sunday's Telegraph. It seems incredible that politicians continue to ignore the expert - and well-intentioned - advice of any number of people it's clear understand the economic and other consequences of both the Conservatives' and Labour's industry destroying proposals a lot better than they ever will. I cannot attest to being an avid reader of the bible, but am sufficiently aware of its content as to be enable to come up with Luke 23:34 .............."forgive them Father, for they know not what they do", which applies admirably to these devious cretins. I personally wouldn't be inclined to forgive them - I'd have them tarred and feathered.............but that's just me.
Before posting the link and a relevant extract for those failing to scale the pay wall, a quick word on NEO and the rumours it's soon to be sold by its owner, HitecVision https://hitecvision.com/about-us/ wouldn't go amiss.
This is no real surprise, given the continuing uncertainty over just how damaging to Britain the permanent destruction of an asset, the UKCS oil & gas industry, will be. All to provide money (it won't) to dish out to people who claim they can't afford their energy bills. The belief of Mr Bouncy Big-ears (our PM) - who's not sure which country to call home - that people will vote for him if he gives them money is laughable. And before the liberals jump up to criticise my heartless attitude to the poverty stricken masses, I include myself in the latter, thanks to Sunakhunt, JOG, HBR & SQZ and of course Labour, which was only intending to tax windfall profits - where are they, anyone? - by an extra 10% whilst BC and gas prices remained above the norm - until Sunakhunt showed them the way to fill the Treasury's coffers with your and my hard-earned and (so we foolishly thought) shrewdly invested money. I have limited sympathy for a category (seemingly the majority) of British people who are said to be 'living in poverty'. A modicum of 'forensic' thought might fairly be given to why people find themselves in this position - if indeed they are. Might it be because they've never denied themselves anything, often equipped with the latest smartphones, treating themselves to holidays whenever the fancy takes them and generally spending every last penny that's passed through their hands on themselves, with no thought given to rainy days ahead. "Savings"? What are those. According to a Finder report in Jan 2024, the average UK adult had £11,185 in savings and about 46% of people have £1000 or less, with 25% have £200 or less. Seems to me to be a case of: "we've spent all our vouchers and now we want yours". Successive Government have pandered to this and the race to the bottom has accelerated. Any society making a virtue of underachievement is destined for failure. Britain has all but failed.
ST article in the following post.........
I see JOG is back to cash value, ignoring its oil
dyor
Several documents on here relating to Buchan approvals with letters back and forth between Neo and secretary of state, most recent from a couple of weeks ago https://www.gov.uk/government/publications/buchan-redevelopment-project
End of March shareholder information shows little change other than the Ravenscroft holding rising from 3.16% to 5.06% and a small increase by UBS from 3.77% to 3.96%. As per previous TR-1 the Nick Robinson holding has dropped below the 3% threshold and so does not appear on the updated list.
Well said Dick
I have to suffer both Westminster and Holyrood.
There would be no point sending a letter to Holyrood, unless there was a section for the MSP's to colour in.
They struggle with basic Arithmetic as well.
Probably a good idea to pour boiling water (heated from a sustainable source) over the whole place.
You may well come up with a new flavour of pot noodle.
Our lot are getting bored with destroying the North Sea Oil and Gas sector (albeit they are still going to fund independence though oil revenues - aye, right) - they have now decided to put the boot in to people with wood burning fires (quite a lot of the Highlands and Islands)
Burning wood is now apparently off limits, albeit up until a few weeks ago, biomass was the "in thing"
The brains in Holyrood (you could fit the inside an empty aspirin bottle and still have some room) have no idea how to grow an economy.
When it comes to taxing or banning things, well, hold their jackets...nothing is off limits.
Free speech is now illegal up here. If somebody up here gets hurt feelings over something you say, you can get a police record...the best of it being the police don't need to tell you that you have a record. You get that nice little surprise if you go for a job interview, or for a visa to travel somewhere and then learn that you are a criminal.
I'll probably get arrested for posting this.
Sadly, it isn't funny anymore.
Edinburgh, the Athens of the North. Not now. It's the Tehran of the North.
Enjoyable if depressing post DU. UK really is going down the economic swanny in more ways than one. I just don't have the nuts to move to Texas however.
I watched Steve Brown talk on the Orcadian presentation, one of his interesting points was that the NSTA is increasingly lining up behind low emissions projects, and getting tougher on high emissions ones.
My dream would be that Lab use this as the way to proceed. Investment allowance only on electrification ready stuff, and tax raid the rest. Morally that's grim but it does suit a JOG shareholder. Perhaps it would be a good to to push green agenda without killing NS.
I think we ALL agree with you, DU, that the share price is battered because of the c**ts in Downing Street and that their actions, and the actions of the incoming LIEbour gvmt, will finally destroy the NS O&G industry. (From my perspective, the industry themselves have been complicit in this, since they refuse to man up and give a strong response in their own defence, with the typically apathetic British attitude of, "Oh, it'll be alright, I'm sure they don't mean it; have a cup of tea.") Sadly we must deal with the reality we have rather than the reality we wish we had. I only hope that when NS production starts to fall off a cliff that the Iranians close the SoH, and then I might take out a full page advert in the Communist Comic saying something like, "Can't afford pay your heating bills or fill up your tank? Dont blame the c**ts in Downing Street for doing what Joe Idiot-Public said they wanted, look in the mirror at the tw*t who sided with the Greenies - you're now experiencing EXACTLY what you said you wanted, the demise of Britain's Oil industry!"
Quite an eye opener when considered in the manner you set it out.
It begs the question as to why industry leaders have not put the question to government in the same manner. Perhaps they have and it has fallen on deaf ears. In any event once the CNS is dead, watch out Tesco or maybe the banks with Q1 results due in a couple of weeks.
............if you've read Part 1, in fact additional revenue generated by the increased BC price would fall straight to the bottom line (as shown in my example). Don't quite know why I confused the issue with my "pro-rata" nonsense. Out it down to age and general infirmity.
Any ideas on whose gonna win the Masters, anyone? I've backed a few outsiders at long odds (a bit like betting on AIM listed oil juniors except that the Conservative and Labour parties can't shoot the golfers at Augusta).
Tips for Saturday's Grand National also appreciated. I'm thinking of liquidating about 10% of my JOG holding and backing one of Willie Mullins horses but might decide to put the money on a golfer as he's less likely to fall over.
........."so you shouldn't suggest some kind of allowance is due".............not should
mea culpa
Goodnight and goodbye (for now at least)
Part 2 (ie Part 1 contd)
Work it out – it isn’t rocket science but for some reason everyone, including the useless OEUK, has been conned into calling it a windfall tax, when it quite clear it goes way beyond that. Just wait until Labour get in and finish off the job of killing the North Sea.
For the less mentally adept, had the so-called “windfall” tax (called EPL to discourage challenge) not been imposed our company would have had a profit after tax of £86m. It now has a profit after tax of £36m.
In a nutshell additional pre-tax income of £43m has led to a tax charge of £50m – an effective tax rate of 116%. And this is before Labour gets to work by increasing the (so called) wft rate from 75% to 78% and removing the “anomaly” of re-investment relief and disallowing decommissioning and interest costs, plus removing the ability of companies to use b/fwd losses to the full (perhaps ‘at all’, if the chancellor whose legs touch all the way up from her ankles, gets on a run).
“Dear Government – would you please let us lift and sell enough oil to enable us to give you 100% of the additional profit we make as a result of what we accept was a windfall event. We won’t charge you a penny to do this, so not only will we not make anything as a result of the windfall event, it will actually cost us money as we’ll be working for you for nothing”.
“Dear Nonentity we don’t care about, because we’re only interested in virtue signalling and getting cash in so that we can pay people’s energy bills, which will make us popular and keep us in power…………no you can’t do what you suggest because it doesn’t get us enough money. And before you say anything else, we don’t accept that the 3 year dispute between the Saudi the US governments that caused the price of oil to fall off a cliff and stay there for about 2 years+ from 2014 to 2016 was a windfall event (ie outside the industry’s control). Nor Covid, which caused BC to crash to $25pb. These were everyday events so you should suggest some kind of allowance is due to offset against the latest wft - it doesn't work like that. And 7 years of wft (at least) is fair enough even if prices are now back to normal (near enough)”
dyor
DYOR
Part 1
Before a “windfall” event, imagine a Brent Crude price of $70pb.
Further imagine an upstream operator, focused only on the UKCS, making an annual profit before tax of £100m.
Tax charged on the £100m or profit would amount to £40m (40% of £100m), leaving £60m after tax.
A “windfall” event occurs that causes the price of Brent Crude to increase to $100pb.
In the (say) 12-month period following the “windfall” event, the upstream operator would make more profit (which for simplicity I have calculated “pro-rata”, although in practice it would be higher because fixed costs would be recovered over more barrels, thereby reducing $ cost pb).
But for the introduction of a wft, the upstream operator’s P&L would look something like:
Profit before tax: £143m (increased by BC$100/BC$70)
Tax @ 40% = £57m
Profit after tax = £86m
So, our upstream UKCS operator would be better off to the tune of £26m as a result of the BC price increase (£86m - £60m).
Along comes Sunakhunt and (after deciding 65% tax was too low and increasing it to 75%) imposes a tax (stating it is a wft) of 75% across the board on all UKCS operators’ profits. Never mind the enhanced re-investment relief (important to companies like NEO and SQZ but irrelevant to, say HBR and Enquest who had just completed multi-year investment cycles costing billions, to which the enhanced relief is as much use as tits on a bull). See my last post about getting dragged into a 78% forever tax regime with no capital allowances under labour, which won’t lift the tax when 2030 arrives because the ill-informed net zero agenda groupies will be making an even bigger issue of fossil fuels than we’ve had since a conman somewhere planted a seed that led to the ugly Swedish truant and now hypocrite, as she’s said to be worth £20m and travels everywhere as comfortably as possible)
What does our upstream producer’s P&L look like now, with a tax of 75% slapped on its entire profits, at the same time denying it the ability to claim decommissioning expenses and interest – and just for good measure restricting the use of b/fwd losses to 40%, not the full 75%.
I reckon it’s as follows assuming BC holds at $100pb):
Profit before tax £143m
Tax @ 75% £107m
Profit after tax £36m
What tax rate does this mean our company has paid on the windfall profit of £43m?
tbc
I'm about to make a post that will spill over into two setting out some basic arithmetic that shows just how dishonest both political parties are in labelling their destructive taxes as being tax on "windfall" profits. They are no such thing. It's probably another complete waste of time spent trying to stimulate meaningful discussion that might lead to something positive happening. By all means challenge my logic. But please also bear in mind that what I have included in my posts to follow does not take into account the carnage that Labour's latest dishonest or perhaps plain economically illiterate proposals will cause.
We are at a watershed moment and we are getting from OEUK and most companies with UKCS interests is: "we're making progress in discussions with Labour officials in our efforts to persuade them it is better to have the industry as an ally during the transition to net zero by 2050, than a foe. The naivety of these people is unbelievable. For a start, they HAVE TO stop calling this shortsighted and fundamentally flawed tax grab as a "windfall tax". Yet again: IT ISN'T - it's a heist.
If you can't find fault with my logic - copy what's written and send it to your local MP, the Media - whoever. Everyone is being conned. Wake up to the fact.
imo/dyor
I assume the comment about not wanting talk of JOG's share price is directed at me. Apologies if I came across as a GOM - I've been under the weather for a while and it's affected my general demeanour. It's not my place to comment on whatever anyone wants to discuss. Talk about price to your heart's content - to me, it's understanding JOG's underlying situation that's important as a LTH.
JOG's present low share price is imv the result of the Government wanting more money to pi55 away on pleasing the masses - and choosing the UKCS oil & gas industry to destroy for the purpose by dishonestly imposing what it calls a windfall tax (wft), when it is no such thing. A wft would be charged only on windfall profits, whereas what Sunakhunt have imposed is a punitive tax on ALL UKCS upstream producers' profits, at the same time removing the ability to offset (against the "above normal" element of these profits) categories of spend like decommissioning and interest cost. In addition, b/fwd losses can only be used for offset at up to 40%. Under Labour, most expect it to get worse.
A tax rate of 75% on all profits is here to stay accounting to Hunt. In the circs, who cares about whether companies can offset investment in new projects at up to 91p in the £, when the profits these will lead to, which will take years to achieve and involve lots of opex, are then taxed at 78%, with a lot more being disallowed, inc capital allowances on future capex, by the Labour cretins cheered into office by people who don't understand that what they're voting for, which is an unaffordable and freezing cold form of Armageddon.
The plans and aspirations of tens of thousands of highly skilled workers and their families, plus those of hundreds of thousands of people in connected industries are being flushed down the toilet by politicians, who don't appear either to understand the industry, the Laffer Curve or anything else, inc simple economics. Labour doesn't appear to give a monkey's toss about energy security, or anything else that would concern a patriotic individual of average intelligence. Labour might be able to collect extra tax revenue from a few companies locked into the UKCS as a result of recent multi-billion investment in new projects, where it is less costly to pay the 100%+ tax rates implied by Labour, than to throw the towel in; but otherwise it's a "no-no". And tax revenues will fall dramatically pdq. A gloriously destructive complete waste of time and lives.
Why invest in the UKCS unless you're overseas owned and see cost and tax rates as secondary to the energy security of your nation? eg ENI, VAR and ITH (Delek).
Makes sense (not) for the UK to shut down the NS, then import whatever oil and gas it needs in order to function effectively, at much higher prices from abroad than it would cost on our doorstep - and at about 10x the carbon footprint. 10/10 for stupidity.
The UK is responsible for less than 1% of global emissions.
dyor
90% of the house analysts’ targets then I’m very happy. Sorry though some of you don’t like it I think it’s more than ok to discuss the share price. Official Fdp approval comes much earlier than expected I hope.
The 2024 list has been. (very delayed) just been issued - here is what has been said about JOG - He remains bullish.
Jersey has been busy in recent years building up the Greater Buchan Area into what will be one of the biggest and cleanest developments in the UKCS as well as doing two of the best farm-out deals in recent years. With undoubted demand for a development such as this, the management deserve credit for taking this from start up to a substantial and extremely valuable prospect, it gives the shares a huge upside I conservatively value at over £10 per share.
Perhaps someone with the ear of Sunakhunt and Kweir could explain to them that pushing NS fields to uneconomic status asap will not only destroy tax revenue and remove any semblance of fuel supply security, but will accelerate the government's decommissioning liabilities! (Most likely they won't care, since they have been able to issue gilt confetti until now in order to pay for every vote they want to buy, but when the world wakes up to the fact that the UK is broke, they'll get a swift, unforgettable lesson in fiscal responsibility!) As an aside, the UK's fiscal situation rather reminds me of that lovely Clarke & Dawes skit about Greece, where the interviewer says to the economist: "Greece's broke, right?" and the economist responds: "Ha, they would be if their economic situation improved out of sight!"
Https://www.heraldscotland.com/news/24232398.wet-blanket-brings-chill-north-sea/
Steve Brown from Orcadian published yesterday. The consequences for Labour are so dire by meddling with this, I think the industry is in disbelief that it will happen.
"...it's not a U-turn for Labour to clarify this in a more advantageous way."
-100% agree. From where we were to where we are it's easy to see the sky falling in, but all is not lost and the market has yet to adjust to the new realities. Just imagine if Labour DIDN'T win!!! As I said the other day, I'm sure Labour will back off from their perceived loopholes. They will 'moderate' their position; we haven't touched on paying for a 20-50% increase in defence spending to counter mad-Vlad's ambitions. I think O&G is already sucked dry from a HMG revenue perspective and they will turn their attention to banking 'windfall' profits. Hasn't anyone noticed that raised rates and consumer inertia has left banking rolling in the green stuff?
DU's NAV calculation
I don't want to shock the board, I haven't sold and I will say I even added recently (which is crazy but there you go). The reason for me is: the worst case scenario is still investible, with a massive upside if Lab back off loopholes.
I believe the project will continue its sprint to FDP. I also believe Neo and Sereca will pay their FDP millions to JOG - sometime in H2 this year, pre-election. People all over (Ping with Orcadian) are planning to spend small amounts (in comparison with project CAPEX, Revs and profits) to create oven-ready (sorry) options to develop fields that would be hugely successful in the right tax regime. This money is stranded in UK regime anyway. The alternative with Neo is basically to shrivel into nothing and HiTech lose their money.
DU's NPV calculation shows JOG's oil unvalued, with cash in bank and tax losses alone valued at this market cap. You will note that NS M&A is a desperate effort to optimise tax losses, rather than an excitement to get new money into UK barmy banana regime.
Unlike pre-farmout, where JOG's value goes to zero on failure, we are already bouncing along the bottom with worst case baked mostly in.
For reasons in my other post, Lab will moderate its stance pre election - and we will finally be released from our grim grinding down.
I'd welcome some critiquing to my post, ideally not in the form of a giant elephant defecation.