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Hi all hope you all had a good Easter!
Just to ask for all your opinion. All brokers reckon our worth is around £7 per share and most believe takeover is fairly likely post fdp, fid.. now question is would the buyer pay £7 or half of that as they would need to make a profit? Greener? Einstein? Silly a question as it might seem but would appreciate your takes on this.
Dear onthe6, in my opinion, from a very damp forecourt, you may be conflating 2 things.
Share price might reflect some notion of the discounted value of the company’s ‘worth’- future earnings etc. (Dick would be more precise.) What a company might be prepared to offer for JOG, once FID is announced, is a very different string of sausages. FID may be the definitive step in value promotion in the JOG ‘odyssey’. Post FID, when the value can be attributed to reserves and production start-up date is less risky, if JOG lasts that long, the share price could well be north of your magic £7 and a buyer would need to pay a premium.
My fear is that a company looks at all of the runes and takes a low-ball punt pre-FID.
Not many dead bugs on the windshields in this weather…..
Dear Einstein, thank you for wise words to my very dumb question. All explained very nicely :-) 699p dinner on me, remember? Better than hot cross buns I promise. .
Tis an interesting question.
One thing I don't understand, is why someone would pay cash out of retained profits for oil revs, and not simply get a massive tax deduction on CAPEX to say, get incremental oil revs from existing assets. Obviously there is an answer to this and I'm happy to be sh@t on by some of the more experienced posters on this board. It's not enough to be right, it's that others must fail etc.
Another ponderance in my tiny mind is that can a contingent offer be made? Say on FID, or even first oil? Is that a thing in M&A? Take out the management team and essentially you have a financial derivate, so why not? Might be nice to snap off the target now when atmospherics are rubbish.
One thing I'd add is that if we want to see first oil Q4 2026, we're going to need to see activity pretty sharpish. Rig contracts (or at least options) need signing, long lead time items like er, infill tube thingys and errrr 'well heads' need ordering, building etc. These will likely be released by RNS and this must close the value gap? I see no risk from regulator, only a tiny risk from a partner getting cold feet - but these items would confirm that would not be true beyond all reasonable doubt.
Where is an M&A banker when you need one.
I thought Neo has awarded the engineering work to a company? Or that’s just a study or conceptual work? It’s nothing to do with the physical side of the project? That will be later after fid? Too many dumb questions I know.
I don't believe Neo has committed much capex yet other than the success fee to JOG and operating costs of the project team. I do believe we will see movement on that soon.
Transactions heating up since late last week because of the end of tax year. Presume will continue this whole week.
But for some it has nonetheless burst the bubble created by Labour’s overtures to win over investors. As one oil and gas executive put it:
Labour has been hawking itself around the City saying we are on the side of business and we want you to invest in the UK — then a few days later they are U-turning.
It’s a bad day for investors in the UK . . . Everything I’ve heard since Friday suggests they are rushing to the exit.
The sector’s backlash against higher taxes is to be expected, yet there is a lot at stake. The UK still gets about 75 per cent of its energy from oil and gas, and efforts to move towards cleaner energy are proving difficult and slow.
Labour must tread carefully on road towards UK’s clean, green future - https://on.ft.com/48i8fOc via @FT
Apologies was trying to post that. In short, if Labour kill the investment allowance you get redundancies like pit closures in 1980s
Maybe they will remove investment allowance but give a huge tax break on jobs, so even things out. Or quietly walk.
This is what was announced woth respect to contracts for the refurb Onthe6 https://www.pressandjournal.co.uk/fp/business/6269212/pivotal-work-on-giant-western-isles-vessel-is-happy-landing-for-apollo/
...for what it's worth, here's mine. To the original question you bet it's worth 7 quid - and some! Years ago I stated I wouldn't sell out at
Think most long time holders will be happy with £4. Bad investment unless bought in in the pennies. Agree with alibro.
Thing is if this gets to £2, those bought in recently around 150p, 160p will be selling then it’s back down again. The only way for our board to make sone money is to sell the company.
Of course I pray that the £7 talk will come to pass and I can dine with Einstein. 699 actually. Enjoy your day all.
For some reason I got truncated in mid flow. Most uncomfortable. I went on to write........ at
Onthe6: " Of course I pray that the £7 talk will come to pass and I can dine with Einstein. 699 actually. Enjoy your day all."
Prayer as an investment strategy - could put IC and lots of others out of business - and cheaper than a Wealth Manager.
For some reason I got truncated in mid flow. Most uncomfortable. I went on to write........ at
For some reason I got truncated in mid flow. Most uncomfortable. I went on to write........ at less than £8 and since then a great deal has been achieved. I see the issues as almost entirely political. Labour and the current lot communicate in words of one syllable to rally the tabloid reading masses. For many 'just stop oil' is a coherent strategy. There is another discourse only accessible to those prepared to apply effort and intellect. Once Labour get into power the front bench, most of whom have no real world experience of government, will be confronted with the actual realities. This is how u-turns happen.
Cyril 2 - " ...for what it's worth, here's mine. To the original question you bet it's worth 7 quid - "
I agree - let those want to get out at £2- go and dont worry about huge SP fluctations - those that would grab at £4- goodbye, you've been nice travelling companions
If no takeover - Oil will flow - big dividends will paid - and then there will be takeover bids
There's a thing. Never use a left angle bracket (or 'less than' character) in your post as it will be truncated there.
Onthe6
You presume to think what other holders will be happy with.
Not wise.
Dividends after 78% tax. How much would that be?
Nice little summary https://www.offshore-technology.com/projects/buchan-horst-oil-field-uk/?cf-view
Re: onthe6 - " Dividends after 78% tax. How much would that be? "
If Neo/Jog/Serica think there will be sufficient profit at 78% tax to go ahead with the development, there will be sufficient profit to pay good dividends - and I dont think neo and Serica have come this far to be deterred by another 3%tax, and I think the latest Zeus note says it doesn't have a big impact on anticipated net revenue
I'd be interested to know if I have this correct:
Under the present tax regime its better to not pay dividends ?
So in the early years you reinvest profits into the project thus minimising taxes.
In the later years you reinvest profits into (for example) a wind farm, again minimising taxes.
At some point you sell the assets and pay taxes on the capital gain.
Under this scenario its the reinvestment relief changes that are the most critical ??
I think it depends on the profile of the firm. If you own producing assets, having bought them with leverage (or added to your assets through M&A), you have a finely-tuned model that has been blasted to bits by EPL. Consider - if you have an expensive, moderately producing asset with loads of tax-losses, you are not paying 40% normal corporation tax for O&G. Pre-EPL, you eek out your profit tax-free, minus cost of leverage and decommissioning costs (paid into an escrow account and adjusted for inflation). During the last few years, EPL (not deductable) has cut a big hole in your profits. The cost of leverage has skyrocketed. Inflation has pushed up your decommissioning cost payments. This renders some firms basically bust, and meanwhile you have to ask the regulator to be able to stop producing, a timeline of maybe 2 years! It's basically nationalisation.
If however you don't have tax losses, and you have more profitable fields, Investment Allowance is more critical. GBA is in shallow water, reused infrastructure and should be a profitable, lower cast development. GBA can tolerate EPL at 78% - the asset value just drops to accommodate the yield. However in our case the Investment Allowance is critical as it dramatically reduces CAPEX.
I believe from having talked around, the worst case tax scenario (both EPL increase + removal of all allowances) puts GBA at risk - even then Neo might proceed as what else will they do with the FPSO - instead of modest profit they now scrap it, lose an asset as well has reserves etc. I think some kind of moderation will save the project. As 'loophole' is undefined, it's not a U-turn for Labour to clarify this in a more advantageous way.
Finally - I have had industry friends tell me that if Labour does remove the investment allowance completely, all NS investment other than a bit by BP and Shell (who do it probably to take pressure of their global profits by their HQ nation) will stop. Cambo, Rosebank, pretty much everything. This will be communicated to Labour - I doubt they will want be forced to renege on punishment taxes in order to facilitate high-profile developments that ignorant greenies in our country hate. That is some egg banjo eating.
To address your question more specifically, I don't think you can use the allowance to invest in renewables. I had a look here: https://www.gov.uk/government/publications/cost-of-living-support/energy-profits-levy-factsheet-26-may-2022
One interesting point is that there are a whole host of deductions (loopholes!). Labour could remove only one deduction and still have 'closed a loophole'.