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Weird how the proposed 'floor' for NBP of £0.54 per therm for gas is just a tad below recent low of 55p/therm !!! lol
Megla commented earlier that this new floor appears to have been drawn up by a 5 years old, well Hunt does have an 8 year old, maybe they worked on this together, only way it makes any sense to me.
Good w/e all .... slap on that factor 50, esp on part that don't normally see the sun (ooh err missus)
AIMO & DYOR
SQZ on some daily green candles winning streak atm, last seen several years ago. How leaky are our new partners in crime is the question or just a case of Mr Market seeing value particularly with dividend yield of ~6% this month ?
aimo & dyor
Agree NewKOTB, it hugely complicates RBL lending.
As an investor this government is so incredibly frustrating. How can it be acceptable for FCF to be lower at current energy prices than it would be at prices underneath the cap? It just doesn’t make any sense. Tax should be progressive, it feels like a 5yr old has put this all together.
How companies are expected to plan when a £0.01 increase in the oil/gas price could trigger additional tax payments of $100m+ is beyond me.
A floor price is better than no floor price, but the Tories had the change to write some wrongs here and they’ve absolutely blown it at the 3rd time of trying.
One of the casualties of this EPL is the ability, or should I say inability to raise capital against RBL ... This 'tinkering' with the EPL does noting to address the ability for companies to plan large CapEx projects as the banks will just see RISK, RISK & more RISK.
As mentioned before, this will have only hardened NS players to deploy capital outside of UK and other mercenary tax regimes.
aimo & dyor
“EPL thresholds: Brent ($71); NBP (54p) for 2q; NBP now 62p; Brent $76 -> triggers EPL.
If this is the mechanisms (i.e. step instead of sliding scale charges) it would be a failure by
@HMRCgovuk
.
UK shareholders would have to hope for LOWER price band for a HIGHER NAV. Absurd”
https://twitter.com/BurggrabenH/status/1667130891456397315
This is a mess, looks like the average price over the quarter will be used but this means if for one quarter either Oil or Gas is just above the floor WFT is taken for everything.
Also not sure if this tax is removed retrospectively if both O&G below floor or from that point on until one goes above the floor.
This may well change after the O&G companies point out the floors (excuse my pun) in this policy.
As I said "I expect no less from Hunt and this government" complete bunch of idiots.
So in effect it could fall below the floor for 3 consecutive quarters less a day before we see any benefit... or worst still, break the floor limit every other month and we would could be dealing with 9p/therm and still not get any relief on 75% tax rate. Total and utter mess this EPL ..... Just BIN IT and start again this time in full co-operation with the companies that will ensure UK energy security and enable the green revolution with a suitable tax going forward.
aimo & dyor
From Kistos board thanks to NoQuestionMarks
My apologies, I have just read the HMG statement and as you say it clearly states 'oil and gas'
The mind boggles...
"The tax rate for oil and gas companies will only return to 40% if both average oil and gas prices fall to, or below, $71.40 per barrel for oil and £0.54 per therm for gas, for two consecutive quarters"
I would imagine the industry will be explaing to Hunt that he needs to revise his figures, at least they are talking and we know the starting point is the current proposal, one can only imagine that it will improve further from here when they all sit round the table !
This seems crazy to have a cliff edge for the WFT, it means we will need a fall in the prices to enable to make a decent profit, if prices go up high enough to make a decent profit with the WFT I am sure another rise will soon come along.
This cliff edge approach and the 2 consecutive quarters will give no confidence to companies for future investment and will need to work of the worst case scenario (ignoring a price crash) of prices just above the floor especially on developments where external finance is required. However I expect no less form Hunt and this government.
Https://twitter.com/surprised_trade/status/1667086525929082880
''Serica would be on a EV/FCF with risk to the upside irrespective of the direction of O&G prices? Find me a better investment scenario in the O&G sector where you are not worried about falling oil and gas prices?''
I can't, I've looked :-)
My understanding of the scaling back.
1. Windfall tax remains until March 2028 at 75%.
2. The tax rate would fall back to 40% if the average oil and gas prices fall to, or below, a set level for two consecutive three-month periods.
3. The level has been set at $71.40 per barrel for oil and £0.54 per therm for gas.
This seems a rather blunt tool questionable floor prices. In the 'new world' without russian oil and gas 54p per therm and $71.40 a barrel Brent seems pretty low to me.
Surely a sliding scale would have been much fairer rather than the cliff edge proposed ( for example. 50% tax at an average of over $70 a barrel. 60% tax at an average of over $80 a barrel. 70% tax at an average of over $90 a barrel)
Hopefully OPEC+ can peg Brent at $70 for ever..... If only!
Fully expect the industry to push for a higher floor, however, on current proposal it's an improvement, let's see if there's more to come.
To put in perspective how much improved the initial proposal for wft is and it could improve further after todays meeting, the Lowest FREE CASH FLOW SQZ would make under all scenarios (for the next 3 years) is £170m.....Without EPL applied and with $55 oil, it would get to over £230m Free cash Flow .
That's not too shabby on current view and adds greater value, we'll see if it improves further after todays meeting.
The Proposal is if both crude oil averages below $71.40 a barrel and gas £0.54 a therm for two consecutive quarters, tax rate will revert from 75% to 40%
Serica makes £300m+ in FCF if oil below $71 and gas below 54p/therm. If not then it makes at least £170m in FCF p.a. for the next 3 years. Its a win-win at the current valuation and a much improved picture for the UK assets and clealry SQZ can still invest elsewhere, at least the UK side will keep a larger percentage on the current proposal, meeting today may well revise some figures if the industry finds them not to their liking.
Outside of market crashes, ie Covid / financial / economic recession etc ..... I'm struggling to find an example atm
Why didn't they wait for two consecutive quarters of highly inflated O&G prices before introducing the EFL .... better still fix the broken energy market.
See Mr Market is not taking this news to heart, small gains today across the NS Players
aimo & dyor
FT..
Chancellor, Jeremy Hunt, is expected to confirm plans to introduce a “floor” on the 35 per cent levy in the coming days so that it only applies if oil and gas prices trade above a certain level. Treasury officials are due to meet the oil and gas industry on Friday at a forum
Where the floor for the windfall tax could be set is not yet clear. One industry source suggested the sector would like to see it set at about 120 per cent of the long-term average price
This move by Hunt will do nothing to stop the accelerated decline of the NS imo, more investment outside of UK waters will continue, more jobs lost too, ie HBR
aimo & dyor
Well, some how Hunt has even managed to screw-up the floor too ..... Can anyone remember the last time these prices lasted for two consecutive quarters or more .... that's without taking into consideration compound inflation/costs.
aimo & dyor
Https://twitter.com/OilSheppard/status/1667059673311084546?s=20
UK government confirms our scoop from last night - sets price floor for oil & gas windfall tax - if both crude oil averages below $71.40 a barrel and gas £0.54 a therm for two consecutive quarters, tax rate will revert from 75% to 40%
https://ft.com/content/ef695abf-6d2b-4ba7-aeb5-9d5a19feb1c5#post-9d096317-7de8-4315-8676-1199974400af… via
@financialtimes
UK Government rumoured to bring in price floor for UK gas & oil producers to encourage investment which has been lacking since the intro of the 35% tax introduced, tax paid would be dependent on oil & gas prices & not just applied regardless
If this goes ahead SQZ share price should go up as price is currently pinned back by the current unprecedented tax burden the new rules had on all UK based producers, fingers crossed for s good day
More like 270/280 tomorrow given news leaking out from Government
Also for the current Q2, Brent has averaged exactly $80/barrel, NBP 84.85p/therm, so for me these are the minimal floor that Hunt should put in place, plus both should be linked to inflation until EPL ends. Hunt should also consider excluding Brent totally from the EPL as it had very little impact on the energy crisis, with what little spike there was, Brent soon returned to normal as it has many times in the past.
aimo & dyor
"Jeremy Hunt is preparing to soften the Government’s windfall tax on oil and gas companies after warnings of a jobs bloodbath in the North Sea.
The Chancellor could announce changes to the so-called energy profits levy as soon as Friday, The Telegraph understands, following intense lobbying by the industry.
Changes are expected in an effort to boost investment in the North Sea, with many operators either cutting or reassessing their commitments in the wake of the tax.
Easing the tax burden would also draw a clear line between the Government and the Labour Party, which has adopted a hardline approach to the oil and gas industry in recent weeks.
Sources close to discussions confirmed that one option Treasury officials have examined is a “floor” for the tax, which would mean it no longer applies if oil and gas prices drop below certain levels..."
https://www.telegraph.co.uk/business/2023/06/08/jeremy-hunt-poised-ease-windfall-tax-boost-north-sea-oil/
The average NBP price for the past 10 sessions has been 60.1p/therm, so the floor if announced had better be well above this.
aimo & dyor
Lets hope that we can hold the 240p level tomorrow - 210-220p level appears to be a bottom for me. GLA