focusIR May 2024 Investor Webinar: Blue Whale, Kavango, Taseko Mines & CQS Natural Resources. Catch up with the webinar here.
It's done really well over the last week or so to jump from the placing. Seems like a lifetime ago! I guess we'll bounce around here until after Wednesday, maybe take a little drop and then everything crossed for some form of news!
https://www.gov.uk/government/publications/autumn-statement-2022-energy-taxes-factsheet/energy-taxes-factsheet
Seems more positive than that (all credit to Jarv for the research!)
Full details (more positive!) here:
https://www.gov.uk/government/publications/autumn-statement-2022-energy-taxes-factsheet/energy-taxes-factsheet
Apologies again all!!
Posted on SQZ board this morning.
Worth a read and surely not great for us. Has to impact Dunrobin development / JV / Sale, no? Could pause bidding for licences as well? Anyone that knows more have any views?
I am still stunned at todays autumn statement that a Tory government would effectively nationalise North Sea oil. While I was expecting an increase in the levy to 35%, I have taken a look at the detailed statement and the investment relief for new capital expenditure has decreased from 80% to 29% (except for decarbonisation related expenditure). Accordingly the investment offset has also been materially reduced.
It should also be noted that interest cost and abandonment cost cannot be offset against the WT and so the real additional tax rate is much higher depending on debt levels and decommissioning costs - probably more like 45-50%. I think it is this detail that drove the price further down late afternoon. Further there is no longer any commitment to remove the windfall tax even if oil and gas prices drop to more normal levels.
On the positive side Harbour has tax losses carried forward from Premier to use but only against the core tax and these will probably only last for 2022 and 2023. After that the cash tax rate could be as high as 90% on reported profits- if oil prices fall below $70 the tax rate could be over 100% of reported profits.
This has certainly killed any M&A of existing U.K. fields which are now effectively worthless. Why would anyone take on significant decommissioning obligations and significant operator risk, when the government takes up to 90% of profit made. Also any new field developments are now highly unlikely - the risk/reward models simply will not work. This level of tax take might work in a Saudi/ Iraq environment where operating costs are $3-4 per barrel with simple and relatively low upfront capital costs, but it just will not stack up in a very expensive and complex North Sea as the risk return model has been destroyed.
Jeremy Corbyn and Greta must be howling with joy. Unless I am missing something the only solution is to separate the overseas assets, trade out the U.K. existing fields with no new investment and keep the 10-15% of profits left after the tax for dividends (€200-300m). Then file for bankruptcy once decommissioning costs become due.