The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
https://www.investorschronicle.co.uk/news/2023/02/28/windfall-tax-puts-cambo-decision-in-doubt-ithaca/
It reads slightly better in relation to net debt than the headline suggests, and therefore the ability to raise capital in my view.
Results end of month, but you sense they have enough on their hands - although conversely they have a North Sea only strategy - so ultimately need a pipeline of assets.
Personally, and IMHO - I regard this as more sabre rattling ahead of the budget, and connected to the Energy Voice 'price floor under consideration' comments...
Ithaca also have a huge bill to pay this year EPL wise if they dont 'act'. and they are 2 months into their financial year already. Others inevitably will be the same..
DYOR
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!
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....
There is not much volume going through... my advice would be to stay calm and think rationally (I dont know anything more than anyone else)
For interest On 2.8.19 the JOG share price was £0.58, 5-6 weeks later it was over £2 with it roughly quadrupling on news of the GBA licences..
If it can do that on a material licence award, then there is significant potential on a farm out / sale. We are dealing with a very low market cap / asset value relationship, which we all know
I really dont think anything has really changed since the last announcement at end November (most things happening in the market today were known then). It just feels like it's taking too long.. the price is sliding and it's uncomfortable..
I thought Jim's comments were interesting earlier this week through the lens of a major shareholder, and whilst everyone should absolutely do their own research - in my view little has changed to the late November narrative (other than time has elapsed!)
DYOR
Reenforcing the IC email extract from earlier... I would say there is still a lot of interest in the NS... despite the EPL! 100 bids is a lot...
https://www.energyvoice.com/oilandgas/north-sea/475645/oil-and-gas-companies-lodge-over-100-bids-in-north-sea-licensing-round/
DYOR
The other interesting point here is whether they have just triggered a potential bidding war with that announcement. If you are staying in the North Sea , JOG is one of very few pre production assets (of scale and size) not owned by a major player. In fact, it’s the last of the top 3 …. And de-risked due to the history of Buchan.
Anything can happen now (and in short time).. you either bid big quickly (if you’re out of the FO process), or it’s farmed out to a ‘select’ group.. which may or may not be shortened further, depending on the plan. Ardens original note (post windfall increase) was quite interesting when I re-read it. Yep, the NPV has gone down with the windfall increase, but JOG’s potential attraction has gone way up to a buyer sticking in the NS (vs the choice of ‘sunk’ taxes). The development funding point from WHI makes this yet more interesting…. If the government add a ‘floor’ to the OP then it’s yet more interesting…
Exciting…….
DYOR
The other key point is that the Arden broker note issued recently (Arden are the house broker) has indicated that this isn't the case re Jog being impacted... Note the timing of their note, just shortly after the WFT increased. In addition to that, there may well be a floor introduced this week on oil pricing by the government in a revision to the bill, or certainly there is a possibility of that (The Shell and Equinor rhetoric is clearly focused on leveraging that outcome). Thinking logically about timing.. if you're a UK producer, who desperately wants a floor introduced, you are hardly going to champion announcing a farmout ahead of the finance bill returning to the house this week, especially if the government point to a recent Jog deal as an example of ongoing investment in the NS (and therefore no need for a floor).
Lets see what happens... there are some clues on timing, and an olive branch on reassurance from Arden
All IMHO
https://www.energyvoice.com/oilandgas/north-sea/464077/windfall-tax-risks-destroying-north-sea-production-tory-mps-warn-chancellor/
Gathering momentum.. I suspect there will be an amend..
DYOR
The counter argument to this is that there are only so many decent assets available to offset the tax and claim the relief, If a faminee waits too long they run the risk of missing the opportunity. I think Arden (as the house broker) were hinting/giving a message re this yesterday, when they said they didn't expect this to impact the Jog farm-out. Whilst there may be refinement, I think it is unlikely the government will materially change their position again in the near term.
IMHO
Has anyone seen anything on the P2170 extension - from the last update? We may be due some news tomorrow...
On Licence P2170, there is a requirement to submit an FDP for the Verbier discovery in order to advance the licence into the third term. Verbier is part of our phased area wide GBA development plan, with production scheduled to commence following the start of production from the Buchan field. The P2170 Licence is due to expire on 22 November 2022, therefore we are in close consultation with the NSTA to agree an appropriate way forward.
IMHO