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I reckon this well has cost about £75m to drill.
My back-of-a-***-packet calculation...
Rig rates are currently around £450k per day and this rig has been on hire since July, i.e. 5 months => 150 days x £450k => £67.5m. Add some extra costs for well services, supply, logistics, etc., and I think £75m gross is a fair estimate.
Cost will be around £30m higher than planned due to the technical challenges encountered and the 2-month delay.
AIMO
Not surprised about North Eigg which has been overhyped. It was always more likely to fail than succeed.
What's important now is that the company demonstrates it has a future, otherwise they should return the cash pile to shareholders through special dividends. The BoD has had ample time to evaluate commercial opportunities.
From the Moram article:
"Serica’s management team gives NE a 20-33% chance of commercial success."
North Eigg is an exploration prospect with a low chance of being developed. I think Serica's success is more dependent on commercial deals and possibly expanding outside the UK (if WFT persists in its current form).
Soon our cash in the bank will exceed our market cap and we have zero debt. Even with tax at 75pc of profit, the cash pile is only going to grow, especially with c. 92pc tax relief on investments. Sooner or later our share price will reflect our true value. IMO, DYOR.
I don't think they want the likes of Shell and BP to shift their HQs out of the UK but they're happy to whack domestic producers with eye watering tax to appease the red wall and the green lobby. They probably think they can offset lower domestic production in the future with LNG imports. Obviously that's insane.
"All politicians are corrupt"
I agree that some are corrupt but most are just ignorant.
Some people seem to understand the new investment allowance but for me it's as clear as mud. In my mind, tax rules should be clear, and ideally simple.
Unfortunately our tax system keeps getting more complex and punitive. The opposite of what businesses need.
It's not explained very well but the new investment allowance provides £91.40 tax relief for every £100 invested. Previously it was £91.25.
See:
https://www.gov.uk/government/publications/autumn-statement-2022-energy-taxes-factsheet/energy-taxes-factsheet
Maybe there's an upside.
For the next few years, gas prices will remain high, profits will be modest, but cashflow will be plentiful. If they invest wisely, cash-rich, debt-free companies like Serica can grow their business, grow their revenue, and grow their profits.
The investment allowance provides an excellent opportunity for growth which could pay handsomely from 2028.
AIMO.
If Hunt extends the WFT period to 2028, this indicates the government expects gas prices to remain sky high until at least then. Assuming he keeps the investment allowance in place, the outcome might not be too bad for SQZ. No debt, plenty of cash, very strong cashflow for investments (which won't be taxed), and a steady, respectable profit. Probably better than the extreme volatility of recent years. IMV.
Maybe gas producers should shut down for a while to catch up on all that maintenance they missed over the summer to maximise production, as requested by the government. Not a great look for the government if people can't hear their homes in winter.
The industry is in a very strong negotiating position if they have some balls.
I still find it very odd that the UK government hasn't sought to secure a deal with the UK industry, fixing prices at a reasonable level for 3-5 years to provide stability and certainty for both parties. They seem to prefer doing deals with other countries while taxing domestic producers out of business.
The Rhum Iranian money won't be accessible to the UK government. It will be held in some sort of ringfenced escrow account.
I don't think it's possible to backdate tax changes. If it is, it shouldn't be.
What he says and what he does are entirely different things.
COP gets more farcical each year.
Eco loons demand immediate cessation of oil and gas production.
Government leaders threaten to tax oil and gas companies to oblivion.
No-one is working with energy producers to develop sensible, workable solutions.
SQZ and other NS operators should suspend production until our government gets its act together.
IMHO.
I think collective representation and bargaining is required to prevent the government destroying the industry and the country's energy security. I would hope Offshore Energies UK - the industry body - is brokering discussions between operators and government. Like the government have stated, nothing should be off the table, including pausing gas production. Maybe this would help to bring the government to its senses.
The board are too risk averse. Four years after the BKR acquisition, they're looking for a similar deal which is never going to happen. Paralysis by analysis.
The KIST offer when shareholders were "strongly advised" not to do anything. And here we are, less than 4 months later sitting on a 30pc share price drop.
The SQZ share price tracks the gas price pretty closely. Gas price has dropped as supply comfortably meets demand at present, but as the European winter progresses and storage depletes demand is likely to ramp up again, the gas price will rise, and the share price will do likewise inmv.
That's fine in the short term, and I'm happy to hold for now, but longer term the company needs to grow to secure its future. North Eigg might come good, but I'm not counting on it, and I hope the BoD aren't either.