Member Info for dickupham

Thanks for your thoughts on the economics of oil, Alibro. I'll certainly 'bare' them in mind. Leaves me wondering about the future for OPEC, given everything you outline. No doubt ways will be found (using wind and solar) to produce enough oil to make the 6k (or so) everyday products (and to provide the services) people have (sort of) come to take for granted for the past few decades. A few examples? :

Transportation: Oil powers cars, trucks, planes, and other vehicles

Heating: Oil is used to heat buildings

Electricity: Oil is used to produce electricity

Plastics: Petroleum-based plastics are used in electronics, computer components, solar panels, and packaging

Fabrics: Petroleum-based fibers like nylon, polyester, and rayon are used to make clothing

Sports equipment: Petroleum-based materials are used in sports equipment like golf balls, basketballs, and tennis rackets

Personal care products: Petroleum is used in many personal care products like cosmetics, hair dye, perfume, toothpaste, and deodorant

Medical devices: Petroleum-based plastics are used in medical devices like pacemakers, IV bags, and surgical instruments

Pharmaceuticals: Petrochemicals are used in pharmaceuticals

Fertilizers: Natural gas is used to produce ammonia and urea, which are nitrogen-based fertilizers

Asphalt: Oil is used to produce asphalt, which is used on roads

Chewing gum: Petroleum and waxes are used in gum base to give chewing gum its soft, chewable texture

Lubricants: Mineral oils are lubricating oils refined from crude oil

"Does the world need JOG's oil" is the biggest question you say. Nah..........bin it, is presumably what we're supposed to infer, based on your expertise on the subject. But not everyone would agree with your somewhat negative outlook for us guys who weren't clever enough to switch our JOG holdings into Costco, on which you have done spectacularly well thanks to your superior investment skills. I should have stuck to horse racing - it's a little-known fact I had the tricast in the 1984 Grand National (Party Politics, Romany King and Laura's Bow - paid 2587/1 - pity I only had 50p on it).

As a matter of fact global demand for oil has consistently increased over the years, despite the forces levelled against it. The world just won't listen. Is there enough oil to last as long as its needed (which will be a long time unless planes can be encouraged to fly on chip fat, explosive hydrogen or batteries).

https://www.livescience.com/planet-earth/how-much-oil-is-left-and-will-we-ever-run-out

Not one of your best imv, Alibro. I think most LTHs in JOG recognise the risks associated with E&P oil juniors. The dishonesty of politicians and evangelism about global warming are what have halted progress here. Will JOG come good? Who knows? But what I do know is that I won't lose my nerve and capitulate, despite your hopes I and other will. It won't happen.

Erudite post otherwise

:-)

Per one broker's latest report today:

"Conclusion: JOG holds 20% in the Greater Buchan Area assets in the UK North Sea.

Development of the main Buchan field, with expected recovery of over 70mmbbl gross and

plateau production of 35mbbl/d, represents one of the largest oil development projects

offshore UK. The outlying J2 and Verbier discoveries, both future tieback candidates, then

add a further 40mmboe gross. During 2023 JOG agreed farm out deals with NEO Energy and

Serica Energy, leaving JOG fully carried to Buchan first oil at its 20% interest (based on

CAPEX expectations at FID), largely eliminating funding risk for the company. JOG is also

funded for its share of ongoing FEED costs, and cash milestone payments under the farm out

have left the company with £13.0m cash as of the end of June 2024, with a further US$20.0m

to come in on Buchan FID {note from DU - FDP approval triggers the payment, not FID}.

The current UK fiscal and environmental regulations backdropunder the new Labour government does create an element of uncertainty for the project, with FID not now likely until at least 2025. Nevertheless, in our view the underlying economics of Buchan remain strong, and we would expect the JV to progress the project to FID as long as

sensible outcomes on scope 3 emissions and the long-term UK fiscal regime post 2030 are

forthcoming.

The shares are trading at a wide discount to our 525p total risked NAV, and we

would expect any further positive news on the UK fiscal/environment backdrop, renewed UK

North Sea CAPEX from peers, and positive news on Buchan itself to all help close some of

this gap in the coming months".

Https://www.aquis.eu/companies/JOG.GB?securityidaqse=JOG.GB

Was searching round for some spare cash earlier and found a postal order my elderly aunt (who used to run a small post office in Paignton) sent me for my 73rd birthday in February ; I'd completely forgotten about it.

Anyway, I decided to "cash it in" (so to speak) and added a few more JOG shares to my existing pile (9517 shares @ 76.7p). In for a penny and all that. I was influenced in my purchasing decision by a post written on here in the early hours by someone who doesn't appear to follow convention when it comes to sleep but seemed to be talking sense about JOG perhaps being undervalued. What does he know?

Here's one to ponder. Think of a 4 letter word ending in UNT which has female connotations.

The answer's in the first sentence above

:-)

"Does not feel like major projects will cost given the new tax regime".............

........can you explain what you mean by the above? Are you saying it doesn't feel to you as if major projects will produce adequate returns and therefore won't go ahead?

......"JOG's tax losses alone are £28m".............

............they're actually c.£70m. I meant their cash value is £28m (assuming a 40% tax rate applies on the profits they're used to offset).

"The market" - in this case the short term day traders and people losing their nerve - is evidently telling us that JOG would have to pay someone £5m to take its £12m cash in the bank, its 25mboe of oil in Buchan and Verbier and its 20% of 200mboe+ of prospective resources in Cortina, Verbier Deep and Wengen.

Energy Voice:

"Trade body Offshore Energy UK bemoaned “a difficult day for the sector” after Reeves confirmed that the government will increase and extend the energy profits levy on oil and gas production to a headline rate of 78% and remove the associated investment allowance, but will retain the 100% first-year capital allowance and a 66% decarbonisation allowance which the Treasury said meant its “cash value is maintained”,

The Chancellor also confirmed that the EPL will fall away in March 2030. The energy security investment mechanism (ESIM) remains in place, which should “give businesses confidence that EPL will no longer apply if prices fall”.

The Labour government further pledged to publish a consultation in early 2025 on a “successor regime” to support “long-term stability and predictability in the oil and gas fiscal regime” after the EPL ends.

The independent Office for Budget Responsibility (OBR) said it has now assumed that offshore energy capital expenditure will be 26% lower over the forecast period, with oil production 6.3% lower and gas production 9.2% lower compared to its March forecast".

A couple of points for some to consider:

1. What is "decarbonisation" in the context of the (now 66%) allowance?

According to Gov.uk: HMRC:

"decarbonisation expenditure which is broadly capital expenditure on assets relating to:

*Powering oil and gas production facilities from non-fossil fuel sources, and

*Reduction or elimination of flaring and venting of greenhouse gases."

Was the acquisition of the FPSO vessel (Western Isles) and its subsequent work-over not effected so that oilextraction and other onboard operations could be powered by electricity sourced from the Scottish Crown Estates wind hub planned to be installed within tie-in range in the Moray Firth?

Would the greater part of the planned infrastructure spend of £900m not relate to Capex that would qualify for this additional allowance? If it did, then subject to NEO and SQZ not making what would be an entirely reasonable decision that UK Govt (of whatever colour) is just too dishonest to trust with such a big investment and either sell their interests or just walk away, the investment case would become that much more compelling.

2. I see the OBR has estimated that capital investment in the UK North Sea is likely to be 26% down on the levels expected before Reeves started her "quest for growth". An own-goal in the first minute of play. More reason not to drive away any more cos and projects.

Warren Buffett: "price is what you pay; value is what you get". This defines long term investment in a sentence. The rewards come in identifying undervalued companies, buying shares and then waiting.

Is JOG worth multiples of the present SP? People forget how few shares are in issue. They trade price alone - short term. JOG's tax losses alone are £28m. At 70p, the whole company is valued at £23m. You decide

dyor

Https://assets.publishing.service.gov.uk/media/672232d010b0d582ee8c4905/Autumn_Budget_2024__web_accessible_.pdf

see P5

.......mega special with 2 eggs and an extra hostage..............

I have reworked my numbers based on 100% capital allowances (aka first year allowances or FYAs) being available on all capex spend @ 78%. The resulting NPV10 of the Buchan project, after preparing DCF projections through to 2034, is c.$600m. Revenue generated over the same period is just over $6bn. The principal assumptions I have used are BC@$75pb; Opex of $25pb; $/£ rate of 1.25 throughout; 35kboepd production; tax rate 40% from 2031 onwards.

I prepared earlier models based on first oil in 2027 but have not adjusted for the delays on the grounds it won't make much difference to the overall value. The tax charged until 2030 might be a bit higher than 78% because of the disallowance (against the levy profits) of decommissioning expenses (not really relevant here) and finance costs (ditto).

If it were to go ahead it would be extra remunerative for JOG, which currently has c.£70m of tax losses to offset against its share of GBA production

So, basically slow everything down by 2 years or more, but assuming NEO and SQZ view a 10% (discounted by 10% anually) return as sufficiently attractive, the project is worth proceeding with. The question remains as to whether or not the Supreme Court decides to intervene, or Milliband and Co decide to introduce to scupper UKCS investment. Looks to me as if an adult in the Treasury has persuaded Reeves it would be super-stupid to drive new investent away altogether.

Interesting to see what JOG's covering brokers have to say tomorrow.

Nobody warned me that share prices can go up as well as down. The Happy Eater in Buckfastleigh might be back in the reckoning................

dyor

I don't know why so many seem to be hanging on what former junior economist at the Bank of England (as Mervyn King described her on Sunday) has to say in the Budget tomorrow. The final nail was hammered in when she increased the tax rate to 78% and the 29% investment allowance (which allowed infrastructure and other capital spend to be acquired for a net 16p in the pound). No UKCS development could ever go ahead after that bit of economic brilliance. All it confirmed to me was that Labour has absolutely no intention of ever allowing new development in the NS, whether it's under an existing licence or not.

Labour idealism will be its downfall. The insane pretence that renewables are cheaper and the whole country can be powered by "green energy" (wind turbines and solar) will pretty soon start to unravel. Whether it gets disguised or not is another debate - but truth will out in the end. The loss of jobs in Scotland won't go unnoticed, nor will the escalating cost of domestic energy, or the lack of choice available when people's boilers next need replacing. I won't bother listing again some of the 6,000 odd everyday products and services that rely on oil for their availability. Inflation?? What's that?

As someone said earlier, we might have to just tuck our shares away for the next 4 or 5 years (ie those of us who are still alive!!). The thing I fear most is that the NSTA will decline to approve a delay in production (as it has done to Deltic Energy) after leading JOG up the garden path since 2017 (when Repsol/Sinopec surrendered the Buchan and J2 licences) forcing a surrender of the GBA licences. That would be as dirty as it gets but I wouldn't put it past this Govt to do it. Legal action is a strong possibility imv. Not sure if anyone saw this recently:

https://www.telegraph.co.uk/business/2024/10/27/french-oil-giant-legal-battle-plan-shut-north-sea-terminal/

""Plans to shut down a vital terminal in the North Sea have sparked a bitter legal row over claims it will damage the UK’s oil and gas production.

The proposal by French energy giant TotalEnergies to decommission the Gryphon terminal, which serves four offshore oil and gas fields, has triggered a claim from a rival operator.

Nobel Upstream, which operates two of the fields reliant on the Gryphon, has launched a judicial review in a last-ditch attempt to halt the process.

However, rather than suing TotalEnergies, Nobel Upstream has issued its claim against the North Sea Transition Authority (NSTA), which has signed off on the closure."

JOG will have a "Plan B". We could find out quite soon what it is - I'm only speculating. They wouldn't have said anything before the Budget - there's a possibility (a remote one) someone with an economic brain cell or two has explained to the twatess she'' be minus £20-40bn of NS tax revenue if she persists.

dyor

"Be fearful when others are greedy, and be greedy when others are fearful".

'Greed and fear – the two emotions that are the bane of every investor.

Greed: People see early investors walking away with large profits and they rush to jump in because they don’t want to “miss the boat”. But more often than not, when everyone starts jumping onboard to try making money out of something, the more prudent you should be in investing your money.

Likewise, history has proven that an economic crisis is the best time to invest in the stock market . But fear triumphs over logic in most people. When prices fall, investors dump their shares to “cut their losses”. Are you able to override this fear? If you can, you will have the opportunity to buy into longer term success at huge discounts'.

**********************************************************************************************************************

Ask yourselves this. How likely is it that JOG's experienced and capable directors are just sitting on their hands waiting for things that happen to them when the former trainee economist at the BoE (Reeves) and Screwsloose Miliband set out their latest proposals aimed at (UK) O&G industry destruction asap in the Budget on Weds?

There will be a Plan B, although one can only speculate on what this might be. Their worst option is to give up on trying to increase shareholder value by growing JOG into a reasonably sized mid-play focused on the UKCS.........and put the company up for sale as it is. We know the value of the tax losses and the cash it has in the bank (c.£40m). What we don't know is what someone might pay for a fully carried 25mmboe of 33°API light crude in Buchan, Verbier and J2 - plus 200mmboe of good prospects in Cortina, Wengen and Verbier Deep. These would be likely to interest a longer term player with deep pockets willing to sit out Labour's destructive period of Govt alongside NEO and SQZ (or whoever it might suit them to sell their interests to) before then resuming production plans under a more sensible Govt.

Or maybe JOG is considering acquiring a producing interest in a non-UK field - there will be options around raising the necessary funding to tide things over for the next 4 years+.

Whichever way I look at the situation I don't see JOG failing its shareholders - the people, the assets and the partners it has are too valuable to let that happen.

I guess the continuing sale of shares is reflective more of loss of nerve, or an inability to think things through rationally, than anything else. A share price that suggests the whole shooting match is worth £16m or so is silly. I guess fear can make people do things they'll have difficulty understanding they did, a year or so down the line. Time will tell

dyor

.........."but I've got batteries and panels on my roof".................

................bet the panels look great, legache. No doubt they enhance the local landscape. Do you live in an area of outstanding natural beauty by any chance, or are you perhaps hoping that your contribution will help your local area achieve this coveted status? Perhaps a few hundred wind turbines covering over those horrible rolling green fields -vying for top spots with those industrial scale solar jobbies - would help persuade the local planners of the strength of an application?

That William Blake would have been ashamed of himself if he'd still been alive today. Look what he started. We got more than a visit from a well-known native of Jerusalem. Quite a lot of its population now live here permanently. Four or five of them are MPs ffs.

(Ref: "According to its most common interpretation, Blake's poem suggests that a visit from Jesus will create heaven in England, in contrast to the 'dark Satanic Mills' of the Industrial Revolution").

:-))

Fair enough summary, Megla. But I don't think Reeves (or anyone else on the front bench) knows enough about business, practical economics or this industry to rein back Miliband, whose plans have already severely damaged the UK O&G industry (and the UK's wider economy).

I put together DCF projections to get to a NPV10 value of the Buchan Horst licences for NEO and SQZ (JOG is different because it has no capex) just before Labour got in. Using what I thought at the time were conservative assumptions (BC $75; Opex $25pb; 35kbpd for first 7 years; tax @ 78% through 2030 and 40% thereafter; continuation of inv relief @ 29% giving a tax shield on investment of 84%) the Buchan project produced a NPV10 of £735m (a number the JV might have moved forward with??).

Reeves removing the 29% investment allowance recently (wef 1 Nov) has put paid to a positive NPV10 for any new UKCS project, whether or not the licence is an existing one or not . Reducing or withdrawing capital allowances (FYAs) altogether in next week's Budget will just add decoration to a cake that's already inedible. Reeves slipped in an important "footnote" when she talked of the need to avoid "surprises" in energy prices after 2030 (by which time hopefully she and the other equally noxious and fundamentally dishonest communists in Govt will either have been booted out forever, or dead). By this, she undoubtedly meant the EPL is here to stay - maybe an even worse form of it that will bag Govt a minimum of 100% of the profits of whichever UKCS producers are still alive by then.

The industry had the chance to overturn all this nonsense just by hinting that output might be restricted for a week or two (say in the lead up to Christmas) "to make a point". Long queues at petrol stations would have been guaranteed, with an inevitable knock-on effect on supermarkets and empty shelves in supermarkets. Stock up on the bog rolls - wouldn't want to have to resort to the FT. That's just for starters. Instead, its representative body (OEUK) has tried to win over, using logic, people who are steeped in dogma, idealism and virtue signalling, regardless of the disastrous effects this will have on the UK economy and the way we all live our lives. They are not influenced in any way by economics (which they don't understand anyway) or the good of our country (which they regard as theirs). A Govt the vast majority of us didn't vote for will increasingly control our lives.

Better not say more, lest I be prosecuted for my views.

https://www.telegraph.co.uk/news/2024/10/16/army-veteran-convicted-over-prayer-at-abortion-clinic/

"An army veteran has been convicted after praying silently outside an abortion clinic for his own unborn son. He was given a two-year conditional discharge and ordered to pay £9,000..... Judge Orla Austin ruled he had failed to comply with the Anti-social Behaviour, Crime and Policing Act 2014".

God help us all

dyor

........from Serica's interim results statement on 10 Sept:

" With an efficient subsurface programme, we believe Serica can offset the natural decline rates from

our fields. The viability of sustaining production levels from our existing assets over the longer term,

however, depends significantly on the future fiscal regime. With an appropriate fiscal regime, including

full tax relief for capital expenditure, we have attractive options to invest both in our existing producing

hubs and the Buchan Horst project.

Buchan Horst is precisely the sort of project the UK needs, involving the creation of over a

thousand jobs across the UK, the re-use of existing infrastructure, industry-leading low emissions and

domestically produced oil. We and our partners are keen to have the opportunity to allocate capital to

the project and we hope that Government will deliver a fiscal framework, and (following the recently

announced consultation on Environmental Impact Assessment guidance) a regulatory environment,

which will enable this".............

https://www.serica-energy.com/downloads/reports/Serica%20-%20HY%20results%20announcement%20FINAL.pdf

"The interim dividend is payable on 21 November 2024 to shareholders registered on 25

October 2024, with an ex-dividend date of 24 October 2024

• Given the importance of capital allowances to the economics of future investments in our UK

portfolio, we will provide further guidance on our future ability to reinvest in our portfolio as

part of our medium-term capital allocation policy following the Autumn Budget

https://www.serica-energy.com/downloads/reports/Serica%20-%20HY%20results%20announcement%20FINAL.pdf

Https://www.lse.co.uk/rns/DELT/operational-and-strategic-update-7622l6y7t4a566x.html

A lesson in how British Govt kills off enterprise. The least it could have done was to compensate (to an extent at least) people who have put their lives and committed their financial resources to projects disingenuous and misinformed Govt has decided to kill off with taxes, plus blanket denial of consents needed to progress projects on which funds are committed from day 1 but development spans decades. Licences will progressively be handed back in, transferring ownership of the oil & gas remaining sub-sea to...................yes...........Govt. Nationalisation without compensation.

All in the cause of the pointless and unachievable "net zero".

It's coming to a cinema near you anytime now. Already showing in Deltic Energyville and elsewhere. Rosebank and Jackdaw will soon follow when the Supreme Court overturns the NSTA's earlier EIA approval. The NSTA won't be challenging the appellants' claims ie Miliband wants the EIA and FDP approvals to be rejected.

dyor

The 29% investment has already gone ...............I missed out "allowance"

ie The 29% investment allowance has already gone............

Labour has to go (or come to its senses) for Buchan to go ahead..............I'll be happy to be wrong (if I'm still alive)

According to Climate.Gov (edited by Miliband E??):

*Global average sea level has risen 8–9 inches (21–24 centimeters) since 1880.

*In 2023, global average sea level set a new record high—101.4 mm (3.99 inches) above 1993 levels.

They've come up with the following to frighten people who can't think for themselves (the majority of the world's population) even more:

"(we're) on a pathway with high greenhouse gas emissions and rapid ice sheet collapse, models project that average sea level rise for the contiguous United States could be 2.2 meters (7.2 feet) by 2100 and 3.9 meters (13 feet) by 2150". OMG - we've had it. Hang on a minute...what's all this about nuclear powering the planet by the end of the century? Well, it will in the countries that have the sense to invest in it, rather than rely on renewables and drive their economies over a cliff because Red Ed, who seems to want to become "the world's worst politician" in two different ways: 1) by making Labour unelectable when he was shadow leader 2) drive Britain's economy and energy security off a cliff, after 20% of UK people took leave of their senses and voted hardcore socialists (or worse) into Govt a few years later, as appointed Energy Minister.

I wonder how rich people like Al Gore and Barack Obama will be by then (their successors more like, unless the same models are applied to their predicted lifespans and they live until they're 200+)?

Ref the sinking Maldives, they were supposed to have become submerged by the end of the last century. Greta had to delete her original text and add 30 years or so.

Things have turned really dirty at the DESNZ. The NSTA, having issued licences under its old mantra: "MER", or "Maximise Economic Recovery" - ie encourage as much UKCS production as possible and the tax revenues will flow into the Treasury. It's all changed under its new masters, who have made it impossible for any new project to succeed commercially by imposing a 78% tax rate on UKCS upstream operators' profits - after disallowing decommissioning and finance costs, inc interest payments); also disallowed is the use of b'fwd tax losses to offset against any remaining profits. Restriction of FYAs on capex will come on 30 Oct, setting aside a fundamental principle of tax in place since taxes began: relief on the spend allowing business activity to commence, profits to be made and taxes to be raised.

"Despite the excellent technical work completed by the Deltic team, which significantly de-risked the Syros prospect, the ongoing political and fiscal uncertainty has prevented ...parties that participated in the farm-out process from moving forward. Deltic has requested a 12-month extension from the NSTA to Phase A to allow a period of stability post the Oct budget for Deltic to re-engage with interested parties. The NSTA .. is not minded to support the request and ..... the licence will now expire on 30 November 2024".

Labour - the Party of business

link to follow

The 29% investment has already gone - same time as the tax rate was increased to 78% - near enough 100% when the disallowed expenses and restricted ability to use b/fwd losses to reduce tax is taken into account. This is effective from 1 Nov.

What's not yet clear, although it will be on 30 Oct, is the extent to which allowances on capex (aka FYAs - first year allowances) are restricted. I have posted about the significance of this on the SQZ board.

The Supreme Court will have been placed on standby by Labour, the various judges having been instructed on the results it expects of them if one or more of the projects submitted to the NSTA for EIA and FDP approval should accidently slip through.

Devious, dishonest to the core and utterly incompetent doesn't do justice to these Labour vermin. I thought the (non)conservatives were dishonest and inept, but this lot are on a different scale altogether.

jmofwiw

dyor