Member Info for dickupham

Apologies if others have already pointed out what's below. Most people probably don't read everything that's written in RNSs.

Seems to me there's still plenty of headroom in the share price, given that: " Approximately 921.2 million new Harbour shares issued to Wintershall Dea's shareholders (the "Consideration Shares") at an agreed value of $4.15 billion or 360 pence per Harbour share, representing a premium of c.60 per cent to Harbour's 30-day volume weighted average share price of c.227 pence".

https://www.investegate.co.uk/announcement/rns/harbour-energy--hbr/acquisition-of-wintershall-dea-asset-portfolio-/7957173

The vendors are content to value HBR's shares at 360p - sets a benchmark for fair value.

Hope gazillions of shorters got fried. A stonking deal - congrats to LZC, AK and the extended team. Goodness only knows how they kept it so quiet

dyor

For NEO and SQZ, it's all about tax - more specifically EPL.

The two organisations have committed to £850m-£950m of CAPEX to get Buchan to production. Both are (I believe) paying tax on their UKCS profits at 75% and can take advantage of the 'Energy Profit Levy investment allowance' (businesses will be able to claim £91.40 in tax relief for every £100 invested rather than the previous £91.25).

https://www.gov.uk/government/publications/autumn-statement-2022-energy-taxes-factsheet/energy-taxes-factsheet

I'm not aware there will be significant CAPEX when Buchan starts producing, although there's scope for it if and when exploration drilling starts (assuming it does) on the P2170 licences (Verbier Deep, Wengen, Cortina). But that's looking well into the future.

On the face of it, were NEO and SQZ to increase their stake in the GBA licences by either buying JOG, or its 20% in the GBA licences, they'd have to lay out money now, in the knowledge they'd be paying tax at 75% or more on Buchan's production from 2027 onwards (unless they had 2027 and later CAPEX they might be able to offset against their profits from Buchan).

All a bit complicated.

A more practical approach might be for JOG to do some focused research on which UKCS-focused O&G companies JOG's acquisition would make sense to, because those companies had planned CAPEX that would qualify for 'Energy Profit Levy' investment allowance' from 2027 onwards.

The EPL is supposed to be gone by March 2028. But you can bet your bottom dollar that whichever cretins are in Govt in 2028 will come up with some other wheeze to kill the NS, at huge cost to our economy, our comfort and our security. The lunatics are well and truly in charge. And they're dishonest with it. The lot of them.

It might not affect me for as long as most, but it's unfortunate for the sane among us regardless :-)

jmofwiw

dyor

"North Sea Windfall Tax 75%".............it isn't a windfall tax, it's a heist

"Hardly worth producing oil & gas in UK waters".............if they've got any sense, the facility will be used exclusively to secure non-uk production.....

Sushi and the rhyming Hunt should note well what Serica has effectively announced today (I hope) which is that the UKCS is a dead duck as a direct result of the childish and dishonest proposals they foolishly think will lead to the limitless inflow of unjust tax revenue from UK OIL & Gas companies, which they can then use to pay the bills of life's failures in return (they think) for their votes come the next election.

If the EPL was a windfall tax, it would be charged on windfall profits, whilst those profits were evident. Instead, it is charged on ALL NS profits for a minimum of 5 years. The floor price mechanism is a fraud that's designed never to apply. And whilst we're on the subject, whilst the headline rate of 75% (it's 78% in Norway) might be comparable to that regime, our Government (and Keir Stoma's lot of rampant socialists - not that different to Sushi's actually) selectively fail to mention the full cash refund of any and all losses that's made immediately to NCS companies in the event of them incurring losses due to unfavourably movements in oil & gas prices.

You can fool some of the people..................

I hope every penny of the new RBL facility will be invested outside the UK. Do something useful and intelligent that's beneficial to shareholders (as opposed to yourself) for once in your life, will you Mitch?

https://www.gov.uk/government/publications/autumn-statement-2022-energy-taxes-factsheet/energy-taxes-factsheet

jmofwiw

dyor

OK - if you must, spend £200m of the money buying JOG, which has a fully carried 20% of 150mmboe of 33°API in the CNS - and go 50/50 with NEO Energy........slight self-interest declared in that one :-)

......don't make sense

dyor

I'd slept most of the day, Cyril :-)

JOG doesn't keep me awake, although I find it frustrating that some within the Company don't share my reading of the extreme political risk there is for the whole UKCS oil and gas industry.

Politicians from both main parties are out of control. They have long since ceased to be driven by what makes sense for our country, is good for the economy and vital for our energy security and defence. It's all about votes for political parties.

Under Labour it will only get worse. The EPL is not a windfall tax. If it was, it would only be charged on profits arising from the spike in oil & gas prices caused by the hostilities in Ukraine. Brent Crude was trading at $92pb on 22 Feb 2022, when Russia invaded. It spiked at about $120pb in June 2022, then steadily dropped back to more 'normal' levels thereafter. Gas price volatility was more marked, but levels today are now back to 85ppt, down from a brief spike of 650ppt in Aug 2022.

The forecast (and greatly feared) oil & gas shortages predicted by "experts" in early 2022 failed to materialise, because the sanctions on Russia threatened by spineless countries around the world (particularly EU countries like Germany, France and Italy) failed to materialise. These countries continued to take Russian supplies; China mopped up anything left over, strengthening its ties with Russia. Putin's fears of Russia being starved of foreign currency evaporated. "Business as usual" resumed.

What does Sushi do (shortly after stating publicly the Conservatives don't do windfall tax)? He slaps a 25% surcharge on an already unfairly high 40% tax rate on UKCS cos. And the rhyming Hunt then adds another 10% and extends the duration of the tax to 5 years. The 'price floor mechanism' is a fraud that's fixed never to apply.

The overall effect? Oil & gas prices back to normal; supply and demand more or less matching. UKCS oil & gas co's profits slammed at 75% or higher forever. Neither party will reduce the rates, Stoma already having said "Britain has to set an example in reducing carbon emissions" - even if this means importing expensive and carbon inefficient LNG in unlimited volumes from the US and oil less efficiently lifted from Norway and other exporting countries.

The above is why I think a sale asap is the right way to be looking at JOG. Make your views known to management - the email address is on the website. Increasing tax from 40% to 75% halved NPVs across the board. Who can tell what's next? Stoma has made no secret of the fact that what he calls "loopholes" will be closed. By this he means investment allowances will be consigned to history. Only companies trapped by huge recent spend on infrastructure, where there's still a marginal case for continuing production (for half a long as originally intended) will want to remain on the UKCS.

Talk about black swan events. Who'd have thought the Conservatives would kill us stone dead with unjust taxes that don't make s

Asartara.............two points you might might want to consider:

1) I wasn't talking about fair value in my last post. I was talking about what it might be realistic to expect a NS player (or AN Other) to pay for what JOG has to sell (assuming it wants to)

2) What I (or anyone else) might think or say about anything to do with JOG or any other company, is only my opinion, based on the facts as I see them.

My background and experience steer me towards conclusions I see as logical, but this doesn't mean they're the same as anyone else might reach. And whatever I might have to say doesn't mean I'm right. My purpose in posting is to try to promote clarity and understanding, where it might otherwise be missing - encourage others to learn more about a very difficult subject called investment valuation in a very complex sector called "oil & gas". My advice is always "dyor" - "do your own research". There is no substitute for this, no matter how convincing people writing on blogs such as this might sound.

It's better to study what Warren Buffett has said over a lifetime spent justifiably gaining the title: "the world's best investor". One of my favourite sayings attributed to the Sage is: "price is what you pay; value is what you get". That alone should answer your question.

You appear to think investment analysis is a very precise science. It isn't. Ultimately it's about 2 people sitting at a table thrashing out a deal that, if it's struck at the right price, will leave both parties feeling dissatisfied (think about it).

Well said, CornishoilPirate - spot on (as usual) . I have always been a great believer in the saying: "always leave something for the next fella". Given the political and other risks involved in waiting 4 years for any meaningful income, I suspect a lot of investors here would be content to accept an offer that was within range of what analysts are saying is "fair value" although not quite there. There's a saying: "a bird in the hand"...............What one shareholder might find acceptable may well be different to what another would find so. Entry price, period shares have been held, age, health, risk tolerance - there are dozens of factors to take into account.

The ballpark figures I've come up with might be totally irrelevant, because JOG's directors might simply not want to sell now or at any other time. Ultimately shareholders have the right to call a general meeting at which the only agenda item might be: "where next for their company"? The directors are bound by resolutions made at such meetings.

No point in saying any more. Making predictions is a mug's game. JOG looks a sitting duck to me, but I'm not holding a cheque book

dyor

CHF - in view of the different assumptions that could be made - some relating to tax - I decided to concentrate on working out JOG's annual income before tax - and then went on to construct a sort of "hybrid" valuation that might be applied to JOG.

Looking at p/es, eps and whatever else won't get you far. The unpopularity of the sector is such that 'norms' are out of the window. SQZ and HBR are yielding not far short of 10% in dividend, and are full of cash despite the EPL. I noted yesterday that iEnergy (whose prospects don't look that bad to me) are yielding close to 20% in dividends paid every 2 months. Perhaps there's a catch - but I didn't spot an obvious one so it seemed a reasonable (small) addition to Mrs Upham's ISA

I think JOG has something like £80m of accumulated tax losses to date. In calculating JOG's income in year one of production, these losses would all be available for offset against RFCT and SCT (40% in total). In cash terms it adds £32m to JOG's value (discounted back to NPV).

The losses can't be used to reduce EPL.

Increasingly I'm coming around to looking at what it might be realistic to expect a NS player (or AN Other) to pay for what JOG now has (20% of Buchan/J2 and the P2170 licences fully carried, plus a lump of cash). A UKCS-focused company might want to replace dwindling reserves. It's what happens. I can't readily see how EPL savings might come into the equation, so best to ignore that helpful little chestnut. JOG might also be attractive to a VC or PE fund looking for a low entry point, a ready exit in 5 years and an impressive IRR to justify the exercise.

Via various different routes, I keep coming back to a number that's between £175-200m for 100% of JOG's shares. If a buyer was willing to accept the political risks, the Company could be as good as moth-balled in the period leading up to production.. The ex Ithaca chaps were brought onboard to get deals done. Time to get moving and complete the big one

dyor

The office cat told me that JOG's share of production in 2027 would be about £100m. There were slight communication difficulties, but the gist of it was that total production from Buchan would be 35kboepd. Tibby (the office cat) went on to explain that JOG would have an entitlement to 20% of total production, or 7kboepd. Assumptions had to be made about prevailing oil prices in 2027, but Tibby thought $75 (Brent Crude) was reasonable, given current forecasts. With anticipated downtime for maintenance etc estimated at 35 days a year, and extraction cost (Opex) at $20pb, Tibby's estimate of production revenue for the first full year of production (2027) was (7000 x [75-20] x 330) = $127,050,000............converted @ 0.79 = £100,369,500.

The above (as I have eplained about 50 times before) is JOG's estimated profit before tax on an annual basis, based on 2023 price assumptions.

Tibby lost me a bit when going on to say that if one were to work out a sort of hybrid NPV of JOG, by assuming a multiple of 5 times pbt earnings and then discounting it back to 2023 values by applying a 10% annual discount for risk and a further 5% for the cost of money, a present value of (£100,369,500 x 5 x 0.85 x 0.85 x 0.85 x 0.85) = £262m - or 748p per share fully diluted.

The answer to the rest of your questions is £43

dyor

"58% is owned by institutional investors"..............

...............please name them.

..........."I, like PC01, still own as many as I ever have done".............................

........and I stupidly have more, as a result of adding 6,100 shares and 150 shares a bit earlier. Had to scrape around the edges of the relevant SIPP to find the cash.

Now is not the time to be doubting outcomes. I know what I want to see happens - others can agree or disagree; it's up to them.

What I don't want (and will do my utmost to prevent) is a bunch of people continuing to take substantial rewards for delivering shareholder value that (so far at least) hasn't materialised. It's time to take a reality check. The time for congratulations (PC01) is when the money's sitting in your bank account, not an entry in your SIPP recording the fact the share price hasn't gone anywhere for the last 6 years

JMO as a pragmatist

dyor

Sorry, Didas - I don't understand your question.

There are various methods used to value companies, some specific to companies operating in the O&G sector. Each company's individual circumstances are different and (as we've all found out here) sector sentiment can materially affect share prices. Oil & gas is now permanently off the radar of a large number of investment funds, for instance so, just at the time JOG needs significant longer term investors to buoy up the SP, such investors are nowhere to be found.

My immediate reaction to your question is that, however you have arrived at it, £19 per share isn't the right "starting point" for JOG's SP. The price at which any company's shares is quoted is the simple result of supply and demand. Clearly (for the present at least) investors/traders won't pay any more than about 225p for JOG's shares.

Using 3 different ways to get to what I see as "fair value", I'm not a million miles away from what 3 or 4 well-respected investment analysts have concluded. The hope is that circumstances and future news flows are such that the market will be willing to pay a lot more for JOG's shares than they are presently.

I'm not sure what news we're waiting for. We seem to be in a kind of limbo, with a lot of people who've retained their faith up to now - some for many years - asking: "What's next"?

Maybe JAB will decide to tell us something before next year - who knows?

dyor

Whoever buys JOG can expect to generate net cash before tax of something like £100m pa when production starts. JOG surely cannot be planning to just sit there shelling out cash on directors, employees, 3 lots of office expenses and the rest, whilst NEO and Serica - NEO as operator and Serica with a paying WI - do all the work needed (and spend all the infrastructure cost of getting to FID and then production in 2026.

So, how much is an income stream starting in 2026 worth to a bidder now? That bidder might well have unrealised tax losses to add to JOG's own b'fwd losses of something like £80m.

It's all well and good JOG's directors continuing to talk of adding shareholder value as JOG moves towards its (ie the directors') objective of becoming a significant UKCS E&P, but from where I'm sitting and given the multitude of uncertainties - many of them political and therefore way outside anyone's control - we simply don't know what's going to happen on the world and UK stage.

I know what I'd be looking to achieve (sooner rather than later) if I was running JOG and I truly had shareholders' best interests at heart. There's been a fair bit of M&A type activity around of late. The skill for JOG's leaders would come in identifying potential candidates to whom JOG's circumstances might appeal - and then being big enough people to put their own interests to one side whilst they do what's best for all.

Others' views would be welcome - particularly those of some of the bigger holders. In the absence of solid news, where else is the price going to drift but down?

jmofwiw

dyor

OK - what's below is produced by (cough, splutter) Simply Wall Street - those intellectual giants of the investment valuation world. But they've published it today, so I am summarising what they say and providing a link to the relevant article. I'm sure I've seen a reference to a SP of £43 somewhere before.................

"Share Price vs Fair Value - UPDATED 11 Dec, 2023

What is the Fair Price of JOG when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Current Price

UK£2.30

Fair Value

UK£43.29

JOG (£2.30) is trading ......significantly below our estimate of fair value (£43.29)

https://simplywall.st/stocks/gb/energy/aim-jog/jersey-oil-and-gas-shares

dyor

...........the big problem is the current UK Govt and the one waiting in the wings. Neither cares about wrecking our country

Has FEED even started??

Errrr....................

CHF/Andy144

Quite a lot of the Government's debt is to UK citizens and UK Pension funds (via gilts & government bonds).

The likelihood seems to me that they'll come after wealthy (or even perhaps not so wealthy) people with wealth and stealth taxes. They've already come at us. What is EPL if it isn't a wealth tax?

Message to young people in the UK? If you want to prosper as a result of your education, enterprise and hard work, pick somewhere other than the UK to spend your future.

..........sorry - forgot the knighthoods and peerages

yours ever

Buckfastleigh

Yes, Millario. But you're sensible and possibly even have your country's best interests at heart. You're not after votes at any cost from the masses so that, after getting voted in, you can line your pockets with salary and expenses, a guaranteed index linked pension for life no matter how short your period in office as an MP - and a ticket to fat pay packets as non-exec directorships in companies after the Commons in return for lobbying for their interests among former colleagues who remain MPs.

Be under no illusions, politics is a very dirty business. Those who rise to the top are sometimes even smellier than most.

Commercial oil & gas is forecast to run out (at present levels of demand) by about 2050 and 2070 (respectively) anyway. It's only ignorance that prevents people from understanding exactly what's going on.............

dyor

Robsroom - the problem is virtue signalling. Labour has said it doesn't mind importing the oil and gas Britain needs at higher prices and a much higher carbon footprint - as long as it sends the right message to countries not as super rich as the UK (shows how deluded Stoma is - Britain is as bust as a rat - most countries in the world are better off than the UK simply because no one would ever lend them the amount the UK Gov't owes. Sadly a good deal is owed to UK citizens saving for retirement, via the ponzi known as "gilts" and government bonds.

Below is just the National Debt part of the liabilities. "Off balance sheet" liabilities have to be added. These include unfunded liabilities for (mostly) index-linked public sector pensions, old age pensions and onerous "leases for life" signed on all the new schools and hospitals Brown had built under the "private finance initiative" - his personal favourite. Depending on actuarial assumptions used on the unfunded pensions, total government debt is £7 or 8 trillion

https://www.nationaldebtclock.co.uk/

If it's any consolation, the US is in a much bigger mess. China and other far-eastern countries have all the world's money.

..........not the best thought-through assessment of the situation, dgdg1.

It would take too long to explain why your assessment is unbalanced, but it all comes down to eventual investment return. How investment return is measure depends on a multitude of factors, all involving assumptions about the future. These include: future oil prices, cost of money, tax rates, currency fluctuations and a whole lot of other things. How much is a commercial asset worth? You possibly can't tell me, but I can tell you: the present value of all the cash that asset will generate over its lifetime (or your period of ownership). Work it out. It's called: NPV.

A simple example of what changing the risk/return metrics can do? When Gordon Brown raised the rate of tax charged on UK oilcos's profits (in 2008) from 40% to 60% and then the clown Osborne increased it to 62% from 2010 to 2015, the result was that taxes paid by UK oilcos to HMRC dried up completely in 2015, 2016 and very nearly all of 2017. Osborne reduced the rate to 40% in 2015, but it was too late. The OGA was set up in about 2015 (I can't be certain of the exact dates) with the mission: MER - maximise economic recovery (ie generate lots of cash for the Treasury). Taxes started trickling back in as production levels increased and annual tax receipts steadily increased (despite fluctuating oil and gas prices). By 2022 the situation was looking quite positive (levels hadn't yet reached pre "Gordon knows best" levels but were heading in the right direction). Step in Sunak and the rhyming Hunt and slam UKCS producers (not BP and Shell because they'd gone) but the smart "next generation" operators like HBR, Neptune, Ithaca, Enquest & NEO, most immediately focusing on opportunities anywhere but the UKCS. The naivety of Sunakhunt in thinking tax revenues at the absurd new rates would just flow into the Treasury's coffers is breathtakingly stupid. £28bn more in taxes by 2028?? It's taken a while for oilcos to reduce UK activity (unless justified by the present re-investment reliefs available) towards "care & maintenance only", but the movement is increasing. Politicians should eventually get it into their thick heads that if you tax companies to the hilt, those companies will walk.

That two UKCS big cash generating (despite EPL) companies should find JOG an attractive partner to farm into is great. The fact they can reduce their tax bills by paying the infrastructure costs of getting to production in Buchan in no way reduces the value of what JOG has retained fully carried. I refer you to the earlier part of this post.

God knows why there are so many nay-sayers talking down the assessments of analysts who've forgotten more than the nay-sayers ever knew in the first place.

https://www.bing.com/search?q=dunning+kruger+effect&form=ANNTH1&refig=17f2a681fe85440c9a8de1f4c383984d&pc=ASTS&sp=1&lq=0&qs=AS&pq=dunning+kruger&sc=10-14&cvid=17f2a681fe85440c9a8de1f4c383984d

dyor