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Tigar, the EPL is a Levy and they used this definition to say past tax losses could not be used to offset it. How the OGPM and past tax losses will interact, as with how hedging will be managed to arrive at a realised price, has not been communicated. Even if the OGPM’s implementation remains 2030, these are important details companies need to model and make informed decisions.

Merging the hedging discussion with the OGPM, I imagine it will be very complicated how to work out and report on how hedging “maps” to sales revenue. If the company is free to map, as it wishes, I assume, in most cases, they would want to use hedges to stay below the OPMG thresholds for sales from production in the UK. This may all be somewhat irrelevant at the moment, but I again wonder whether this aspect could also be another factor holding up the implementation of the OPMG.

The OGPM means CT and ST is payable on all profit, and an additional 35% tax is paid on realised (post-hedging) revenue above the thresholds.

Tigar, my understanding of the OGPM, is that it is a 35% tax on realized revenue over the thresholds, which for oil for 2026 is $90. Corporation tax and supplementary tax continues to be paid on all profits irrespective of the realised prices. For the Majors, anything over $90 must be almost all profit. Therefore, on real revenue over $90 they would be paying something like 75% tax, being 30% CT, 10% ST, and 35% OGPM. It is not clear whether the OGPM component could be offset against previous tax losses.

Let me get this straight. The oil and gas industry is requesting on its production in the UK a PERMANENT windfall tax designed and approved by the government, which would both secure windfall taxes and encourage investment and job creation, but the government prefers to maintain a temporary windfall tax, which is disincentivising investment and destroying jobs. This permanent windfall tax at oil prices above US$90 would generate tax on all profits AND on realised revenue above $90, the effect of which would be close to the same as the current temporary windfall tax. 🤔

Https://www.agcc.co.uk/news-article/agcc-ed-miliband-is-wrong-on-bp-profits-and-should-apologise-to-workers-for-deleted-tweet

Around 3% of BP’s worldwide production comes from the UK continental shelf. Therefore, EPL or no EPL doesn’t change much for them. In fact, considering their limited hedging, the OGPM at current conditions would likely deliver more tax revenue from them. So, more reason to implement sooner the OGPM. But the public will not notice this. A big part of these results is due to exceptional returns from trading, and I don’t know how or where that is taxed.

Click on "ENQ Financial Diary", Ex-divi date is 7/5/26.

Still more… and it could well be exuberant optimism mixed with confirmation bias, but on top of the mounting pressure from all sides and the real energy security issue (yes, won’t change anything for a while, but will help for the next time, which will surely come), I also read into the industry’s muted negative reaction to Reeves Tuesday statement the intent not to push too much now as something is known to be coming. As an example, AGCC’s communication today, instead of demanding what must be done (earlier implementation of the OGPM) strikes a gentler tone:

“AGCC said the £17.5 billion pipeline of potential North Sea investment - an offer made directly to Chancellor Rachel Reeves by operators earlier this month - demonstrates that growth can be unlocked quickly if the right policy choices are made, with major benefits for jobs, energy security, supply chains and public finances.”

“That is why growth must now become the top priority. Government should be doing everything possible to unlock investment, strengthen confidence and create jobs. With £17.5 billion of potential North Sea investment reportedly ready to go, ministers have a major opportunity in front of them. Grabbing that opportunity would support employment, boost supply chains, improve energy security and generate substantial value for the wider UK economy.”

https://www.agcc.co.uk/news-article/growth-must-become-top-priority-as-chamber-urges-government-to-seize-17-5billion-north-sea-opportunity

Furthermore… Why is Reeves even talking about tiebacks, and their benefits, without referring now to the fiscal conditions? Tiebacks, what they are what is allowed and not allowed etc, is absolutely the domain of Milband. Reeves’ communication yesterday was something of a nothing burger. So, why did Reeves not refer to the critical thing under her domain and control? Could it be… she has requested the companies provide information on their current realised prices, and will use this info to model what the OGPM would likely generate in tax revenue. The assumption is it would be more than the EPL, and with this information she could justify an earlier introduction of the OGPM, explaining it was meant exactly for situations as now and so on. Indeed, why not even introduce it now? Doing this would penalize the unhedged Majors, something many would like, but would help the hedged Independents, who are probably more important for the future of the North Sea.

Not, change is coming. Reeves is not going to allow herself to be embarrassed by hailing tie-backs, their importance and all the benefits they enable, only to then find the companies tell her to stick the tiebacks as it's not worth the risk and effort. This will have been all prearranged. An announcement on fiscal changes must be close. Most likely OGPM late next year. This allows companies to invest knowing most production will fall under the OGPM regime and the government to snaffle more EPL. James Murrays "all I can say" comment could be an indication change is close. As is the fact, as yet, no outcry has been heard from the industry following M&R's statements.

The oil shock is coming. It’s already here. The paper price says fine, the physical says fear. One number on Google, another in the real. $35 apart. Now that’s a big deal. And when paper meets physical… somethings gonna break!

https://youtu.be/tZbBjmDwHJQ?is=TP7v5QTHDYoIqKly

The oil shock is coming. It’s already here. The paper price says fine, the physical says fear. One number on Google, another in the real. $35 apart. Now that’s a big deal. And when paper meets physical… somethings gonna break!

https://youtu.be/tZbBjmDwHJQ?is=TP7v5QTHDYoIqKly

In a statement [today], DESNZ said it will publish further details on plans to expand North Sea production and “provide greater certainty and clarity for industry looking to invest in already-explored areas near existing licensed fields, supporting a fair and managed transition”. https://www.energyvoice.com/renewables-energy-transition/596070/live-ed-miliband-clean-power-plans-updates/

And… when will Reeves also provide the fiscal “certainty and clarity” to give companies the confidence they need to invest?

Does the paper v physical price difference not blow a hole in Miliband’s position? He argues that as oil and gas are global markets and producing more in the North Sea will not take a penny of people’s bills (not that, anyway, this alone would be a valid reason not to increase production from the NS). “In a crisis, oil stops being global. It becomes regional, physical, and political.” If there was more or less physical oil available from the NS then, presumably, there would be an impact on the physical price paid by refiners, and the price at the pump is driven by the price of product from the refiners. For gas, the price of piped NS gas, whether from Norway or the UK is lower than LNG. Miliband’s core (yet flimsy) defense of his policy is that increased production would not reduce directly prices for the consumer, but even this is a flawed argument.

Come on Hunbah, what part of the below is difficult to understand? 😆 😆 😆. Such meaningless indecisive double-speak drivel from Miliband to try keep all audiences happy and please none. And it is Starmer, who is in enough trouble already for his duplicity, who lets him get away with it in damaging the country.

“The North Sea is an important resource for our country which we will continue to use for decades to come,” he is expected to say.

“I do not agree with those who say we should ‘turn off the taps’ overnight. But nor do I agree with those who suggest that somehow ‘drilling every last drop’ will take a penny off bills or give us energy security. You can’t solve a fossil fuel crisis by doubling down on fossil fuels.”

Let’s hope it’s part of a double act, and Revees’ part will follow soon after Miliband’s speech tomorrow.

Malu, Hibiscus, as you say, could be a target, but to consume and release value from the $3+B of tax loses the acquisition of UK production must be the priority. Profit, for eggs and baskets reasons, maybe purchase of other assets from Harbour would work better than Kraken. The hope is Reeves provides soonest clarity on an improved fiscal environment and this unlocks the deal door.

As expected the potential delinking of gas/electricity prices is getting the attention. This could be good for us as if the 2 things are packaged together in the same communication the potential drop in lecky prices will get the lion’s share of attention. People are saying the O&G companies will lobby to resist this delinking - I don’t see why they would. I also don’t see a direct connection between more NS production and delinking gas/electricity pricing. Maybe Reeves could say the extra revenue will be used to subsidise electricity prices.

Very nicely put, Hunbah. To add, and maybe getting ahead of myself, but after the unexpected oil price rise should there be an acceptable change to the fiscal conditions, then the third major catalyst for EnQuest, a sizeable acquisition of UK profitable production, could also easily fall quickly into place.

The SoH status and oil prices is “pumping and dumping” oil company SPs, but physical oil being sold in the $120-150 range will show in results and, eventually, fundamentals will replace sentiment in SP pricing.

Far more important for us right now is what Reeves and Miliband plan to soon announce about delinking gas and electricity prices, and tiebacks.

On tiebacks only acceptable fiscal conditions will endure “that companies have the confidence to exploit those resources.” There could be more details in Sunday’s press.

Why have/are R&M put delinking gas and electricity prices and tiebacks in the same communication? The gas/electricity delinking and its consequences should get far more media and public attention. Has there been horse-trading between them to, especially for Miliband’s benefit, reduce attention on and criticism of actions to encourage increased NS production (and, maybe, also the consenting of R&J)?

Who loses out if the link between gas prices and electricity prices is cut? The electricity generators (which?), wholesalers and retailers?