Member Info for Dumbly

Mansard, I share your major doubts, but I also cannot see Starmer and Reeves (sounds like the name of a comedy duo) wanting to knowingly pretty much kill investment in O&G in the NS with all the resulting consequences. Labour are planning to be in power for a long time and oil & gas is going to be needed for a long time. For this I fall on the side of assuming the changes to the investment allowances will not be major. There must be a lot of number crunching of different scenarios going on just now at the OBR.

The Conservatives played it really dirty. In their interests, not the country’s. Politics at its worst. They shamelessly took Labour’s key taxation policies, including the WFT, to fund their NI etc tax cuts and in large part remove Labour’s opportunity to champion the already implemented policies. The Tories knew it was highly unlikely they would get reelected, so they made the situation as difficult as possible for Labour. During the election for Labour to still be able to campaign on these issues, WFT, non-doms, etc, required they go further than the Conservatives, hence the statements about increasing the WFT by another 3% and removing the investment allowances loopholes. Labour by saving they will not increase taxes on working people, which I understand to mean income tax and NI on wages/salaries, has greatly reduced their scope for revenue raising. We will have to see how their statements about oil and gas fiscal policy pans out. Significantly worse conditions, especially without a road map for the long-term fiscal policy will stop investment and therefore is against Labour’s primary objective of economic growth.

I think the best we can hope for is the EPL is increased by the announced 3% but there is only some “for show” tinkering with the investment allowances, together with something providing assurances of longer-term fiscal policy stability, including the eventual removal of the EPL. Something like this should work OK for EnQuest, especially if combined, as expected/hoped, with acquisition/s of existing production. I would expect the anticipated Autumn budget to include the detail concerning the WFT percentage and investment allowances, as well as the policy framework for the duration of Labour’s term. They need to give enough detail and assurances to allow companies to make yes/no investment decisions.

Thoughts?

Aim, Miliband is searching for relevance and influence. He has used the classic ploy of plastic-leaders by finding a parade and then placing himself up at the front. That a lot of the things he champions also dove-tail with his political ideology is a win-win for him. He will get found out, the question is when and how much damage will he have caused in the meantime. Unfortunately, I can’t see Starmer replacing him or reining him in any time soon.

I am afraid to say it looks like Miliband will have the last laugh here as he pushes through his policies by using the weak argument that the voters’ recent choice equates to support for his agenda. This, even if 30% or so of 60% of voters went for Labour (which was less than Corbyn collected). Last laugh, that is, before most of the rest of the world who will benefit from the UK’s and EU’s ideological virtue signaling.

Garyn, Stevo wrote before: “In broad terms, EnQuest losses would be available to reduce the taxable profits of an acquired company by 50%. If EnQuest acquired a business with tax losses, these losses would not be available for EnQuest to use for 5 years.”

I doubt conditions would be different in the event of a merger, but maybe others know more and could comment.

Unless a UK-focused company is in a desperate situation, and both Serica and EnQuest are not, why would they enter into something as major as a merger before knowing the fiscal conditions/outlook after Labour's first budget?

O, I had a similar thought. Nothing specific about O&G and its associated taxation is… good news? I guess the next major step in this regard will be RR’s first budget likely in mid to late September.

“OECD member countries have agreed that to achieve a fair division of taxing profits and to address international double taxation, transactions between connected parties should be treated for tax purposes by reference to the amount of profit that would have arisen if the same transactions had been executed by unconnected parties. This is the arm’s length principle.”

https://www.gov.uk/guidance/transfer-pricing-transactions-between-connected-companies

https://www.gov.uk/hmrc-internal-manuals/international-manual/intm412040

Nice thinking, Tigar, but I think HMRC would challenge successfully a similar transfer pricing arrangement. If such schemes were allowed many would transfer the profits from local activities to more favorable jurisdictions tax-wise.

Even if the fiscal conditions were left as they are, I cannot see companies being prepared to risk the future introduction of a this or that emergency law putting another tax on oil and gas production. To be prepared to invest I would expect the companies now demand something similar covering the fiscal conditions to the arrangement Sajid Javid introduced in 2013 to provide legally binding deeds with oil and gas companies to guarantee decommissioning tax relief at 2013 levels in perpetuity.

It’s real and, apparently, from well over a year ago. Does not change him being a right plonker.

Someone who knows how to check these things, please tell me this is some sort of AI-generated Deep Fake. Otherwise… Sir Keir, you must intervene soonest as this plonker won’t change and risks to derail your government.

https://x.com/mwduffy2duffy/status/1811817655185047671?s=46&t=3icqiBhgmGSnUo8L1GVnng

Oxygen, I read the situation slightly differently, being that Miliband's department was sort of falling over themselves to make it clear they would not stop existing licences or even those in the process of being awarded. This I saw as a poisitive. However, their “We….will manage existing fields for the entirety of their lifespan” comment comes across as if they think it is entirely in their gift, their control, to manage these fields, some of which could have a lifespan of another 25 or so years. My point is they are enablers through their policy choices, whilst the real power to decide the management of these fields sits with the companies and their investors. Unless... Labour wants to properly nationalise the UK O&G industry, but this won't happen. And further partial nationalisation via fiscal policy would result in earlier field closure.

Miliband’s department said yesterday “As previously stated, we will not issue new licences to explore new fields. We will also not revoke existing oil and gas licences and will manage existing fields for the entirety of their lifespan.”

I love the “We….will manage existing fields for the entirety of their lifespan”, like they control, or even own, the licences of these fields. They can create the fiscal conditions to encourage others to maybe “manage existing fields for the entirety of their lifespan”, but they cannot ensure this happens. Maybe just sloppy language but maybe an insight into their thinking, being that these assets are under their complete control. Instead, they need to show their fiscal conditions for this sector, ideally for the next 20 or so years. Put something irrevocable in law and then let the companies decide whether to develop the fields or not.

Romaron, re your yesterday 1308 2nd para, I also assume EnQuest acquiring WP’s Kraken asset is highly probable. And buying the lot very possible. On use of tax losses, anything WP has attached to Kraken, I wonder, is it possible to separate out tax losses by field, or does the whole company have to be acquired to get the tax losses? However, and whatever, if tax losses cannot be used before 5 years and considering all the risks involved and the current political climate, then their NPV cannot anyway be much.

(I have not yet seen an official confirmation about the content of the “sale’s document” seen by Reuters.)

I’d imagine the use and value of tax losses will be a significant part of any deal. Waldorf Production has it’s own tax losses. I read this somewhere, but I can’t find it now. On transfer/use of tax losses, Stevo wrote before: “In broad terms, EnQuest losses would be available to reduce the taxable profits of an acquired company by 50%. If EnQuest acquired a business with tax losses, these losses would not be available for EnQuest to use for 5 years.” Maybe use of tax losses on the exact same field asset i.e. Kraken, are treated differently?

The pool of potential buyers of WP’s NS assets must be very limited. The “Giants” are unlikely to be interested. Would Harbour want more exposure to the UK, and does it have the resources considering its big deal going through? Unlikely.

How long do such things, to sell assets in this condition, normally take?

I wonder how significant the EPL/WT was on WPO’s downfall. Majorly significant I would imagine, and therefore another message to the politicians.

Maybe the company knew those buying constraints would ensure the buy-backs were less than planned? Anyway, won't be long before Labour put a tax on share buy-backs.

Has Sir Jim got Sir Keir’s ear? We can but hope. Sir Jim in this article last month made his views crystal clear.

Jim Ratcliffe: Labour’s net-zero plans are absurd

https://www.thetimes.com/article/5c469701-1809-4086-832b-3bdeebca9017?shareToken=f8e0260e47086f4f6af1226ba13d650a

Ensuring a the future for the refinery but not ensuring at least the

maintenance of current levels of O&G production in Scotland seems illogical. “Energy” was discussed and sure would be good to know the detail.

https://www.shropshirestar.com/news/uk-news/2024/07/07/ensuring-future-for-grangemouth-oil-refinery-is-real-priority-says-starmer/

From the article:

Ensuring future for Grangemouth oil refinery is ‘real priority’, says Starmer

Sir Keir said he and Mr Swinney discussed issues including the economy and energy at the meeting at Bute House in Edinburgh on Sunday.

Mod, is was putting the additional comment in between quotation marks which threw me. A laughing emoji or :) would have helped. Maybe was the “seriousness” of the day and matter which caused by sense of humour bypass.

AA, the hope that Labour could post-election relax their position on the sector was dashed by your comment but thanks to your clarification my state of likely delusion has now been restored.