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Ancient, miles, thanks for your comments re possibility of a Harbour/EnQuest link-up.

Yes, ancient, from Harbour's stated expansion strategy inorganic growth in the UK is not on the menu. I assume LC would not want to be seen to be considering investment in the UK until and if any decision to do so was announced.

As you wrote, miles, there are indications at E that they are re-arranging things possibly to facilitate some sort of M&A activity. I did not know it was pretty sure EnQuest had approached Harbour earlier this year. A tie-up between the two allowing a faster use of E's tax credits would not reduce the EPL charge but until they last should remove the 40% tax from RFCT and SC. The introduction of the ESIM's with its EPL price triggers CPI index linked from April 24 has improved slightly E's RBL position, but an E/H combo would greatly improve RBL conditions and allow re-financing to lower borrowing costs.

Thanks again.

Rookie1 and others, could a merger of some sort or other between Harbour and EnQuest be in the works? Apart the synergies and economies of scale etc, such a merger could create value by releasing faster the value in the $2.4B of so of tax losses at EnQuest and reducing their financing costs. Does anyone from the Harbour side of things have any insight or has seen something indicating M&A between Harbour and EnQuest could be on the cards? Or indeed anything indicating no way such a deal could happen. Wild guesses OK too 😊. Thanks.

Wow! I am positively impressed I will get a reply and the speed of the reply.

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What is the historically normal hand-back percentage?

Auto-reply: "Due to strict parliamentary protocol, I am only able to deal with enquiries from constituents of mine in Oxford East. "

"If you are not a constituent, and are emailing me in my capacity as Labour Party Chair or Shadow Secretary of State for Women and Equalities, please email anneliese.dodds.mp@parliament.uk. Please be aware that there may be a long wait before your correspondence is answered. "

I'll re-send my email to anneliese.dodds.mp@parliament.uk - it can do any harm.

Maybe we should all email Ms Doods stating our interest in this matter and asking for the original source for the 9X cheaper information. Not sure if is the right email for such things, but I have already emailed her at anneliese.dodds.casework@parliament.uk

Vor, I am pretty sure both oil and gas prices have to be below the trigger values. Oil could well go below its threshold but vv unlikely gas would. This is a big issue, especially for companies like EnQuest where there is not much gas. It would be an accounting headache to split oil and gas revenues and taxes.

See: https://www.gov.uk/government/consultations/energy-profits-levy-and-the-energy-security-investment-mechanism-discussion-note/outcome/energy-profits-levy-and-the-energy-security-investment-mechanism-discussion-note-summary-of-responses#Chapter%201:%20Introduction

"In this announcement the government confirmed that the end date for the EPL remains 31 March 2028 but that the levy will permanently be disapplied earlier if average oil and gas prices BOTH meet or fall below the ESIM price thresholds for 2 consecutive quarters."

Vor, one thing to note is that per the ESIM there is dual lock of price triggers of $71.40/bbl for oil and £0.54 per therm for gas. For the EPL to fall away both prices have to be below the trigger values for 2 consecutive quarters.

And my guess is that most holders on the SE exchange who intended to sell will have sold by now.

I say this because I assume most sellers would have used the delisting date as their sell deadline, and any who hesitated would not want to sell now at current SP.

Romaron, regarding question 2, from the 30/10/23 RNS, extract below, I understand the last day of trading to be around 19/12/23.

"The formal request to delist is therefore expected to be submitted to Nasdaq Stockholm on 5 December with the last day of trading likely to be around two weeks after the application date (the "Delisting Date")."

Sekforde, I agree, Stevo has helped me understand better about the interaction between the EPL, tax losses/credits, and his view of the resulting benefits of going now for either organic or inorganic growth, as well as getting clear for me the difference between EnQuest's declared gross production and its "entitlement" production. He also explained why he considers EPL is chargeable on disposal of assets not part of a single legal entity. He may point out things we prefer were not as they are but that does not make him negative. He bases his conclusions on info he declares and when he finds the information he was basing his conclusions on was wrong or has changed he readily changes his view/conclusion.

The steps for a legal challenge to the EPL/ESIM’s price thresholds:

1. Wait for the ESIM and its CPI-linked future annual adjustment to be passed into law.

2. Initiate legal proceedings to challenge the threshold prices used in the EPL/ESIM by using the government’s own documents which define the reason for the EPL etc and how the price thresholds are calculated (average of the 20 years start 2003 to end 2022). Bring in Expert Witnesses to confirm, as if really needed, that any monetary value from the past to be meaningfully used in the present must be adjusted for inflation. There is now the precedent of uprating going forward using the CPI as the benchmark. Why uprating for the future and not for the past?

3. Upon a successful outcome, and if the government of the day then just makes up some other different reason to apply a similar levy, contest that too as it would effectively be retro taxation for the period from 2022 until then.

Using the inflation-adjusted threshold prices it will be possible to demonstrate that the “extraordinary profits” were limited to just a part of 2022. In addition, having higher price thresholds will increase the change of the EPL ending before 2028 and improve the RBL lending conditions.

Such action unlikely to be a crowd-pleaser and which company or industry association would “risk” to bring such a challenge, but prima facie there does seem to be legal merit to my argument. Maybe we could all dig deep down the sofa and bring a class-action?

The other thing this price-setting “trickery” does is contribute to many people thinking the current price of oil is high according to historical averages when in fact it is lower than the average and far lower than it should be considering its real value. People have got used to energy being far cheaper than it should be, and Red Ed and co are cementing in people’s mind’s energy will be getting cheaper when it will not (see “The Great Simplification” etc on how long it took for hydrocarbon fuels to form and how long it has taken us to use this energy army).

Irresponsible behavior from our so-called leaders.

1. The ESIM threshold prices were calculated using 20-year historic averages to the end of 2022 and for oil is set at $71.40 per barrel.

2. The ESIM will be uprated in line with the UK’s Consumer Prices Index (CPI). This will be set in law.

3. The $71.40 figure was calculated using actual not inflation adjusted annual Brent prices.

4. If UK CPI inflation-adjusted annual prices were used using the $71.40 threshold figure for Brent would instead be $97.75.

Therefore, according to the Treasury’s own logic, rules, and now established precedent that it is correct and fair to adjust the ESIM according to the CPI, why were actual and not inflation adjusted 20-year prices used to set the starting ESIM threshold? I realise the Treasury could use whatever self-serving explanation they want to justify this, but if the UK and its Treasury wants to be seen as acting by the “rule of law”, or at least by the “rule of rules” or “correct and fair behaviour”, they must apply one and the same calculation rule for the past and the future. It is plainly absurd past prices are not inflation-adjusted.

Why does the industry not challenge this? And, once the ESIM is legislated, through the courts if needed. What do they have to lose?

Stevo, re your 23/11 1910 post, and "a reference that EPL is chargeable not only on oil production, but also on sale of producing O&G assets". (Your full comment copied below.) Is the reference you refer to in the Review Outcomes document? Is it your understanding that it is already the case EPL is chargeable on sale of producing assets or that this is a proposed change on the way? Thanks.

3. However my biggest concern was a reference that EPL is chargeable not only on oil production, but also on sale of producing O&G assets. Given that the tax base of O&G assets is zero (due to initial capital allowances), there will be a 75% tax on the sale proceeds of producing reserves. This is going to make sale of producing assets much more difficult and uneconomic. There are potential workarounds if the asset are in a separate legal entity but could make deals like Magnus much less viable for seller.

Romaron, hehehe, even the Greek PM now meets and speaks first with Starmer.

Regarding the ESIM and annual price threshold updating, see post 22 Nov 2023 16:36 :) :) :)

Good solid update for the past and building confidence in the future. Surprising the SP has not reacted more positively.

Romaron, one of those interesting market developments was yesterday’s announcement about the agreement between Jersey Oil and Gas and Serica https://www.energy-pedia.com/news/united-kingdom/ersey-oil-and-gas-agrees-greater-buchan-area-farm-out-to-serica-energy-193367

This looks like a good omen for EnQuest. Buying existing profitable production to accelerate value-release of the tax losses/credits still looks the best, but could we at some point read something similar to the JOG/Serica deal involving Bressay and maybe later Bentley?

My thoughts too, romaron, all rather bland. However, I guess that’s how they have to play it. An organisation representing just oil n gas production going forward would be on a hiding to nothing and many would immediately close their ears . Having all under OEUK gives the oilies a voice which will be listened to and emphasizes the transition is a team effort and the crucial role the oilies can and must play for a long long time.

Romaron, re your 1900 post yesterday:

https://www.energy-pedia.com/news/united-kingdom/oeuk-autumn-statement-response--investment-in-homegrown-energy-key-to-uk-growth-193360

This either puts Miliband at odds with Starmer, who stated he would not “extend” the WTF/EPL, or means Starmer is being disingenuous as he may not “extend” the EPL but he intends to “expand” it.

Both need to be quizzed on this. Best would be Red Ed is jettisoned but I can’t see this happening.