Member Info for Dumbly

EnQuest continues to work with OEUK, the industry regulator, our peers, and as a standalone corporate entity to raise awareness of the challenges presented by the EPL and propose changes which, we feel, will make the outcomes fairer for North Sea operators. You can rest assured that our efforts to influence targeted change within the EPL will continue.

Plus 60% on current price would make it around the 32.65p I "offered" a little while back :) :) :).
I think most right now would grab that with both hands,

Nothing is cheap if you don’t want it! For sure will send a message if the uptake is very low. Whether the message will be listen to is… another matter.

And 32.65p per share looks like a very full
and good offer :) :) :)

mrc, thanks for your thoughts on this, yesterday 1158, and on where you see the opportunities for the company.

12/1/23 is the deadline. The level of interest should be an indication/verdict on the impact of the EPL.
"The 33rd UK Offshore Licensing Round officially opened on 7th October 2022, inviting applications for licences. Applications will be accepted until 14:00 hrs GMT on Thursday 12th January 2023" https://www.nstauthority.co.uk/licensing-consents/licensing-rounds/
Energy Voice are reporting "An expanded windfall tax undermines firms’ ability to invest in the North Sea, sector representatives told Chancellor Jeremy Hunt in a key meeting on Friday, though they failed to secure concessions...". This was part of the conversation was not recorded in the readout of the meeting from HM Treasury as posted yesterday by mrc.

Stevo, re your comment "would be nuts to undertake high risk exploration on new blocks", which is a logical statement, it will be interesting to see the uptake/interest in the new round of licences on offer. We won't need to wait long to find out as, if I recall correctly, the deadline for responses is 12th Jan 2023. Perhaps tomorrow an early indication of likely responses will be given to The CofE.

QfO, they are thinking more short-term, and need this Windfall Robbery money to balance the books to pay for the waste during Covid and cost of living crisis now.

Good morning.
Regarding hedging losses, as said before, in their current position it would be great for Enquest if hedging losses can be used as an allowable investment to offset the EPL. However, I think hedging losses through the use of financial instruments are treated as other business expenses, for example as insurance costs are treated, and therefore are deducted as normal from revenue before both EPL and corporation tax are applied to profit. Not doing this would mean levies and taxes were applied on a false profit amount. Allowing hedging losses to be used to offset the EPL in the same way allowable investments are does not match with the objectives of the EPL. If others have a different understanding I am happy to listen.

Pelle/KrisS, thanks, that's interesting. I had missed that and need to think through the consequences.

KrisS. sorry, I should have added that I understand hedging losses can be used to offset profit, so in that way they offset the EPL and corporation tax, but can hedging losses can be used to offset EPL in the same way allowable investment would?

KrisS, are you sure "Realised hedging losses can be used to offset the EPL"? I am happy if you are. Thanks.

romaron, regarding the present value of the tax credits being around 40% of the tax credits themselves ($1.058bn), I may be being a tad harsh. I later said the present value could be $0.5bn, so increased to 47%. Apart the uncertainty about if and when they could be used, and sounds like 3-4 years is a forming consensus, another issue to consider is how inflation could eat into the benefit. At June 2020 the company said they recorded their estimate of the "real tax savings over time" to be $0.7bn, and at the time the tax loses were $3.1bn. Using the same ratios, the current tax losses of $2.627 would have an estimated real tax saving over time of $0.6bn. I am not clear whether the "over time" bit means the estimated figure has to be further discounted to give a present value estimate. Maybe there is something recorded on the balance sheet to show the estimated real value of the tax credits?

Interesting that nobody posted that yesterday "Jefferies cuts Enquest Energy price target to 30 (40) pence - 'buy'". If the price target had been raised I'm sure there would have been a post. Positive tho that the company is considered a buy. (For the avoidance of doubt, I'm long Enquest).

My pleasure, romaron. The important is that people do not confuse "tax losses" with "tax credits" and think there is $1.6bn or $2.6bn or so of "value" tied up in the company because of the "tax losses". The actual present value of the "tax credits" is probably around $0.5bn.

romaron, with regard to your reply to Tigar's comment of "at 40% tax saving our Tax losses will allow $1.6bn of Tax to be saved", where you wrote, "Tigar - you're out by about a $1 billion. Our tax losses at 30 June 2022 were $2.627 bn.", my understanding is that the "tax losses" are as you state but that the "Tax credits" are $1.058bn, being 40% of the "Tax losses". Therefore, the maximum amount of tax which could be saved is this $1.058bn and therefore lower than the $1.6bn Tigar stated. To find the actual present "value" of these "Tax credits" this maximum amount has to be discounted to take into account the likelihood of the "Tax credits" actually being used plus consider when they will be used. A finger-in-the-air calculation makes me think the present value is somewhere around... 40% of the current "Tax credits"? If the likelihood the "Tax credits" could be used increased and/or they were used sooner then maybe their value would be higher. This could happen in the case of an acquisition/merger, but I don't know the rules regarding the use of losses in one field being allowable to offset profits in another field and so on.

Sipp10, you were ahead of your time. 32.65 looking full as an offer. And i am not happy to think this.

Thanks for the info, Pelle.
If I had the resources, and there was a fit with my other things, I would be …making an offer right now to buy the company at 32.65

Jan, I agree with you about wanting an impact statement on the latest windfall tax, but FYI I recently (before the Autumn Statement) asked IR about this and they said they have not provided specific guidance as it could then allow investors to work out potential profit estimates and the company does not give profit guidance. I don't know if that's just a company choice or some legal requirement or due to some other restriction. However, they did add that... research analysts covering the company on average estimate c$100m EPL cost impact per annum at $100/bbl oil price (this was with the EPL conditions as communicated before 17/11/22).

romaron, your question about "the window of paying EPL 35% tax instead of 75% because of past tax losses" is the same one I have. Tarmac or Jan are maybe best placed to answer that. I'll have a go later. The EPL Enquest pays should not be 35% as they will make allowable investments. Having said all this, Enquest really should now make an EPL impact estimate statement.