Member Info for Greener101

facing facts uk ns production will be 20% of what it is now in 2030. the infrastructure will be gone so late life will be dead. jog may be the last big dev. i can't see lab doing anything to help. meanwhile we will still be consuming!

if only there was a way to go long africa dictators/ putin.

my dream is that jog develop buchan / j2 / verber and give back the cash @75% tax.

uk is ******ed.

ps the reason for the move may also be that the market knows neo have bought the fpso, and thus made the commitment. i've heard the rumour from several sources. our next announcement maybe the mother of all rns to paraphrase an oily dictator.

DU - I was hoping some brave soul would take the trial sub and summarise it!

Like you I believe JOG will end up with more than a 12.5% carried interest. But that's all we know now. I would add I hope the market sees some risk between where we are now and 2nd FO/ FPSO S&P contract signed otherwise RNS day will be a dud!

My understanding is JOG will get their capex paid for, but retain a concomitant interest in the oil revs minus opex. There is some jiggle potential on the definition of those terms.

We know that if NEO buys the FPSO, it's likely out of their own pre-tax profit with an EPL target on it. Effectively, they pay only 8p in the pound (something like that).

So - not using a calculator, if FPSO is 800mm, JOG might end up with a $180mm share. Do they get use of it? Or do they own it? Neo will have paid only $14mm for this share - why not give it to JOG (for something else), who may be able to recoup a multiple of that if the FPSO is sold rather than scrapped at the bed of the project?

That's all I meant. It may be claptrap, but I don't think it was what you had taken from it.

Https://www.upstreamonline.com/exclusive/fpso-negotiations-ongoing-for-buchan-project-in-the-uk-north-sea/2-1-1498512

I can't read this as behind a pay wall but here's an update from this morning

I asked a shipbroking mate last week about this particular FPSO. He got back to me 5 mins later after speaking to the relevant desk and said that everyone knows it's being bought by NEO and that it's heading for refit before Buchan. Just not offical yet.

Wouldn't it be interesting if NEO structured the deal such that JOG owned 12.5% of an asset that cost >2bn new (in exchange for something). It'll be no more than half that now but still. Be a tax efficient way to transfer the asset? Pure conjecture.

Nice points DU. I might be overestimating the discount applied for NEO's commitment, in passing I have a shipbroking friend who says it's an open secret S&P world that NEO has bought it and it's heading to GBA after a refit. Also the second FO.

Probably the lack of clarity on the nuts and bolts of the deal and total cost are the main cause of discount, which as you say should be resolved soon. Even though we have a carry ratio for Capex, we don't know the details of how they will share the FPSO. We cannot be sure but JOG will had a decent hand to play in the negotiation if NEO really had little other obvious option for Western Isles, especially as Dana was happy to bugger off from the region at a good price (I understand they have had their fill from UK gov).

One thing I would say, to your point about timing, we are still absurdly cheap here, and if we get a good RNS in the next few days, you can normally get a chunk at 8:01am if you mash your keyboard hard enough! It's amazing but the market often takes minutes to decide at the open.

Https://www.energyvoice.com/oilandgas/north-sea/522892/shapps-summit-harbour-energy-equinor/

I had it from a very close source that something would be changed about the fiscal environment, even that there were three options being looked at. Meetings like the one above are happening, and companies are reacting positively as if something good is happening. Meanwhile no changes or even changes on the table. What in the name of all that is holy is happening?

A thought occured to me - I wonder if anyone could comment.

If indeed Neo has bought Western Isles FPSO off Dana, and now owns a bit of kit worth 900mm, I had considered why don't they do the FO 100%?

My thought is, what is the tax treatment on the way out for selling the 37.5% of the FPSO? Because on a cash basis it would seem very sweet to enter the GBA project with a massive tax deduction, and then flog the 23% of the FPSO they already owned plus a bit more to an FO partner. You would almost get paid to do the project.

I'm always looking for Neo's motivations, given the horrible NS climate. It could be a smart way for Neo to disinvest from NS (cheap in via tax, selling assets on the way out)

Very interested to hear people's views.

PS when is that RNS coming!

Regarding the 12.5%, I simply mean a second FO is not yet confirmed, and this a 20-25% is not guaranteed. Although again, I believe it will be confirmed very shortly.

DU - for the avoidance of doubt I do not believe Neo will walk from the project, and I also believe the FPSO purchase terms effectively lock them in. So I'm not suggesting to anyone on here anything. I've also endlessly opined why NEO are almost forced into developing the GBA, and I have bet big on it.

But so far, NEO have committed 2mm, on a 1bn dollar project - which is a rounding error. There is absolutely no contractual obligation to proceed should their strategy change. I'm not sure what aspect of contract law you would cite that suggests otherwise.

You will note that Ithaca is reported as the blocker to proceed on Rosebank, not the gov. The market is not taking GBA development as 100%. Hence the current multiple discount.

BUT - I believe we are very close to news that almost completely mitigates that risk.

We are waiting patiently for 2 things that fundamentally de-risk this stock.

There is limited political risk as JOG will get approval well before Lab gets in, and Starmer will not rescind granted licenses, especially redevs which are politically less sensitive than high profile projects like Cambo and Rosebank. NSTA has said they don't object, the project is a reuse of existing infrastructure and what possible objection could they have.

The risk is that NEO don't end up going ahead, and that the farmout is only 12.5% .

Once FPSO purchase is announced, NEO will have committed to the deal. Drilling components with long lead times will get ordered, and it'll be more costly to pull out than go ahead.

Once the second FO is announced, that risk is also removed.

This pieces of news could hit tomorrow. But they have not yet been confirmed, so we still see fragility at this low price.

I am Spartacus

Https://www.cityam.com/why-the-windfall-tax-is-here-to-stay-after-todays-bombshell-oil-and-gas-announcements/

It appears the Windfall tax itself won't change, but some other long-term plan is on offer; freeports and suchlike.

Even if they did change it Lab were sure to screw it up. Hopefully whatever they come up with to sweeten investment in NS, Lab have to break a contract to undo it...

Many thanks Cyril. Magnanimous in victory, gracious in defeat.

TOLD YOU SO!!!!

Https://www.gov.uk/government/news/hundreds-of-new-north-sea-oil-and-gas-licences-to-boost-british-energy-independence-and-grow-the-economy-31-july-2023

Last paragraph

In the Telegraph - 'the gov has signalled that it will rethink its windfall taxes on o&g profits'

How about oil cos can invest their profits with tax deduction in renewables? That would seem extremely sensible and politically acceptable. I mean I'm sure they'd rather have the cash but if as joggers we had $100m going into a windfarm it's more attractive than $25 after tax

What a relief. Particularly for those trading on margin!

Nice to see animal spirits returning to the board, and top posters posting amongst a sea of green. Good day for JOG PIs. Power to the people!

We are getting close to the point when someone will just take it out. It's odd but within a few weeks probably much higher

I know nothing more than already said, a small additional is that my industry source said that Hunt did not enjoy being criticised when he met E&P firms a fortnight ago. The same source said that E&P is no longer viable in NS full stop, and that the lack of EPL offset for decommissioning is terrible and incentivises companies to 'walk' from previously profitable assets. It also shortens the useful life of assets. This means the government is being faced with an accelerated collapse in NS due to closing infrastructure. The worst part about this is much NS production and incremental drilling relies on this infrastructure, and when it's closed it's not possible to reopen it. EPL has yanked the life-support machine from the dying patient.

In happier news, as said this puts JOG in a good position - FPSO needs on a little decom costs.

Something's got to give on EPL or those licensing round are for naught- E&P is basically impossible currently, according to the industry.