RE: Buyback milestone should be reached today7 Jul 2023 08:29
So with these very simplified assumptions for 2023, assuming all production from UK (I know it's not, but easier for tax calcs):
- 185kboepd with the hedging in place and the rest sold at $76/bbl & gas at 100p/therm
- EBITDAX: 1.8B; CAPEX: $1.1B, FCF before taxes: $660M; P/FCF: 3.4x
- numbers look great here!
BUT here comes the problem: 40% PRT + 35% Windfall Taxes with very few get-out clauses!
- Full taxes assuming no tax credits can be used, no capex clawbacks, etc: $1.35B (that's probably the situation where HBR will have to dip back into the 2022 "tax allocation" accounting strategy & where Labour will come in)
- Taxes assuming the full tax credits can be used on that first 40% portion: $0.63B (almost zero FCF! how to continue paying the dividend then?)
- Taxes assuming 90% of CAPEX can be offset: $0.36B (Most/all of FCF goes to dividends?)
No doubt the above are very simplified and you can complicate everything more but this is my take:
- UK production with the capex allowance is now worth 1/4 of an equivalent US company or even less
- Without the capex allowance, UK production is almost worthless & now a liability! Better to just stop producing entirely from the UK and fire all UK employees
- Unfortunately, 2P reserves will be seriously destroyed and RBL headroom will disappear into thin air
- LH needs to act fast and with more urgency, there is little time left from the next elections and I reckon the market is still ~6months-1year to realise the supply shortage despite all the doom & gloom in the news these days!
Sign In
Follow the stocks
