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well, the SP moving to 80p surprised us all, and had upset the people who took CDFs that it would drop to 40p again... sometimes you win, sometimes you lose....
clearly something is in the works. rob12, what do you reckon is about to be announced?
hi Philsy027 and Lemming99,
thank you for your insights. all going to plan. i see the possibility of iog ending the year with a larger cash balance than it had at the end of last year, even after spending £85M in CAPEX.
at some point IOG will need to pay dividends to get the SP going. but first the refinancing of the bond. dinsalas32 thank you for your posts. Ditto for SailorNL's posts.
thank you for your clear and thoughtful insights, as always.
Like you I am surprised with the working capital movements. it led to negative FCF.
Taking the long term view, i believe BREE will become a more dominant force in the years ahead.
As for this year's and next year's results, we will have to expect that they might take a hit. But we have always have to remember that in some industries market power can be counter cyclical and that means that margins could increase even if volumes decrease. the net effect can go wither way.
As for the SP, Mr Market is being very cautious. I still thought this could go up above 100p, before the HY results, but clearly he is not in buying mode.
hope you are well.
p.s.: isn't it great when a company does not have a "problem child"? -:)
Money Week says: " While the government’s windfall tax will hit earnings, the fact that both (SQZ and...) are established businesses in a stable jurisdiction...".
were established in a stable jurisdiction, which no longer is...
I wrote the following on 8 sep 21:
- produces 500-600MT year, sells for $35s/MT. Revenue is about $30M, because some of its products have more value added. at the moment iodine is selling for c. $40K/MT, so perhaps revenue might be up 10% higher, i.e, $33M.
- EBIDTA $5M,
But IOF needs to build a plant every two years to keep production steady perhaps with an increment of 10% of annual production... so that costs $3/$4M every 2 years or so."
So, production is much lower than 600MT, but prive is much higher than at the time I posted. But as we know IOF does not sell its iodine for the prices that we hear about in the media. The CEO himself said so. How much less IOF gets is not something we know.
Yet, EBIDTA this year should be much higher than last year. (I am thinking close to $9-10M this year, easily)
And this leads me to wonder why they need the two lines of credit that it secured recently. (rylidan asked 3 questions that are connected to mine)
WHY? IOF should be swimming in cash and its OCF should be large enough to pay for IOF#9 and the development program the CEO mentioned when interviewed.
Indeed, this a question that the interviewer should have asked... But they never ask the hard and uncomfortable questions. (I am happy with CEO's delivery when presenting. Prefer that to how rogue traders sound... But he needs
to be careful when giving interviews to dispel concerns that arise of RNSs that do not address the central issue: why is there a need for more debt when the business should be genrating a high single digit multiple of the amount being secured through the lines of credit.)
In summary, until an answer to this question is provided the SP will not re-rate much higher, unless there is M&A activity by others wanting to acquire IOF.
"Taking into account the contingent consideration ($75 million inflow), the arbitration payment ($76 million outflow) and the pre-emption payment ($126 million outflow), and after adjusting for revenues of over $200 million relating to two Ghana liftings which took place in early June but for which cash was received shortly after 30 June 2022, on 1 and 5 July respectively, free cash flow in the first half of the year was neutral."
It is good enough. It basically meant $126M "of before the above transactions FCF". They expect FCF to be $200M in H2. (with increased WI in Ghana, any production above 40K/bbl is unhedged.) Note that they have repaid $100 of bonds that pay 10% interest. Savings of $10M going forward... peants but every little helps.
TEN is the problem child. But there are hints things are imroving; "No new wells were drilled in TEN in the first half of 2022, however active reservoir management has helped slow the natural decline. A previously drilled water injection well at Enyenra (En16-WI) has been completed and will come onstream later this year to provide pressure support for existing producers."
"Work on the TEN Enhancement Plan, which has identified significant upside to the current 2025 production target of c.50 kbopd (gross). A development concept is currently being finalised for the project, with detailed engineering expected to start later this year."
I have kept an eye on TEN wondering whther it would be come a ZERO or a TWENTY... I am now more hopeful it will be the latter.
Kenya: Well, Tullow will have to sell most of its WI. There is no capital to spend on it.
As usual thank you for your extremely well informed opinions and thoughts on acquisitions and business activity.
It is good to see business will be very strong at least in a part of the country.
My remarks about CMA was not very precise, thus might have conveyed a wrong line of thought.
I meant that at some point, i.e., as Breedon keeps acquiring companies, the CMA will make it harder for such bolt-on acquisitions to continue when it comes to some parts of its business (which you identify in great detail, i.e., the RMC plants and quarries), as the usual remedies will be hard to put in practice in a way that makes an acquisition earnings accretive in some parts of the country.
I am sure you have been following the twists and turns of the EPL...
I have been very clear with my posts. I am not the one who is confused or who was wrong. I am not of the type who engages in point scoring when discussing an issue with others. If that is your type, let us not reply or refer to each other. Understood?
Well, some people start behaving strangely, when they have no answers and are unwilling to debate an issue ... I am not surprised ...
Anyway, I have made my point, which is that the current draft of the bill does not treat decommissioning costs the same way as it treats investment expenditure. There seemed to be a lot of people writing in many boards that thought the government had changed its mind. Unfortunately they did not.
"Decommissioning allowances are already in the Bill." This sentence is vague and not precise... Some could read it as "Decommissioning (costs) allowances are already in the Bill." and i think that was the logical inference given Rookie1's post and others posts to which your seem to be replying to. But, the vagueness of your sentence indicates you were referring to ""Decommissioning (rebate) allowances are already in the Bill." Those are 2 different things, and that is why language has to be precise if the sender wants the receiver to understand the message.
As far as "The Bill will become law this week I think and then the O&G co's will be under a bit of pressure to assess and publish impact. The uncertainty will evaporate and this will help the SP move up."
No, uncertainty will not evaporate, because the law does not define what "normal oil prices" are.
In fact this law would be deemed unconsitutional in any country that had a modern constitution, but since that is not the case in this country, which is displaying all the traits of a banana monarchy that has no bananas, it would survive being challenged in court.
As far as my agenda is concerned, it is the truth and nothing but the truth. I am invested here and was previously a PMO shareholder. I do expect the SP to rise, but obviously the EPL has led me to revise my "valuation" of the company. I do hope that HBR will ties its future to oil production and exploration outside this jurisdiction.
So you do not know the answer, then? I really thought you knew.
And by the way your statement about decommissioning expenses generating an allowance akin to the allowance that CAPEX spending generates, is not correct, as you old Cambridge law professor would also tell you...
Howdy to TheTexan again,
One question for you:
As far as the "91.25%" headline figure the government's propaganda is telling left and right, well it is not correct for a variety of reasons:
The answer t this question would provide such an example: How much will a company be able to recover when it spends £100M in exploration and appraisal wells in a field that is then found not to be economically viable to bring into production?
It is not 91.25%.
as a SQZ shareholder I am voting against it. In fact the offer values SQZ at a price per share lower than SQZ ATH. Why? Because of the EPL bill/law.
What I meant is that this new tax will reduce investment in oil&gas in the UKNSCS when compared with the counterfactual (i.e., no EPL on oil&gas). It is a distortionary tax, not a windfall tax.
"A rebate is payable on decommissioning in the majority of cases." Agreed.
"Decommissioning COSTS are very different to this REBATE and these COSTS are NOT allowances. So you are correct to a certain extent." This was exactly the gist of my posts/comments: decommissioning costs will not attract an allowance like investment does in the current draft of the bill. That is why I asked you to quote a passage from the bill that would contradict my statement.
"Rebates however are not included in the profit test. So they ARE therefore ALLOWANCES." Sorry, but this is playing with terminology. Yes, from a conceptual point of view you can label it an allowance, but it is not using the bill's terminology of allowance.
From a practical point of view you cannot add CAPEX and ABEX and then assume that 20% of the sum will be the tax relief from that expenditure as I some posters here and in the BBs of other oil&gas companies have (apparently erroneusly) claimed.
I hope this makes sense to you as well.
Have you read the text of the bill?
Can you tell where you read that decomissioning costs are in the bill?
This is what the text says: " financing costs and decommissioning costs are left out of account in calculating the amount
of the profits or loss of any ring fence trade of the company for the period"
A quote from today's Hansard:
"Taking those considerations into account, the amendments and clarification that the Government have made are welcome. They include the exclusion of petroleum revenue tax rebates from the levy, reassurance that capital expenditure on electrification linked to oil and gas is included in the investment allowance, and the inclusion of the aforementioned sunset clause."
Where is decommissioning?
As far as the "91.25%" headline figure the government's propaganda is telling left and right, well it is not correct.
Example: I ask people to read the oil&tax laws (including this bill) and tell me how much a company will be able to recover when it spends £100M in exploration and appraisal wells in a field that is then found not to be economically viable to bring into production?
This bill will reduce investment in oil&gas in the UKNSCS.
And Harbour should push its projects in Mexico and Indonesia forward and drop its plans for the NS.
Corriedog, that is why HBR, ENQ, SQZ, and all PE oil&gas companies (Ithaca, Neptune, etc.) operating in the North Sea should engage in a PR campaign and make it clear to the public that they are deploying their capital to other jurisdictions because it is simply not possible to operate in a country with a tax regime that is unstable and unpredictable. Also make clear that if there is no energy security it is the politicians fault, and choice.
No FIDs in the UK until the end of 2022.
HBR should prioritize increasing production in Indonesia and in Mexico (Zama). Deploy capital there. No point deploying capital to the UKNSCS to reduce taxes today, but increases tax bill in the future.
Once again, my thank you to robs12 for his posts. I agree that it is unusualthat PMG issues a RNS so shortly after the end of the financial year. Also, the RNS is very poorly written, as robs12 mentioned. A lot of "truthful" info that is misleading (we want to know net BOEPD, not gross BOEPD, e.g.). Also, the revenue in H2 didn't quite reach even €10M euros... Why, because in H1 it was £4.6 million. An since in FY was " is now expected to exceed €14.5 million", the difference after converting euros to GBP, is now more than £7.5M in H2. So nothing extraordinary, really. This means that the cash balance will not have gone up by more than £6.5M in H2, as there are expenses.
As far as PMG being able to fund drills in GPA or Skerryvore .... I say it just won't have the money to do it. It will have to farm out part of its WI. I say to TC, just let go some of the WI, but get going. It really is about time (a decade is gone) he does something.
shakeypremis, if evidence was needed that democracy is overrated then this bill provides it. These MPs would let people freeze over the Winter in pursuit of their very noble but non-sensical goals. With such non-sense who is going to invest in the UKNSCS? It is time for these MPs to get real: when there is scarcity of fossil fuels countries that produce them only export the excess after they have enough for domestic consumption at reasonable prices. And that includes the US with its direct or indirect export restrictions.
If you have email I will write with some questions about the canadian oil&gas companies and oil service companies. Mine is l3traderuk at the gmail ...
just got dividends from CPG, and might add to my holding.