Member Info for L3Trader

Howdy again,
"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.

TheTexan,
I am not confusing anything.
But could you please quote the passage in the bill that states decommissiong costs will receive that same allowance as "other" investment?
Thank you.

TheTexan,
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:
https://hansard.parliament.uk/commons/2022-07-11/debates/CDDDF326-8810-47DB-B3EE-CAE1893344C3/Energy(OilAndGas)ProfitsLevyBill

"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.

Hi Modestus,
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.
ATB

Quite interesting that BREE is still acquiring small companies. Much better strategy than going for a large one overseas. That would be my concern. Of course at some point the CMA might say enough is enough and they won't be able to acquire more companies here.
SP seems to have found the bottom. I know Londoner7 keeps an eye on the announcements of other players in this industry, so he might tells what if anything he learned recently.
ATB

Hi Adieuk32,
Hard to know what is going on. May be slift or jj.. can add what they know...

Assuming there are no operational issues and production has stayed around 65K bopd, then CF from operations is going to come in veryhigh at the end of H1. And that is all that matters. Of course, we do not know what is going on in relation to the Kenya farm out, or other areas where Tullow is drilling. Or problems in Ghana.

It is also very clear the market does not believe the merger b/w Tullow and CNE can happen as was announced. I believe the CEO jumped the gun, and botched it. The merger is seen as a desperate atempt to shore up Tullow's finances, giving the impression that they are in worse shape than in reality. The truth is that even w/out a deal with a cash rich company Tullow can motor forward and reduce debt w/ current production plans. But it has to find a way to not to spen in Kenya more than the amount it will receive by farming out part of its WI. And that is the balancing act that is required. So, it is possible that Tullow might have to sell most of its WI in the Kenya discovery.

ATB.

Today's RNS is positive, but apart from confirming the 2- gas well campaign in early Q4 didn't add anything that regular posters didn't know. Robs12 has been very kind (thank you Robs12) with his posting of the production data, so we knew where PMG was. The cash balance should now be above £30M, and with a bit of luck another £10M will be added to it in H2.
Now as far as the upcoming 'LDS' two-well campaign in the Netherlands, since PMG's WI is small, finccap estimates total net cost at €1.5M. So, no need to raise cash.

Nevertheless, T Cross really needs to get his act together and either farm out the GPA licence or get going with Skerryvore (WI of 30%) asap, . The lack of a deal over a period of 10 years is unexplainable.

"“Either the chancellor will raise the £5bn he touted, or the oil and gas companies will take advantage of the £0.91 deduction on every £1 invested,” says Chris Hayes, senior data analyst at think tank Common Wealth. “He can't have both.”

I am glad someone finally noticed that the extra 45% investment allowance proposed in the EPL is just there for propaganda reasons. The whole purpose of the EPL is to raise £5 billion. This means HBR and other UK focussed operators will fork out that amount.

MasksNewNorm,
Your link to the gas prices is not the correct pricing benchmark for IOG's gas sales. I had already written that when replying to Lemming99.

Hi Lemming99,
That price series you are looking at is not the correct one (the one you are looking at is the first future contract - in fact that is what people tend to post here, but that is well above the price refereference that matters). Just compare the data with that on page 5 of the most recent presentation IOG posted. Also, bear in mind the price IOG gets is directly linked to UK BNP day ahead, but not exactly equal to it. There will be a discount off the benchmark.

I do not envisage the £91M revenue royalty (i.e., 20.2% of IOG’s net share) to be fully paid by the end of 2023. For that to happen everything would need to fall into place.

Hi lemming99, cash balance should be fine... They had £31M in cash on 31 Dec 2021. Revenues would have added another £20M+, so enough topay OPEX+FINEX and CAPEX in H1...

ATB

Today's RNS is important in the sense that keeps us informed and also that production seems to be going well.

However, I am surprised WAPrice for June was only 130p/therm. So, people have to bear in mind that the gas prices they have been quoting are not the UK NBP day ahead price. Also note "Gas offtake pricing directly linked to UK NBP Day-ahead" might well mean a discount is given...

With the production data and the WAP since production started we can do the calculations of gas&condensate revenue sales in H1. Under £25M. And "Expected total capex net to IOG for 2022 remains within the previously guided range of £70-85 million." Plus £10M in interest. So, a very good H2 is needed for the FCF in 2022 to break even.
ATB

obsolte, in te long run HBR should invest in asia and not spend more money here. you can never know what the returns will be here... no point in investing in the UKNS. sunak can invest his wife's faMILY MONEY IN THE north sea. he is welcome to do just that, and pay taxes accordingly.

HI E121,
The EPL is driving away international investors, o.k. the swedich holders of ENQ might stay...), but there are much better places to produce oil that the UKNS given that the stability of the fiscal framework for oil&gas is gone.
Since deomissioning expenses are being left out of the investment allowance of the new EPL, companies that are exploring late life fields like HBR and ENQ are going to get hit very hard.
At least HBR pays a dividend, while ENQ does not.
please check email...

Hello Philsy027,

Thank you for the calculations. There will be also condensate revenue to add to the revenues, but it will be a single digit (in millions) figure.
I have yet to try to come up with an estimate for revenues in H1.

As long as the gas price stays high IOG will do well this year. Might even end up generating FCF, is Southwark comes online by no later than the end of November.

I am always going to use this thread when posting about IOG. I intend to be a shareholder for the foreseable future.
ATB

"Iog earnings must be over £500k per day on the current figures and U.K. gas spot." How? remember 20% goes to CalE and they sell below spot price...

Hi Trencherpilot and Londoner7,

SP is now at insane levels. It is pricing in a stoppage of activity due to energy rationing... sinceI had read that energy costs for 2022 and 2023 had in part been hedged. Am i wrong?
Rationing of energy will shut down cement plants, but will hit the other activities slighly less, correct?
Thank you in advance for your answers.
ATB

What some people seem to be missing when they calculate revenue is that there is a revenue royalty 20.2% of IOG’s net share payable to CalEnergy Resources (CER), to be paid via entitlement adjustments, up to a cap of £91M over Phase 1 life.
So, you have to reduce your revenue estimates by 1/5th for 2022 and 2023.