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It is the stubborn refusal of Britain’s economy to grow that is now concentrating minds. The country cannot afford to lose a sector directly employing 30,000 people and supporting another 85,000. Donald Trump may have his detractors but when he chastised Sir Keir Starmer at Chequers, and then at the United Nations, for wasting a precious national asset he had the GMB union cheering him on. With Rachel Reeves’s make-or-break ­budget approaching, and next year’s elections for Scotland’s parliament looming, Sir Keir simply cannot afford to alienate opinion north and south of the border by endangering livelihoods.

Renewables and nuclear must be Britain’s long term future (North Sea production is in any case nearing its end). But killing off gas production when the UK continues to rely on that fuel is illogical. Britain is the world’s 55th largest gas producer. This country cannot save the planet alone, and certainly not by cutting off its nose to spite its face. A more gradual advance to net zero is required.

In the annals of asinine political promises, ­Labour’s manifesto commitment not to issue new licences for gas and oil exploration in United Kingdom waters deserves a prominent entry. While continuing to import natural gas by pipeline from Norway and in liquefied form via tanker from the United States and Qatar, both sources being more polluting than domestic gas, this country decided to choke off production in its sector of the North Sea purely to satisfy green ideology.

The simple fact is that, whatever the progress in renewable energy in coming years, Britain is going to need natural gas until at least 2050. Yet such is the net zero zealotry of some in Labour’s ranks that they would rather import fossil fuels than ­extract them in home waters.

The madness of this view requires little elucidation. According to the industry group Offshore Energies, some 1,000 jobs are being lost in the sector every month. New gas and oil fields will go untapped, even as the UK’s dependency on imports continues. Good news, then, that the government appears to be reneging on its albatross of a policy and allowing production to expand once again.

Later this year the government is expected to set out its strategy on oil and gas. One solution being discussed is “tieback”, the expansion of existing fields using current infrastructure, which would not require new licences. This could unlock 3.5 billion in barrel equivalents of gas and oil. In addition, new guidance has been issued allowing ­ministers to weigh the economic benefits of new fields against the environmental impact.

Given the UK imports 40 per cent of its energy needs, more homegrown gas in the medium term is surely desirable. As is a reduction in the crippling rate of tax on producers’ earnings, due to rise to 78 per cent in November. It is this brutal regime that has persuaded Ineos Energy to transfer all future investment from the UK to the US.

The high priest of net zero is Ed Miliband, the energy secretary, who has surrounded himself with advisers convinced that wind and solar are the only way forward. Mr Miliband has promised that renewables would free Britain from the yoke of imports. But killing off the North Sea production ensures imports will not only continue but increase. Now, having seen the light (or having been subjected to No 10’s thumb screws) he is said to be looking at ways to encourage drilling, while technically remaining faithful to the manifesto.

Berenberg upgrade ….

"Given the strong and growing order book, as well as the continued margin progress, we have increased our earnings estimates and have raised our price target from 510p to 530p

Not just transatlantic announcements….remember we are expecting an order from Denmark for frigates to be announced in September.

The market tempered its excitement about Costain’s (COST) ability to benefit from a UK infrastructure boom when the company reported its first-half results; the shares that had risen 50 per cent year to date promptly gave up half those gains.

An 18 per cent fall in revenues to £525mn was unfortunate. While the company had previously flagged that project completions in its road business would lead to falling revenues, down by more than half to £83mn, the deferral of certain HS2 revenues into later years came as more of a surprise. Rail revenues fell 23 per cent to £185mn as a result.

There are always likely to be some of what chief executive Alex Vaughan called “ebbs and flows” for an infrastructure contracting business. Importantly, Costain’s forward work position, which combines its order book with its preferred bidder book, ticked up by £200mn during the period to £5.6bn. “The business is in its strongest position for years and we are winning high volumes of work,” Vaughan told Investors’ Chronicle bullishly.

An increase in higher-margin consultancy work, which now accounts for 16 per cent of revenues, will help Costain achieve its target adjusted operating margin run rate of 4.5 per cent by the end of 2025 (3.2 per cent in H1). Clearer guidance around the sustainability of this margin would be welcome.

Free cash flow was also a little weaker in the period, largely due to working capital outflows. The company’s year-end net guidance is £170mn, which factors in the £10mn buyback launched in June.

The group doubled its interim payout, and launched a £10mn share buyback in June, but it needs to deliver on its growth potential. Net cash accounts for a third of its market cap, so its consequent rating of 5.5 times on an EV/Ebitda basis sits well below the peer average, therefore we keep the faith despite the setback on results day. Buy.

Good presentation on website. I think this is a slight over reaction by the market, on a day where the inflation numbers have soured market sentiment. The rephasing of HS2 is no surprise…it’s a rephasing, not a cancellation. I topped up this morning, but there may be further weakness until the budget is past us. Good medium term hold.

Thankyou for taking the time to find that information Dumbly.

I think Shanks use of the word “much” suggests the amount exported is greater than 21%. But it’s not in his interest to be accurate, as it would undermine his argument.

Shanks said:

“The truth is that much of the gas that’s extracted from the North Sea is exported, and so what we’re trying to build towards is a stable power system that removes gas from the system”.

I find it hard to believe that gas procured in the UKCS, which has a pipeline connection to the UK, is subsequently exported. I suspect he is talking nonsense. Does anyone have any stats on this to verify his claim?

If the UK is a net importer of gas (pipeline or LNG), you would expect NS producers to sell every molecule of gas they could produce to the UK market, unless their are abnormal market conditions which make the spot price in continental Europe, higher than the UK price.

Https://www.thetimes.com/article/9355f909-5976-48df-9157-b5b29e1fa097?shareToken=b2636f257cc80a60747895304043377b

Hats-off to Morgan Sindall…they do provide brilliant RNS’s. Profits ahead of expectations again.

Ice….Happily Aberdeen exceeded your expectations. Hopefully a good omen of better times ahead for Wood and North Sea O&G.

Apologies…finger trouble

Also…accounts will no be ready by end June.

Https://www.thetimes.com/article/b7fe0203-5c2b-44ec-bfe7-79b2a4e2dfa3?shareToken=2c389d73fe9540807eef161d69e14d9d

And debt reduced from 4.7 to 4.2 $billion in three months. That will please the market.

According to the Times, the chap who wrote it, Steve Gray, is the managing partner of Ventex Studio, a climate tech venture, and a member of the North Sea Transition Taskforce.

So even people on the pro-climate side of the spectrum can see the folly of the current policy for NS O&G. The government will have to change their net zero / energy policy to appease the threat from Reform. However, it would be better if they did of their own bat, and just admitted they got it wrong…and sacked Ed Miliband.

There is a mistake in the cut and paste below. The Times article says £13.8 million, not £3.8 million.

EnQuest (ENQ) recorded falling production and prices in 2024, but shareholders were provided with some consolation in the form of a maiden dividend of 0.616p a share. They can also take solace in the knowledge that the independent oil and gas producer drove production efficiencies during the year, while reducing debt by $95.1mn (£73.7mn). Indeed, the company has paid down around $1.6bn since group borrowing hit its peak, which means that the adjusted leverage ratio stands at 0.6 times cash profits.

With an intensified focus on maintenance, particularly in regard to key production equipment, the driller managed to boost optimisation across its portfolio, while extending the life of mature oil and gasfields. It is actively pursuing M&A activities to bolster the reserve replacement ratio, including the prospective completion of the acquisition of Harbour Energy’s (HBR) assets in Vietnam, further diversifying EnQuest’s production base.

But despite the positive operational performance, overall production fell by 7 per cent to 40,736 barrels of oil equivalent per day (boepd). This, combined with lower realised prices and a 15.5 per cent increase in average unit operating costs, meant that adjusted cash profits contracted by 18 per cent to $673mn.

Management has characterised 2025 as a “pivotal year”, a reasonable enough claim given developments under way in south-east Asia, to say nothing of the ongoing talks with Serica Energy (SQZ) about a possible merger. The tie-up would provide further scale benefits, something of an industry theme nowadays. Last year’s optimisation efforts have translated into an average production rate ahead of guidance at roughly 43,000 barrels of oil equivalent per day, which, along with the maiden payout, have boosted market sentiment, but we need to see further progress on the still sizeable debt overhang. Hold.

Last IC view: Hold, 12p, 5 Sep 2024

My comment might seem insensitive, when people may have been injured, or worst. I do hope that none of the crew or rescue people are harmed in the incident.

It might be looked at in a different way. Just imagine how much worse it might have been, if it was an LNG tanker. It might make the powers that be think twice about making us reliant on importing LNG on tankers. Good old pipeline gas is a lot safer, and it emits less harmful emissions.

The Sunday times says that Sir Douglas Flint is leaving. Apparently this information was included (hidden) in the recent results RNS.