Member Info for londoner7

KGinvest, it's important to understand that the quarters are not equal.

Q1 is likely to have the highest production in the year.

Maintenance is conducted in Q2 and Q3.

Q2, Q3 & Q4 will see higher Capex and tax payments.

It is the outcome over the full year that matters to dividend coverage and the potential for buybacks.

New presentation on website.

Slide 22 answers recent questions asked here on the status of bonds and funding.

Nitro182, let's assume that the other 20% of production is linked to Brent prices.

The maths is the same as I posted previously, and a pro-rata $5 adjustment equates to $53m. I might have dismissed that on the basis that post tax @ 78% that's $12m. But I don't know what the tax agreement is on the Argentinian and Egyptian assets, so potentially this could make up a large part of the difference between $70m and $115m.

However, this prompted me to look back at the numbers for the 40% gas. Given 52% of this gas is hedged at c. $13 mscf the post tax impact I have is $40m. Ignore that first $1 mscf as a rounding error on the hedge and it's $80m.

In conclusion, I'm inclined to go with the $115m/$5 oil, $1mscf, on the first step down (or up), but beyond that the hedging offers good protection and must come into play. I'd guess the CFO was offering guidance at the margin, but it becomes less meaningful further out. Let's see if tomorrow brings any clarity.

Nitro182, you make a very good point.

When I looked at this a month or two back I considered the impact of this 20% of production. If the contracts are linked to Brent prices, which is entirely possible then it will be a factor. But I discounted it. I don't remember why.

I'm just back from a late night out. I'll take another look tomorrow and expand on this.

Neversellshell22, first let me be clear. I am not disputing Harbour's $115m FCF/$5 change in oil. It is just that my sanity check came up with something lower, so I assume I'm missing something.

Using the hedging described in the presentation (note the AR has different number but I assume these state the position 31st Dec 24).

Just taking oil in 2025. 27% hedged at $76, based on mid-point production guidance.

Unhedged oil production is 462,500*40%*73% = 135,050. $5 shortfall = 135,050*$5*365 = $246m

Hedged production at $76 = 462,500*40%*27% = 49,950. $4 shortfall = 49,950*$4*365 = $73m.

Fall in revenue on $75 Brent = $319m.

Marginal tax rate is 78%, so post tax drop is 22%*$319m = $70m. This is well short of Harbour's $115m.

EPL is paid 1 year in arrears and Norwegian tax is paid 6 months in arrears, so that benefit doesn't come till next year. Capex will have an effect. But I don't see these factors accounting for the difference between $70m and $115m, so I guess I'm missing something.

If anyone has anything to add, feel free to comment.

The reversal in Harbour's share price since the Jan high of 292p has been dramatic.

The cause would typically be attributed to:

Market sentiment;

Fall in oil and gas prices;

A drop in production.

Market sentiment - generally, sentiment across the sector has been negative, but specific to Harbour we have BASF's declared intention to sell their holding. After Thursday's AGM Harbour should have in place a buyout option for c. 15% of voting stock, largely put in place to provide some order to BASF's exit. This has been discussed recently so I won't go back over the ins and outs, but unless a 3rd party institution steps in BASF's exit will be a headwind beyond 2025.

Fall in oil and gas prices - no doubt this is a factor, but the same is true of other companies in the sector, who have not been as badly impacted. HBR put out a clear FCF prediction metric based around oil and gas prices, which may have flagged an unanticipated impact. Given the good hedging Harbour has in place for 2025, I've struggled to make these FCF numbers work, but who am I to question the CFO's calculations. It puts into question the FCF outcomes for other UK listed producers with lower hedging and higher marginal costs of production. The interims across the sector should add some clarity.

A drop in production - at the FY results HBR gave YTD (end Feb) production of c. 500Kboepd. I thought this was a decent start to the year given a 2025 target of 450-475 Kboepd. I only have access to NS production numbers for March, and they look good. I don't follow the detail of Harbours numbers but just taking their larger assets there appears to me to be little change in their Britannia and Captain assets, but a substantial increase in the J-area, largely due to the start up of Jocelyn South mid March. Based on these numbers I'd expect Harbours Q1 production to have had good support from their UK assets.

My conclusion is that if Q1 production is much below 500Kboepd, then either there has been early scheduled turnaround work on a large asset - this would probably be in Norway, and entirely possible - or something broke impacting production.

I hope we'll have some clarity of Thursday.

Yesterday NSTA published North Sea production numbers for March.

For Ithaca it was their best month since the combination with 131Kboepd. For Q1 I have them on 123Kboepd, beating the 116Kboepd achieved in 2024 Q4. I have the combined oil, gas pricing and hedging up slightly too, so the Q1 numbers due later this month should beat the Q4 financials, barring the usual adjustments for stock movements at the EBITDAX level and working capital movements at the CFFO level. (Note on my numbers - Ithaca introduced changes in how they measure production. I've allowed for their change to their gas metric. I'll be looking with interest are any other differences.)

March saw a good boost from the J area and Britannia areas operated by Harbour. The new well at Talbot continues to perform and the mid March start up on Jocelyn South suggests more to come in April. These contributions reinforce the benefit of last year's merger with ENI. As I've posted previously, I think Ithaca got the better end of the deal.

It was clear at the recent presentation that the COO is focused on improving production efficiency, particularly at the Captain field. Feb and Mar showed Captain currently capable of c.27Kbopd (gross), but it was below 20Kboepd in Jan and who knows what the rest of the year will bring. It's a busy vessel with lots going on so 'enhancement' activities may have an impact on production - I'd imagine that's a challenge for the COO to manage. Next year, 2026, is expected to be the peak production year.

I should add that good as they are, the March production numbers were largely 'in the bag' when Ithaca announced their targets for 2025, so I'm not expecting any change at the Q1 update. (I haven't seen a date but the Q1 update usually come out end of May).

Sekforde, from the prospectus, pg54, "The dividend payable on each Non-Voting Share will be at a 13 per cent. premium to any dividend payable in respect of each Ordinary Share, reflecting the fact that the Non-Voting Shares are unlisted and do not have voting rights attached to them."

On FCF

I thought the guidance HBR provided on slide 75 of their results presentation gave us excellent detail over 2025-27 FCF against oil/gas pricing. The low case is $4.4bn - £2bn = $2.4bn (800m p.a.). The high case is $5.8bn - $2bn - $3.8bn ($1.3bn p.a.)

The gas price has come well off the 2025 forward curve of $14 mscf, so worth watching, but I suspect the current pullback is a reaction to a possible unwind of sanctions on Russian gas flows, which I think is premature. European storage is low and will need c.250 LNG cargos above 2024 supply to fill to 90% by Oct/Nov. That might bring gas prices back up.

As to the oil price, I haven't a clue other than $65 oil is likely to add demand and subtract supply.

HBR's 2025 FCF forecast of $1bn was based on $80 oil and $13 mscf gas . In Q1 pricing was just above their target price, and after 4 months is now down to flat. Gas +1.2, oil -1.45 = -0.25*$115m = $29m off the $1bn guidance. We should get confirmation next week.

Bottom line, I'm monitoring prices and applying them to the slide 75 capital illustration, rather than attempting to estimate specific cash movements.

My main interest is, is the dividend safe and is there potential for growth. Harbour's 'low case' says yes on both counts,

Sekforde, your dividend calculation is still wrong. Ignore the non-voting stock and associated dividend of $75m ($455m-$380M). From memory the dividend on the non-voting stock is a 13% premium to voting stock. It doesn't have a big impact but if you want to be precise just consider the voting stock and associated dividend of $380m, as I described in my post 'Dividend Yield'.

If sanctions are removed from the two Russians then letterOne can convert their non-voting stock to voting stock. They'll lose the dividend premium. An incentive to convert is that above a threshold of voting stock LetterOne can nominate a director to the board.

From the results presentation, "$380 million dividend paid on the voting ordinary shares"

At current FX $1.336/£, this equates to £284 dividend on voting ordinary shares.

Latest update (3rd Mar 2025) on total voting rights is 1,440m. At 153p share price this equates to a market cap of £2,203m.

Dividend yield = £284m/£2,203m = 12.9%.

I have to admit that when I wrote my previous post I had in mind that the purchase occurred in a single transaction.

While on an x-trainer in my local gym this evening it occurred to me that the rule is based of the date the threshold is exceeded. ( I tend to good clarity of thought during those 25 minutes.)

It's possible that LetterOne had purchased 2.99% of stock over preceding days or weeks and only purchased c. 4.7m on the day in question.

Probably in the weeds, but I'm an engineer by training, which requires focus on the detail. Hence this clarification.

Begs the question, who sold 3.3% of stock to LetterOne?

47m shares didn't come from retail investors - look at the published trading volumes. I think this story still has legs!

AlexTrader0, thanks for the reference.

I wasn't aware of the distinction between an 'issuer' and 'non-UK issuer'.

I don't know what you mean by straight away, but LetterOne were required to report their >3% holding and did so the day after purchase.

"if BASF were selling down there would surely have to be an RNS"

As I commented, BASF are not required to report any change in their holding until it falls below 30%. Market Screener would have no more insight than us.

dumbly, your post prompted me to look at recent production from these fields. through 2024, ahead of a complete shutdown in dec 24 the fields had been producing c. 6,700 bopd - i didn't look at the gas. this is more production than i expected. the fpso is over 30 years old, so perhaps has reached the end of it's economic life, but it seems nobel upstream doesn't agree.

i note the decom plans were submitted in 2023. when the epl was introduced total took a particularly aggressive response to their north sea operations, cancelling planned additional development of the elgin and franklin fields they operate. at the time i had the impression that hbr, as partners, were not happy with the decision. however, i understand the development of these fields is back on. these are much larger fields than those associated with the gryphon fpso, which may be a factor.

but my takeaway is that, stating the obvious, the epl has made north sea production more marginal, prompting the big boys to take some hard nosed decisions - they have other options for their capital investment. the smaller operators have to take the epl on the chin, and although not as profitable as it was, will continue to draw the last profitable drop of oil.

the bigger picture is that the north sea infrastructure is highly integrated and as fields cease operations the tariff costs of hubs and pipelines increases on those that remain. a potential snowball effect. no doubt the the operators currently in discussion with the government will have this in their ****nal - alongside the impact on jobs and tax revenues.

imo, the key player in government is rachel reeves. i suspect she'll see things in £ terms rather than co2. (besides, i've never been convinced by the argument that imported lng increases co2. yes it does, but ultimately burning fossil fuels (scope 3) far exceeds any incremental increase in scope 2).

until the current drop in oil prices i didn't see much hope of the government pulling back on their 2030 timeline for the epl. today, i'm more optimistic that we might see movement.

* this morning i caught up with last weeks presentation to enquest retail shareholders. two points struck me. an acknowledgment that the recent pull back in the oil price might impact on 2025 plans - i took this to mean capex, but unsure, and the use of past tense in describing other m&a outside of sqz. "have been in negotiations on other m&a."

however, both factors are secondary if the merger with sqz goes ahead.

To be clear, my $450m cost of buyback is based on current share price and FX.

The timing of the LetterOne purchase of 3.3% stock (47m shares) is interesting - last day cum-dividend. Published trading volumes on the day don't cover that purchase so perhaps this was an off-market transaction with BASF. It's quite possible that each attach differing value to capital and dividend returns, which would align with the timing.

That in itself has little relevance to me as a retail investor, but I'd guess LetterOne has good insight into the motives and valuation BASF attaches to an exit of HBR, given their discussions in the lead up to a possible IPO - outlined in the FT article - before HBR entered the fray.

The proposed buyback contract with BASF included a 2.5% discount to the prevailing market price (from memory) on any agreement BASF might have with an interested 3rd party. I missed the reference to book building, but this is a common strategy to either buy or sell a large portion of stock off market.

Again, of little relevance to me.

As another poster said, these resolutions offer options to the HBR board in managing BASF's exit but might not be exercised. However, I would like to see some level of buyback in the next 12 months, whether that's from BASF or not.

Taking just 3 lines from the latest 6 month results:

Admin Exp $162K

Corp Exp $584K

Dir fees $90K

-------------------

AU$836K x2 (12 months) and convert to US$ = US$$ 1,072K. I rounded to US$1,200K because I expect the running 12 months to be higher rather than lower.

On EPA 155 I'd point you to RNSs dated 11/5/2020 and 27/9/2022. MSMN and GEX have a long history of slow to crawl progress on meeting the terms of licences (EPA155/EP145), then seeking extensions. The balance due on EPA155 is AU$300K subject to the grant of the licence, which is subject to permits etc. Don't hold your breath on seeing that AU$300K.

AC has referred to being fully funded (subject to funds received from EP145 sale) for exploration commitments over the next 12 months. In a recent presentation he expanded on these exploration commitments, $260K for the five Vetra drills and $500K for 2D/3D.

Jamesjohn, aside from your opening lines on the possible need for a placing I think your post is a good summation of Mosman's position.

I'm not invested here and have no plans to, but I've enjoyed following the Mosman story since I first looked at them in Feb 2016. In 2016 I was asked for an opinion on the investment case. I said sell at 0.8p, the buyer had bought in much higher.

At 0.04p, it has since come off another 95%.

This is a speculative stock for short term traders, and given the market cap, small investment. Not one for me, but I can see the appeal for some.

Fully funded isn't the same as paid for. Let's examine the numbers (US$):

2024 year end cash, $2,200K.

2025 cash outflows:

Sagebrush acquisition, $630K. 2D/3D, $500K.

Vecta payments $3x$50K. Drilling $260K.

Corporate costs p.a., $1,200K.

2025 cash income:

c. $250K net income from oil projects (assumes full year from Sagebrush).

c. $250K from EP145 sale - expected in a few months.

$30K non-refundable deposit on EPA155 sale. Timing and expectations on payment of balance is uncertain. I can see this project being returned to Mosman.

Totting up for year end, 2,200-630-500-150-260-1200+250+250+30= -$10K. I don't see other revenue, but see plenty of scope for addition cost, so expect a placing this year.

Historically, Mosman doesn't like to take their cash position so close so given the weighting of costs to the next few months I expect a placing within 3 months.

Timing may be opportunistic on any positive reaction to news on the Vecta drills, or based on a development plan for Sagebrush. I'd expect a dual well approach on Sagebrush - I still see oil as the driver with Helium for the dreamers.

Mosman has proven to be effective at getting money in, but less effective in spending it. Opportunity for the trader. A dire investment for the longer term holder.

Nitro182, thanks for the FT link. It provided good insight into BASF's desire to exit the sector. As they hold 46.7% of HBR's voting stock it shouldn't be a surprise that the market isn't going to make their exit easy. The article also ties to others on Letterone which suggest the current executive are making hay possibly at the expense of the two sanctioned Russians. But while the sanctions continue (these are EU sanctions) LetterOne will remain a passive investor limited to 5% of the voting rights.

While we can't be sure of the strategy of BASF or LetterOne with regard to their holdings in HBR I think it's reasonable to assume that the HBR board will have other shareholders interest in mind. Hence the flexibility the off-market resolution offers.

What do we know?

The lock-in period on BASF has expired.

While the sanctions remain LetterOne is limited to acquiring 5% of the voting stock. For another 6 months (from memory) LetterOne has first right to buy up to 5% of stock sold by BASF.

I don't know if last month's purchase by LetterOne of 3% voting stock came from BASF. BASF are not required to report a change in their holding until it falls below 30%.

Resolutions 26&27 offer the HBR board some flexibility in managing BASF's exit. In aggregate it is possible for HBR to buyback up to 15% of the voting stock over the next 12 months. At maximum this would reduce BASF's holding from 46.5% to 37% - material but IMO not significant. But who else is in the market for a large holding in HBR? This exit could play out of for a while, unless/until another institution enters the fray. It is in BASF's interest that their exit is orderly, and the buyback contract seems to me supportive of this path.

If this a fire sale? Aker BP is on a similar yield of 13%, so unless I'm missing something in the relative valuations HBR seems priced for the current market view of the sector. I bought in around a 9% yield. I was happy then and happy to wait for things to play out.

A 15% buyback of stock would cost $450m - manageable. I haven't done the maths but given the non-voting shares I'd guess it translates to a c.12% increase in the voting share dividend.