Member Info for londoner7

Tamovv, I don't think I've even made a comment on the market's valuation of Ithaca's holding in Cambo. The comment you're referring is in a valuation of the Cambo asset with respect to the comparative valuations of ENI and ITH assets in the merger. Meaning, ITH probably realised a good valuation of Cambo within the ENI transaction. If Cambo doesn't go ahead then ENI share the loss of Cambo's current book value, which is (as I recall) over $300m.

As regards the markets valuation of Cambo I do recall a comment by one of the credit agencies that their valuation didn't attribute any value to Cambo going ahead. It did have value booked for Rosebank.

ITH may be looking for farm in partners for development of Cambo, but they'll assess it's value against other potential transactions. The UK fiscal regime looks clear till 2029-30, but I was not encouraged by the consultation paper on what follows the EPL.

It's likely to be a revenue tax on realised pricing above a threshold to be determined. Talk of historic pricing and CPI adjustments to determine the threshold leave me with the impression that it will be set low. The question then is how much of the 'windfall' revenue will be taken in tax, 10% or 90%. I suspect that the UK government will attempt to maintain their North Sea tax revenues through 2030. I see this as a sop by Labour to their union masters on their concerns about North Sea job losses. They don't give a hoot about NS companies other than a wish that they continue funneling capital into what I expect to remain marginal investments.

Until the detail of this consultation is clear I don't see how Cambo can proceed. Ithaca might move on this anyway, but as an investor I can choose to exit. I watch with interest.

In a post last Jan on the ENQ chat I said, "I'm expecting several NS deals in 2025, involving Enquest, Serico, Ithaca and perhaps Harbour. I thought AB made an insightful comment when he said at the interims, "North Sea assets are transactional"."

The key point was AB's reference to 'transactional'. I interpret this as an ability to circumvent some aspects of the UK fiscal regime. Today's acquisition is exactly the sort of deal I'd been anticipating. JEX is exiting the North Sea and this transaction allows it to realise various tax assets, with ITH taking a share of the 'profit' for facilitating the deal.

At first sight a $140m cash payment for 7mmboe of 2P and 4-4.5 Kboe/d production isn't cheap, but the tax loss numbers are substantial. I'm not going to try to untangle the detail - I think Friedman's comment sums it up nicely.

What I can determine is that the production adds c. $85m in a full year to EBITDAX, worth today's 3-4% pop in the share price. Of course that could be unwound by this afternoon, but the value is (or will be) in the business.

When the EPL was introduced Total, who operate the Elgin and Franklin fields pulled back from planned additional drilling. They'll have their reasons, but I felt it was at a loss to ITH and HBR as the non-operators. Today, the EPL allowances are less generous but I suspect there is still value from further development of the fields. If so, I'd expect ITH and HBR to be having conversations with Total. If Total doesn't want to proceed with further development then perhaps there'll be transactional deals in this space.

Half a dozen of these transactions may be more rewarding to ITH than a marginal Cambo development.

Although the RNS doesn't explicitly say it, my take is that the $900m repays the $500m due in 2026 and leaves $400m towards repaying the Euro1,000m notes due this year - as I recall these Euro notes were on a very low rate of interest c.1%, so it makes sense to leave these in place until due for repayment. The additional c.600m required for repayment will come from current cash flows and existing borrowings, i.e. the RCF.

The low interest Hybrid Notes initially due in 2026, and now classified as equity, can be extending by HBR.

Aside from any additional M&A this leaves debt refinance clear until 2028, allowing HBR a clearer view of future cash flows for consideration of future buybacks. Given HBRs policy of declaring fixed total dividend payments, currently $380m to voting stock, any buybacks translate into an increased per share dividend payment.

The Wintershall Dea transaction happened because BASF want to exit Oil & Gas. The details of the transaction leaves BASF with the problem of selling their shares into an unenthusiastic market. This will create volatility until they fully exit. The HBR board will be managing this and the AGM buyback proposals will be a step in that direction.

I'm in for the dividend with a 3-year horizon, by which time I'd have expected BASF to have exited HBR. It's been a turbulent few months in the HBR share price but I was encouraged by the recent Capital Markets presentations.

As always the pricing of oil and gas is not in HBRs gift. The UK government is hostile to the sector, but the fiscal regime looks stable for the next 5 years. However, I wasn't encouraged by the consultation document on what follows the EPL in 2029-30. But by then I anticipate my current 20% allocation in oil & gas to be 0% in 3-5 years.

D220, you should check the detail. Ahead of the recent changes there was a grace period before you were required to reinvest in a different AIM stock without losing the two year qualification.

"J-Area: Jocelyn South discovery, due online Q1 2025"

ITH has a 33% working interest.

This drill was described in an RSN last Dec, but I didn't realise it was so close to tie back.

https://www.youtube.com/watch?v=2oeTbjea7QU

Mommur, thanks for the clarification.

Mommur, I don't understand the logic of your post.

You get a healthy dividend from Serica, larger than the 5-10% figure you mention. Why do you need Serica to make the investment in another region or company when you could use your dividend to make the same investment. You have free reign - you could have gone for BP yourself if you felt it was a good investment.

Am I missing something?

To get a 10.9% div yield this broker has ascribed the proposed 2025 dividend payment ($455m) to the ordinary shares, but $75m of this dividend payment is allocated to non-voting shares, leaving $380 allocated to the voting stock. This equates to a 9.1% div yield at 230p.

This dividend allocation has been described in several recent Harbour reports and presentations. The fact that this broker has missed this point while making it a key point of the note doesn't give me any confidence in the rigour of their assessment.

Hi Tamovv, you say, "You are talking about a potential settlement payment in ITHs favor of 100 mUSD."

To be clear, I said, "There may be other adjustments but Ithaca is owed ENI Q3 cash flows, which I estimate to be over $100m (c.$150m EBITDA)."

Meaning there should be $100m on the positive side of the ledger before the deduction of the c.$50m tax repayment to ENI and any other adjustments. I don't know what the net adjustment will be. I'll be happy with a flat year on year debt debt number, after the payment of $434m dividends in 2024.

Tamovv, you asked a couple of questions:

"Can somebody on this board please help me to understand the following "proforma-comparison of 405 mUSD" (see yesterdays RNS, one of the last points). Is this some kind of settlement payment between ITH and ENI regarding the effective date?

My understanding is that $405m is the 2024 cash tax for the combined business. ENI paid c.$50m before completion so this is owed to them and will be repaid with adjustment payments to complete the financial side of the completion. There may be other adjustments but Ithaca is owed ENI Q3 cash flows, which I estimate to be over $100m (c.$150m EBITDA).

I was hoping for a net debt number which would have drawn a line under these matters.

"Non operational cash movements".

I think the analyst was querying the cash tax guidance rather than the liquidity position. In relation to cash movements my reading of the 'pro forma liquidity position post financing' is an increase in the drawn facility from $974m to $1,025m,. I assume the $31m increase is bank fees for the refinancing. (From memory, the refinancing also includes provision for an addition RBL facility of c.$700m - not shown - subject to Ithaca acquiring supportive production assets. I'd assumed this follows future M&A activity.)

Generally, the update was as I expected except for two elements: the low Opex in Q4 ($14/boe) and the c. $5.4m tax loss position. Both better than my expectations.

When I adjusted my Q4 estimate for the lower Opex I had $639m EBITDAX - pretty much bang on, though there may be significant stock adjustments which would imply an error. Otherwise, it gives me confidence that I'm correctly translating the hedging positions.

Given, last year's NSAI CPR guidance on Captain and a 15% decline in the other fields I'm looking for mid-point production guidance of 107Kboe for 2025. The guidance for Captain was bang on for 2024 at 16.5Kbopd (gross) so good to see it will be refreshed with next months finals.

I was initially surprised by the 116.0K boepd Q4 production number, given my estimate of 113.3Kboepd from the NSTA data, but the note at the end of the update explains the difference. In my EBITDAX calculation I used the 113.4K number, so unless there is a significant stock movement to force a reassessment I'm sticking with the old conversion. I'm guessing ENI used this new conversion, and given it moves the 2024 production outcome from mid-point to upper range I can understand Ithaca following suit.

Silverlight, I appreciate you offering a response to my comment on the transfer of EP155 from Mosman.

You say, "We already know the COS here is high .. its been documented many times."

I've only seen claims of a high Chance of Success posted on this chat board. Could you point me to an official document supporting this claim?

* Someone didn't like me highlighting that even in the case of success, re-entering Hussar-1 doesn't access a prospective resource covering a 350Km2 area - rather than respond they had my post deleted.

InvestingGoals, I haven’t seen you post here before, but you seem to understand the commercial realities of exploration better than others, so welcome.

This is my post from 5th Jan 2025

“Somewhere on the Hussar permit area there may be a commercial source of helium but consider the chance of that source being at the bottom of a previous oil exploration drill. I’d say slim to zero.

The story on EP-155 is much the same – re-entering an old exploration drill.”

Expanding on this:

The primary work commitments on EP513 (Hussar permit area) are for 2D seismic survey and interpretation, and one exploration well to a minimum depth of 3Km.

A conventional exploration plan would be to evaluate seismic to determine an optimal location for drilling. But as you say, a conventional drill would cost c.$20m. Georgina Energy’s strategy has been to re-enter Hussar-1. The business case (sell) is that re-entry is a cheaper option which can be completed – Helium to surface – within initial placing funds.

Which, in my opinion, overlooks the probability that commercial Helium extraction will not be found at the bottom of an oil well drilled in 1982, which was subsequently plugged and abandoned.

The question then is, what was the plan post re-entry. I believe the plan had to involve a follow-up placing to future proof the business ahead of the Hussar drill result. (Helpful that the drill timeline has now moved out)

Modifying a justification for a placing made by HE1 in May 2021 would read:

· Funds will be used to continue the fast-track development programme of the Company's Hussar project in Australia

· Proceeds will enable the Company to save significant time and costs by keeping drilling equipment in the field to carry out appraisal work immediately following intended re-entry success

Another funding path is via the JV they are pursuing with an Australian company on additional well re-entry opportunities. Apparently, they’ve narrowed the field down from 100 to 2. I suspect they’ll go the well-trodden path of Mt Kitty and Magee.

Given the delays and collapse in the share price, I doubt neither funding option would go down well with investors.

2024 Q4 update from MPA.

https://mineralproducts.org/News/2025/release02.aspx

Yesterday, I posted this on the HBR board:

‘NSTA production numbers for Dec 24 has Talbot producing 28.8K boepd. (HBR 67%, ITH 33%).’

But given its greater weighting to Ithaca’s production I decided to expand on it here. (I’m invested in HBR and ITH.)

I was relieved to see the ENI merger go through because a significant part of Ithaca’s contribution to the valuation is Cambo, and it’s my view that Cambo will not go ahead in the current fiscal environment. In the latest AR the auditors took a critical look at the carrying value of Cambo ($364m). It passed audit, but I’ll be interested to see it’s value in the next AR, given recent changes in the EPL, and a clearer assessment of the likelihood of an FID in 2025. If ENI accepted the $364m value in its assessment of assets, then I think it was a gain for Ithaca shareholders – hence my relief at the merger going through. Also, I didn’t appreciate the value of the Talbot asset which came with the ENI merger.

I believe there are 3 production wells on Talbot. The first 2 were drilled in 2023, with the 3rd well drilled in 2024. A sub-sea structure and pipework was also completed in 2024 with tie-back to the Judy platform. The point here is that the tie-back means that the additional production volumes from Talbot should incur minimal additional operating costs.

In the Environmental Statement (ES) Talbot was expected on stream in 2024 Q3, reaching full production in Q4. The ES also states, “production will be of the order of 25,000 barrels of oil per day (BOPD) and 40 million scfs (MMscf) of gas per day”. That is 32K boepd. Given the estimated resource is 18.MM boe, I’d expect an initial spike in volumes tailing off significantly within a year (50%?). However, after a late Nov start and 28.8K boepd in December I’d expect higher production through 2025 Q1 before production tails off.

On a recent update Ithaca reported production peaking above 120K boepd during November. The NSTA production numbers for Oct/Nov/Dec are 101K/114K/124K boepd, for an average of 113K boepd in Q4. The step up in Dec is due to the c.9.5K boepd from Talbot. But it was interesting to see Captain at 21.5K boepd (18.2K boepd net) in December - the highest monthly production since April 2023. Perhaps the polymer injections are finally having an impact, and we’ll see further improvement through 2025 – a recent forecast was for Captain peaking in 2026.

In a couple of weeks, we should get a summary of 2024 performance with the closing net debt number. At an operating level I’ve my own forecasts, but I can’t predict additional merger or working capital costs, so I’m keen to see the outcome. I don’t expect guidance for 2025 until the results in March.

NSTA production numbers for Dec 24 has Talbot producing 28.8K boepd. (HBR 67%, ITH 33%).

Eckie8, I don't recall where I heard it, but the argument put forward by management to reduce the dividend growth to 2% over the next 3-year period, alongside regular buybacks, is that there could be greater scope to increase dividend growth from the next review in 2027 (?).

I'm not defending that decision - I prefer a larger dividend in my pocket - but I can understand management's reluctance to pay an increased dividend when , in their opinion, the share price is low, so the better long term decision is a share buyback. There 's an argument that buybacks improve the EPS growth component of management's LLP bonus structure, but most are now based on total returns which negates this argument.

Correct me if I'm wrong, but if you're an investor who reinvests their LGEN dividend in LGEN stock, then, daily price movements apart, there's no impact between cash spent on a higher dividend or on a buyback.

Correction:

"The questions in my mind were"

My grammar grated on a 2nd read.

Dumbly, thanks for the info.

I caught AB's interview in Davos and my response to his 4-7 years to use up the tax credits was 'and the rest'. I didn't need a calculator. I saw your post on this and felt you were in the ballpark with your numbers, but my key conclusion was that Enquest must do an M&A to utilise these tax assets.

The questions in my mind was, what size is a transformational deal and how would it be financed. I felt 20kboepd was required, so interesting to see IR talking of a doubling. On current NS production that would be 30Kboepd.

That would be transformational, but leaves open the question of financing, and of course , the price. I look forward to seeing the detail and given the tone of recent comment I doubt I'll be waiting long.

I'm expecting several NS deals in 2025, involving Enquest, Serico, Ithaca and perhaps Harbour. I thought AB made an insightful comment when he said at the interims, "North Sea assets are transactional".

Hi Tamovv, HBR has classified the Hybrid Notes as equity. Note the reference to a 'first call' date. I looked at these last year and my recollection is that the call is Harbour's, meaning they can allow them to extend beyond the first call. I don't remember what other conditions apply. Perhaps a higher interest rate.

My consideration was, what debt is due for repayment over the next 3 years (2025-27 inclusive). It's the 1.1bn Euro note and the $500m Senior note. There's 3 years of dividends of $455m ($380m to voting shares). If we get c.$1bn of FCF over each of the next 3 years.

I think the dividend is safe, but I'd like to see c.$150m of buybacks to add a c.3% inflator. Given the latest guidance the scope for this is marginal. That said, I think we'll see M&A within the next 12 months and I wouldn't be surprised if it related to the North Sea. That will change the picture, hopefully for the better, otherwise, why do the deal.

I'm note expecting fireworks here. A decent 8% dividend if you don't chase it above 260p, and decent trading opportunities at the margin - perhaps 20% of my stake.

To your query on valuation. Whether the Hybrid Notes are equity or debt, they will be part of the Enterprise Value. If anyone believes otherwise, I'd be interested to hear their argument.

Hi Stevo12, a significant difference between our models is that you take the income route, while I prefer cash flows. It means I avoid estimates of G&A, which is added back at the cash stage anyway, and on finance I note your $400m (finance cost) number, while I only consider the cash interest charge, which I have at $180m.

On the detail:

my EBITDAX is $8.9bn. Have you taken the int. gas into account? 20% of production at $4/mscf ($23/boe);

as I said, $180m cash interest;

I've used mid point Cap&Abex of $2.5bn;

my tax charge is $4.9bn @ 78%, you've used 75%;

and finally my EPL fudge factor which I put at an addition tax of $138m.

Resulting in FCF $1.24bn.

I'll admit the EPL fudge is messy, but I think significant. EPL paid in arrears on declining UK production means in the year of payment the cash tax charge is >78% (40% CT + 38% EPL).

15% field decline, costed at EBITDAX $44/boe and 38% EPL, gets me to $138m.