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My view on the recent weakness is simply a combination of EIG investors selling and poor sentiment from the wft.
The 8 July RNS announcement said that “Harbour announces today that it has been notified by EIG that their notifiable interest in the Company has changed from approximately 37 per cent to approximately 16 per cent.” That means to me that 21 per cent of the equity or about 175m shares are now free to be sold in the open market without any further disclosure. It is this 21 percent that is being sold and has reduced the price to where it is today. Unfortunately the institutions are not mopping them up and probably won’t show much interest until this 21 per cent has had a chance to unwind. Afterall the investors that own these shares got in when oil was at a far lower price and it’s fair to assume that they are in profit even with the share price at 300p. Once this selling pressure stops the shares have a chance of recovering. The buybacks, whilst derided by some, are helping to mop up the ex EIG shares and provide some support and it looks like 300p is a fairly stable floor for the time being.

Excellent analysis thanks for this it’s really valuable.
Am I the only one that thinks spending 1bn on wft is mad and they need to find a project to spend it on instead? What project I don’t know but paying wft when it’s entirely avoidable seems crazy to me.

So Rookie you saying that you think O&G prices will fall, and perhaps stay lower, to the extent that the wft would be abandoned? I think I’ve heard $70 mentioned as the trigger point but guess if would need to be at that level for at least 6 months or a year.
I agree I think O&G prices are on the way down.
I agree oil w

Infor I agree HBR needs to buy a U.K. asset. But it needs to look at undeveloped fields that require massive investment. Hbr has potentially 2bn coming down the pipes in 2024 and either spends it on development or loses it on wft. So what to buy? Well in my view it has to be another company with proven reserves but has yet to make a start or can’t afford to develop on its own. Ithaca springs to kind.

Or just go for licences. There’s no case for buying companies with existing producing fields as they are not able to be offset against Hbr wft liabilities.

Info I liked Serica but if north EIG is a duster, it will fall. Not so much because of the well but because there’s nothing else in the pipeline.

Steve this is absolutely the point. HbR have massive cash flows on the horizon but at the moment seem to have no better use for them than giving it to the taxman. They have to buy a big ticket development project in the U.K. in my view and then hope the wft drops away.

Baccs yes you are right. At this price it’s a good yield. Share buy backs only make it better. On balance I will hang on, but I want HBR to tell us how they are going to put nearly 2bn of extra gas revenues that are coming in 2024 to good use and not just have it clawed off them by the government.

If HBR do nothing, they will lose much of the amazing gains to be had from gas (assuming it stays at 200p). If they can find a project to sink this big money into in the North Sea, then if prices fall and the wft is cancelled then it could be a master stroke. I think it’s a good company but there’s more ifs and buts now than a year ago.

The big prize here is the gas hedges coming off which could double revenues. But what good is that if it has to be reinvested or face being taxed at 70% ( it may not be it’s just a guess and this is the point - there is now so much uncertainty). Any reinvestment back into the U.K. needs to be a total bargain. Meanwhile any international expansion has to come from post taxed U.K. revenues which may not be enough.
Conservative government has just screwed the best stock in the market

I bought in at 345 over a year ago. I thought it was a fairly simple story of waiting for the hedges to come off. I guess it still is. But now that extra revenue needs to be reinvested or face being taxed to death. I’m 50:50 now hence posting to see what others think.

Moresmash you are describing the dilemma that Hbr faces. Invest in U.K. with an uncertain future and use funds that otherwise would have disappeared in tax, or pay the tax and use what’s left to go international and away from the U.K. regime (which itself has risks)

Sure. The investment case here has changed dramatically. For me it’s all about what the company can do with the massive increase in gas revenues in 24 months time- does it squander it to the govt in tax or does it find something to sink it into with the view that capital will be tied up for a while but ultimately gas and oil prices will fall and the levy will fall away long before the 6 year end.

So Shell paid no windfall tax this year, HBR meanwhile will pay approx 400m.
Next year if everything stays the same, HbR will pay closer to 1bn. The year after that when gas hedges come off and revenue soars by nearly 2bn, are we happy for that just to get mauled by the wft? Seriously is management going to just sit back and lose lose 70% of that and just watch it happen?
Isn’t the whole point of the rebate to make the wft optional if proper planning is in place?

I agree Baysil. M&a is the obvious next step for HBR. I had though it would be with Repsol or one of the other Andaman block holders. News on that discovery seems to be also be downplayed but the recent EIG deal with Repsol is telling.
Having said that, despite all the negativity surrounding the U.K. wft, I think there is opportunity in the NS while there is blood on the streets. The offsetting allowance in the wft is not to be sniffed at. I can agree with the Macy’s blog view of “ A good update from Harbour whose production is good and the debt falling which was the problem from its predecessor the buy-back also fits the bill. Rather than grumble about the Looney tax maybe it should utilise the investment relief and put some money down….”
The time to buy NS assets is when no one else wants them, so what better time than now when the doom mongers say it’s all over? Doesn’t the offsetting provide the opportunity to develop a field completely free of wft?
In my view, O&G prices will fall - many are predicting recession, so I hardly think O&G prices will stay this high for the next 6 years. That’s never happened before. Brent’s not far off the $70 mark where ukgov says it would cancel the tax anyway.
Bizarrely, the investment case for HBr that I looked at just over a year ago was all about rising oil prices but now it seems we might want them to fall (so they the wft is cancelled). Strange times indeed.

Looking at the fca list of short positions, HBR is the only O&G stock on there. So why’s that? Is it because there is something fundamentally terrible about HBR? Surely ENQ is fundamentally weaker than HBR but if that’s the case, why are there no short positions on ENQ?
So it can’t be a sector issue in my view as there are no significant short positions on any other North Sea O&G companies despite the carnage today from the reported windfall tax increase.
It seems to me that the short position from Tactonic and Capital, along with the huge swap position at baml and the stock held at euroclear are all connected to ex EIG concert party holders who are simply looking to hedge their positions. The EIG concert party made up nearly 40% of the register afterall and they can’t all just sell out in one go.
So I’m not buying into the argument that increases in shorter activity is anything other than long holders looking to protect their investment. It’s not reflective of a negative view on HBR fundamentals.
If there is a coherent case for a different view then happy to hear it.

How can shorts be massively up? The fca update short positions daily and the last change was 4 November.
https://www.fca.org.uk/publication/data/short-positions-daily-update.xlsx

As for the baml position, I think most of its in swaps and probably being used by ex EIG concert party (Noble?) holders to hedge against downside.
It’s not a traditional long position that’s for sure.

Why?
Because the wft can be offset against development costs. Surely better to spend on that than giving it to the government?

Disappointing to be back to where we were shareprice wise from a over year ago. Over that time 1bn comes off the debt but 800m goes on the tax bill. It’s very frustrating but is what it is.
I think the pressure is now on HBR to come up with M&A to use the allowance within the wft. SQZ has been mentioned but maybe Ithaca is a better bet? HBR could buy Shells 30 percent stake in Cambo for not much. Ithaca has some good undeveloped fields, the costs to do so would be offset against the wft.
HBR could even merge with Ithaca which might also provide a route out for Delek.

Thanks for correcting my *** packet calcs and agree had missed the point that this years wft started in May and so therefore needs to be upwardly adjusted for the extra 5 months.
Still, 11.6 mmboe come off the gas hedges in 2024, maybe realising 200 instead of 40 which is an uplift of 1.8bn. To minimise this extra revenue being walloped by the wft, surely HBR need to find a NS project to sink their teeth into? To sit around and do nothing, letting the treasury take it would be criminal.
There would still be plenty left over to develop Mexico and Andaman.

This is supposed to be a discussion board about HBR.
Some may find what you say interesting but I am not sure this is the appropriate forum for it.

Post your analysis on the company.