Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
The company is probably content or even wants the share price to drift lower. The detailed legislation concerning the windfall tax has yet to be revealed and the industry will be lobbying the Treasury for some mitigation in the details.
Many thanks for all the comments. To be precise the govt. have not said they will end the tax if the oil price falls. They have said the tax will remain in place until oil and gas prices " return to historically more normal levels " - weasel words indeed. $50/ $80 per barrel who knows. What we do know is that they have put £17.5bn from the tax in their budget plans some 8 times the figure that Labour said they wanted to raise. They have created huge uncertainty in the UK energy sector and Enquest is probably the leading casualty. Investors had every right to expect that its £3bn of tax loses would mean that there was no foreseeable prospect of the company paying tax. As the Chairman has indicated the company`s future now lies beyond the UK.
Rishi Sunak has called his tax on oil companies a windfall tax. A tax that it levied on extraordinary and unforeseen profits? But it is not. The tax is set to run for 3 years and the 25% levy on profits will still apply if oil falls to $60, $50 or even $40 a barrel. As long as a company makes even one $ of taxable profit it will be hit by this tax and of course tax losses brought forward will be ignored. Maybe this explains why the Enquest share price has been so badly hit. If over the next three years the oil price falls to these comparatively low levels, although it was not so long ago that`s exactly where they were., Enquest will be paying this tax.
In last Saturday`s Telegraph Bank of America analyst Matthew Smith stated that the windfall tax paid between 2022 and 2024 by Enquest is likely to be £237m. It is almost certain he would have got that precise figure from the company. It is around 43% of the company`s market cap.
January24 thanks for spending your time to produce some meaningful projections. Your tax charge is pretty much in line with the figures quoted in the Telegraph last saturday based on the Bank of America numbers.
TheGoldenDragon, the 3 billion of tax credits cannot be set off against the windfall tax as stated in the treasury press release issued last Thursday. Please pay attention. The analysts have calculated the likely tax liability at just under £267m for the next 3 years (see Saturday`s business section of the Telegraph.) This is why the share price has been falling since last Thursday.
BTFAITH1, the windfall tax disallows the utilisation of losses brought forward and a principle of tax law is that general provisions cannot be used to reduce a company tax liability. B OF A has calculated that Enquest will pay nearly £300m in windfall taxes over the next 3 years quite a high figure for a company with a market cap of around £550m.
Sipp, by all means write to your MP. I have already contacted one of the most financially literate, but do not expect anything to change. The Tories want the revenue from the oil industry to bribe the voters with and Labour came up with the idea of a windfall tax in the first place. Sunak topped Labour by coming up with £5bn essentially by striking a line thro` taxes losses brought forward. What a cowboy. He`s completely wreaked the prospects for the North Sea to be a major energy supplier for the UK. Give him back his green card.
On friday the share price was manipulated downwards which wrong footed most of us as the results and the oil price pointed to much better future. This morning the oil price is down and you might expect enq to be down as well but the extent of the manipulation on Friday means that further downward pressure on enq could not be generated.
In the early stages of his investing career Buffet looked for "cigar butts". Stocks that had been discarded by the market but still had a few puffs left in them. Enquest is a super cigar butt. The net cash flow in the first 2 months of the year of $132m is equivalent to an annualised cash flow per share of 32p. Today`s youthful analysts brought up in the age of Nasdaq find it hard to appreciate the merits of this investment approach.