Member Info for romaron

This guy got suspended for this speech a few days ago. He was head of "Responsible Investing" at HSBC. He used to write the "Lex column" for the FT and knows his stuff.
You should all listen and the item about P/E and stranded assets (10:20) - Pelle will certainly enjoy it.
He discusses falling volume and falling price. Absolute returns. Are we Pigeons, Dodos, Eagles or Pea****s (09.30)
I'd say we're Eagles valued as Dodos. Enjoy.

https://www.youtube.com/watch?v=bfNamRmje-s

One thing it does confirm is the danger of going against climate change evangelists and the transition to unreliables.
This guy is almost the absolute opposite of Stuart Kirk.
https://www.youtube.com/watch?v=50cqLL_xRQ8
I know little about Stuart Kirk but the floppy haired guy is a proven liar, philanderer and will do absolutely anything to stay in power. He has absolutely no integrity. AB is wise to look away from the UK. If the Tories can crush an industry just think what Labour might do? The Levy has similarities to Russia invading Crimea. Will they stop there?

Thanks MSM

It is encouraging MSM but errors like that are amateurish and undermine the story. I emailed IR to see if they can at least get the online edition corrected. I don't have access to the full article just the headline.

FFS - North Sea oil behemoth turns to Asia as windfall tax bites
FTSE 100 firm EnQuest eyes overseas expansion as Rishi Sunak's levy hits investment

By
Tom Rees
and
Rachel Millard
27 May 2022 • 8:23pm

I despair. We're FTSE100? Does the behemoth refer to us? We don't even get half decent journalists following the story.

I think we'll drift. Monday is a US holiday and the UK will empty for the following long weekend and Jubilee celebrations. There won't be people around to coordinate any responses to the Government's actions and they don't come back to Parliament until 6 June after the Whitsun recess.
I think they'll use the time as cover and see how it pans out. If I was AB I'd be seething and I imagine there could easily be a consensus between the smaller oil companies. Mutiny or non-cooperation is a possibility. The transition doesn't exist or happen without their/our contribution and we are being penalised for staying the course and experiencing some pretty lean times. I imagine Harbour are massively p*ssed too. We have a route to pay the Levy and run the company with business as usual but no new developments taking advantage of the high oil prices which judging by the mismanagement around the world (ignoring Russia) and lack of investment in fossil fuels because of pressure to move to unreliables means we are in a pickle with no easy way out and high prices for the foreseeable. BP need us but have queered up the pitch for everybody.

I'm happy with EnQuest's fundamentals and we have the AGM in 3 weeks where questions will need to be answered. The picture will hopefully be clearer by then. Meanwhile we can just keep doing what we do and letting the (super) profits roll in. With our tax credits we are in a better position than many. I would just choose what is best for EnQuest and have minimal contact with Government. The damage wasn't caused by us and we shouldn't have to foot the bill for damage to our energy system. The Levy is unfair on us but I accept that populism and politics got us here. That's life
The dreamers and crackpots were allowed to much power and weak companies signed up to hopelessly ambitious promises and time-lines. The Government have not helped the industry so why should we help them?
The Government could have had us on its side. They've sold us down the river with their mismanagement and I wouldn't trust them as far as I could throw them. Distrust, dishonesty and being thrown under a bus is no way to foster an industry.

*welcome back MO

The $ HYN has hardly fluttered. Fixed up around 1/4 of a percent today. 95.923>96.154

That's a YTM of 9.89%

got cut off .... - I do worry about those who are selling into this void. They'll need good timing for the bounce.

If I remember correctly Jefferies look after AB's extended family holdings. They get more information than we do and can speak directly to the company. VOR1 said it correctly when he wrote "ENQ is a retail darling ". The traders can have their fun but the few Institutions invested in EnQuest will probably not change their view too radically and may even recommend a BUY. I do worry

Good points. This didn't all happen yesterday and during negotiations I guess that Brent was between $100-$110. the Government is well aware of the precarious situation if more O&G isn't produced and I'm guessing they factored in an increase. Everything we hear and read points to it. If oil goes into the $120/130 range then the Levy funds itself; and that's without any new drilling or FDP's. Nobody likes their stocks to fall but the country needed some assistance. Might be unfair picking solely on O&G whilst others escaped but we were easy pickings from a populism perspective.
I wonder who the "activists" are going to choose as their next "baddie".

A commentator, Alex Epstein, says that there are 3 billion people in the world who use less electricity than the average American refrigerator.

I think the reports of the death of fossil fuels are greatly exaggerated. The move from coal to gas is a lot easier than moving from gas to unreliables.

Jan - I wouldn't worry. You can read the desparation in the shorters posts.

There is a short recess in Government which is why the Levy announcement was squeezed in yesterday. This means there will be no response from Government and little from the industry. Smart money knows this. We also have UK public holidays on 2 and 3 June. The day traders are selling into a void. They either hold or buy back. They have 10 days to decide (4 working days, 2 weekends) . The Government will produce good news when they return. It's what they do. Risky to be short.

*I have bought.

Worth adding -I think it was Seav - our profits and FCF are often conflated but they are close and it helps that we won't be paying tax on the remaining 40 per cent of profits. This Levy may inadvertently highlight our attractive buffer. We are still highly profitable at this level of production and oil price.

We have to start somewhere and I detect seeing the whites of the Government's eyes. They are in the usual position - between a rock and a hard place. The incessant demonisation of O&G has made the industry recalcitrant and this is more stick and stick than stick and carrot. The companies can protect themselves by keeping capex at a minimum without any new developments forcing the price of oil higher to compensate for the "Levy". They aren't completely helpless and any new development would need written Government Guarantees.
Last night on QT a member of the audience mentioned that when oil was higher between 2010-2014 the price at the pumps hadn't rocketed. There is some truth in that but gas/electricity ws cheaper and we may have to get used to these levels.
Using a base of $100 and a profit of £600M I calculate the Levy for 2022 at £150m/$190m [219 days] - To cancel out in simple terms you would need an increase of $17.35 per barrel (Over a whole year it would be closer to $10 a barrel). It would also move the whole calculation higher because the profit would grow and it would be more than the $190m required but our overall profit would be higher also (remember this is shallow end accounting). This would make profit increase by $316m with a percentage increasing the Levy by c. $79mio but we would be $237 better off. I actually consider this the more likely outcome as SPR will need to be rebuilt and we have no idea of the macro or geopolitical.
We also don't know for sure which costs can be offset against the Levy. Drilling new wells on existing developments looks likely to be included.
Sorry that it's a jumble but on balance we hold a commodity in very short supply. Othe Governments around the world will use us as an excuse to attack fossil fuels. There is no simple solution and I wonder where Insulate Britain will glue themselves next. They will probably claim this as a victory.
Of course Labour might want to Nationalise the North Sea or close it. Some are daft enough but it is easy to be rhetorical when you're in opposition.
What we need now (and imo likely to get) is another hike in the price of oil. Jeff Currie and other experts predict it will happen. With this lack of joined up thinking they may well be right.
The industry is too important to be written off but the ramifications of this move will require a supine industry to comply. Foreign companies will just AVOID. Is the UK still a place to do business?

Bloomberg are playing to the gallery. Their readership/viewers. They produce just so much garbage. They are the Fox News of financial reporting. As for BP - I shiver every time Looney opens his gob.
It is in the industry's interest to be seen to be begrudging.
We can't grumble. Most LTHs here are running large profits.

Today twitter: "The multi-year oil bull market will result in an oil price that is both high enough to kill discretionary demand while encouraging necessary long-cycle investment. Windfall profit taxes only defer the critically necessary production response…energy ignorance at its finest."

My own view is that it is the right thing to do. We are helping people in genuine need. Of course there will be some abuse but that is common in all areas of human activity.
The O&G industry has been seen to play its part. It means that we are now free from political pressure for the foreseeable future and might even be able to cash in a few favours traded. The Industry has been remarkably quiet and compliant in arriving at today's announcement so I imagine there have been some unwritten 'gentlemen's agreements' that will help make new projects easier and faster. Countries always trump companies.

As oil goes higher the "Levy" grows with it. The Government response will be that there is now a built in escalatory mechanism that helps reduce bills even as energy prices rise adding the proviso that they cannot control O&G prices as it is a global market. Eventually the wind producers will attract attention too; they're next. For now, we are out of the spotlight.

The Energy Minister Greg Hands and Kwasi Kwarteng Secretary of State for Business, Energy and Industrial Strategy never seemed happy with or in favour of a levy. They would have been powerful allies in getting a commitment towards the North Sea's future. There are always 2 sides (or more) to negotiations and the O&G industry is no slouch at getting written agreements for the foreseeable future. I imagine our future is now MORE secure.

A group of UK oil producers have complained that EnQuest has been given an unfair advantage in today's announcement of the "Energy Profits Levy". They already have a tax advantage from credits relating to past losses and with new production proposals in front of NSTA means that EnQuest will come out of this time of high energy prices even stronger. An industry source which does not wish to be named quoted "The North Sea basin was finished and most of us had left. This is propping up a lame duck, inefficient and expensive industry by using tax payers hard earned money to subsidise them. It means less is available for our renewables sector - how unfair is that?"

*The CEO of EnQuest was unavailable for comment as he was absent organising a party.

Build it and you can join in the negotiations.

I agree mrc. I was going to add that any new investment between today and 31 December 2022 (our YE) would likely qualify. Using the Seav figure the £75mio would turn into £15mio. It is almost as though AB had a hand in drafting it. This is a very good deal for us imo. I just wish I was better at reading and understanding the small print.

*HYN crept up a tad. No rush for the exit there.

Using Seav's figure a £300mio profit would incur tax of £195m. £120mio @ 40% and £75mio at 25%.
We won't be paying the 40% (£120mio in this case) for some time as it will be offset against tax credits. The plans for BBK now become much more attractive.

We have to accept facts and the times we live in. The country is suffering and we can afford to help. Higher oil prices will mitigate somewhat. My immediate reaction was too draconian by half but I initially read it wrong which wasn't helped by trolls and shorters. As J24 says the higher Brent will mitigate and it does appear that the Govt expect it to be higher for longer.