Member Info for Sekforde

All the forward prices for 2026 and 2027 have moved up significantly. I am now modelling 500k boe for 2026 average $85 dated brent and $14 msfc gas.

The top of the range production is based on 520k in April, excellent news from Norway, the imminent additions of 20K from Waldorf and production continuing to rise at LLOG.

Free cash flow is now as follows for 2026: $600m plus ($170 x 4) plus ($150 x 3) plus $400m (Waldorf and Indonesia) plus $200m (top of the range production = $2330m. We are already below a ratio of 1 net debt to EBITDAX. But assuming a distribution of $900m (conservative) and assuming that the dividend is $300m. The sum available for share purchases is $600m or around 15% of the share capital at current prices.

Laidback I come to a much more bullish number by focusing on LLOG. By 2028 we should be producing 68,000 boe equivalent a day. Using the forward curves the consensus price of US oil should be around $67 boe. The gross revenue should be $1.662bn. Opex should be around $300m and capex by then around $200m. There should be no tax to pay because of the depreciation allowances which we have discussed before. There is no interest on debt to be considered because by then net debt will be well below the level before LLOG was purchased. The FCF from LLOG alone will be around $1.16bn.

Tunch. Yes I am intrigued by the reference to January 2025 being the effective date of the transaction and what that means in terms of the actual payment. Also the High Court case referred to the purchase price less "leakages" . I think the net effect is that Harbour keeps the money earned since January 2025. It rather than Waldorf's creditors (who are to receive a defined sum from the money paid by Harbour) will benefit from the $120 a barrel in April of this year. Any how all this is quite marginal. We are essentially being paid $200m to receive 20k a day of untaxed oil.

That is a piece of good news. I was beginning to worry about Waldorf. It was a small but really good deal. Harbour is effectively being paid to take over the company. The tax losses are worth $900m or 20% of the entire market cap of the company. The valuation of Harbour is truly insane. I think we could sell LLOG for around $4.5bn which is in line with the market cap of Harbour. It is certainly worth more than the $3.5bn we paid for it.

Neversellshell. Neverselllharbour! The time to buy is always when every one is fed up completely. I am. If the fundamentals are right then the company can buy back the shares. I hope it starts that in August. It has plenty of cash and it should not sit on it.

A few days ago Thetadecay posted an interesting AI generated algorithm for calculating FCF for 5 years. I have been looking at it and playing around with the slide rulers. It is actually quite crude because the modelling requires you to insert a figure for brent and gas prices which is constant over the period. So for example the base figure for 2026 is $770m but that is at $70 brent and $11 msfc gas. The model clearly has picked up the beginning of the year forecast of $600m based on $65 brent and $11msfc. During the first half the average for dated brent was $90 and for gas $14 msfc. For the second half (based on the forward curves) we have $72 brent and $13 msfc. There is a further adjustment required to take account of production being tilted to the first half. I now have brent averaging $82 and gas averaging $13.6 for 2026. My updated FCF for 2026 is therefore $600m plus ($578m - brent) plus ($390m - gas) $395m, (indonesia and waldorf) $200m (top of the range production). This gives us $2.163m FCF. Strictly one should not count waldorf and indonesia but I have done so as they reduce net debt materially. Because the Thetadecay modelling assumes only $770m in 2026 the FCF for 2027 ($920m) 2028 ($1090m) 2029 ($1200m) and 2030 ($1520m) is understated as there will be a much greater reduction in expensive debt reducing the interest payable. I also do not think the modelling captures fully the fact that there is very little tax to pay on the LLOG production. But the figures are otherwise accurate and are staggering figures in relation to a company with a market cap of just $4.5bn. The turning point will be the 6th August 2026 when the first half results are announced. I am expecting FCF of the order of $2.5bn (It will be slightly negative in the second half) and that should vastly cheer up a sceptical market.

I think there has been a slight delay to Waldorf. It will not matter in the end at all. HMRC having lost its cram down case before Sir Michael Green in the High Court sought his permission to appeal. That was refused. HMRC then applied for permission to appeal to the Court of Appeal. On 23rd June HMRC's application to the Court of Appeal was also refused as being "without merit". If that was a paper refusal then HMRC could ask for the an oral hearing. But as the refusal has only just been announced it may have delayed finalising Waldorf.

Neversellshell. It is entirely oil and gas price related. The falls have been dramatic indeed and seem to assume that life will very quickly return to normal as the strait reopens. I prefer as you know not to guess what might happen and just look at the futures markets. These still are better than they were back in February of this year and we have in the last golden four month period made around $2bn in FCF.

I think that one should use the forward curves for valuation purposes and of course for this year there has been a sharp fall. FCF now looks like $600 plus (3x £170) plus (2 x £150) = $1.41bn. We must add the $395m received or due for Indonesia and Waldorf. I also insist that one should add a further $200m to take account of top of the range production. So we are still on for $2bn for this year. The market cap of the company is now just $4.75bn. For 2027 we should achieve $1bn and rising sharply thereafter.

Neversellshell. Thanks for your kind comments. I enjoy your lists of reasons to be cheerful especially in these dark days. Londoner 7 when LLOG was completed on 11th February 2026 at $60 US the gross revenue for the rest of the year looked like $808m. Deduct say $250m Opex and $250m capex and say $140m on servicing the additional debt and say a tiny bit of tax and some legal fees etc and additional FCF looks from LLOG looks close to zero. I think the company is always cautious about the future. We saw this at the beginning of 2025 where they were forecasting $1bn with Brent around $80. It ended much lower but FCF was still $1.1bn.

Auson the debt on 27th February 2026 was $7.2bn and the market cap was $5.35bn so EV $12.55bn. The debt now is around $5bn and the market cap is $5.08bn so EV $10.08bn. I think all the FCF will be in the first half - may be more than 100% as it was last year. £9.36bn v £7.52bn.

On 27th February 2026 before the war began the price of brent was $72 and Harbour closed at 253p. At the time using the forward curves the company looked like making about $800m in 2026. I now have $600m plus (4 x $170) plus (2 x $150) = $1580m. Also the market could not have known that production would reach 520k boe in April 2026 which is why I believe that the company will achieve top of the range production for the full year which could add a further $200m to FCF. The forward markets for 2027 and for 2028 are higher than they were on 27th February 2026.

Londoner in the March presentation about 32 minutes in Alexander Krane suggested that the company could depreciate the acquisition costs and pay "very little tax". I think somewhere he went even further .

Londoner 7 the company has said that there will be "no or very little tax" to pay until the end of the decade on the LLOG earnings. That suggests to me that they are able to write off against tax the whole of the cost ie the $3.2bn and not merely tiny sums spent on professional fees and the like. And it also explains why between 2026 and 2030 the effect of the acquisition is to lift FCF by 60% despite daily production being in 2025 only 34k and by 2028 only 68k - a small fraction of the overall production. The market either does not understand this or does not believe the company. If FCF rises by 60% for an 11% dilution of share capital than that should enhance the value of each share by about 50%. Incidentally at the time of the LLOG purchase it did not affect the forecast FCF for 2026. This implies that the real enhancement will be greater than 60% between 2027 and 2030. I know nothing about US tax law and am simply relying on the company's public announcements about tax on LLOG's earnings. If my figures are right then your suggested $800m FCF for 2027 seems far too low because more than $600m should come from LLOG alone. And Waldorf is also a nice little earner because it has relief in all three categories of tax. But that transaction I suspect is being delayed by HMRC trying to appeal the judgment.

Londoner I am not sure I understand your question. The cost of LLOG was $3.2bn. No reason why the acquisition costs cannot be written off in 2026 as well as 2027. I do not know why it should be that the 23% tax is not payable for the rest of the decade but that is what the company has said is the effect of US tax law.

I have again revisited what we have been told about LLOG and that has caused me to revive upward my figures. Nigel Hearn stated on 22nd December that production would increase by 25% compound per annum from the 34k boe a day in 2025. If so that takes us to 53125 boe a day for 2027. (The graph produced showed greater than 68,000 boe per day in 2028 - so more to come.) Previously I used $68 but in fact the correct figure for forward US crude is $70 for 2027 even after the falls of recent days The gross revenue from LLOG using these figures is $70 x 365 x 53125 = $1.357bn. I assume $14 per boe Opex which gives us $271 to deduct and (same again) capex of $300m. I then deduct $150m to take into account the finance costs at 6% per annum. There is NO tax to pay on LLOG because the acquisition costs many be written off against tax (amazing). I arrive at a figure for FCF generated by LLOG alone next year of $636m. Please note one mystery which should be answered on 6th August. The bridging loan used to finance llog at no doubt high rates of interest was said at the time to be soon converted into a bond. That has not happened. I think it is simply because it has already been paid off by the outlandish cash generated in April and May of this year.

LLOG's production rises 25% over 2026 in 2027. This means it will be about 50,000 boe a day. There is no tax to pay. The gross income at $68 dollars a boe is $68 x 50000 x 365 = $1241m. Opex should be around $200m and capex around $300m. So FCF for LLOG alone will be above $700m in 2027. I have ignored that additional $2.5bn borrowing required to acquire LLOG as that additional borrowing has already been largely paid off by the spectacular earnings in the first half of this year. If you include it at 6% and assume none is paid off the debt servicing costs would be around $150m. But on the most conservative assumptions more than $500m FCF comes in next year from one small part of the portfolio.

Dan 222. Londoner is not right in that he has not appreciated that FCF is after tax. The purpose of attempting to work out FCF in 2027 and 2028 and beyond is to determine whether the market has properly valued Harbour. It just has not even with the forward curves coming sharply down in 2026 and 2027 but not interestingly in 2028 or beyond.

Londoner 7. FCF is after tax.

Once again using the forward curves and the company's guidance we now have:

2026 $600m plus (4x170) plus (3x 150) = $1730m plus $395m (waldorf and Indonesia) plus say $200m for top of the range production. (Brent now averages $85 for the full year (the average to date is $91) and gas averages $14 msfc) = $2325m.

2027 $800m plus (1x170) plus (1x150) = $1120m

2028 $1000m

2029 $1300m

2030 $1500m.

The ratio of debt to EBITDAX is already well below 1 so of the total fcf of $7245m between now and the end of 2030 over $5bn should be returned to shareholders and the remainder used to paydown debt. The present market cap is around $5.2bn.