Member Info for Sekforde

Krane said that the dividend would not "necessarily" be cut. That implies however it might very well be. He also said that the current dividend was a bit of an "outlier" which also implies it might very well be. But does it matter? If FCF is up from day one then that either means more buybacks (huge fan!) or else more rapid debt reduction (not a huge fan). By March we shall have FCF guidance for 2026 and will know the policy. The market should then start to value the forward FCF to at least 2030. After discounting the sum to 2030 could easily be in excess of $8bn which is indeed twice the current market cap.

This is a beautiful gearing situation. It is sensible to take on $2bn worth of debt at an interest rate of around 6% costing around $120m a year to make an additional $600m a year FCF from 2027 onwards and growing as production increases. I do not like the dilution but it is very modest and can be eliminated after two years of solid buybacks. I think the dividend will be reduced somewhat but replaced with a clear commitment to buybacks which I favour anyway.

The only rational way to value the company is to calculate over time FCF suitably discounted for time. I see next years FCF in 2026 as being around $1.8bn $1bn coming from the existing business, $400m from the two earlier December transactions and perhaps $400m coming from the new transaction. $500m on dividends, $200m on share buybacks and balance on debt reduction in 2026. Looks good. Happy. Just added 50,000 shares.

I was initially horrified. Fancy paying $3.2bn (or close the entire market value of the company) for just 34k boe of production? But the key slide in the presentation shows that it will increase FCF between 2026 and 2030 by 60%. If true that is incredible.

There will be no tax to pay on the 20000 barrels of production. That is no tax on the RFCT, no tax on the SC and no tax on the ELP in 2026. Waldorf has sufficient losses in all three categories to cover these for 2026.

I have never suggested there is no tax to pay. I suggested that we do not need to worry too much the EPL. That is all. A large chunk of additional production is completely protected and that means a huge boost to FCF in 2026.

There should be no tax at all to pay on the 20k barrels a day acquired from Waldorf in 2026. Assuming a gross revenue of $60 boe that is 20,000 x 365 x 60 = $438m. Assume production costs of say $13 a barrel $94.9m would have to be deducted. Very difficult to estimate the 2026 cost for decommissioning and any required capex but let us allow a further $100m. So we are looking at over $200m FCF!!!

I no longer think we need worry too much about the EPL. The assets acquired from Waldorf carry a lot of tax losses. I look forward to the January update when I am confident we will be told that FCF for 2025 was above $1bn and that FCF for 2026 will be well above $1bn despite the fall in commodity prices

The sale of the Indonesian assets results in a net payment next year of $215m. The purchase of the Waldorf assets results in a net payment to Harbour of $180m. ($170m being the purchase price and $350m being the money released to secure decommissioning liabilities.) So almost $400m pouring in next year on top of the earnings. Of course next year's fcf looks terrific thanks to some impossibly decent hedging. We can ride out $58 Brent with ease, maintain the dividend, spend $200m on share buybacks and slice a huge chunk off the net debt. All looking good.

The real problem is not the temporary hitches but the large fall in commodity prices. In these time management needs to be focussed on cost cutting. The last RSN suggested opex were 10% higher than forecast. That was attributable in part to a stronger pound against the dollar. But the strengthening has been very modest indeed.

Auctus Advisers research notes are not helpful because they refuse to update their price assumptions for oil and gas. These should be based on the forward curves rather than a blithe assumption that Brent will be back to $70 a barrel and gas will be at 82p a therm. In fact in October they did some modelling based on Brent at $60 but kept them same optimistic assumptions for gas.

I would be surprised if Total does not exercise its pre-emption rights. It is a very small amount of money for a large company for an excellent asset. One would expect the company to wait to the last minute as there is always a possibility of a fall in commodity prices which makes the deal less attractive.

There is another reason to think that the board is being too conservative on FCF for 2025. Forecast capex was reduced to $2.4bn. However in the 1st half it was $1.1bn and in the first nine months $1.6bn implying $500m so far in the second half. What is going to cause a sudden leap in capex to $800m in the last 3 months? I see nothing on the horizon. A capex of $2.2bn for the full year and a top of the range production could lift FCF for the full year to $1.2bn at least. This matters in terms of maintaining the dividend and all important buybacks throughout 2026.

The confirmation of forecast FCF at $1bn was a little disappointing because I was expecting that to rise to at least $1.1bn. However I think we will end up with FCF of $1.1bn for 2025. The present forecast is based on the midpoint of the revised range 465k - $475k or $470k. However the company has produced 473k in the first 9 months. With the summer maintenance over we should be back up to close to the July level which was 493k. So I expect full year production to be at the top of the range. That should add around $100m to FCF.

Stevo thanks. An insanely good deal. Fingers crossed.

Still trying to get my head around the deal. The following facts are known: The headline price is $232m with some contingent payments later. Culzean produces net to BP 25.500 boe a day at opex of $10.7 per barrel. There is some adjustment to be made to the headline figure to reflect income from September to year end. But is not the net effect of the deal that we have an additional gross revenue of well over $500m? Not sure what our share of future capex would be or whether any tax losses will be available. But is it not possible that this pays for itself in about a year or so? And any borrowing we have to do will be very short lived provided Triton does not explode again. I guess the board cannot crow too much whilst it waits hoping there will be no pre-emption. Why does Bp want out so much? Inexplicable. Bargain of the century.

Dan222. The board has suggested already that capex will fall to below $2bn. However, I think a lower capex is a rational response to lower commodity prices. Argentina and Mexico are the future not the UK or Norway. But they do not require much expenditure in 2026. The board has already suggested that capex in the UK will fall to $500m and I suspect in will be similar in Norway. $1.5bn is still a hefty investment. But the really fast paybacks at $60 Brent should be a priority until we know that commodity prices have not got further to fall. ($65 Brent seems to be Trump noise related and I doubt it will last.)

Would definitely be good for Harbour too. And there is the gearing effect that should enhance the increase in the SP. The market will see the debt melting away like the winter snow ......

This deal could be transformational. It is insanely cheap. Hard to believe that the pre-emption rights will not be exercised. But I assume BP sounded out its partners first. If it goes through and Triton performs and Rachel scrapt the EPL then FCF in 2026 and 2027 could exceed $1bn - the entire value of the company. £3 by Christmas.

The UK is only one third now for Harbour. The biggest beneficiaries would be Serica and Enquest. If the tax were scrapped and replaced with a tax just on the windfall element ($80 plus Brent) then prices could rise more than 20% for these two companies. Hard to know whether the Government will act. The reform proposed increases tax in the long run as investment returns. But the immediate effect will be to reduce it and the Government is in no position to lose money this year and next.