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There will not be any buybacks today. This is because the sp is more than 5% higher than the average for the last five trading days and stock exchange rules prohibit them. However the fact that the price is rising without buybacks is positive. Buybacks should resume next week. The higher Brent price gives hope for an additional $100m before the year end. If the current price is maintained we could average around $83 per barrel for the year which implies an additional $54m FCF above the $1bn FCF forecast.

We have nothing to fear from the results. They will confirm substantial debt reduction despite the price of Brent averaging $6 less than the price today. I would be pretty certain there will have to be some additional hedging for the additional facility. But that is ok at present prices. I am hopeful that they give us the figure for net debt to the end of August 2023. I think they must say something about future shareholder returns beyond "we are getting closer to the day". I would say at least $25M in dividends and $50M in buybacks for 2024.

Hi Stevo - the only figure we have so far for production this year for Enquest is that issued in May which indicated 47,725 barrels a day to 30th April 2023 down from 50,361 in the same period in 2022. I supposed the question is whether the $150m raised can be used to buy something that will boost output into 2024. I would be disappointed if for 2024 as a whole we are down to as little as 40,000 barrels a day let alone 35,000. I hope at least we get some firmer guidance for 2023. I am still hoping for around 45,000 a day. I am hoping for an average realised price of around $81 by the year end. I do not know much about tax law. But the takeover of Premier was technically done by means of a reverse takeover and that seemed to have allowed Harbour to make highly efficient use of Premier's tax losses which, as you have pointed out, are virtually exhausted. So I suppose it would have to be something along the Premier lines. The combined entity would have very little debt in relation to size.

Well if HBR paid a 50% premium to present sp and then hedged say 60,000 barrels a day, it could easily make back $600m in saved taxes in 2024 regardless of what happens to the world economy. In effect HBR can buy Enquest for nothing.

Papegoja

It was showing as 5th September then taken down and now is up again.

Stevo I wonder about that? In 2022 the FCF of Enquest was about $520m. (I appreciate that FCF is not quite the same as profit but it is the only figure that really matters) The EPL was introduced at the end of April 2022 and was 25% for the year. So one might have expected the EPL to be $520m x 7/12 x 25/100 or $75.82m. It was in fact just $70m of which $35M was paid in December 2022 and the remainder is payable later this year. This was confirmed as a result of a question (which I in fact submitted) as to estimates of FCF in 2023 and 2024 in the April audio presentation. 2024 could potentially be a quite similar year to 2022. We realised in 2022, post hedging, around $89 per barrel I am hoping for a similar figure for 2024 given there is no bad hedging and Brent is now already above $85 a barrel. I am also hoping for a similar level of production (47,000 barrels a day) with the new lending being used to boost production before the general election. If we end up paying say $75M EPL in 2024 on much lower profits for 2023, that could give us a FCF of around $450M in 2024. (I am expecting the lower financing costs to balance out the higher OPEX and capex). I see a realistic possibility of the net debt being reduced by around $200m this year and around $450m next year if there were to be no shareholder returns. In practice there is no need to reduce net debt to under $100m by the end of December 2024. I think we will therefore see very significant returns to shareholders in 2024 of the order of $100m which would still mean net debt of under $200m by the end of next year. Once the market realises that at some point in 2025 Enquest will be a virtually debt free cash machine with a very low effective tax rate I cannot imagine we will still have a market cap of under $400m.

The total number of shares purchased today for cancellation was 575000. I think that is a record for one day.

It is the investment allowance at 91p in the £ which does in fact make the North Sea quite attractive even with an effective tax rate of 75%. One has to assume a change of Government at the end of 2024 and an end to that allowance. Enquest has an effective tax rate of 35% until 2028 (the supposed end of the EPL) when it will reduce to zero. HBR has $500m in cash and will receive almost $100m from the sale of its interests in Vietnam. So it could do it so easily.

The point is that it would not cost anything at all to buy Enquest for say $800m (double its present valuation) if it saves $800m in tax in one year. The share buybacks can continue anyway.

And if only Harbour would buy or merge with Enquest, it could save roughly $800m in tax in 2024 alone. Enquest has a market cap of under $400m and roughly 12 years of reserves at a production rate of 44,000 barrels a day. Its main asset is its $3.5 bn of tax losses.

The results are out on 5th September 2023. It is on the website. They should be good.

The actual timing of the golden eagle $50m contingent payment is a little vague. The original prospectus said second half of 2023. We may not yet have paid the sum due and there is of course around $140m needed for the October stub. The reduction in the RBL from $282M to around $240m in the 3months from 30th April to 31st July is pretty positive. This is especially so given for most of that period Brent was well below $80 a barrel and production was low relative to what it should be now and going forward until the year end.

Apropos my earlier post, I have listened again the to investor presentation back in April and it does appear that the original RBL of $500m has been reduced because of the EPL. It is not clear by how much. Also the $50m golden eagle payment due in the summer will have gone out. So it could just be about making sure there is enough to cover the October retail stub of $135M.

The additional facility is junior debt and is additional to the existing RBL facility of $500m. With only $240m used why seek $150m more? The total unused borrowing facility would be $410m or say $425M if you assume further paydowns in August. The company also has some cash which is not ring fenced for joint ventures. I think all this means an acquisition is planned which will require some upfront consideration and a rapid payback in the remainder of 2023 and 2024. This is all about using the tax losses.

Buy backs are always preferable to dividends. To the extent that the buybacks force up the sp and you are sitting on losses then until you get back to breakeven point there is no cgt to pay on any disposal. In contradistinction, the payment of a dividend is taxable as income regardless of the capital losses you are suffering. Bound to be some good news on shareholder returns with Brent at around $84 when H1 results come out. Pleased that Harbour is not merging with Talos. It should merge with Enquest and make rapid use of the huge tax losses.

Another 565,000 shares purchased and cancelled today. Well above average. The current programme must be completed by 31st December 2023, but with just $40m left at the current purchase rate the program will be concluded by the end of September. Suggests to me that there will be more to come. Why not when the company is sitting on $500m of cash?

Well Harbour produced $1bn of FCF in the first half. The key figure in the Enquest results will be FCF and the corresponding reduction of debt. I am hoping over the next 5 years we can produce at least $20m of FCF for each month. That would be $1.2bn against a current market cap of under $400m.

The other points that are quite interesting is that the finance charges rose to $140M from $115M. Not clear why. Going forward and being net debt free these should come down a lot. There was a $85m foreign exchange loss. That is a quirk and bad luck. Should assume zero loss for the future. G and A costs more than doubled to $91M. Not clear why. Looks anomalous

Xpo 45. The investment case is completely overwhelming. Where else can you get a sustainable yield of 23.5%? Sustainable because the company can easily afford to pay its shareholder $500m a year for the foreseeable future. It has some brilliant investments outside the North Sea. It is a great and marvellous paradox that the lower the price the more shareholders who decide to ignore an irrational market will benefit from the buyback programme. Because of the terrible hedging on gas in 2023 we only made 58p a therm in the first half. That all changes next year. Good hedging in 2024 should offset the substantially higher tax rates.

I think the results were good. I was expecting much lower FCF because the previous guidance assumed $85 barrel brent and 150p per therm gas. We have a new forecast of $1bn even with lower oil and much lower gas. As of last night there were 784,396,753 shares outstanding. That gives a market cap of $2.26bn. The forward dividend yield is $200m/ $2260m or 8.84%. With $40m left to spend in share buybacks the number of shares outstanding should be about 770M by year end. So again assuming $200m in 2024 the yield rises to almost exactly 9%. Add in the likely share buy backs for 2024 of say $300m and the true forward yield (or total return to shareholders) should be 9 plus 14.5 = 23.5%.