Member Info for Sekforde

It is interesting to note that, unlike in the past when the number of shares repurchased varied, the pattern has been remarkably consistent. Each trading day precisely 550,000 are bought and cancelled. There are now share 824,938,792 remaining. There are 248 trading days in a year. If the purchases were sustained at the current rate, 136,400,000 would be purchased over that year. That is 16.53% of the total remaining. If the company maintained its dividend at $200m each share holder would receive an enhanced dividend of 16.53%. The current level of purchases is sustainable from the FCF for 2023 and 2024 and it is absolutely the right approach. We have been through the wars on the share performance - a combination of the EPL, lower Brent and gas prices, the increasing hostility to the sector and perhaps also the perceived threat of a Labour government. But quite impossible to justify a market cap of just $2.5bn for a company that will make at least $1.5bn FCF over two years.

Y11. You should just filter. If you comment they produce more of the same. No point in trying discern their motive or engaging at all. Just one lonely guy with many aliases. That is all.

Stevo agreed.
It is all entirely down to brent prices. I was guessing net debt as of today. Since end February we have had almost two further months of production at around 47800 per day with Brent averaging above $80. When you have a market cap of around $400M and debt is reduced by say $40m that is quite something. Did not quite understand their working capital point. In the presentation on 19th April debt was presenting as having smoothly decreased from $717m to $624m in the two months to end February 2023 which seemed quite some progress. And presumably the reserves are being replaced at more or less the same rate as they are being depleted?

Thanks Stevo. You put a low valuation on the tax asset. It could be much more if it could be used quickly. Why not more like $800m? You have used the year end figure for debt of $717m. That is now less than $600m is it not? Also there should be some value attached to the embedded expertise of the employees. For example in the talk they highlighted their expertise in decommissioning a service they expected to sell for profit.

I do not think it really matters whether shares are cancelled or held in treasury. No dividends are paid on shares held in treasury so they cease to count for valuation purposes.

Absolutely Banbury. I love seeing those green lines appearing. Just bliss to be rid of them. Sane contributors should not ever comment or engage in any way. Just filter.

If you assume that the losses will be used over 7 years and use a deferment rate of 5% then the Net Present Value is just over $800M. Given we have a market cap of around $410M and a net debt of around $590m, that would mean all the other assets are worth just $200m. Hmmm.

NewKOTB there is no possibility of a legal challenge to the EPL. This is primary legislation and under the UK constitution Parliament is sovereign.

Dumbly you are right. But in assessing their value you have to discount your $1bn to allow for the fact they will be used over the next 8 years or so and not immediately. The answer is the buy other assets from a company without that advantage and defer the consideration.

I do not how the market would perceive paying all the money in the form of a dividend. It would certainly give a pure yield of well above 16% and is affordable. The debt is being paid off anyway and it is very tiny and just no longer a concern. I much prefer share buybacks and it is only a matter of time before the mathematics begins to work through.

Assuming that the net debt has continued to fall since the end of February, it should now be about $590M. The market cap is $410M. We have an Enterprise Value of $1bn. Assuming only that we achieve around 45000 per day and the price of Brent remains at $81 average for the rest of the year. I have the net debt falling by about $20m per month this year. If the market continues to give the company the same EV then the market cap will have to rise by that sum per month or about 5%. Of course, as the debt is eroded, the risk associated with buying a highly leveraged company is diminished. It is reasonable to assume that in those circumstances the market marks up the EV to say $1.2bn by the end of this year. On these fairly modest assumptions we get to a near doubling of the share price by the year end.

There is no problem at all with the current level of net debt. It is just 0.2 x EBITDA. And there is no advantage to paying it off before the end of 2024. The argument for share buybacks strengthens as the sp falls. By eliminating 8% of share capital a year (at current price) the company can increase the dividend per shareholder by 8% without it costing the company anymore. The money spent on share buybacks has not been "wasted". It has been returned to shareholders.

Johnny3. I agree. The time to invest is when all the bad news is priced in and everyone is extremely fed up and pessimistic. In the end rational investing is attributing a valuation to the future stream of income accruing to the company. This stream of income belongs ultimately to the shareholders. Harbour is able to pay a dividend of $200m a year and has committed itself to $200m of share buybacks. At the current share price that is an effective 16% yield. But that direct return to shareholders is being achieved whist paying down debt and investing heavily for future growth. Much of the $1.1bn capex will result in a greatly enhanced return in future years. There are some astonishingly good fast payback deals to be done at the moment by a company that has plenty of cash and facilities and an excellent experienced team at the helm.

Hope so. Another 550,000 shares purchased.

Slater 606. You lack sophistication and you seem an emotional investor. There are as of this evening (assuming 550,000 shares purchased today) 825,478,792 shares in circulation. So the market cap is in dollars $2.468 bn. This gives a pure forward dividend yield of 8.1% or 16.2% if you include the share buybacks. Neither the dividend of share buyback programme is threatened with Brent and gas at their current prices especially taking into account the hedging in 2024/2025 and the extremely low levels of company debt. FCF should still be around $700m for 2023 and then rather more for 2024 IF prices remain at their present levels. Calculating a forward yield is always done at current prices. It is the recent fall in the sp that has boosted the yield which is all I was referring to. And yes for what is worth I think the risk/reward calculation is very favourable indeed at present prices. The huge capex programme this year should produce some mighty and very quick returns in 2024 and 2025. So I bought more today averaging down my very substantial losses. Once the market as a whole believes the yield is sustainable it should mark the shares higher to reduce that abnormally high yield. A doubling of the share price would still leave us with an 8.1% true yield - more than double what is obtainable on the FTSE 100.

I am pleased that both my questions were answered. The first was about FCF for 2023 and 2024 and the second about leveraging the tax losses. No actual forecasts for either year but they did run through some numbers. On tax losses they said no tax payable until the end of the decade (apart from EPL) which really is quite amazing. I am hopeful that we will soon be back at $85 per barrel and that the production will be right at the top of the guidance. Just a question of months of patience.

Bp is not affected by the EPL. But Hbr is extremely well managed and has a track record of delivery. $2.1bn FCF in 2022. Excellent safety record. Among the lowest costs of production. Implementing carbon reduction targets. Miniscule net debt. Time will tell.

Just filtered another two. 826,588,792 share remaining. Pure dividend yield 7.77%. Yield including buybacks 15.54%. Cost of dividend and buybacks $400m against forecast FCF for 2023 of around $800m. So balance sheet at year end strengthened by further $400m. It is now good value despite the EPL which explains the fall since last summer. Ignore the noise. Our day will come.

Just done it. Seen them disappear. Bliss.

Happy Investor an additional $10 boe on (assumed) same again production (192500 per day) gives an additional revenue of $702.625M. That is roughly the effect of the ending of the bad hedging in 2024. There should also be lower interest/financing costs as the debt is further retired. I have allowed an additional $500M in taxes which may be too pessimistic and that is how I arrive at a figure of FCF of $1bn for 2024. Harbour has access to relatively cheap money and could boost these returns if it chose to re-leverage itself to pick up a few bargains. But not sure how you get to FCF of $0 to $200-$300M for 2024.