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I doubt anything will happen in tomorrow's budget. However the latest plunge in Brent really does make a nonsense of the EPL. The government will soon work out that it is both harmful and unnecessary. Lower prices reduces the fuel subsidies required by billions. We do now have a yield which is safe and comfortably above 7%. I would be tempted to use the relatively cheap borrowing available to Harbour snap up little Enquest. It would be a good fit. It has 12 years of reserves and huge tax losses. We could take about $100m a year out of its bloated cost structure and pay off its very expensive debt.

At around $83 Brent 2023 should see FCF of $240m. The Moody's report just means that the razor sharp focus should be on debt reduction and nothing else. The EV value is now around $1.070 bn. (Market cap $400m Net debt $670). If we could chip away at the debt by about $20m a month and maintain EV at current levels we would see the SP rise by about 5% a month.

This looks interesting. At first sight I was mildly disappointed. I was looking for higher forecast FCF for 2023. The net debt comes down to $200M by year end after allowing for dividend payments and share buybacks so we will not be entirely net debt free in 2023. The finance costs were higher than expected however this is just explained by currency movements. But there are two pieces of really good news. The first is the complete elimination of profits in 2022. This is entirely attributable to the accountancy treatment of the EPL. Of course we already know that the FCF for 2022 was $2.1bn but a statutory nil profit means all our historic losses remain unused. They will be fully deployable in 2024 when the bad hedging come to an end and we should start to reap the reward of non North Sea investment. The second and really fantastic news is the additional $200m of share buybacks by the year end on top of the dividend. This means an effective return of about 14% over the next 9 months or so.

Hunt is a pragmatist. But I accept he may do nothing. The market expects nothing so anything will be a bonus and could bring some relief. Regardless the company is still making a mint. It is investing its CAPEX wisely for future growth and on a fair wind we could make our market cap in less than three years in terms of FCF. Tomorrow could be an exciting day.

A confirmation of a $200m dividend or higher, a net debt of around $500 - $600m as of 28th February 2023 and a further $100m of buybacks should send this much higher over the next few weeks. I am hoping we get guidance on FCF for 2023. That for me is all important together with the assumptions on which it is based. The budget is also something to look forward to. Very difficult for the chancellor to ignore the large falls in prices and the threat to future investment in the North Sea.

I have used $81. Post hedging at $81 gives 44,000 x 81 x 365 = 1.30086 bn. We need the average price of brent for 2023 to be around $83.5 to drag the post hedging average up to $81. Average Brent at $90 raises the post hedging price to about $87 boe and adds (6 x 44,000 x 365) $96.36M to revenue of which $33.726m goes in additional EPL. There then would be a further interest saving of around $5m. Factors that could further improve the position would be for the production to be nearer the top end of the forecast range and opex to come in a little lower on £ weakness v $. We could get to FCF of $350M on that quite possible outcome. These apparently marginal differences become extremely important against a highly leveraged company with a market cap of just $420M. And I agree with buying back shares a some stage fairly soon. Each $ spent produces an annual "return" of $0.59 at FCF of $250m.

2022 - Revenue $1536M. Opex $400M. Capex $120m (using declared poste hedging price of $89 boe and 47300 turnover)
2023 - Revenue $1301M Opex $425M Capex $160M (using assumed post hedging price of $81boe and 44,000 turnover)
Net revenue $300m lower. But EPL roughly same as 2022 on lower profits PLUS additional capital allowances.
Improvement in finance cost $50m.
FCF 250M.

Well there is more upward momentum in New York tonight. So it could be punishment time come Monday.

The company will not make anything like the FCF that it made in 2022. That was an astonishing $500M. The post hedging price of oil looks like being about $10 lower this year and production will also be lower by about 3,500 barrels a day. Then of course there is the EPL and slightly higher operating costs. Against those factors is the reduced interest charges as the debt is retired. But the real point is that the EPL is only 35%. Other taxes are largely but not entirely dealt with by the huge accrued losses.

Having gone 4m shares short at 295p and watched the price fall to 269p I guess there must be now a little sweat appearing on the brow as we head towards what will be an excellent update on 9th March.

Today we have a market cap of $423M and net debt of $698M (as of 31st January 2023) implying an EV of $1123 M. I see the FRC as amounting to on average $20M a month this year - it was $19M last month when a good chunk of tax was paid. That is less than half of last year's FCF. If we were to merely maintain the existing EV that would mean the share would rise by 52% - 220/423 by the year end.

Yes but Johnny (and all other sane people) the very best approach is to ignore him (Rookie/Jeff) or filter him out. If you comment then there is just more of the same. He obviously does not own any shares and never has. He craves attention.

Slater O6. Those companies you mention are paying similar dividends, but in no case is the dividend safe. Three are at the mercy of commodity prices and there is little cover to the dividend. BAT is highly vulnerable to lawsuits in the US. Moreover, I have "harped on" about pure dividend yield. In my view you should add in the share buy backs. That could take the true yield to more than 21% for this year and the next. That is quite interesting to me as a unrepentant and exclusively "value" investor. My grandmother is now well over a hundred. People of her generation love a good safe dividend. It is an approach that has served her well since the 1930s!

I was dead against hedging. But I have change my mind in the light of the EPL. I now think we should hedge the entire production until the end of 2026. Post the use of our tax losses, we are only getting 25% of any upside and it is not worth taking the risk of a fall for such a small share. By hedging for 4 years we guarantee a FCF of not less than $3bn over that time period. A substantial fall in oil /gas prices would compel the Government to scrap the EPL which would then enhance our post tax returns. The present sp can only be explained if the market considers the dividend itself is not safe.

The pure dividend yield now is comfortably above 7%. The short sellers have been lucky. Their heroic punt was followed by a drop in oil and gas prices and a drop in the general markets. But we bounced off the previous low of 272p quite quickly and the dividend is safe with oil at $60 or a bit less.

What really has the board got wrong? $2.1bn of FCF last year despite the start of the windfall tax. No spills or safety issues. $600m paid to shareholders. Virtually eliminated debt. We are just witnessing a stock market anomaly which can be quickly corrected by a good update and resumption of buybacks at even lower prices than before.

The pure dividend yield has just edged above 7% for I think the first time. If share buybacks are maintained as $400M then the effective yield is above 21%. I think Linda Cook should simply be her reassuring self in 2 weeks time. I bet she will have some good news.

Megla how do you get to FCF of $270M on those assumptions? Which year?

The politically astute way to attack the EPL is to say it is a tax on Scotland and is diminishing investment in Scottish industry. But the 91% effective investment tax allowance is a big mitigating factor and it is really only this year that we we see the true overall impact.

Raging bull I have taken all the purchases into account in calculating dividend yield. It is almost bang on 7%. And entirely safe in all realistic eventualities.