Member Info for Sekforde

I am not sure what that coming off plateau in the new year meant. Some reduction from Tolmount may not matter too much. But I would be surprised if overall production in 2023 was lower than 2022.

It is likely that the windfall tax will be increased to 30% for 2023 and extended to 2028 (see Times report) . It could be introduced immediately on 17th November 2022 but is unlikely to be retrospective and so only marginally relevant for 2022. Even with the current windfall tax (2022 $400m) we have forecast free cash flow for 2022 of $2bn to $2.2bn. I am very confident we will exceed that range by a small margin. This is because the forecasted average production 205,000 - 210,000 boe and the forecast average price for the rest of the year are too pessimistic in the 3rd November 2022 update. Brent is assumed to average $90 per barrel for the rest of the year. It was around $94 for October and we are now at $98. A similar story for gas. On production we have averaged 207,000 boe this year to 30th September 2022 but are now heading into a maintenance free (more or less) quarter which should improve the average for the full year to around 211,000. So I think the actual figure for free cash flow will be around $2.3bn. From this sum of $2.3bn we need to deduct the $200m dividend paid and the $400m now allocated for share buybacks. This means that the remainder of $1.7 bn will have brought the total debt to $400m ($2.1bn less £1.7bn = $400m.) by the year end. In other words debt should fall by $700m in the present quarter. For 2023, assuming present prices, present level of production and assuming 2022 capex we should see similar levels of profit. Free cash flow will be impacted by the windfall tax rising from $400m to around $850m. We could therefore be looking at around $1.85 bn free cash flow for 2023. This takes care of the remaining debt of $400m and leaves $1.45bn to invest or reward shareholders. For 2023 I have taken account of the slightly better hedging position and the lower sums paid in interest on debt but prices for the year if maintained at present levels will be slightly lower than for 2022 as a whole. The board should maintain the dividend at $200m and increase share purchases to $600m or 15% of present capital at current prices in 2023. It will still have around $650 m to invest outside the UK whilst maintaining the current 2022 CAPEX. If you take out 15% of share capital and the market cap does not change then the price per share must rise by 15%. But markets are forward looking (most of the time) and throughout 2023 we will be looking forward to 2024 which is the year we are free of all the bad hedging. So guess what I am fairly relaxed about the increased windfall tax. This investment is all about maths in the end. You cannot take out 15% of your share capital every year without it impacting on the price per share.... eventually.

GGG I have understood. But you are mistaken on three points. First if Harbour buys Enquest for $1.75bn and pays off its debt then Habour has to borrow $1.75bn to do that. Habour's debt goes from $1.1bn to $2.85bn. A very bad idea. Second simply buying all the shares in Enquest will not enable Harbour itself to use the tax losses. Third of course the Government can wipe out tax breaks. It just introduces legislation to do precisely that. In our constitutional system Parliament is sovereign and there is nothing stopping it passing any law that the majority of members of the House of Commons are prepared to vote for. The Tories have a huge majority and the opposition is no friend of the oil industry. So doing precisely that is very much a possibility. Gearing up the balance sheet is a seriously bad idea. We have loads to do to develop the existing portfolio .

GGG if you are that cynical about Government intentions then the last thing you would be doing is assuming the current law on use of tax losses will continue. Takeovers are complicated and involve huge amounts of management time to say nothing of lawyers' fees. And I am not sure the tax losses could be used anyway without doing some sort of reverse takeover as with Premier Oil. You suggested Enquest could be purchased for $1.75bn. At present market cap that would buy you 43% of Harbour. Enquest produces about 50,000 barrels per day Harbour 210,000. So our own shares are much better value and require nothing more than an instruction to the broker. Keep buying. Here is another $100M.

I do not see the point of buying little Enquest - cheap as it is. We would have to pay a premium to the present market price. Our own shares are better value.

I am very happy with shorters. They will eventually have to buy back. The company will be in the market soon. $100M is a fair amount to spend.

We are now moving into a golden period with very little maintenance and higher prices.

The buybacks are absolutely the way to go. Another $100M at crazy low prices.

I thought the debt would come down. But it is simply a function of timing of investments and tax payments. The important point is the huge increase in free cash flow. Beyond my wildest dreams. This will mean we will be debt free in say March 2023. All fine.

135 years of trading and I am a big big fan of share buybacks. Absolutely the best investment with all the surplus cash.

The tax is not going to be a very big element for many years because of the unused losses. At some time there will be some really good news on the drilling front. We do not spend $1.2bn a year in CAPEX to receive nothing in return. The share buybacks will happen some time soon - perhaps early in the new year. I think 8 times free cash flow would be not an unreasonable Valuation once we are debt free. That would give a valuation of around $16bn.

Laidback has included Capex and Opex in his calculations. His figures are right for free cash flow on the assumptions he makes. The only think I question is the tax assumption. Windfall tax should be payable from 26th May 2022.

On Laidlaw's calculations could easily end up close to 210 barrels a day. Costs could be even lower given costs in sterling and sales in dollars. $90 a day for Brent and 200p a therm below present prices. Capex could be below $1.2bn if board more cautious given awful world economy. But look if you can make your entire market cap in 2 years and add to provable reserves then something wrong. Surely.

There is not a $7bn loss on the balance sheet in any real sense. When a company hedges and the price rises it is just treated as a loss for accounting purposes. As the hedges unwinds the loss disappears. But all the forecasts of cash free flos take into account that because of the bad hedging we are selling well below market price until 2024.

Yes I agree that the rate of share buy backs was very high and I thought that meant the BOD was going to throw in another $100M or so because even at £4.80 the price was far far too low. But then we had the price of oil and gas fall a bit and general chaos in the UK Government and rising interest rates so I guess they thought "lets play safe and clear all the debt first". Well we are now just at most four months away from being net debt free. In 2023 we will probably invest $2bn pay a dividend of $200M and buy $500M of shares. And end 2023 with about $500M to $1bn in the bank. So time to double down and ignore the noise.

The only thing that matter in investing is rational valuation. If a company is able to generate free cash flow of 50% of its market value every year for say 4 years then it is undervalued. If that same company plans to buy shares with its free cash flor then the SP will eventually rise in value. Not a matter of graphs. Not a matter of machines. Not a matter of any one group or person controlling anything. Nothing to do with momentum. Just ultimately mathematics.

I agree with the coiled spring thesis. But the 20 p in old money point (frequently made) does not really amount to much.. The old Premier Oil shareholders only ended up with 5% of the company so they can never hope to recover to the glory days of £1 plus a share.

In fact against the rest of the market Harbour has performed well this year. It has paid a dividend of $200M and purchased for $300m or roughly 7% of its share capital. The share purchases have stopped now and I guess with lower oil prices the company has decided to concentrate on clearing the last $700-$800M in net debt. ( I am estimating that since 30th June 2020 when the net debt was $1.1Bn we will have paid down a further $300 - $400M.) I looked at the Fitch report which reaffirmed the BB rating on the bonds. Absolutely everything was taken from the company's last report and there was no independent analysis whatever. However there were a number of points it just got wrong. First, it suggested costs of $15 a barrel were high. They are not. And in any case likely to be lower because of the collapse of sterling. Second it suggested that having only 7 years of reserves was a negative. That ignores the enormous scope to increase the life of the wells by tie backs etc. Moreover, CAPEX is high and increasing and that should boost the reserves every year. The FTSE fell further in after hour trading on Friday so we may have another bad week for the market generally. Third it ignored the huge reduction in risk attributable to the hedging through 2023. The net debt will be cleared come what may by the end of that year.

Always look to the future. The present dividend yield is 5.11%. But you should include the buybacks when calculating true yield. At $3.5bn a quarter or $14bn a year that is an additional 15.62% at present market price. So the total yield to shareholders is 20.73%. And sustainable? Of course. The debt is probably now about 18bn and should be completely cleared in just over a year.

I am just not a fan of trading in and out. Short term fluctuations are impossible to predict. I think it is one to just hold and hold.