Member Info for Sekforde

I think the present assumption of the market that prices of gas and oil will start to fall may turn out to be wrong. Trump has spectacularly misjudged Iran and its capabilities. He has no plan at all for opening the Strait of Hormuz and none of America's (former) allies has the means or the will to try to help. Demand for oil and gas is highly inelastic. It would require much higher prices to reduce demand by 10% let alone the 20% that used to come through the Strait. At the moment demand is being satisfied by the drawing down of finite reserves. Iran will allow its own oil to pass but that is a tiny contribution of about 2 million barrels a day. If present prices are maintained then the FCF for Harbour would be $600m+ (8x170m) + (10x150m) = $3460m. I just see no reason for not adding the $400m coming from the December 2025 transactions and I do maintain that production will exceed the top end of forecasts which adds another $300m. Accordingly I see a clear path to $4bn plus this year against a market cap of just $6.3bn. I do concede it is bullish to assume constant prices when the market indicates sharp backwardation but without a plan to open the Strait the future may result in sharply higher prices and not merely constant prices. At the moment prices are not particularly high by historical standards. In July 2008 Brent reached $147 which after adjusting for inflation is around $260.

Goldman Sachs' position seem to be based on the opinions of Michelle Della Vigna. I thought it was all to do with her bearish view on oil (Working out well) But I now discover that the same individual has rated BP a stonking buy with a price target of £6.40. Makes no sense. Ignore. They are wrong. Harbour is a stonking buy.

Krono the company has a consistent position with hedging which is to hedge 50% one year ahead and 25% two years ahead. It is sensible in a a world of extraordinary volatility. Waldorf is an absolute gem because of its tax losses. It allows some quick payback drilling in the over taxed uk.

Trojan horse. Quite. I like that way of thinking. And 150p a therm translates to about $21/mscf!

Stumpy. Of course you are right that something must explain every movement in a share price. What I mean is that the fundamentals have not changed and there is nothing in the fundamentals that justify the fall. I am entirely a value investor. I never attempt to guess what may happen on a day to day basis. I do not believe you learn anything at all from a graph and I do not think there are resistance points. But the fact remains that the company is capable of generating its entire market cap in the next three years on the basis of fairly conservative assumptions. Moreover at the end of that three years it will still be generating perhaps $1.5bn a year. That is extremely unusual and a real opportunity.

Nothing really explains the drop this morning. Using only the forward curves for gas and oil and the company's own sensitivity indices we remain on target for FCF of over $3bn for this year. But there is a further point. In 2025 the FCF was made entirely in the first half. It was $1.35bn against a full year of $1.1bn. The same thing will happen this year. It is attributable to the timing of capex tax payments and current exceptionally high prices. This should mean the bridging loan of $1bn used to pay for LLOF will be completely repaid and it will not be necessary to issue a replacement bond. The share buybacks will start soon and we will be in the FTSE in 3 months.

Onedb I have not read the Barclays' analysis. But it is already out of date and does not take into account the almost insane jump overnight in gas prices. Interesting times and let us see how things work out.

Onedb the current forward curve this morning does show Brent slightly above $95 for the full year. And the sensitivities I have used come directly from the company and expressly take into account all the hedging that they have done. The $400m is of course the product of two one off transactions but comes in the form of hard cash which reduces debt. On production I have relied heavily on the published figures for the first two months of this year - 509k per month including one month's LLOG. So these show hardly any decline at all on the old portfolio which produced 500k a day in the first three months of 2025 and 474k for the full year. And yet we have 20k soon to be added from Waldorf and now rapidly increasing production from LLOG so 475k to 500k for the year does look conservative. I find myself wondering whether these figures can possibly be correct. But I cannot see any undue optimism. Some people argue you should ignore forward curves and rely only on the spot prices and assume they remain the same for the year. That approach would produce even higher numbers.

Using the forward curves which seem to improve every time I look, we now have average brent for 2026 at $95 and average gas for 2026 at $20. Using the company's published sensitivity index which takes into account the current hedging position (which will now be showing a large paper loss) we have FCF for 2026 of $600m plus (6 x 170m) $1020m plus ( 9x 150m) $1350 = $2970m. To this figure must be added $400m cash that will accrue from the first two December 2025 transactions and at least $300m arising from the clearly excessively conservative production forecasts (475 -500k per day). This takes us to FCF of $3670m for 2026. This year 45% of FCF is due to be distributed in one form or other to shareholders. I assume the board will not include the $400m. But that would still mean around $1.5bn or just under 25% of the current market cap. Even with a distribution of that order the huge retiring of debt will mean that the ratio of debt to IBITDA should be below 1 in 2027 allowing an increase in distributions to 75%. In May this will all become apparent in the trading update when the board will announce the commencement of a share buyback operation. In June will will enter the FTSE. We will be far the highest dividend stock.

Stumpy the forward curves reflect what traders are prepared to pay for oil or gas for delivery at a future date. So I can buy brent for delivery in December 2026 at around $84 far below the current spot price. The forward curve falls throughout 2026 and 2027 and then begins to plateau in 2028 at a little above $70. Whenever the spot price rises or falls the forward curve tends to change also. Backwardation to the extent we are seeing in the market at the moment is highly unusual. It suggests that the market as a whole believes that the disruption to supplies will be short lived. I cannot understand why the US or Europe does not sell most of their reserves into the market now and simultaneously buy them back at much lower prices for delivery in 2027 or 2028.

Stumpy I have based my calculations on the forward price curves not on current spot prices which are of course much higher than the market's assessment of what prices will be later in 2026 and 2027 and 2028.

Even excluding the $400m received for the December transactions the forward curve for brent and gas produce FCF of nearly $3bn at today's prices. 2027 looks like around $2bn and 2028 also $2bn as there is strong backwardation. With a 45% payable this year to shareholders total dividends and share buybacks will be around $1.3bn.

On the subject of LLOG it is remarkably easy to work out its contribution to FCF for 2027 and 2028. We have been told that production should rise by 25% per annum. So that takes us to 56.25k in 2027 and 70.31 in 2028. Assuming that the gross price obtained is $70 a barrel we should receive a gross revenue of $1.437bn in 2027 and $1.796bn in 2028. Deduct $250m for opex in 2026 and $300m for opex in 2028 and $300m for capex in each year and we have a pre-tax earnings of $887m in 2027 and $1.19bn in 2028. But here it the thing. Although the blended tax rate is 23% there is no tax to pay. The entire purchase price can be offset against tax. There is some interest to be deducted from the loans although these are rapidly being paid down throughout the period. It is entirely possible that from LLOG alone the FCF will be above $1bn for the following 16 years even when some tax has to be paid. It is quite impossible to see that the market has priced all this in yet. Mexico will be chiming in with similar figures by 2030 or so.

Er well Goldman Sachs was saying that the shares were worth 200p and that the price of Brent was going to $55. I am in the camp who says I do not know what oil or gas will do but the forward curves are the overall market's assessment and from that one can calculate FCF which the only rational way to value a company. We could easily make in terms of FCF the entire market cap in the next 3 years and at the same time increase our 2p reserves substantially. Some 50% of that sum will be paid to shareholders I hope mainly in buybacks.

The present FCF for this year using the company's own metrics and this morning's forward curves averaged for the whole year is Brent ($87.5) and gas ($17). This gives us $600m plus $850m plus $900m = $2350m. We have $400m coming in from the two December transactions. And all the calculations were based on the company producing 492k a day which is far too low in the light of the evidence of the first two months (509k) without Waldorf and with only one month of LLOG. So in total we will have nearer $3bn FCF against a market cap of now under $6bn. And 2027 should be more than $1.5bn on the basis of the current forward curves with the increased production from LLOG and the sharply reduced costs of debt servicing. Smart folk should take advantage this dip which does not appear to be based on anything at all.

There is no reason for the drop and it will quickly be corrected as the market realises that the forward prices have again moved upwards overnight for both gas and brent. Very soon the buybacks will commence and it will not be the tiny $100m of last year. 45% of $2bn FCF with a $300m dividend implies as much as $600m in buybacks. Each holder could end the year with a 10% larger stake in the company at the end of the year.

Further reasons:

FCF this year $2bn plus based on current forward curves.

$900m (45%) to share holders is 15% dividend/share buybacks

509k barrels of oil equivalent in first two months.

Entire purchase price of LLOG deductible against tax in US to "very little" tax to pay.

The sum of the market cap and the net debt is the enterprise value. In Harbour's case that is $6bn and $7.2bn or $13.2bn. People worry too much about Harbour's debt. The cost of servicing it is tiny in relation to the turnover of the company. But the company is going to pay down a large chunk of it this year and next.

The safest thing to do is to use the current forward curves. These now produce average Brent of around $85 and gas around $16 for 2026. This gives us using the company's own guidance $600m +(4 x170 + 5 x 150) = $2040m. If you add in the $400m from the first two December 2025 transactions you have $2440m. The company will achieve better than its average guidance on production and so I am expecting FCF for 2026 well above $2.5bn. if rather than using the forward curves (which show the market expects commodity prices to fall throughout the year) you use the current prices the company will generate over $3bn this year. So impossible to justify a market cap of just $6bn.

Keep buying on this irrational dip. Alexander Krane forecast FCF of $1.4bn this year on the basis of $75 Brent and $14 gas. Assume $80 brent and $15 gas and you have to add $330m. So we will see a huge paydown of the debt and many share buybacks later in the year. And the effect of that early paydown of debt is to greatly enhance the scope for further FCF enhancing capex.