RE: Why dropping like a stone?7 Jun 2022 12:09
From yesterday's Serica Energy Corporate Update RNS. Much applicable to HUR. One hopes HUR June monthly update contains similar direct, positive & upbeat addressing of windfall tax issue:-
" Energy Profits Levy
The Board notes the significant fall in the Company's share price in the run up to and particularly following the UK Government's announcement on 26 May 2022 of an Energy Profits Levy.
The Levy is applicable to profits arising on or after 26 May and so Serica's profit prior to that date is unaffected.
Although fiscal instability is unwelcome in an industry with long lead times for capital expenditure, this new Levy is part of a package that includes significant investment incentives designed to encourage companies like Serica to continue to reinvest profits. Serica already has an ongoing investment programme including the LWIV campaign and the North Eigg exploration well in 2022. Based on our current understanding of the Levy, this programme will qualify to benefit from these incentives with each £1 invested by Serica offering an overall tax saving of up to 91.25 pence. Our planned 2022 expenditure on the North Eigg well and the LWIV campaign is around £60 million which we expect to be eligible towards this tax saving. This will offset a large element of the Energy Profits Levy that would otherwise be payable on Serica's profits this year.
Moreover, we are evaluating additional candidate projects designed to increase the productivity of the Bruce hub. Our strong cash balances with no borrowings, 100% of cash flows from our shares of the BKR assets and now enhanced investment incentives puts Serica in a strong position to continue to prosper as it adapts its strategy to changing circumstances.
The Company will be holding its Annual General Meeting on 30 June and looks forward to presenting our forward plans in more detail and hearing shareholder views.
Mitch Flegg, Chief Executive of Serica Energy, commented:
"Our established strategy of investing in our portfolio to enhance production and create greater value means that Serica is well placed to take advantage of the investment incentives included in the Levy. We have built a strong cash position and balance sheet and this, combined with strong cash flows and being a current taxpayer, gives us the leverage and resources to do so.
Although Serica has financial strength, our industry operates within unusually long investment horizons against a backdrop of often highly volatile commodity markets and business cycles. We therefore encourage policy makers to consider the importance of fiscal stability in enabling government and industry to meet the mutually set objectives of sustaining investment in the UKCS at a level capable of ensuring security of oil and gas supply in volatile markets and delivering energy transition targets."
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