Member Info for shakeypremis

Really? What happens when they have their market cap in cash?

Was 149p/therm as of yesterday at 18:15. Goes down slightly (at the moment) to 128p on the 19th before rising again.

https://www.cmegroup.com/markets/energy/natural-gas/uk-nbp-natural-gas-daily.html

This happened yesterday. It sends a significant amount of LNG to Europe. In theory should help UK NBP gas prices.

https://www.reuters.com/business/energy/explosion-hits-freeport-lng-plant-us-natgas-prices-plunge-2022-06-08/

Like I said, will be choppy and volatile. Most likely won't break out of downtrend at first attempt.

Gonna be a lot of chop and volatility up and down but chart looks good in my mind.

https://tvc-invdn-com.investing.com/data/tvc_1eb5ff0f6c9da01074810246ddeac60f.png

Less than £10 lol. Because post-tax NPV of a successful NE will be much lower. If I were a company that had the knowhow I would run down my NS assets and take any profits from the NS out of the UK and invest overseas where post-tax NPVs of projects are more attractive.

However, if you know the NS well there could be opportunities to acquire producing assets that will now be much cheaper and grow (because their future post-tax cashflows will be lower given static oil/gas pricing). That is the choice companies will now face. I really can't see how this tax will increase production in the NS. Maybe it could to an extent in the very short term. I don't know.

Obviously adversity and strife always produce opportunities. So the only positives here might be that a company like Serica can exploit the situation to their benefit and maybe grow etc. But that is yet to be seen. But all oil and gas assets in the North Sea have just be come much less valuable on a NAV/NPV basis.

Well of course it's going to be damaging. Everyone's NPV/NAV is going to be impacted by the WT. There are no positives from this. Companies are going to make less money in the North Sea going forward. The only silver lining is if you already had planned CAPEX you can get most of the extra tax you will now pay back (until you stop doing the CAPEX).

There is no benefit to anyone here. It's only bad. It's just that it will impact companies with investment plans (like Serica) far less than those that don't. Seria are still going to make less money going forward, all things being equal.

This energy crisis has been decades in the making. We are in the endgame now. It will get worse. You can bet your bottom dollar nationalisations WILL come eventually. It's just a matter of time. Make hay while you can chaps.

Stuff drops in a straight line very easily but very rarely goes up in a straight line, especially after dropping in a straight line. Just the way it is. Will be plenty of time to bag a position if so inclined.

Becoming harder and harder to believe stupidity is main cause of policies like this tax.

I say upgraded, I meant refurbished. I.e they can't really have their lives extended.

Our nuclear energy fleet is apparently the only one that cannot be upgraded due to the way they were built. Essentially big sealed boxes with equipment in the middle that is degrading. To get in to the box you must break in to it and thus weakens it. So a no go as far as I understand it. We are so screwed this winter. Serica is going to do well.

Ralphmeister, these look like monthly futures, not day ahead futures pricing.

Try this one. Not real time but does update.

https://www.cmegroup.com/markets/energy/natural-gas/uk-nbp-natural-gas-daily.html

These have spiked to about 170p as of today. What is that about? It can't be the windfall tax because it wouldn't affect such short term prices. Longer term sure.

It'll probably go back up again though.

Yes this wealth tax is egregious, yes it is gonna be counter-productive, yes it is going to lower investment going forward due to essentially all projects' after-tax NPVs going down (maybe some projects with high CAPEX to post-tax NPV ratios become more viable???) but surely most projects become less attractive, but, right now, even with the tax, Serica would seem to be quite wildly undervalued. It could have it's market cap in cash in a couple of years and perhaps even sooner if NBP goes nuts this winter.

What is the EV/FCF yield here at current gas prices? 40/50%? I haven't done the maths but it's got to be a pretty big yield. Doesn't make sense to do a market cap/FCF yield because so much of the market cap is cash now.

I think it results in short term investment by CURRENT players, or perhaps new players who have development/exploration CAPEX but only if they first buy a producing profitable asset so as to be able to reclaim investment CAPEX. There are probably more scenarios and more nuanced than this too.

You could get some existing players and new ones who were thinking about it going "F this, despite this cost recovery measure, discounted future cashflows for our prospects just got a whole lot worse going forward due to 65%, let's not bother and do something else with the cash and go overseas or pay out dividends on current assets and wind them down".

Time will tell. Short term maybe we get increased investment as described, maybe not though, but surely medium/longer term this is very bad for oil and gas production in the UK as companies invest far less in the mature NS and supply reduces as a consequence.

Just trying to get my head around all this and having a think about what this new tax and cost recovery measure (90p in the pound) incentivises and what it doesn't. It's bad all round, no doubt about it, but there are some players who'd be in a less bad position than others I think.

1. If you're currently in the NS, with PRODUCING PROFITABLE assets it makes sense now to do any exploration/development you were umming and ahhing about. Due to the 90p in the pound cost recovery. Essentially it derisks capital investment for such players in the NS because you'll be able to get 90% of it back by paying less tax. Is that correct?

2. Outside investment coming in looking to exploration is surely now very disincentivised. Who wants to risk capital and then have to pay 65% tax afterwards on any profits and with no cost recovery because you aren't cash flowing.

3. Following on from point 2, if you are a new player without any producing profitable assets in the NS and you had a pile of cash you might want to participate in exploration and development via purchasing profitable cash flowing assets and use the cash from those assets to do said investment.

More marginal prospects and projects are surely less likely to be developed but anything relatively compelling I guess will still get investment but via current players or via new players who come in and buy out existing producing assets/companies. I think overall it must reduce investment though because that 65% tax is so onerous. The cost recovery is very compelling however but only if you have producing cash flowing assets.

Does that make sense? Have I thought about this correctly and understood the tax? Opinions welcome.