Member Info for shakeypremis

Yet another modification to the WFT? If we do get some kind of sliding scale royalty or something similar, could this be the Jack in the Box the North Sea needs to remain competitive. If this happens, surely bias must be to the upside for someone like Serica.

Gas prices are still fairly high and probably going higher in to winter. Those poor oil/majority oil producers in the North Sea are going to get absolutely slaughtered with the WFT being so high and oil where it is. I really don't see them removing the WFT, it is here to stay. What is most likely to happen is that oil does go back up again anyway.

'Deliberate' is the word you are looking for.

The National Grid warned of this some time earlier this year. It's not a 'likely' scenario but it is a possible scenario they warned could occur if temperatures get really cold early next year and we can't secure gas supply.

TerryM1, I agree. OK so not the very smallest, but those who might want to invest a bit outside an ISA (which they have filled for the year) and indeed small company owners/directors, someone who might want to invest in a small private business etc. These changes hit who you say, the squeezed middle, but in my book these are small investors. Guess it depends on your definition I suppose.

Only the small will be damaged by the lowering of tax free dividend and CGT thresholds. If you are making much bigger investments or getting paid big dividends these thresholds are irrelevant. Who they hurt are the little guy, small company directors paying themselves in dividends, those making investments in very small businesses etc, the saver trying to make a little on the side on the stock market etc. Anyone making serious money from dividends or capital gains doesn't care about these changes. If the headline rates had increased then that would have been different but they haven't. Just like the 45p rate threshold coming down, it makes no difference really to those on the biggest salaries, only those who are just starting to earn at that level.

The EV here must be so low now. If gas prices in 2023 do a 2022, could this be trading at close to a 1x FCF/EV ratio?

Only thing they will force is investment out of the NS in to other countries.

Chinch, see this;

https://imgur.com/a/p7rmbYa

No I don't think it is a double whammy infor.

https://www.gov.uk/government/publications/autumn-statement-2022-energy-taxes-factsheet/energy-taxes-factsheet

How will the Energy Profit Levy’s investment allowance change?
The government has always been clear that it wants to see the oil and gas sector reinvest its profits to support the economy, jobs, and the UK’s energy security.
The energy profits levy included a ‘super-deduction’ style relief which aimed to encourage companies to invest in UK oil and gas extraction, putting more UK gas on the grid for longer, supporting jobs and the economy and bolstering the future energy security of the UK.
This 80% Investment Allowance meant businesses would get a £91.25 tax saving for every £100 they invest – providing them with an additional incentive to invest. This nearly doubled the tax relief available and means the more investment a firm makes, the less tax they will pay.
Under the 35% levy rate, the government is reducing the rate of the allowance to 29% which, due to the higher rate, will broadly maintain the existing cash value of the allowance.
This means business will be able to claim £91.40 in tax relief for every £100 invested rather than the previous £91.25
We also recognise the crucial role oil and gas firms in helping us to achieve our ambitious net zero targets by investing in world leading renewable infrastructure and green energy products.
The government has always been clear that it wants to see the sector reinvest its profits to further support Net Zero, domestic jobs and the UK’s energy security. The Net Zero Strategy also recognised that remaining oil and gas installations will use low carbon power, with the sector currently working towards reducing emissions by 25% in 2027 and by 50% in 2030.
To encourage this, decarbonisation expenditure such as modifying existing installations to use power from offshore windfarms, installing bespoke wind turbines to power the installation or running electricity cables to the installation from shore will continue to qualify for the current investment allowance rate of 80%.
This means from the 1st of January 2023, a company spending £100 on upstream decarbonisation will now be able to deduct £109.25p when calculating its levy profits.

I wonder if the policy paper may contain some positives. We'll have to wait and see. Probably not though.

You are right though that Serica do need to invest abroad. Even in the event of NE success capital must be returned to shareholders or investment made overseas. I agree the board are not aligned with shareholders may well not have the guts or motivation to invest overseas. They are going to get paid regardless. We need a grouping of major shareholders to threaten to kick them out if they don't do the right thing.

Do you really think almost everyone who might sell has not already sold? The WFT drop is probably already priced in. We know what it is going to be already, 35% most likely. If it does turn out to be less than that great. After the WFT was originally announced this stock HIT AN ALL TIME HIGH. I think the same is going to happen again as long as gas prices remain high. There are signs they are going to start going up. We need to see over 200p/therm really.

https://archive.ph/o2Vgd

So they are basically going to do a sliding scale royalty for electricity generators (a semi-sensible policy), calling it an excess profits tax but maintain a WFT for O&G and totally hamstring and disincentivise them, upping it to 35%!!!!

"However, Hunt is now preparing a tax of 40 per cent on the “excess returns” produced by the sector above a certain price per megawatt hour, according to people close to the discussions. That threshold has not yet been decided."

A sliding scale royalty would be a good way to have done this. Of course the government are actually trying to curtail investment in the NS though. That is the only logical conclusion of this. Perhaps they think high prices are here to stay, maybe they are, but investment is surely going to still decline.

It's highly unlikely management will distribute cash and wind up company. They have no skin in the game and are salary men. They will IMO probably try to invest in the NS or maybe if we are lucky they will look abroad (as they should). If they need expertise in foreign jurisdictions they should bring it in or farm in to non-operated assets for an equity stake. An activist investor needs to buy in here and give the board a kick up the **** or kick them out.

We might get increased dividends but we won't get them winding down the company.

Serica must however invest overseas or return cash. IF NE is a success then that might be worth investing in. North Sea is not a viable jurisdiction for any long term kind of investment unless the return on investment is very high.

I really don't see how any of this additional WFT changes very much for Serica. After the first WFT announcement, Serica share price crashed and subsequently then hit all time highs. Yours truly bought in at almost the very bottom of that crash. So the WFT may be increased by 5% or even 10%, yes this is a horrendous level of taxation but the reason for investing in Serica after the first WFT announcement was a view on high gas prices staying. Of course an increased WFT lowers NPV of future cashflows all other things being equal, but again we are surely here for the huge cashflow that will be generated by high gas prices remaining (and further supported by this stupid tax). Of course there's also the huge and increasing amount of cash Serica have on the balance sheet that provides an ever increasing floor in the share price too.

This unfortunate coincidence (in a long long line of similar unfortunate 'coincidences) has occurred at a time just when the European winter is starting to bite and wind and solar generation is down in the UK. Did somebody say NBP? We'll see what the price does tomorrow.

There is nothing that can be done. Government and media have too much power now and have been completely infiltrated. If companies stop production they will be labelled as 'greedy oil barons' holding back production so as not to pay 'their FAIR share' and the government would move to nationalise. Anyway, I think as a condition of holding a license in the NS you MUST produce to the best of your ability or lose the license or something like that. So you see there is nothing that can be done except stop investing and return capital to investors or invest overseas.

The only thing that can keep the North Sea viable is high oil and gas prices. I think that is what we see, I think the government knows this and I think the EPL helps ensure that this remains the case because while such an egregious rate of tax makes high prices necessary you can not be sure that high prices will remain so LESS investment will surely occur and production will fall and prices will have a higher chance of staying high.