Member Info for StarBright

I am wary of the tendency for discussion on this board to focus quite aggressively on dates, perhaps driven by the ongoing search for a clear catalyst for sudden sp appreciation. Sometimes this focus is unrealistic, with “tipping points” created artificially. We’ve seen this on so many topics - the change to an operating company, Solo share sales etc etc. I can sense that the board might soon be filled with posters saying that testing results are late/withheld/whatever, when the reality might just be that testing and the collation of results takes time and must be done properly.

Is the 150 days a regulatory/permission limit of some sort? Or was it just an indication by the company of how long they thought testing would take? I recall reading somewhere that the 150 days of testing might not be contiguous. Could one of our resident experts or fact-hounds clarify this?

Looking at the RNS, a key output (alongside flow numbers) will be the overall reserves estimate

“The long term reservoir performance data is also expected to provide the necessary data to enable, for the first time, Petroleum Resources Management System compliant Kimmeridge and Portland reserve figures to be estimated at Horse Hill.”

I don’t think the RNS indicates that this information will be available within 150 days. Whilst we would all like comprehensive and definitive news from the testing, I am not convinced that it is imminent.

100% agreed. It is pathetic, and has no place here.

Bloomberg screen. HDS function. Shows last notified position only.

Winner: "Most Insightful Comment of the Day"

Jungerns - I read that as Sanderson having "sectioned" one of the twitter guys. Seemed to make sense....

I am optimistic too, though.

Thank you. So it is an enhanced capital allowance, intended to encourage onshore exploration. It brings forward relief (from the 10% SC, not the 30% RFCT) on qualifying capital expenditure, allowing 75% to be offset rather than the 62.5% under the general field allowances. Basically, you can claim relief on an additional 12.5% of your capex.

If £5m has been spent on developing a project then it is a one-off tax saving worth £62,500. It’s not a material consideration in valuation terms.

As per my post, I am seeking input on this topic. What will be the impact of the onshore allowance?

Do we have any posters with professional knowledge of how corporation tax is applied to oil companies? If so, I would very much appreciate your help in understanding how a Weald oil producer (eg UKOG) will be taxed once it is up and running.

My understanding is that UK oil exploration and production activities are effectively subject to corporation tax at 40%. This is made up of two components, RFCT ("Rig Fenced Corporation Tax") at 30%, and SC ("Supplementary Charge") at 10%. In addition to customarily allowable expenses, a Field/Investment Allowance delivers accelerated relief for qualifying CAPEX.

Tax liabilities are estimated in advance (based on production expectations) and collected in phased payments through the calendar year.

I'm looking to ensure that I'm treating tax properly in my valuation modelling. Thank you in advance.

I don't see how net profit per barrel can be that high. I think that iPad's question about corporation tax is the right one, and I think that iMac1's answer (that it is included) may be mistaken.

My understanding of the tax situation (if we have any resident tax experts I would welcome your input in particular) is this:

UK oil exploration and production activities are effectively subject to corporation tax at 40%. This is made up of two components, RFCT ("Rig Fenced Corporation Tax") at 30%, and SC ("Supplementary Charge") at 10%. In addition to customarily allowable expenses, a Field/Investment Allowance delivers accelerated relief for qualifying CAPEX.

ANGS reported £10.4m of accumulated tax losses in its last accounts. It also reported £2.8m of Oil Production Assets, which may qualify for the Field/Investment Allowance. If both of these can be offset, they will in any case be used up within the early months of production so are not material.

As a result, even if what Imac1 describes as "operating costs" are zero, the tax charge alone will be $28/barrel after the available reliefs are claimed during year 1. This suggests that the $25 used by Imac1 (and similar figures quoted elsewhere) must be pre-tax. As costs rise, tax will be reduced so:

$14/barrel of pre-tax operating costs will give earnings of $34/barrel after $22 of Tax
$25/barrel of pre-tax operating costs will give earnings of $27/barrel after $18 of Tax

How does this affect the P/E based valuation illustrated in Imac1's post?

Take Oil price at $70 - $25 operating costs - $18 tax = $27 earnings per barrel
$27 x 1000 = $27,000 per day x Angus 65% controlling interest = $17,550 per day

So in 1 month Angus will have $17,550 x 30 = $526,500

In 12 months $526,500 x 12 = $6,318,000

Let’s take the middle PE ratio of 20 normally 15-25 for oil companies
Market Cap $6,318,000 x 20 = $126,360,000
Converted into £ at a market rate of $ = £0.76
$126,360,000 x 0.76 = £ 96,033,000

So market value per 1000 bopd using PE would be £96,033,000 / 404M shares Issue = 23.7p

Itsallaboutme said that Mr Vonk has suggested $14/barrel for operating expenses. In that case market value per 1000 bopd using PE would be £119,500,000 / 404M shares Issue = 29.6p

That's a double from where we are today, and I suspect we're all looking for average production far in excess of 1000bopd...

"All"? What can you see that points to an after hours RNS today? I'm not saying it's impossible, just wondering how you've reached your conclusion.

What is it that precludes the possibility of a conventionally timed RNS when the results of the testing are available - hopefully during November?

I don’t see why anyone would use the word “correction” when we’re well within the average daily range. Nothing to see - or explain - here in my view.

I rather enjoy Boyzee’s cryptic contributions.

Unless the vote goes against it (unlikely) the placing can’t be undone or re-priced. It will be contractually binding.

But it’s not going to matter here in any case. 22m shares isn’t many, either when compared to the average daily traded volume or to the number of shares in issue. I don’t think that absorption will be impactful, whenever admission occurs.

The term “Institutional Investors” covers quite a lot of ground. Whilst we like to think of institutional investors as diligent buy and holders, I have seen the term used creatively (in connection with placings) to describe the spivviest of bucket-shops too... Where the positions concerned are below the notifiable level I think it’s best not to read too much into the description. We simply don’t know.

Daily volumes are still low though Willow. I think that Solo have just been selling into PI demand, which isnt’t particularly strong as most have built their positions to size and are waiting for results.

22m shares isn’t many, either when compared to the average daily traded volume or to the number of shares in issue. I don’t think that absorption will be impactful, whenever admission occurs.

He has engaged [RampMode] for sure. Although I can't help but laugh at the careful inclusion of the 1st Class headrest. Not sure which is oozing most - the oil or the vanity... ;>

The best scenario - as wasit10538 says - is that the testing results are good across all the Weald sites. This could underpin the idea that Weald oil is of national significance, smoothing the path to commercialisation and economies of scale - pipelines for example. Better this than mixed results which create winners and losers, but at the cost of diminishing the total prize. The strongest returns for investors will come from broad success.