Member Info for Stevo12

Monger

Two cases were won by the claimant against Italy and were awarded an amount based on lost discount cash flows, plus costs. Italy appealed for annulment in both cases in Stockholm in 2019 and award was suspended while annulment considered.

looks like neither appeal has yet been progressed.

While I am no fan of WT which is hugely inequitable for the independents with high levels of hedging (Harbour booked a $3.8b loss on hedges in 2021 - more than our market cap), it will drive an increased level of exploration and development in North Sea. The government is paying 95p for every £1 of investment. Why would you not explore and develop new fields in NS which will probably not start production until after sunset clause ends in 2025.

I think Harbour and other producers will pull forward and expand NS spend and will end up paying very little additional WT. certainly worth some wild cat exploration if it only cost you 5p in £1.

Lucky

The way it works is the loss of exiting Falklands and Brazil can not be offset against U.K. profits.

By way of an example, if group profits were £314m and exit costs were £40m, then U.K. profits would be £344m and we would be taxed in U.K. on this higher profit. There are many other tax adjustments for decommissioning costs, impairments etc which can distort the rate from the 40% as well as taxation of profits in Far East. We also have large U.K. tax losses to utilise from PMO days which will reduce tax cash costs.

On a relatively low profit number of £314m there are lots of relatively small items that can distort tax rate, should be much clearer in 2022 with far higher profits.

Take a look at the tax note on page 42 of annual report which explains reason - namely Falklands and Brazil exit costs which can not be offset against U.K. and Overseas profits.

Hydraites

There are 160 litres in barrel of oil and a doubling of oil to say €240 per barrel would increase petrol prices by less than 60p per litre. The rest of the cost is processing and distribution (which should not increase) and taxes which is at the discretion of the government.

Still enough to dent demand. Indeed current prices are reducing demand.

Our debt providers require hedging as a condition of the loans. However seems we have exceeded the required hedging level, particularly for gas.

Everyone hates hedges when price is rising and loves them when oil falls. Remember if PMO had hedged in a similar fashion to Harbour we would still be an independent company at a share price many times current levels.

The increased profitability of BP and Shell on the back of rising oil prices has got the left wing socialists into a bear baiting frenzy and conservatives have capitulated. What never seems to get mentioned is that U.K. North Sea accounts less than 5% of BP and Shells revenues. They may be listed in the U.K. but they are international groups with limited activity in the U.K. NS and will pay minimal additional tax.

The exit of BP, Shell and the other super majors from the NS over last decade has left a number of medium size producers such Harbour, Enquest etc who are not realising significant windfall gains due to the hedging programme (Harbour was receiving about 1/4 of the revenue from gas sales at peak price). The windfall gains have been made by the parties to the hedge who will not pay any additional tax.

All that said, as a result of the investments planned and the hedges in place, Harbour will not pay a significant amount of U.K. tax in 2022/23. I wish we were making huge windfall gains and paying a lot more tax.

Not a convenient truth for politicians but lazy media are not highlighting the truth.

Auson

Are you sure historic losses cannot be offset against additional levy. I have been trying to find details of levy but struggling.

Really frustrating that it is the financial institutions (Goldman Sachs etc) who are holding the other side of Harbours hedges that are making the windfall profits.

I have not yet seen anything definitive that states brought forward losses cannot be offset against the new tax. However even if historical losses are not offsetable, the 91% allowance on new investments should minimise tax implications until current hedges are wound down.

The shareholder approval for the Company to buy back and cancel 15% of the shares per annum (approx $1b) translates to average 750,000 share purchases per day. This should support the share price by sweeping up sellers.

Combine this with a requirement of the passive FTSE 100 tracker funds to buy Harbour from tomorrow should play through nicely. Just need to eat though the current low price hedges and replace with better priced hedges into 2023 and 2024.

This is a very conservative management team who are not into high risk, high return speculative projects. The days of Wildcat PMO are truly over and I, for one, are looking forward to a more predicable ride.

I certainly will be holding tight until underlying value is reflected in share price.

Hedges (mainly gas) have reduced revenues by $11 m per day - that $990m for the quarter. Accordingly our pre hedge cash flow for quarter 1 was close to $1.6b which is an insane amount.

Hopefully new hedges are being introduced at current market rates but 2/3 of gas production appears to be hedge for remainder of 2022 and 2023 at low rates. Still I would take $2b of pre dividend cash flow for 2022.

Always easy to feel negative about hedges when commodity prices are high but ultimately these hedges saw Harbour survive the dark days, while Premier’s lack of hedges result in its demise.

Sealion investment costs by PMO were written off as part of the fair value acquisition accounting on takeover of PMO (reverse takeover rules). Accordingly no further write down to take as I am sure they also booked a provision for any exit costs such as dock.

Accordingly any tax advantage would have arisen last year.

Thanks for your thoughts and insights. I have gone 50;50 between harbour and Enquest.

I have some spare funds to invest in oil companies. Not sure about the supers (BP, Shell etc) as they seem more committed to green energy.

Would you go with harbour as a mid cap or Enquest as a small cap. Looking at financials Enquest looks much more indebted relative to size, but a lower market cap relative to current production.

My assumption is that Enquest share price should perform better in a rising oil market but Harbour a safer bet with less downside risk. Any thoughts fellow investors?

A windfall tax sounds easy. However given that it is the counter-parties to the hedges and the Middle East producers that are capturing the majority of the windfall upside. how do you tax them? Harbour is reporting a $3billion + loss on its hedges at 31 December 2021 and that will be higher as of today. Our loss is a corresponding profit for the counter-parties.

All that said- harbour generated $400m free cash flow in the first 2 months of 2022 which is huge. However need to recognise that Jan and Feb are always good months with no maintenance downtime. Great start to the year.

I would add that the webcast highlighted that debt has reduced by a further $400m during Jan and Feb 22 to $1.9m at end of Feb. At anything near current prices, debt should be down to $1b by year end which would be 6-9 months of free cash flow.

Shame we have a high level of hedges at historic prices but need to recognise Harbour is highly conservative and if Premier had hedged at a similar level they would still be independent! Everyone loves hedges when prices crash. Really like that from May 22, the Board can buy back approx £500m of shares per year. This will provide huge support for share price and enable the exiting of remaining overhang shareholders.

Have to admit I got my forecasts of share price post merger totally wrong. I was expecting £6-7 by Dec 21. Hopefully I just got timing wrong and we will see minimum £6 on release of first 6 months results in August 22.

Pearls

The free float is currently 4.5 billion shares and 25m shares trading hands in a day is approaching 5% of the free float. This is way above the normal for a FTSE250 company.

We will have now cleared a material portion of the creditor shares but the tracker funds will not start buying until our admission to FTSE has been confirmed (notified in July but not effective until 1 October). important that we end June at 25p or above to secure a FTSE 100 position and I expect management to deliver a very positive trading update to drive the price up as they will be keen to achieve FTSE 100 status, which will in of itself drive more tracker fund buying.

However, I do think it will be towards the end of the summer before we achieve a comparable valuation to our Peers.

They also replaced the toilet rolls at head office last Tuesday and no RNS.

Captain Kirk and admiral Cook are holding over 270 million shares between them. How much more alignment with us shareholders do you want?

Believe me they want the share price higher than current levels with each 1p increase in SP worth £2.5m for Captain Kirk. His salary is almost irrelevant compared to his share holding. There is a clear road map to a much higher price by end of the summer.

Lina cook awarded options over 20m shares yesterday. Option price a little under 20p and they vest over 3 years.

Hopefully the share price will be substantially above option price by end of the summer.