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Bit of a wildcard question. Any chance they are looking to split the gas and the power/green hydro businesses? I have no intel, just curious as they’ve talked about funds not being able to invest previously due to the fossil fuel component..

Yes!!!!!!!!!!!!

Good note DU :-)

https://www.energyvoice.com/oilandgas/north-sea/465451/frank-and-constructive-north-sea-forum-meeting-tackles-windfall-tax-and-energy-transition/

Sounds more positive…

I'm not sure.. I think looking at the amounts being sold over the last few days, this is likely a big seller exiting. There was another sizeable holder from memory , Nicolas Robinson (RNS 11th July) at just under 5%. I'm not remotely worried about the fundamentals and am firmly on the bus here (and going nowhere). I would think most retail investors for 3-4 months would sit tight if they could double in 4 months, and who knows.. maybe that happens sooner rather than later..

An article from Simon Thompson would help..... especially given this is now an absolute bargain!!

In my opinion!

Assuming say half offloaded so far

If one of the large holder is off loading it’s a total of (~6%) = £2-3m + whatever the extended family holds

…..

For once JS, I wonder if you’re right…..

Massively positive note. Jog potentially the first project of its kind to secure development funding… most positive language we’ve heard re farmout, etc.

DYOR

New note out. Now target 660, up 15 percent. Less worried about the target.. it’s the sentiment of it going up. Finn Cap were historically the lowest. From memory targets are now in a range of roughly 660-720 across the three brokers. Again, it’s more about the positive sentiment for me …

DYOR

New note out. Very positive, and clearly stating recent share price weakness is ‘unjustified’.. looking forward to the coming weeks, etc

DYOR

I dont agree the tax invalidates the buyout option.

The buyout itself wouldn't be tax free (say $300-450m), but the capital spend would be entirely (except for the 9%). The return is more attractive though. Looking at a cashflow on NPV 10, the buyer would recover the initial buyout cost in the first 2-3 years from production (assuming 75% tax). All else is upside.. I suspect it would also enhance the buyers share price (assuming listed)

I think given the reduced capital outlay (funded through the tax) this makes a full buyout more likely

IMHO.

Hi Abatt. DU is right. My comment yesterday about $1.5bn npv after tax correlated related to my 3x or 4x on the share price as a buyout price. I think that £7.50 to £10.00 (3 to 4x - ish on todays price) is the probable buyout range if they execute well. We have the 3rd largest development project that is low risk in the CNS. The other two are already in a major players hands, so we’re the easy target. There is a lot of value in the tax offset to a major player. We have to hope that there is a scramble for the assets from existing producers and a whole load of production assetry isn’t put up for sale in the meantime. A deal NOW in other words has to the right route.

IMHO

I'm less worried about the two big sells, James! I watched a major holder dump their entire holding in a 'covid' related stock two days before it increased about 8x. Individuals/Institutions get this wrong all the time.. You have to make a judgement call based on what you think, James. I think a domestic or large major acquisition is most likely. Taking the £6bn NPV, and dropping it by 75% to 1.5bn still feels attractive if you can pick JOG up for a song. Jogs market cap today is only £75m - even at multiples of that you would think this is a very attractive play domestic producers, especially when the dust settles.

DYOR/IMHO

To MP0818s point - This is not about salary.. The sale or FO will create them vastly more wealth. That isn’t up for debate. The choice on exit mechanism is though.. they need to maximise the exit multiple on a sale! This is suddenly worth a punt for a producing that is sticking around. A $1.4bn investment, now costs $400m. The £1bN is sunk in tax over say 3 years, if they don’t redeploy. The answer is obvious!

IMHO

The broker note from WH Ireland and the ST IC article from September both highlighted selling as a possibility. Thanks Abatt, the big change is the capex - if a producer is sticking in the CNS, that capex is a 91 percent free ride on JOG (development option dependent). If my view that skews the odds more highly toward a sale. Suddenly you no longer need to buy it and find the capital… you now just need to buy it… the risk level and the ratios have changed ..
IMHO

*should have read front phase the recovery instead of ‘battles.’ Also of note is that producing buyer recovers their purchase price in the first 2 (ish) years of production.

Would appreciate a view on this. If a ‘producing’ buyer pays either 3x or 4x they are somewhere between £250m and £310m. The capital for the set up is largely free as the producers offsets this against tax losses. Say they have a bill of £75m payable for the 9 percent they can’t off set. So total cost of $350-$450m dollars with some rounding. Across the GBA assume the extraction is 250m barrels (conservative looking at May 22) with a profit per barrel of $55 given low opex costs once it’s up and running. Long term oil price of $65-75 less say $10-20 production opex. If I front phase the weighting on the recovery battles slightly I get a post tax NPV^10, allowing for 75 percent taxation, at about $1.6bn. The investment still feels attractive.. yes, the oil price could drop, but so could the tax.. conversely the oil price could go up significantly over the short term. I personally think a buyout makes more sense than ever! DYOR and thoughts welcome!

I may be totally wrong, but I think this makes a capital event more likely. You’d want the entire saving. If an existing producer buys this for say 3x on the todays price (£230m). They almost fully offset 2023 and 2024 at least against their tax bill, and let’s say 2025. Beyond this there is less certainty that the incentive isn’t removed by the new government. Even at high taxation and a say $75 oil price surely it’s attractive, especially given Jogs low opex cost once producing. I agree with the NPV point DU, but the only outlay in this scenario is the purchase price (the capital is free if it’s phased appropriately and they can start production in late 25/early 26.)

Thoughts ?

Thanks Abatt :-) Not my words… they are Ardens.. I’m just sharing the hype!