RE: Ithaca Energy yielding 21% on dividend ‘target’ highlights Jefferies2 Apr 2023 19:35
Hi guys,
I updated my model by incorporating the exact hedging schedule and lower revised 2023 guidance:
With 72 kboe/d I get to 1,5 bUSD sales (before hedging) and net sales 2023E of 1.620 mUSD (after 130 mUSD hedging loss oil, but 254 mUSD hedging gain Gas against current UK gas price of 85,38 USD/boe).
2023E
Net Sales: 1.621 mUSD
Operating costs: 499 mUSD
Admin: 62 mUSD (2022 included high level of transaction related costs i.e. siccar point)
EBITDAX: 1.060 mUSD (72 kboe/d, 85 $/boe oil, 85 $/boe gas)
Net debt is stable, so 200 mUSD for Financing costs for 2023
DD&A to be stable too at 660 mUSD
Regardging the taxation, I might need some help from the experts here, I am trying to figure out how CFFO (after tax) looks like 2023 at 72 kboed/d.
Accounting profit before tax should be: 1.060 EBITDAX -200 Financing -660 DD&A, so roughly 200 mUSD only
Thereof 40% leads to 80 mUSD corporation tax charge 2023
EPL is more complicated (too complicated for me):
EBITDAX 1.060-200 mUSD Financing (not sure if deductible, but if not figures look crazy) - 395 mUSD Investment relief (92% of 430 mUSD midpoint CAPEX guidance) = 465 mUSD "profit before EPL", thereof 35% should lead to 163 mUSD EPL charge
Coming back to CFFO:
EBITDAX-Financing-Corporation Tax-EPL charge = 1.060 - 200 - 80 - 163 = 617 mUSD Cashflow from Operations (after tax)
Management guidance confirmed dividend payment range of 15-30% of CFFO (after tax). Thus 2023 max. 185,7 mUSD.
133 mUSD have been payed already. This was questioned during the conference call. I understood that it basically came from 2022 due to timing/trifferpoint issues based on the IPO date.
However, by doing so, I get to a max. dividend of 300 mUSD 2023 rather than 400 mUSD "dividend target", which was confirmed during the call on multiple occasions (why? how?).
The only possible explanation I have in mind, is that actual negative cashflow from EPL will occur (partly) in 2024, so there is more cash left in 2023 to pay the 400 mUSD dividend.
Unfortunately 2024 doesn´t look much better in my model. Even based on 78 kboe/d production and no EPL at all (i.e. very positive pricefloor), I get to 755 mUSD CFFO based on a 1.020 mUSD EBITDAX (fewer hedging gains weigh out higher production).
Thus, 30% of 755 mUSD is 225 mUSD Dividend for next year only, which is way off the 400 mUSD.
Please correct me if I´m wrong, hope I´ve missed something, otherwise I would turn much less bullish. 225 mUSD would give a forward 2024 dividend yield of 12,5% (and this already assumes a full price floor in my model). IPO yield was around 11% for comparison.
Jefferies and Co. highlighted the 21% current dividend yield as well, but for me it currently seems like a "one off" in 2023 as result of the 133m payment (deferred from 2022).
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