Member Info for Tamovv

Agree.

And trust Linda already has and will continue to use HBRs CSS project to build leverage against the EPL.

Thanks! "Grant Shapps" seems to be our man for tomorrow, but still can´t find any schedule for his speech on tomorrow (if there is any rather than an release of an announcement letter or so).

Does anybody know the detailed mechanics of the event? I.e. will there be any live stream or so...

asking again: does anybody know details about the agenda tomorrow?

Tried to google "energy security day aberdeen" etc. but can´t find anything more precise than "30th March"...

Does anybody know when exactly the Energy Security Day will take place on tomorrow?
I.e. is there an agenda including speaker overview, or when do you expect we will have meaningful news?

Source: https://www.theguardian.com/environment/2023/mar/29/uk-scientists-rishi-sunak-oil-and-gas-developments-climate-crisis

Thursday will not only be excited with regards to a possible EPL price floor, but also regarding the investment allowance.

The events topic is domestic energy security, thus I expect measures to ensure the investment allowance is not beeing lifted following a potential government party change.

PS: I will be also looking closely at ITH with exposure to Rosebank and Cambo, so might benefit from all "non direct EPL", but investment allowance guarantee measures in my opinion

Hi guys,

will be an interesting week for ITH in my opinion. FY2022 results to be released this Thursday, conference call 9 am British time.

On top of that we´ll have the UK energy security event on the very same date.

Keeping my fingers crossed!

PS: parent company Delek and sister company Newmed Energy both to release Thursday as well, but both dates are not 100% precise acc. to my experience, they might release earlier. Especially Delek includes consolidated Ithaca results... ;)

Thanks Stevo, was looking forward to your post!

Feels like you are on the rather conservative side, but its okay, I catch myself usually on the rather too optimistic side of the equation ;)

HBR should be down to 500 mUSD net debt. in no time, so I use approx. 3 bUSD as their current EV.

So their EV/FCF might be somewhere between 3,5 and 4,0 (maybe even slightly below 3,5 if we get positive surprises against their guidance in the summer trading update, because Linda used to provide a rather conservative guidance in 2022 as well).

So for me (no advise!) levels clearly below 300p are a buy like 278 pence today.

Even if HBR is fairly valued to slightly undervalued at 300p, no kind positive news from UK government are priced-in at the moment. Maybe the chance something positives happens just outweights the risk labor gets into power and things get worse. But again I´m rather optimistic here. Voices against "hardcore-ESG" and for a fair and important are getting louder in the public. Any kind of floor-price mechanism, or investment allowence modification (guaranteeor CSS expansion) should push us some double-digit-percentages in the right direction.

Perfect, thanks. So we are not to far off each other. Stevo just posted HBR FCF of 800-900 mUSD 2023. So if you two guys are right, HBR and ITH are still very close to each other this year despite 2,5x difference in daily production, crazy what hedging can make as a difference...

The deferred tax asset at ITH is the reason why I´ve applied the unusual low corporate tax rate of effective 15%.

Looking forward to ITH posting their FY results end of this month. I am big in Delek Group because of Leviathan Gas field, but added to ITH recently instead.

Error noted, so getting to 1.000-1.100 mUSD FCF rather than 1.200 mUSD.

Overall statement still the same, should be a close race between ITH and HBR in terms of FCF, whereas HBR runs 2,5x the daily output.

From 2024 on HBR is in the lead again - all else equal - due to the expiration of the very poor 2024 gas hedges.

Thanks londoner!

"The Group achieved an estimated average production for Q4 2022 of 80.8 kboe/d, ahead of management guidance of 77–80 kboe/d"

Q4-run rate given in the last trading update was already higher than FY guidance, this made me use an optimistic 82 kboed having in mind this flagship project captain with the following information:
"C71 well online in October, C72 completion activities ongoing", so I assumed during Q4 with 80,8 run-rate Captain did not deliver full contribution.

However,...thats not the topic for now ;)

CapEx 2023 are a questionmark, I agree, but since I´ve highlighted them complaining about financing issues with Cambo, I don´t expect much progress with the leggacy Siccar Point projects this year, so I am using 300 mUSD (slightly reduced from 2022 because of completion of work at Captain).

250m Admin&Financing based on H1-2022 run rate, assuming lower indebtness covers interest rate increase. This assumption should be on the safe side, because debt reduced more than interest fees have risen proportionally.
D&A 600 mUSD based on H1-2022 run rate.

Thus my rough P&L looks like:
EBITDAX 2,1 bUSD
- 0,25 Admin/Finance - 0,6 D&A
EBT 1,25 bUSD with 15% effective tax rate for corporation+supplemental tax (based on H1-2022 details) = 187,5 mUSD
EBT.WFT 1,6 bUSD with 35% EPL tax rate = 560 mUSD EPL charge

So Net earnings approx. 0,5 USD -> FCF (adding D&A) of approx. 1,2 bUSD as stated below.

But agree, I am always on the rather optimistic side!

With todays prices of 117 p/therm and 81$/boe for Brent it get to 96 mUSD heding loss for oil, but 230 mUSD hedging gain for gas, so overall hedging gain of approx. 134 mUSD for ITH, not bad compared to HBRs hedging loss of 1.850 mUSD this year...

Thus, I see ITH at 2,1 bUSD EBITDAX this year despite massive drop in the UK gas price. This should result in 1,2 bUSD FCF this year, so even better than HBR despite the fact I have assumed 82 kboed compared to 195 kboed at HBR...

Please correct me if I have made any mistake!

Hi guys,

just trying to wrap my head around Ithacas heding for 2023.

Since HBR hedged gas 2023 so poorly (please find my corresponding post at HBR thread), I realized to have to focus more on hedging.

Ithaca shows a schedule on page 20 of their presentation dated 30 Nov. last year.

Harbours schedule was straight forward and easy to understand for me, Ithacas looks more complex with Puts, Swaps and collar floors. As said before, I am not an O&G guy, so dealing with this for the first time.

Lets ignore oil for the while, because all prices are close to market price at the moment. But for gas, I see Puts, Swaps and Collar Floors at 195-248 p/therm, which is twice the current market price level!

I understood that:
A gas put gives Ithaca the right to sell for i.e. 200 p/therm in Q2/Q3 2023 (so only executed if favorable)
A swap is a binding agreement to sell for the given price, i.e. 217 p/therm in Q1 2023
A Collar floor seems to combine calls with puts to fix some range around a an expected price, so in my calc. I would keep things simple as handle a collar similar to a put (since we are significantly above the current market price at the moment)

Please correct me if I´m wrong, in the meanwhile I will start building a model to calculate the potential hedging gain for Ithaca this year.

Hi guys,

I´ve tried to incorporate the given heding schedule in my model in quite detail.

With prices stable at 85 $/boe & 150 p/therm and production at 195 / 190 / 185 kboed (2023-2025) I get to much improved net sales and EBITDAX from next year.
The 2023 gas hedging still sucks pretty much, leading to 1,7 bUSD hedging loss... :-/

Net sales (2023-2025): 4,85 bUSD / 5,8 bUSD / 6,15 b/USD
EBITDAX (2023-2025): 3,6 bUSD / 4,6 bUSD / 5,0 b/USD
EBT (2023-2025): 1,9 bUSD / 2,95 bUSD / 3,4 b/USD
Net Earning (2023-2025): 640 mUSD / 660 m/USD 620 m/USD (assuming tax losses to last until end Q1-2024)
FCF (2023-2025): pretty much stable at 1,0-1,050 bUSD, so similar to current management guidance

Not an oil & gas expert, so can´t judge whether 85/150 is too optimistic for 2024/25, personally think we are seeing higher oil & gas prices from 2nd half 2023 onwards.

Overall I can confirm what has been said here before, acc. losses run out soon but improved hedging schedule from 2024 onwards pretty much exactly offsets the resulting higher effectiv tax rate.

Please take all figures with caution, I am neither a tax nor O&G expert, just a dumb finance guy...

Currently updating my model as well. Going to post the results here soon, as well as comment on some points touched during the Q&A session of yesterdays conference.

Liked the conference call pretty much!

Very fair comments from Linda regarding 2022 M&A environment. "Expectations from buyers and sellers did hardly match in 2022, due to elevated energy price level and high price volatility, so we needed to keep patient"

So for me she´s really the right CEO for the time beeing, with her experience and ability to "stay patient", rather than rushing into shifting away from UK at any costs (=overpay targets).
Also interested that she mentioned they werent able to hedge the production volumes of potential targets at prices used for those enterprise valuations. Thus, we can be sure if they buy, they will only accept purchasing prices based on a commodity price level, which can be properly hedged -> "reduced M&A risk", because we won´t face a situation where commodity prices collaps shortly after acquisition, resulting in "immediate overpaying" and acquisition-related write-offs.

Why is the "highlights note" speaking of 0,8 bUSD net debt? I am continuously reading 0,7 bUSD throughout the full statement, for instance page 11 "Statement of Financial Position", which should be the proper source for stating this figure.

They have decided to set an accounting provision for future tax payments (due to the EPL). So this is obv. not a cash payment, thus the FCF is on FC and was not effected.

It´s even "cleaver", because I expect the accumulated tax losses to have been less utilized than anticipated. Thus they might last longer into 2024/25, to atleast somewhat shield us against EPL (35% EPL will of course occur, but base company tax level reduced due to extended utilization of acc. losses).

But I am not a tax expert, sure others can provide more colour on that decision, but for me it doesn´t feel like a bad one (even though 0 USD net profit sounds & feels crazy).

Thanks @ kign!

But don´t think its negative for HBR, just another clear sign that EIG is bullish on Energy (short- and midterm!).

For me it reads like they valued 600 kboe/d (3x Harbour) with close to 20 bUSD EV...
So any kind of EPL-adjustment (floor price mechanism, investment allowance guarantuee despite of government change, etc.) should boost HBR significantly in my humble opinion.

"Windfall tax ‘rocked investor confidence’ amid US threat"

Source: https://www.cityam.com/offshore-industry-pleads-with-hunt-for-help-windfall-us-eu/