Member Info for Tamovv

Dickupham,

Many thanks! Couldn´t agree more.

JOG offers a massively asymmetric opportunity investors should be looking for. I have been adding last week as well and can´t wait to deploy my juicy Ithaca dividend into JOG soon.

UK Spring Budget 2025 is on Wednesday March 26. Let´s see if Miliband will be sitting in the audience getting filmed again when reacting to Reeves O&G related comments or not...

Many thanks for sharing Dumbly!

Am I too optimistic here (again), or did the wording change against previous versions of this prepared "standard statement" we´ve read multiple times before?

"...to develop an approach, giving the sector and its investors the predictability they need to keep investing while ensuring that they will pay their fair share of tax on excess profits in the future."

That "they will pay their fair share of tax on excess profits in the future." does imply for me, they admit, that currently there might be no excess profits being made, but the new taxation scheme (post 2030, hopefully introduced with immediate effect) needs to ensure fair share of tax is being payed on excess profits.

Thus, might work through a reduction on headline tax-rate (from 78%) but with introduction of different trigger points / levels for incrementatl steps (i.e. opposite direction of the current windfall tax protection mechanism which is bulls given the high underlying oil and gas price levels and unrealsitic combination of both...).

Obv. a lot of wishful thinking involved from my side, but anyways, in my opinion that government statement does read slightly different than before and not too bad...

Yep, many thanks for clarification!

Adj. net debt on 31st Dec. 2023 was 572 mUSD. 30th Sept. 2024 543 mUSD. So yes, I would be happy with 500-600 mUSD as well, the 400 mUSD I´ve mentioned below might be too optimistic considering the Q4-24 dividend payment cash outflow.

What I was trying to say was, with 2,2 bUSD EBITDAX 2025 and 30% effective tax rate (660 mUSD, actual payment due in 2025 will be lower, like 400 mUSD max. based on 2024 act. EBITDAX), 500 mUSD 2025 dividend, 500 mUSD producing assets capex (own estimate based on 2024, no official guidance yet), 200 mUSD Rosebank capex (same, pure guess based on 2024), we might end up with FCF (after dividends) in a ballpark of 500-600 mUSD (obviously heavilie dependent on 2025 capex guidance to be released soon). So they are hopefully on the way to potentially zero net debt for end of 2025 (not a desirable target in my opinion given the already very low leverage ratio, glad to see them doing better yielding stuff with their cash than paying down debt).

With 1,5 EV/EBITDAX and 0 net debt at year end, equity per share would be like 1,54 GBP (=15,1% div. yield). So from a fundamental perspective, before all hopefully to be seen positive political developments, 1,50-1,60 GBP could be a "fair valuation" before the next phase of production growth kicks in (i.e. Rosebank from end 2026/beginning 2027).

Hi londoner,

Many thanks as uual. 107 kboe/d, okay, can work with that, I stick to my about 2,2 bUSD EBITDAX target for 2025.

You mentioned net debt., thats a good question. I still struggle to understand the different sets of information they´ve provided last year (capital markets presentation vs. Q3 release).

Q3) 543 mUSD end of Q3

Capital markets) 857 ITH/ENI.UK combined LTM June-24 (LTM makes not much sense for a net debt. figure, so I assume on 30th June)

However, the Q3 reported figure for ITH standalone is newer, so let´s work with that.

Q4 EBITDAX came in 642 mUSD whereof about 350 mUSD where due for standalone taxes. I have no information regarding capex phasing, so it´s hard to forecast the net effect of Q4 cashflows on the debt position. You are talking about a potential settlement payment in ITHs favor of 100 mUSD.

So resulting net debt. shouldn´t exceed 400-500 mUSD on 31st Dec. (I recall just from my memory that a fair portion of FY-capex was already spent along with the 2024 reporting).

My main point is, after applying a 1,5x EBITDAX multiple on NTM, EV should be in a ballpark of 3,3 bUSD. After deducting 0,5 bUSD net debt., equity might be valued at 2,8 bUSD or 1,30 GBP/share only.

Thus, compared to others like ENQ/SQZ Ithaca doesn´t look too cheap. The dividend is clearly providing strong support.

On top of that ITH should be valued at a premium, considering their organic growth potential, whereas the other two are hunting for acquisitions.

The general validity of a 1,5x EBITDAX multiple has to be questioned as well. What I don´t like is the fact that, Var Energi is valued similarly cheap on a NTM EV/EBITDAX basis, which doesn´t bode well (similar 78% headline tax rate in Norway).

What speaks for Ithaca is, that from a high level perspective, Delek and Eni do aim for an increase of freefloat. They legally can´t do any buybacks given the 10% minimum freefloat hurdle rate, which has to be respected. Cambo of course has a huge impact on 2026-27 FCF, given its development capex and potentially huge stake they will decide to keep. Despite that, assuming their tax losses are sufficient to shield for at least another 3 years, I don´t see them reducing the dividend looking forward. There won´t be debt left to pay off. They can´t do buybacks. At current commodity prices ITH should be stable over 2 bUSD EBITDAX with like 30% effective tax rate and they want to increase freefloat, but not at any price (won´t accept the current valuation).

Some analyst questions came in that direction, but they didn´t really comment on that despite recalling the 15-30% CFFO (after tax) rule, which obviously was a pretty boring answer. As soon as markets realize that 500 mUSD could be a likely standard dividend size going forward (until tax losses are consumed) I hope for a sp appreciation targeting 12-14% dividend yield (similar to VAR), so EV/NTM-EBITDAX might not be the perfect metric to value Ithaca.

I would love to see 2,5-2,6 bUSD EBITDAX for ITH in 2025 but assume its slightly too optimisitc for mainly the following two reasons:

a) summer maintenance

There will be quite significant maintance in August this year. Thus, by just extrapolating a good quarter (like Q4 or Q1) by four times, you will usually over-estimate production (or EBITDAX in your case)

b) field decline

As londoner pointed noticed earlier on this board (thanks again londoner, there was quite some money to earn with your post), the Talbot project went online in December and performed pretty will with a 33% effective stake for ITH. On the other hand, fields which just went online, used to decline a little faster before they settle (I am totally not an O&G guy, just telling you what I have learned from investing in this space).

So I would start with a 2025 year-in production rate of 120 kboe and assume a 10% natural decline (maybe I am wrong and the captain polymer injection is still in its ramp-up phase and gaining traction, what could make up for other declines) leading to a year end rate of approx. 110 kboe/d. So 115 kboe/d annual average in 2025, reducing for some maintance, I am still hoping for 110 kboe/d or more (official guidance was 100-110, so given yesterdays strong positive reaction, the market might agree to my thesis that it could be higher now).

OPEX/boe were forcasted in "low 20s", given Q4s 14 USD/boe, lets hope for flat 20 USD/boe in 2025.

For reasons of simplicity and easy to handle numbers lets assume 75 USD brent. This should leave us with some reserves (gas is higher at the moment and they mentioned some good hedges recently initiated).

110.000*365*55 (EBITDAX/boe) = 2,2 bUSD EBITDAX

Can somebody on this board please help me to understand the following "proforma-comparison of 405 mUSD" (see yesterdays RNS, one of the last points). Is this some kind of settlement payment between ITH and ENI regarding the effective date?

Last net debt. figure I noted was 543 mUSD. They now have a 2,25 bUSD financing in place but talking about just only >1 bUSD available liquidity. This implies for me, that there were some non-operational cash movements. One of the analysts asked a question in that direction in November last year, but didn´t get a clear answer.

Yes. I wouldn´t say "potentially", but "definitely" after 642 mUSD Q4-EBITDAX ;)

0,12 USD per share.

Hi londonder,

Sorry, haven´t had the time to reply earlier. My dayjob kept me too busy, but always appreciate your valuable input on this board.

This mornings trading update has proven you correct. I am a little surprised by the strong positive market reaction, because we (on this board) always thought production results on a per field basis are public knowledge and should be reflected in the sp already.

However, markets, especially in this smaller cap areas, are not perfect, so I am enjoying a day in dark green.

Will be very interesting to get their 2025 guidance. During the november conference call, Luciano was a talking (a little bit too much) about upcoming maintenance, so Yaniv jumped in to slow him down and advised, everything will be baked into the official guidance figure.

I like the new management team very much. I really enjoy creative reporting measures like November-January production >120 kboe/d, which is a pretty strong hint to the upcoming guidance. I hope for indicating potential of >110 kboe/d (including field decline and summer maintenance, but starting from 120 kboe/d). 14 kboe/d Q4 lifting costs and resulting EBITDAX metrics are very very strong as well.

What a strak contrast to SQZs RNS on yesterday...

Interesting times ahead, March will be a banger of a month for UK North Sea O&G with the government expected to comment on new field legislation (and hopefully taxation).

Rosebank with its 80% Equinor share is a no brainer for me, it will (and must) happen. A farm-in partner announcement and/or go-decision for Cambo would be the cherry on the cake for ITH (I am optimistic here as well...as usual).

I bought quite a position in SQZ at 1,23 GBP last year in August. Seeing the share at 1,23 GBP again today makes me of course compare both situations.

August 2024 was before the autumn budget and at better oil prices given the height of the Israel/Iran conflict. In my opinion the fiscal situation improved significantly with more to come.

Must be a nightmare situation for Chris given his comments during the recent management call, which I personally enjoyed listening to very much.

Hope Martin is luckier with his ongoing consultations with the government, which will prove more important than Triton uptime in the long run.

So i doubled my position at 1,23 GBP today.

Any resumption of buybacks or dividend announcement would actively impact the sp, which is unlikely if a deal might include shares beside cash. For me todays strong mentioning of M&A, but not a single word on shareholder capital allocation, is a strong sign.

Good morning,

very interesting!

With regards to timing of upcoming government decisions, Martin said something like "spring, hopefuly earlier than the time when daffodils are up, probably more when roses bloom".

I am far from an expert in flowers, but google says daffodils March/April, but roses in May... so most probably Martin was wrong with the blooming patterns of roses and he meant like March? Glad if anybody can help with a second opinion.

Stevo/Londoner,

may you guys help me with the hybrid notes please?

For me, HBR deserves a 1,3x EV/EBITDAX in any case (shortly after the transaction announcement we assumed a 1,6x, but that was before the EPL extension/78% increse). Equinor currently trades at 1,5x with Norway having a similar tax regime. So 1,3x should be rather conservative and even includes some re-rating potential if the UK O&G political climates improves in my opinion.

My estimate with 9,0 bUSD 2025 EBITDAX is close to Londoners, thus leading to an EV of about 11,7 bUSD.

So HBR seems undervalued in any case, but the hybrid notes do have quite an impact:

11,7 bUSD - 4,7 net debt (as reported) / 1,691b shares (incl. Letterone) = 4,14 USD / share = 3,33 GBP / share

11,7 bUSD - 6,4 net debt (as reported + adj. for 1,7 bUSD Hybrids) / 1,691b shares (incl. Letterone) = 3,13 USD / share = 2,52 GBP / share

PS: would be interesting to learn from HBR if the planned 2025 capex spent does allow for a 2026 production increase or is rather sufficient to maintain the current level of production (which disappointed me most...).

hi stevo,

followed some of your other posts on enq (thanks for those, very useful stuff!) where you were saying eng should be buying producing 2p rather than developing 2c resources, given their tax loss position and short term synergies/upside/increased value of money when using those quicker. i fully agree.

however, whats your opinion on enq buying jog? jogs 2c resources are "fully funded", thus some kind of a hybrid. they don´t require capex from jogs or the buyers side, so they kinda "delayed 2p" if you get my point.

i can´t find your post regarding the current value of uk ns 2c resource, but i remember a very small number in the 1-3 usd/boe ballpark (given all the headwinds, especially before the autumn budget, tide is starting to turn, so that number might be slightly higher now). for producing uk ns 2p you said, those would be worth $6-10/boe.

jog has a fully-funded 20% share of 70 mmboe (= 14 mmboe 2c) + some cash and a tax loss position. what are your approach for valueing those? in my opinion they can´t be as valueable as producing 2p because there is obv. project execution risk, time to get to production (reduced value of cash inflows far in the future) and political turmoil still around. but around $5/boe + cash/tax loss would result in about 100 musd, which seems to be a "good size" for enq.

people are talking about neo or sqz buying jog, which is of course an obv. / straightforward call. however, neos exposure with 50% producing stake is already quite large, whereas sqz is normally describing themselves as mid-to late life specialist. so despite the fact they already have to buy like 37,5% of the buchan capex, it might not fit their risk profile to buy jog on top. ith is still sitting on 100% cambo for now and has quite a chunck of existing organic development potential. during the recent sqz cc it was described that norway m&a is quite expensive (see hbr/wintershall) for obv. reasons, so people start ****ing back to uk (hoping for sense to prevail). thus buying jog could be a valid alternative for enq instead of contested producing 2p reserves - any thoughts?

Thanks dickupham, wanted to reply to your post dated 9th Jan., but didn´t find the time yet (still have to do my daily job for a living...unfortunately...). Glad you corrected the NPV10.

Anyways, many thanks for sharing all these insights/calculations. I a German citizen and mainly came from an investment into Ithaca/Harbour to look into SQZ/ENG and am very glad to have noticed JOG now, which I believe is a HUGE opportunity as you´ve outlined below in more detail.

Having listened to Serica on yesterday, I fully agree. Both, Chris and Martin seem to be very optimistic (same is true for the mood of the Ithaca trio Yaniv, Ian and Luciano during their recent Q3 conference call). Martin seems to be heavilie engaged in direct discussions with the Government (= consulting them). As you mentioned the general perception of oil and gas in the UK (and some areas globally) started to shift again - sense to finally prevail.

My feeling (as stated, as a German citizen I coulnd´t be further from an expert in British politics) is we will get a positive court ruling (Equinor/Ithaca - Rosebank) combined with other positive signals in Spring this year, before hopefully something tangigle regarding taxation by the next autumn budget.

The biggest risk, which is priced in in JOG, obv. is a total standstill resulting in management salary eating up the available cash (i.e. negative court ruling or overly complex environmental statement requirements + years of uncertainty around post 2030 taxation). I am highly confident this risk won´t materialize and we´ll see some action within 12 months.

Thanks Surety, very interesting read:

“We’re more interested in the UK at the moment than we were previously,” Chris Cox, chief executive officer at Serica Energy, said in an interview on Tuesday. “My personal views is that the tax regime isn’t going to get worse than it is today, and I quite like to buy at the bottom of the cycle. So I see opportunities in the UK.”

Doesn´t sound too bad.

Pretty solid guess @SonofYoda ;)

In my opinion sp-action this year so far is solely based on commodity price improvements (brent at 80 USD/boe today). Maybe some kind of sector rotation, but not sure to what extend this really has an effect on UK-based smaller O&G shares like ITH.

However, my main statement is, that we still should have plenty room from here, given remaining political sp catalysts. Any positive news on Rosebank and/or post EPL-tax-regime should cause us jump another step. As the Peel Hunt analysis indicates, 2x 500 mUSD annual dividend for 2024/25 are the base-case now. Before all the EPL-struggle and UK O&G negative re-rating ITH IPOd with approx. 11% dividend yield. Even we assume the market now still requires like 14% to take remaining negative sentiment into account, this allows for 3,6 bUSD market cap. or 1,80 GBP/share . By the way, those 11% yield were before the ENI.UK deal, which now provides additional size, financial strength and improved corporate governance having a strong 2nd main-shareholder balancing against Delek. So one could argue the opposite of what I just said is true, and the market should require less than 11% by now compared against the IPO situation, which would leave further short time upside.

Last but not least, people should take into account ENIs strong development track record with Var Energi. In addition, Delek must have become really frustrated as well recently. Having listened to all conference calls several times now, it feels like Yaniv Friedman is a pretty good pick with strong execution skills. So I am in for the long-run at ITH, looking forward to see 150 kboe/d later this decade (i.e. from 2028). At 50-55 USD/boe EBITDAX margin and a normal (still conservative) 2x EV/EBITDAX an enterprise value of close to 6 bUSD doesn´t seem too stretched as a 3y goal (I remember having seen some management share price incentives pretty much out of the money).

I won´t be selling below 3,00 GBP.

Currently sitting at the beach on the Maldives, so I found some time to update some notes on ITH. Others mind find it (or parts) useful, so I don´t mind sharing. Interested in other opinions for 2025 CFFO (after tax) and YE2025 net debt. (excl. special items like M&A obv.) please:

ITH 2025 FC (official guidance and/or own assumptions)

- Production 100-110 kboe/d

- EBITDAX >2 bUSD (at current commodity prices)

- Div. yield >20% (crazy…)

- Net debt. reported (Q3) 543 mUSD

- Q4-24 cffo 550 mUSD (before tax)

- Q4-24 200 mUSD dividend payout, 370 mUSD cash tax payments

- End of 2024 net debt. less 600 mUSD (before Eni.UK related settlement effects)

- YE net debt. to NTM ebitdax less 0,3x

- 2025 CFFO (after tax) greater 1,5 bUSD (please challenge!)

- End of 2025 net debt. to be possibly close to zero? (assuming 500 mUSD dividend, 600 mUSD CAPEX incl. Rosebank)

- 2025 dividend target of 500 mUSD almost covered by 30% cffo (after tax) without special dividend addition? (please challenge)

Positive catalysts

- Favorable court ruling with regards to scope 3 emissions (Rosebank to continue, Cambo to be developed as well, possible annoucement of Cambo farm-in partner)

- Announcement of stable post EPL tax regime (during the Q3 conference call, all three ITH managers mentioned pushes from the govt. for industry consultation by end of Q1-25)

- Oil price recovery (whereas market sentiment seems quite bearish, I´ve red some articles pointing to limited US shale growth potential for 25/26 and less OPEC spare capacity than consensus)

- 2025 production guidance surprise above 110 kboed (Q4 showed peak rates at 120 kboed before Talbot)

- M&A at bargain prices (kinda disappointing that they didn´t manage to buy some assets before YE24)

Risks

- Oil price collapse due to weak Chinese economy and supply-surplus (drill baby drill...)

- Gas price set back (i.e. ceasefire in Ukraine)

- Unfavorable court ruling causing Rosebank to pause (very unlikely in my opinion, Equinor seems quite confident)

- announcement of unfavorable post EPL tax regime (but can´t get worse imo, October budget should have marked peak negative sentiment)

No investment advice, I am heavilie invested (on an unhealthy allocation level I have to admit, haha) and far from objective.

Most UK O&G companies look cheap at these levels. Also invested in HBR, SQZ, ENQ and JOG. HBR for 2,40 GBP maybe the saftest given international diversification now. Hope smaller players like SQZ/ENQ to benefit more from short term M&A activity, wheres ITH and JOG (most risky, pure gamble) to hopefully profit from any regime change enabling for developments to go ahead.

PS: Can somebody please help me to understand ITH tax asset position? The credit market presentation (some days older than Q3) mentioned 5-6 bUSD loss positions. At 40% tax rate (excl. EPL) this should be worth close to 2bUSD (even after discounting at 15%). Current financial positions shows 786 mUSD "only".

Many thanks for sharing!

Well, that´s clearly negative for Ithaca in terms of local assets available for sale. But on the other hand, the article reads very positive for the future of North Sea O&G. With Equinors pro UK decision in general now, we shouldn´t expect negative news regarding the go-ahead of Rosebank as Yaniv Friedmann already hinted at during the recent ITH conference call (which bodes very well for the important Cambo project).

So Hopefully by end of Q1-2025 we will see some catalysts regarding required environmental statements and long-time taxation, laying the foundation to identify a Cambo farm-in partner soon thereafter.

Had to quit, record is not available yet. Will post a summary once the recording is available.

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Selling started when resports about Israel Lebanon ceasefire deal came out earlier today and brent dropped 2-3 USD. So it´s just normal that UK oilers do react to such a significant price movement of the underlying commodity.