Member Info for Tamovv

Hi Megla,

p. 14 of todays Credit Market presentation shows the tax loss carry forward position as of 31st Dec. 2024. Since they have stated all other metrics on a combined pro forma basis, I don´t expect additional tax losses to have been purchased (otherwise they would have stated it as a positive fact).

In addition, as I recall the conference calls Q&A sessions after the deal announcement, I understood that one motivation of ENI to do the combination, was to benefit from ITHs existing tax loss position (meaning they shouldn´t have had an own one as well...but better to wait for IRs reply to formally confirm).

Hamid, a fair price depends on the comparison.

By doing a simple EBITDAX multiple comparison its just around 1,20 GBP.

But hopefully by end of this month (30th October) the UK O&G sector as a whole will get re-rated by markets. Currently it seems like a worst-case tax scenario is priced in. Thus, any positive news of a constructive regime going forward should benefit the sector and ITH as the company with the biggest new development potential (i.e. Cambo) in particular.

Analyst Werner Riding mentioned 1,75 GBP in the proactiveinvestor article linked some posts below. This is somewhat I am hoping for as well (but given my large positions I am probably far from objective and heavilie biased at the moment). At least I don´t see UK O&G stocks dropping any further (excluding a full blown global commercial crisis with brent dropping to 50-60ish).

So not much to expect over the next three weeks unless some information leak through in advance (other than commodity-price based movements given Middle East tensions and China stimulus developments). Lets wait and (hope) see.

To add to my question below given todays RNS:

"Ithaca Energy (North Sea) plc (the "Company") has commenced a refinancing of its existing debt facilities via an offering of an aggregate principal amount of $700 million senior notes due 2029..."

"The bond proceeds will be used to augment the liquidity of the business which as at 4 October included cash of $194 million which incorporates cash balances related to the Combination."

So net cash as of last Friday should be at 700 mUSD (after paying the recent dividend).

At the Harbour board we discussed a 1,5x EBITDAX multiple under EPL-regime. Thus ITHs EV might be at least 3,3 bUSD - 700 mUSD net debt = 2,6 bUSD against todays market cap. of 2,25 bUSD...

Hi Megla,

Coming back to Werner Ridings FCF projections, I expect him to follow:

FCF calculated as Net CFFO (net of taxes) - Net CFFI (CF for investments) - net financing costs

Todays presentation provides some colour on previous and to be expected CFFI (Eni.UK assets have been described as "low CAPEX" ones).

So given current commodity prices and 105 kboe/d production (see H1 presentation slide p. 13) my model supports Werner forecast (at 78% full EPL).

Sales similar to LTM slightly below 3 bUSD, EBITDAX at about 2,2.

Tax losses (5 bUSD) to last into Q1-2027 (conservativle until end of 2026).

2025 EPL cash tax should be lower given non-full-year-effect of the ENI.UK assets.

So for 2025+26 combined I get to like 4,4 bUSD EBITDAX, -350 mUSD financing, -800 mUSD EPL cash carge (not in a worst case scenario, I work with standard 100% capex deduction), 1,4 bUSD CAPEX, leading to about 1,85 bUSD FCF (as per definition above). Slightly more optimistic than Werner, but I am used to getting caught on the too optimistic side of the equation.

So including rest of 2024 and Q1-2027 (referring to my comment above that tax losses might last until end of Q1-2027) ITH should basically earn its current market cap as FCF. Just crazy. I heavilie invested in SQZ as well, but ITH at todays 1,04 GBP/share seems even more compelling (earning its current market cap. 3 quarters faster than SQZ, haha).

Can somebody help me understanding the net debt. please?

To me, todays presentation is totally confusing:

p. 6: 857 mUSD

p. 15: 506 mUSD

p. 16: 506 mUSD reiterated

But net debt./EBITDAX LTM is shown as 0,4x

2.195x0,4= 878 mUSD (so kinda confirms the figure shown on page 6 included rounding-errors with the 0,4x figure)

Hi Megla,

will reply later on this one. New presentation for Credit Markets was just released, going to study now.

LTM EBITDAX as of 30th June 2024 was 2,2 bUSD at current market cap. of 2,2 bUSD... just crazy.

@Itsaponzi you will got proven wrong very soon.

Well...got caught on the too optimistic side of the equation again ;)

Didn´t expect that weak of a H1 production, causing them to reduce full year guidance quite significantly. Given the H1 results they could have opted for 150-160 mUSD dividend instead, but decided for 100 mUSD "only". However, they reaffirmed 500 mUSD 2024 total dividend target with some positive effects reducing the net FCF effect of the lowered guidance. This must have been some agreement with ENI to apply a potential 100/400 payment split. Given the new completion date, its clear now to me, that the H1 dividend is payed to undiluted shareholders only.

Loooking forward to the call in 45 minutes and hearing the new chairman for the first time.

Thanks! Didn´t have this information I have to admit. My model was solely based on midpoint guidance and required production volume for Q2-Q4 (equally split - simplistic approach). Lets see if they really have to lower 24FY-guidance.

I agree, any dividend payment (and to whom) was agreed between the two parties. Nevertheless, in my opinion its still relevant for us, since it´s not clear if the market has "the split" right in the current valuation, but the effect could be minor (or as you called it: "cherry on the cake"). Non minor is of course the general magnitude of the H1-dividend announcement.

Also keen to know the progress made with regards to forced-selling. In recent days the stock moved quite similar to SQZ, I couldn´t spot any additional sales pressure, but this is just my gut feeling. On the other hand, its also possible that Delek haven´t started at all yet, waiting for close to completion (either hoping for a good share price development after H1 release, or maybe to observe the geopolitical development). Next couple of days before ITHs H1 announcement could especially important for the Middle East (ceasefire talks) and could have an obvious direct impact on the price of oil (in both directions, whilst the weak development on Friday afternoon might have priced-in ceasefire talk progress already).

Sorry, stupid question regarding Luciano, just checked the AGM-results again and he wasn´t elected yet. Actually Yaniv Friedman was appointed as Executive Chairman already. So we might see him supporting Iain as Gilad Myerson did before.

Londoner,

I do expect strong CFFO (after tax) figures for Q2 as well. UK.gas and Brent prices were almost continuously stronger, volumes should have improved as well given the resolved operational issues (ITH Q1 presentation slide 11). I am not an expert in Oil & Gas operations, so with Captain EOR II polymer injections having started in May, is there any chance we see additional volume contribution from that direction? I remember one guy on this board sharing actual production figures from an open source (like NSTA?). Was quite interesting, but haven’t seen any posts on ITHs Q2 actual production.

Due to the absence of UK tax payments in Q2 as well, we should see H1-24 CFFO (after tax) north of 650 mUSD. So I clearly expect a dividend announcement of about 200 mUSD (pattern could look like 200+200 mUSD with an additional special dividend of 100 mUSD to be announced with FY results next year, the latter two both to be payed as one final installment). As discussed previously on this board, I expect that dividend to be payed to old/undiluted Ithaca shareholders before transaction closing in September.

Last year the dividend was payed on 29th Sept. with 1st Sept. registration date. So for Delek it’s a “left-pocket / right-pocket” game with only 10% of the dividend being payed to third parties like us.

My post was mostly about the dividend, but allow me to close with some remarks regarding Cambo. Delek has bought Siccar Point at the worst possible time (I don´t say it was a management mistake, just unlucky timing ahead of the WFT introduction and subsequent de/re-evaluation of undeveloped UK reserves). Without the successful development of Cambo, this transaction would deemed unsuccesful. Delek owner and billionaire Mr. Tshuva himself joined the ITH board, as well as the very successful and capable Delek CEO Idan Wallace who maneuvered Delek out of the Covid crisis. Ithacas former CEO Alan Bruce left (to HBR as we now know), so maybe slow progress around Cambo was one of the reasons (he is not to blame for the deteriorating tax regime). Having this in mind and given ENI´s successful development of Var Energi in Norway and the technical capabilities and financial strength they bring to the table, this looks for me like the preparation of a setup to make Cambo work in a self-controlled manner (must be hard to impossible to find farm-in partners ahead of October 30th). I was in Dubai in March and saw the Sevan-shape Cambo vessel laying next to the Rosebank one in the docks. Cambo was described as electrification ready and very low carbon intensity. So call me too optimistic again, but recent comments from the Treasury were about a "low-carbon investment relief to appease oil and gas industry"

Of course I am far from objective hear, Ithaca has become by far my largest holding with close to 50% of my personal net worth 😉

PS: Do you guys think we will have Luciano Vasques on the call for the first time, or do you expect Iain to b

Hi Megla,

Many thanks for your input. Already noted you in the SQZ section of this board.

Generally I agree to you when claiming that paying dividends from debt. to be a rather bad idea. However, in ITHs current situation, I have a slightly different perspective and see the following ratio behind it:

Delek (and ENI.UK) are both convinced Ithaca (and the ENI.UK part) are undervalued, thus they opted for a relative valuation approach. Delek is now faced to "forced-sell down” some shares, which they don´t like to sell for this price. On top of that, sentiment is very negative and it was not sure that it won´t deteriorate further when they announced the 500m USD dividend potential back then. On top of that there must be many angry IPO investors who don´t like to see the share dropping any further. So for me it felt like they gave this rather optimistic guidance with “dividend potential” (whereas others are rather lowballing) to provide support for the SP in that forced selling situation (I am looking very much forward to the ITH and mother companies Deleks results with regards to the progress here).

Thus and given plenty of headroom against their self-set allowable leverage ratio (having in mind that ENI.UK assets come without debt.) they maybe decided to "overpay" the dividend for a limited period of time (2-3 years).

My base-case (call me an optimist or even an idiot) still is, that taxation will still allow for the development of Cambo (and Sericas Buchan). Pointing to the production profile provided in ITHs last presentation, from 2027/28 production will increase with the ramp-up of Rosebank (and hopefully Cambo soon thereafter). Thus over a period of like 5-7 years my model forecasts sufficient CFC from 2027/2028 (depending on the Rosebank ramp-up) to support a 500 mUSD dividend.

I am not an expert in taxation, so I admit to be struggling with the modeling of different tax scenarios here. I forecast the combined entity to carry tax-losses until 2027 given current commodity prices and management guidance, but glad to see other opinions here from people, who run a more sophisticated model.

I am looking very much forward to any update on the captain EOR II ramp-up, which might boost production earlier than currently guided by management (as an optimist, I feel like the production forecast is rather conservative, whilst the 500 mUSD "dividend potential" does include a positive surprise from the captain field - which is fair, because they´ve called it dividend "potential).

I really enjoyed the different models of SQZs Auctus, comparing the stand-alone value without new developments vs. different development realization. Would love to see a similar comparison for ITH regarding Cambo. We just need to be aware of the fact that Auctus are company paid reports and thus might have had additional data (not only from public sources).

Can´t wait...: 22th August 2024.

Source: https://investors.ithacaenergy.com/news-events/financial-calendar

Interesting discussion gentleman! This Serica sub-board has really one of the highest qualities i´ve seen so far (not as nearly as much spam as in the HBR section...).

I agree to Sekfordes position, let me try to provide another perspective:

Buying back shares (as Sekforde recommends Serica should do) and diversifying into overseas assets (i.e. as HBR is about to do) can be directly compared in my opinion, since both are direct financial transactions. A certain production/reserve/EBITFAX/FCF (or whatever else metrics we choose) has a price. Since the introduction of the EPL, the price for north sea assets totally collapsed, whereas elsewhere in the world they are stable (or increasing, if you imagine all UK O&G companies are looking to diversify into Norway at the same time...).

Thus, buying back own shares, i.e. aiming for an FCF increase of 20% per share can be compared with buying overseas assets providing additional FCF in the same magnitude (so the to be purchased assets to result in the same increase of 20% on a per share basis). If the buybacks are cheaper, and in our case I assume they are MUCH CHEAPER, buybacks might pre preferable (assuming a nearly stable and not further detoriating tax regime).

Of course for an O&G company, short term FCF is not the only metric which matters, reserve life has to be considered as well. But the example I have just given can be elaborated a little more complex to consider FCF and reserve life development (buyback vs. oversea i.e. Norway acquisition) and might come to the same result.

So in Sericas case, given current valuation and recent comments hinting to a not much further deteriorating political environment I am a huge fan of buybacks rather than potentially overpaying for overseas assets and do appreciate the wise spending behaviour of the current SQZ management. However I feel they are "overstaffed" / "overskilled" and prepare for something big, which won´t be a massive buyback program only.

Imagine, SQZs valuation is so much compressed, any transaction must be done with cash (debt.) if it involves non-UK assets (Ithaca and Eni.UK could agree on a relative one, since action since both are UK and "undervalued to a similar extend"). I am invested in Harbour as well and do support the Wintershall deal, but they do pay a price for it.

Hi guys,

I´ve been a silent reader here since a couple of weeks. First of all congrats for this sub-board, it´s much more active than the ITH-area of this website and much less idiots an/or spam-bots compared to the HBR area.

I am a German investor heavily invested in HBR and ITH, but not in SQZ yet due to my overall UK / O&G exposure (which is way way too high…).

I do agree that SQZ looks compelling, many mentioned the juicy forward dividend yield of about 17%, but also the risk of imminent cuts. This is what inspired me to write this posts asking for your assessment.

Both companies look quite similar from size and risk/project development profile (before the ITH/ENI transaction). On certain metrics like market cap / kboepd SQZ looks even cheaper, but if we focus on the dividend the forward yield is almost the same, whereas ITH has provided clear dividend guidance for the next two years, so I don´t fear any cuts. For me it seems like dividend potential has become a good valuation metrics in the current UK O&G politcal landscape in general nowadays hence its focussed on very short term cashflow potential including tax shields in this very uncertain environment.

Comparing both companies 3-month performance I don´t really understand why its -35% at SQZ vs. +5% at ITH, both companies have a very similar profile in my opinion (also as far as undeveloped resources are concerned and thus exposure to political uncertainty around invest allowances). So the only difference I identified is ITH provided a stable/increasing 2-year dividend guidance, whereas the market might fear some cuts at SQZ.

From a shareholder structure there are certainly things not to like at ITH with a 90% controlling-parent shareholder, but this is about to improve with the closing of the ENI.UK transaction by end of Q3.

Hi MightT,

We have discussed the dividend policy and our expections in quite a lot of detail on this board. You certainly find some corresponding posts.

In summary:

- at ITH dividend is not related to the shareprice (so payout does not target a certain divident yield), but will be up to 500 mUSD in 2024 and 2025 (official management guidance)

- in 2023 they were very proud of reaching their 400 mUSD dividend goal (and given the SP development since IPO there certainly is some pressure from early bird investors and mothercompany Delek to reach the 500m in the absence of falling commodity prices)

- current commodity price development does also support further hedging and the general dividend target of 500 mUSD

- attention, you should have the upcoming ENI business combination in mind, old-shareholders like us will only receive 61,5% of that dividend on a diluted basis (there are some considerations that old-shareholders might be the only ones entitled to the H1 dividend, this would boost the yield even further, but for the sake of simplicity you can ignore this for now, comes as a cherry on top if it happens in a magnitude of 1-3% percentage points of additional yield for 2024)

- thus, 307,5 mUSD total dividend 2024 could be payed to us old-shareholders (19,3% yield based on todays market cap.)

...: https://www.energyvoice.com/oilandgas/north-sea/555457/labour-policies-risk-downgrades-ithaca-enquest/

Not so much new in detail, but good summary and Moody´s also noted that short-term cash flows are protected by carried forward tax losses.

What´s your opinion on Serica @ Londonder7? My HBR+ITH exposure doesn´t allow for an investment for now, so I didn´t look into it in greater detail yet. Went ex-divi today as far as I see, but suffered a lot this year.

Just noted that "the first phase of Cambo is expected to deliver 170 million barrels of oil equivalent". So initially much smaller than the 800 mBOE I mentioned below (found that in a database).

Back then Siccar Point purchasing price was 1,5 bUSD, including 300 mUSD variable payment linked to project development (not sure if applicable in full given missing progress on Cambo).

If I recall correctly, daily production was rather small, 10-15 kboe/d-ish. Given HBRs 35k USD / boepd Siccar point operational assets should have been valued around 0,5 bUSD. Siccar Point 2P was 46 mboe, so about 0,5 bUSD.

Thus 0,6-1,0 bUSD of the Siccar Point purchasing price have been spent on 2C resource, or am I mistaken?

70% of Cambo Phase 1 equals 119 mboe

20% of Rosebank (300 mboe in total) equals 60 mboe

This means ITH payed 1,0 bUSD for 180 mboe 2C (assuming full price and full development of both fields, which most probably was the base case back then), equaling about 5 USD/boe (undeveloped 2C). Tax regime obviously led to a sharp decline in UK north sea 2C value since then, but even at 30% remaining value its still at like 1,50-1,70 USD/boe.

Thus 70% in Cambo could be valued (if FIDd ) at about 200 mUSD – does this make any sense?

Londoner, referring to your post on Cambo dated June 20, what do you believe a potential Cambo-FID impact on the SP would be? Please excuse my maybe non-optimal O&G terminology, I am a private investor with no industry experience, just trying to wrap my head around things:

According to recent stock analysis by Stiefel and others, I believe the market currently has priced out undeveloped reserves of new projects (non-tie-backs or near fields). Cambo is supposed to carry 800 mBOE. Ithaca has 100% control, but owes Shell an undisclosed purchasing price for the 30% stake. So to have a conservative approach and to keep things simple, lets apply the following thoughts on the 70% stake already purchased from Siccar Point yet, assuming the farm-out earning equals the price due to Shell then.

A 70% stake in Cambo equals 560 mBOE 2C-reserves. I learned from the HRB-Wintershall merger that Wintershall was valued at 10 $/boe 2P. So is there any rule-of-thumb factor or percentage applicable, or does this completely vary from project to project so the value of a projects 2C reserves is implied by it´s own project-DCF-model (based on investment and expected future cash flows, so tax rates and capital-allowences have a direct impact on future cash flows and thus the implied-value of any given 2C reserve).

In summary, I am just trying to get a feeling for the magnitude of a potential Cambo FID on ITH, assuming a reasonable new and permanent fiscal regime can be found. Only 1,0-1,5 $/boe valuation for Cambo 2C reserves would already have a significant meaning compared to todays market cap of ITH. I trust you have a project-based model, so any insights on the implied 2C valuation (at 78% tax-rate, but with standard investment allowences remaining in place) would be highly appreciated. Since you calculated project payback-time, you maybe also have the "cambo-project-NPV", which divided by the total reserves should give us an indication of its 2C reserves-value?

Thanks, I actually didn´t remember the AGM was held on yesterday. This most probably explains the good "ahead-of-peers-day" on yesterday.

All points below are valid, I am personally optimistic that the captain EOR II ramp-up can be achieved faster than conservatively guided and would have a direct positive impact on 2024 results and indirectly obv. the dividend. Any indication that the Delek sell-down processes as planned or is (nearly) completed would be highly welcome as well in my opinion.

Brent and European gas recovered quite nicely. Don´t expect many further political news. Recent polls showed UK population is equally weighed pro and contra about labors O&G plans. Manifestos are out, so let´s wait and see what the "new and permanent fiscal regime" (fully agreeing to your post dated 20th June) will actually look like. Trust politicians of all parties have understood the urgency on creating clarity within max. 100 days after the election.

With ITH back at 131 pence against the 30th May 2024 temporary-high at 135 pence, we generally can´t complain (just look at HBR or Serica for comparison). All positive potential catalysts londoner et al mentioned are still valid.

Thanks Londonder, as always, highly appreciate your thoughts. Will reply on Cambo later in detail.

Any idea what caused the sharp movement today? Sunaks speech in Scotland?

Source: https://www.telegraph.co.uk/politics/2024/06/23/north-sea-oil-and-gas-not-safe-with-labour-sunak-to-claim/

Haven´t seen any threatening of revoking Rosebank in the actual Manifesto, is reads:

"Labour will not revoke existing licences and we will partner with business and workers to manage our existing fields for the entirety of their lifespan."

Rosebank is FIDed and according to my understanding even Cambo would be possible, it´s just questionable if Ithaca/ENI still want to sanction it under those darkened conditions.