Member Info for Tamovv

Londoner, appreciate your swift commentary.

Not much to add, you hit the nail on the head.

The only quote which bodes well was already provided in your post below: “Crucially, oil and gas production in the North Sea will be with us for decades to come, and the North Sea will be managed in a way that does not jeopardise jobs.”

Since they clearly ruled out all new explorations, but also confirmed the energy needs for decades (plural) to come, it´s questionable for me if they can really risk having prospects like Cambo not to be developed. This would clearly jeopardise jobs as you pointed to from 2026 since a sizeable transfer of workforce won´t be possible that soon.

The removal of "unjustifiably generous investment allowances”, also leaves some room for the creation of new not unjustifiable ones, which are probably needed to the next round of FIDs (Cambo, Buchan, etc.).

Maybe I am too optimistic here (again).

Watched the full speech today, especially Starmer. I am clearly not happy with our current German government at the moment, but this one of those rare days today, when I feel lucky that we have avoided worse (yet).

...afraid this will turn out as a "non-event" for this share, but still offers some surprise potential.

Source: https://labourlist.org/2024/06/labour-party-manifesto-2024-launch-when-released-election-policies/

Solid update, but can somebody help me with the hybrid bonds please?

Normally for company valuation we use a certain multiple of Standard reporting metrics, i.e. 1,65 x EBITDAX as we´ve discussed on this board before (Aker.BP and VAR which are good proxies for future HBR trade 1,55-1,7x EBITDAX), and deduct net debt. By doing so I get to an EV of about 12 bUSD for the combined entity.

Next task is to assess net debt at YE24, slide 16 provides some help (its the most interesting slide of the presentation in my opinion by the way). In my old model I tried to use the present value of the cheap bonds, in order to make my valuation a little bit more sophisticated, however the presentation now mentions hybrid notes, which are about to be reclassified as equity.

What this means is clear to me from a banks perspective, as it improves credit metrics because standard bonds sit in a higher rank.

But what does this from a valuation perspective? I mean these hybrids are not convertibles as far as I understood, so they won´t turn into to be issued shares and "disappear" (dilute), but still sit there and cause (variable) interest, so we can´t "ignore them".

It makes a huge difference when determining potential value of a future HBR share whether we deduct like 4,5 bUSD net debt (as illustrated on slide 19 on the right, they could have provided a little more insights on Q1 actuals and combined 2024 FCF guidance in my opinion by the way...) or like 6,2 bUSD still counting the hybrids as net debt from a shareholders perspective.

Hopefully Stevo12 is still reading here to come and help!

For whatever it's worth, in my model the value of future harbour share hardly goes over 3,60 GBP (potential positive political development in the UK not considered of course since this would lead to an EBITDAX multiple expansion most probably). I hope we can master the 3,30 barriers soon, but I might start downsizing my large position from 3,45 GBP.

In general, I expect the acquisition itself to be (nearly) fully priced in by now, given the recent positive regulatory news. I personally don´t expect a postive shareholder vote for example to function as an actual catalyst for the SP. Given the assumption of higher debt and increase in production, I expect the shareprice to increasingly react to commodity prices (as commodity stocks normally do, haha) as well as to the political developments in the UK the next 3-4 months (to a lesser extent than pure UK plays due to HBRs succesful globalization now).

Last year was 23rd August, this is a Friday this year, so I rather assume the week after, usually Tuesday. My best guess is August 27.

ITHs Q1 this year was 28 May, so pretty much exactly 3 month after the last release.

So approx. 50 days after the upcoming election. Thats at 50% of the "100 days after election phase", when things should get sorted out at the latest politically.

Thanks Londoner,

No worries, my intention was not to comfortably turn off the thing between my shoulders, but as a non UK-citizen (I am from Germany) it´s rather tough to fully get into UK politics in such a short time-frame (but as the upcoming 4th July election requires now…). So I am always happy to listen to some local voices. Your posts on this board implied a rather profound view.

Looking ahead, I see very very interesting 100-130 days for Ithaca, whereas the following topics could function as SP catalysts:

- UK politics (Labour)

- Price of Oil

- Ithaca dividend announcement for H1-2024

As far as UK politics are concerned, I agree to all of your points and find myself (as usual) on the rather optimistic side. Since not only O&G Unions, but also the broader general Confederation of British Industry (https://www.dailymail.co.uk/news/article-13491011/cbi-keir-starmer-windfall-tax-north-sea-oil-gas-firms.html) have noticed the importance of not destroying the local Oil & Gas industry, it feels like we have passed “bottom-sentiment” now. Regarding the potential timing, I am not sure if we rather see any positive confirmation by a “weakened” or “amended” stance in the upcoming labour pre-vote manifesto, or within 100 days after the potential government change. But I don´t see the strict rhetoric of “closing all lope wholes” in an actual manifestation of the removal all of (WFT and “Standard”) investment allowances.

Regarding the price of oil, since I am not working in the O&G industry and now found myself invested with an irresponsible high share of my portfolio in British O&G stocks (rather 70% than your healthy 17% to be honest), I started to consume any kind of oil price related content in parallel to my daily read of British politics, haha. For what it´s worth, some sources I perceive as somewhat reasonable see peak bearish sentiment to has been reached last week after the OPEC announcement (price drop), so we might see some reversed price action towards 85-88 USD/boe (Brent).

Last but not least, I personally see Ithaca announcing a first dividend with the H1-2024 release. Preferably to non-diluted shareholders only, as elaborated in one of my recent posts here.

So in a best case scenario, all the above mentioned posts kinda add up (i.e. Brent back at 85-88 USD by end of August, after Labour took over and confirmed to preserve some critical allowances and Ithaca announced a H1-2024 dividend of 200 mUSD).

For all people invested in HBR as well, I just want to share my idea that if oil improves first, we might see HBR jumping above the 3,30 GBP hurdle. Then, I might consider turning some HBR into additional ITH exposure, because the latter should over proportionally benefit from an improved labor stance (and the nice dividend announcement of course).

All the above does of course include a ton of wishful thinking. I admitted more than once that I am far from objective due to my large UK O&G exposure (I see

Sorry, but the SP movement really has NOTHING to do with BOA. Funny how people always automatically blame the "bad bank and derivatives".

Haven´t you noticed the move in oil comparing Friday afternoon when HBR closed at 3,30 against right now? Fundamentally, with HBR now having a production of 500 kboe/d working on bringing down the deal related debt., nothing has a "fundamentally" bigger effect than that.

Anyways, sad development since Friday, the 330 closing SP offered potential for an important breakthrough this week.

That doesn´t look good in my opinion. Aren´t we looking for an improvement against Q1 run-rate now with problems at non-operated assets announced to have been fixed?

Q1 actual was 58,7, so we are down nearly 10% against average Q1 production, or am I mistaken?

Londoner, have you noticed my post dated 30 May 2024 14:21, I am very curious in your assesment of potential "updated" Labour UK O&G fiscal regime?

Londoner, as usual, highly appreciate your swift and on-point replies!

Fully agree, an interim dividend (if any) is fully "priced-in" the 61,5 / 38,5 ratio. You are also correct when saying one should value the company based on future dividend potential (i.e. 61,5% of 500 mUSD). The cherry on top of the cake analogy really applies here for 2024. However, it might be a rather juicy cherry (0,04-0,06 USD / share on top of the pro-rata share of old shareholders on a potential 500 mUSD for the fully diluted shareholder basis).

For me the share still crazily undervalued. Once things (politics) are sorted-out a fair dividend yield for ITH-investors in my opinion is max. 11% (also given the improved corporate governance with ENI as a shareholder now). With 500 mUSD stable future dividend (my model das somewhat support this ceteris paribus), on a 61,5% non-diluted shareholder basis, this results in a “old-ithaca SP” of 2,20 GPB. I see plenty of potential catalysts boosting the SP this year going forward from now (a “reasonably fair” labor O&G taxation regime first, Cambo partner announcement / FID later and successful start of EOR II in between) and won´t sell any of my lovely shares below 2,00 GBP.

I firmly believe there will be an interim dividend this year again. As longterm Delek shareholder I see them being really proud on their frequent dividend payments (3x LTM). Sister Newmed Energy does pay a very stable quarterly dividend to Delek. So I wouldn´t be surprised if Delek was demanding a continued interim dividend and if this was the (or one of the) reason(s) for the unusual effective date of this transaction. I felt like the 31,5% share for the enlarged company for ENI was slightly on the expensive side. Having a juicy H1-24 dividend for us old shareholders slightly improves this situation.

I am personally highly interested in your own standpoint on any potential labor policy decision Londoner! @Desertsands, it’s not the dividend boosting the SP, this information is well known to markets since weeks. Since yesterday, there is a slight policy shift within the labor party, indicating a not full blown pro-active destruction of North Sea O&G. Thus, Ithaca, having the largest undeveloped resource base, profits the most from a more constructive (or avoidance of a totally negative) potential environment.

Good morning guys,

I will comment on tuesdays results later this week, but have to share the following thought with you, which let me find no sleep, haha.

The economic effective date for the transaction has been set to 30th June 2024. If intended, it would have been easy for both parties to make it 1st Jan. 2024 I think (comparing to the HBR transaction which closes later than ITH/ENI.UK but has an effective date quite in the past mid of last year).

Thus, without having any other information, for this year, I assume a similar dividend payout pattern to 2023.

In 2023, H1 had an ex-date on 31st August, payable 29th Sept.

Given the proposed closing date "somewhere in Q3", there might be a chance that any H1 dividend will belong to "old" non-diluted shareholders only. Q1-24 CFFO was 314 mUSD. Tax payments are H2 weighted, production Q2 should be higher than Q2, commodity pricing, especially gas looks stronger, thus I´ll just assume 650 mUSD without any precise calculation to examplify my idea regarding potential dividend distribution amongst old and new shareholders. The dividend policy was again reeiterated as "30% of CFFO + a special dividend from the evolve basket". Thus, 200m USD could be declared for H1, given the just mentioned phasing of tax payments.

200 mUSD H1 (30% H1 CFFO on an ITH standalone basis) + 180 mUSD (61,5% of 300 mUSD H2 on a diluted basis) = 380 mUSD 2024 for undiluted shareholders (even 23,5% based on yesterdays closing market cap.)

Do you think this makes any sense, also from an ENI perspective? I mean given the effective date from 1st July, they are entitled to keep all their H1 profits as well.

So question to the people on this board (i.e. Londoner, maybe Stevo is also reading here and not only at the HBR area):

- what does "economic effective date" / "transaction closing" mean in terms of actual issueance of new shares? I expect them to be issued shortly after all approvals (so actually end of August or September as advised by Iain Lewis on yesterday)

- do you agree to the above or does this make no sense from ENIs perspective? Thus should we expect ITH to diverge from the 2023 timming pattern, intending to pay the full up to 500 mUSD to the new diluted shareholder basis

Many thanks for sharing!

Hopefully this was the start of a shift in political (public) perception regarding this topic. David Whitehouse is doing a decent job on Linkedin in my opinion, posting frequent content. I have shared an OEUK manifesto link at the HBR-area of this board on yesterday.

Given the large undeveloped resource base, ITH should have one of the largest exposure to any positive political development enabling for new project sanctioning (especially Cambo).

Lets keep fingers crossed that Tuesdays 1,12 marked the bottom. I violated all portfolio balancing rules and got another big chunk in for 1,13 bringing my average down to slightly below 1,30 GBP.

Volume was nicely up, like 4m shares during last 48h. Hopefully Delek used that chance to execute some of their pre-deal-closing forced sells.

Sorry if posted earlier on this forum already, I didn´t see it: https://oeuk.org.uk/manifesto/

Very interesting read, as foreign investor I hope sense will prevail in the UK.

I prefer this, rather than what I´ve seen as the recent initiatives started by the workers unions.

Many thanks londoner, as usual. Couldn´t agree more, so I just comment to provide some additional colour on Deleks potential reasoning for the ITH IPO itself back then.

As a longterm Delek shareholder, I was in the middle of the Covid crash, leaving Delek in a badly over-leveraged situation with credit-rating downgrades below investment grade and a going concern warning for almost two years in their reporting and results.

Delek managed to negotiate a "memorandum" with the consortium of lendings banks. Just to recall from my memory, Delek must not pay dividens until credit rating has improved materially and New Med Energy (they tried to IPO through revise merger with Capricorn for instance) or Ithaca IPOd to increase the potential short term liquidity (by being able to sell own shares against the market in "financial pressure situations" creating additional freefloat).

Thus, the 90/10 Ithaca IPO was the basis for the current Delek Group dividend payments according to my memory.

The fact that Delek believes Ithaca is undervalued with its current market cap. is also strongly reflected the option londoner already mentioned, so they can get back that 1% from Eni, they had to painfully sell at these cheap levels right now.

As I already mentioned several times here, I am slightly disappointed by the fact that the 500m dividend announcement was/is not enough to sufficiently support the stock price. I still plan to add on these levels, breaking with all balancing rules of my portfolio. Hopefully HBR will present positive news on its AGM next Thursday, resulting in a SP above 310 Pence again, so I can continue rotating from HBR into ITH to collect even more of this very juicy 20% dividend offered to people who are willing to collect Deleks forced ITH stock sells.

Can´t wrap my head around todays SP (non) action. Thought the recent drop was caused by weak Q1 production, which is negligible now given the accreditive production for old non-diluted shareholders. Fears about a dividend cut aren´t valid any longer too. So the recent SP drop has been solely caused by political statements / expectations around laber in my opinion, otherwise we should have seen some reversion today.

Q&A session was rather lame today, not many additional useful information in my opinion.

Anyways, I still like the ENI move. My model shows tax loss consumption by the end of 2028 now. Until then the ENI assets contribute to CFFO after tax (also on a 61,5% basis for non-diluted shareholders). Dividends for old shareholders approx. 1,4 bUSD at current commodity prices by end of 2028 at current commodity prices (without any windfall tax 75 to 78% worseing effect of course), which is close to current market cap... Still feels crazy undervalued to me, but maybe I am totally wrong and things around O & G in the UK will indeed turn absolutely terrible under labour and Cambo finally gets cancelled etc.

In any case ITH is a highly political stock and big bet on the industries future. However, the ENI deal de-risked the political exposure for old-shareholders in my opinion given additional optionality, so really don´t understand why there wasn´t any move today. The delek sale of 3% can´t be that disturbing or am I wrong?

Well...to be honest, it is actually MUCH MORE than I have been waiting for (expected).

Especially the special dividend announcement in massive news in my opinion.

As I have presented on this board, I was expecting a 2024 dividend of around 180 mUSD given the very weak reported January/February production (and of course all other known headwinds on ITHS dividend capacity).

At a first sight the ENI UK transaction looked fair to be, but not as good as the HBR/Wintershall for example. Now it looks like they are either completely "overpaying" shareholders from debt. capacity (but I doubt ENI is in for the short term slaughter of debt. capacity), or the short term 2024/2025 synergies of the proposed transaction are significant.

I am very pleased to see the new production guidance, taking ENI UK contributions starting from H1 into account. The standalone Ithaca part seems unchanged, thus I see it as reconfirmation that Jan/Feb actual prodution already was included in the initial guidance mentioned presented for the standalone basis.

(up to) 500m dividend for 2024/2025 ("real dividend" payed in two regular tranches, not as the initial 400m "cheat" stretched over 3 tranches) means up to 307,5 mUSD for old shareholders like us on a non-diluted basis. Thats obviously much more than I expected (20,6% forward dividend yield based on yesterdays closing market cap).

Corporate governance is about to improve significantly with Eni directors to be nominated to join. Shareholder structure to be more balanced. The only short term drag on the SP could be Delek forced to sell 3% to the public, but this should be more than overcompensated by the special dividend outlook.

Interesting to see them having mentioning Norway several times during the last Q&A sessions. Now they show Norwegian Var Energi (ENI subsidiary) as a full powerpoint slide success story of Eni. I might be caught on the too optimistic side again, but this reads between the lines as UK politicians are not complete idiots and that there is something useful in the making for UK O&G in general.

No investment advice (I am much more invested in ITH as I should be and thus heavilie biased), but I see the SP flying today.

Hi Asartara,

Sorry, have just been very busy recently. The reason for not having posted for a while is clearly not related to the recent SP drop on top of the dividend deduction and potential frustration.

Well, February production of course didn´t come up to markets expectations. I think the recent drop was caused by a mix of Stifel downgrade, weak 02/24 production and technical sells given this small stock with only 10% freefloat.

As posted on the M&A announcement day, for me the ENI UK transaction seems fairly priced to slightly expensive, but managements explanations for that were reasonable (having a strategic option to make use of the tax losses if investment climate further worsens after the upcoming election). So clearly not that bad/dilutive for current shareholder to solely justify stock price movement.

Commodity prices rallied, other players like HBR benefitted, but in 2024 ITH with lower production profile, higher proportion of undeveloped assets and some lower oil hedges already in place, doesn´t benefit to the same extent (but I am sure they will put some great additional hedges in place as they´ve shown in the past).

I personally sold some harbour to overweight ITH given share prices below 1,20 GBP, but thats no recommendation.

ITH heavilie relies on the UK O&G climate to stay investable, HBR only has one big risk that the Wintershall transaction will not go through (i.e. vetos from certain governments like Germany - which I hope as a German HBR investor will not happen!). So comparing HBRs 2,94 GBP today against ITH 1,20 GBP I decided to overweight ITH given 40-50% potential I see against 20-30% for HBR over 12-18 months. Haven´t looked into Serica yet, so no comment on that one.

For ITHs FC 2024 I agree to what Londoner or Tornado already commented on 02/24 production, it was known to ITHs management when they presented FY2024 production guidance.

However, in my model, I lowered my rather optimistic production estimate of 63 kboe/d (was betting on Captain EOR 2 to contribute to output earlier than guided) to midpoint guidance again (58,5 kboe/d). That causes CFFO to drop to 600 mUSD, equaling 180 mUSD dividend at 30%.

As Londoner already mentioned, 2023 CFFO was negatively impacted by negative working capital movement. Maybe these were even "engineered" by management to have this effect to reverse and support 2024 (their reported 2023 CFFO was exactly sufficient to cover the 400m USD dividend by applying the 30% rule).

So as you can see it´s too early for our models to be accurate enough to aim for precise numbers. Thats why I decided to leave out own interpretation for now and just work with management guidance, trusting in their capabilities and achievement rate in the past.

I would be surprised to be see a 2024 dividend below 180 mUSD, which equals 11,5% yield. Any positive development around discussions with the UK goverment, Cambo, earlier Captain EOR-2 ramp-up etc. should all offer tremend

On top of that, Stifel doesn´t like the proposed M&A transaction too much: https://www.proactiveinvestors.co.uk/companies/news/1044363/ithaca-s-proposed-eni-deal-is-the-right-strategy-at-the-wrong-price-says-us-investment-bank-1044363.html

"However, Stifel views the price paid for these assets as not particularly value-adding, equating the equity issued for the acquisition to the assets' value, thus creating no additional value from the transaction."

80p translates into 1 bUSD market cap., thats an interesting valuation.

Tax loss position sits at 4,5 bUSD, thus shields against corporate tax until 2029/30 in my opinion. Based on that, even without Cambo, ITH should be paying 200-400 mUSD annual dividend so 1,4-2,1 bUSD by 2030. Even if you consider ITH worthless by the time it consumed its tax asset because of no new Northsea investments and if you discount the expected dividend cashflows, you should arrive at more than 1 bUSD in any case (the 20% Rosebank share not considered).

But I am highly invested and might be biased.

For detailed dividend 2024/25 assumptions please see my conversation with "londoner" on this forum.

At 1,27 GBP ITH market cap is at about 1,6 bUSD. I expect 2024 dividend to be in a 160-200 mUSD range. So for me it seems like they are yielding at least 10% at the moment, with huge additional potential for 2025, because 2024 should mark the bottom for a lot of North Sea O&G companies (HRB, ENQ, etc.).

Londoner,

Appreciate your swift and very comprehensive reply. Very very useful to me!

I will reply to your 2nd part of that post regarding potential strategic considerations behind the ENI UK Deal as per separate post here. I listened to the Q&A section of last weeks conference call several times and some analysts had some question in exactly that direction on got answers with some "management hints"

Many thanks again regarding clarifying on EPL. Just to ensure I got it right, because it differs from German taxation in that regard:

For EPL, it is not allowed to deduct "Standard DD&A" (excluding decom. etc.) from EBITDAX, but 100% of period capex expenes instead? This is why you have used 129% of period capex? I.e. 100% to "replace/substitute" normal DD&A and 29% "allowence" which effectively reduces profit before tax for EPL then.

This means, in a low Capex year, EPL will become an even heavier burden, because EBITDAX is neither lowered by DD&A nor by period Capex spend?

In Germany, for investment allowances, Standard annual DD&A keeps running and allowences add up on top (i.e. the 29% here).

However, your 2023 backwards calculation seems to fit the actual reported figures very well, so seems correct and logical to me.

For 2025 I have adapted your +236m to CFFO. I see additional CFFO resulting from increased production of about 10 kboe/d, so about 220 mUSD for 2025.

Starting from my 2024 EBITDAX assumption, I get to about 630 mUSD for 2024 (excl. working capital movements) at 61 kboe/d (management commented on Captain EOR II ramp-up during a.m. call and I understood between the lines that it could happen faster than as per official guidance). So potential for 190 mUSD dividend. Management really seemed like they care about their dividend capacity (and owner Delek certainly enjoys the ITH payments), so including some lucky working capital reversal from 2023 I wouldn´t be surprised if they aim for 200 mUSD "round dividend" for 2024.

For 2025 CFFO could be 1,0-1,1 bUSD, so 300+ mUSD dividend potential in my opinion. ENI UK effects not included. But having synergies, utilization of ITH tax losses for ENI.UK and the "low ENI.UK CAPEX profile compared to ITH" in mind, the aquisition should be accreditive on a CFFO per share basis for old ITH shareholder.

I am looking forward to getting more data for ENI UK (i.e. production costs per barrel profile) deal soon along the official deal announcement, management seemed very confident to bring the deal over the finishing line inside the 4 weeks period.

Timing doesn´t look that good anymore this time ;)

Strange...is todays movement based on the RNS stepdown of independent director? Doesn´t seem "too concerning" to me.