Member Info for TerryM1

There are just so many dangers/problems with this deal

• Questions on whether the tax losses can be used; my guess is no one really knows will be a big bun fight with HMRC.

• The tax rules are changed; this government has great form on this and are in need of a lot more cash given the latest public sector borrowing figures. If HMRC see they are losing too much money it would not surprise me they go to government and ask for these loss rules to be changed, government only too happy to oblige. As changes to these rules are for future profit it is not a retrospective change. Labour will push for more tax changes to hammer O&G at every opportunity and Conservatives always do what Labour want.

• Labour next government in 2 years or less, does anyone think we are going to be better off or even neutral on O&G taxes. If anyone does get in contact with me, I have some swamp land to sell you.

• Labour nationalise the whole lot they have already stated.

• Mercuria will have effective control of Serica, keep the BOD in place as useful idiots or just allow them to have increase salary and bonuses. They then use it to unload more of their loss making assets onto Serica using that lovely cash pile they will now have control off.

• No chance of takeover premium as Serica now a complex mess relying on tax losses which may or may not be used, UK Government not changing tax rules and Mercuria in a position to block anything they don’t like.

• Serica trading a stable asset Gas for a falling asset Oil, win win for Mercuria and Tailwind, not for Serica.

• Special dividend now very unlikely and don’t see future dividends going up much.

IMO the only logical option for us is to vote no for sell out if/when there are highs

Don’t think Kistos will want to come back with these new taxes and N Eigg and even if they do it cannot be until Feb due to 6 months rule and may be too late to get takeover through before this mess is put in place. Also unlikely there are any others now who want a company in UK O&G.

Well that did not last long

https://www.reuters.com/business/energy/eu-will-suspend-gas-price-cap-if-risks-outweigh-benefits-2022-12-19/

This is not just retail selling, the small shareholder makes very little difference one way or another. This SP today is a clear signal the city do not like this deal as can be seen on the BB neither does the small shareholder. They know the future prospects have taken a big dive and this is about the BOD securing their income for a time but they may not feel so comfortable with Mercuria as a large shareholder. This may be the only good thing going forward and put a stop to anymore stupid deals but has put an end to SQZ getting at least in part out of the UK before Labour destroy what's left.

The only good thing SQZ is useful for now is losses where shares are sold can be used against CGT and especially given the government's attack on CG.

This is why the SP has been out of kilter with the book value of the company, the ones in the know did not believe this BOD would have the sense to either get out of the UK or distribute the cash to shareholders. Look at the market reaction today and I would guess this has leaked out so would explain the recent poor SP. After all they turned the Kistos deal down which made great financial sense but would have got rid of this BOD.

If this move has any purpose it is solely for the benefit of the directors, it will take SQZ out of play as a takeover target, no one will want them now. The BOD are a clueless bunch of self serving geriatrics who would have bought tulips or swamp land if offered. Now the smart money is moving out of the UK this bunch of half wits have given our cash pile to the shareholders of Tailwind and the government. They have turned a cash rich company with good income and diluted the shareholders into debt ridden over taxed mess.

Stevo12

I see your point but the maths don’t work for me.

Take £100,000,000 in profit, you get to put £91,400,00 into a new project and £8,600,000 paid in tax or take the money elsewhere or pay dividends £25,000,000.

New project successful nets you 100% profit £182,800,000, £137,100,000 tax, £45,700 profit after tax so £20,700,000 additional profit but only if allowances kept for the life of the project and no more added taxes. This also assumes that you get this profit before Labour elected who said they will nationalise energy or better case will remove a lot if not all of the allowances as they are pushing for. Add in the case of a hung parliament and Scotland get a referendum to the part of the deal with Labour, good luck dealing with Nicola Sturgeon if in the Scottish side who wants to stop all O&G.

New project a duster lose it all.

IMO the Conservatives, Labour and Scots Nats have given clear signals the UK is un-investable for O&G (realistically not just O&G), you are not welcome and invest at your peril.

Stevo12
“As flying Dutch notes if it had been a success the government would have paid over 91% of the capital cost of developing the field.”

As I have been stating they will get 91% relief now to help develop the field but then have to pay 75% on the profits if successful. Or keep playing the game again until failure.

Also just wait for the next change being pushed by Labour, removal or reduction of the tax offset, just imagine get some way into a new development and the tax offset removed, give up and lose what you have put in or carry on using the 25% you have left after taxes and then pay 75% tax if successful. IF O&G companies go ahead with new projects who believes RS, JH will not change the offset and of course get ready for Labour in a few years or less who will no doubt remove this offset or just nationalise the whole lot as they have already stated.

As a general note given the current cash generation and situation with the Board hoarding cash losing 10% against inflation this will not be allowed for too long. IMO the SP will not go up much if the current Board continues with this and someone will see the value and take them over. Worst option for me if they decided to spend the cash on deployments in the NS and play the governments ridged (change the rules at any time) tax game.

If what I see in the press in anything to go by people are turning to Amazon for Christmas stuff and more as they can't get it through the Royal Mail.

Gerry557

I suspect there are reasons as you say why they cannot buy into another REIT although this is property I suspect it has to be a direct investment. However given this money is in cash would that not count against the 75% rule, must be getting close or over that level now.

However I cannot see any reason not to buy your own shares, seen this all the time including REITS.
The shares can be bought and placed in treasury, as no dividend paid on these shares there is enough money to fully cover the dividend. When the market has bottomed out these share can then be sold on the open market or via a placing releasing the funds to for new investment.

There could be many things at play here.

1. The civil servants pushing (as usual) their own green agenda.
2. The government is playing politics (who would have thought it), they know they are going to lose the next election so why not go with labours plans on steroids, get a sugar rush of tax to help in the short term to keep them in power as long as possible and leave Labour with an insurmountable mess to sort out helping their prospects for the next election. They know as well as do the companies the offset for the tax means nothing because sooner or later the companies pay a tax rate of 75% so no new investments for the next labour government to tax. Also the offset makes them look reasonable to the public encouraging new developments and in the chance O&G companies go this route they can always pull the offset once the money has been spent, Labour are already pushing for this to happen. Can you imagine Labour in power reducing the tax or the time period, would be in far too much trouble, so conservatives in opposition can promise reduce the tax as it is now not relevant and solve UK energy problems, After all we the conservatives only put this in for a short period to solve a crisis which of course was not our fault. Somewhat suspicious the current end date is just before the time of the election after next, Labour will have to extend it and face rebellion from their own side or leave it in place and suffer at the ballot box.
3. Part of the globalist’s agenda, WEF great reset, COP etc to make everyone poorer from WEF “you'll own nothing and be happy”, perhaps a conspiracy theory but too many conspiracy theories are now coming true. Look at the insane plans for Oxford 15 minute zones.
4. Part of RS and JH playing to the WEF, COP agenda to gain good positions in one of these groups when they lose their seats at the next election.
5. They are just plan crazy.

My guess is they know what they are doing, JH has been plainly told what will happen by the O&G companies but refuses to budge, RS just wants to use his time as PM to travel the world making contacts with important people pushing up his profile for his next job and using these contact to add to his considerable wealth. This is the type of policy that get you noticed by the great and the good.

The one thing we know is that politicians now days do not give a stuff about the country or it’s people just themselves.

The problem is that they are sitting on a large amount of cash not earning very much, no doubt a good move in the current environment as there will may be good opportunities to had at some point. However it means the dividend is not fully covered and will probably not be until the money is deployed and there is no point in sitting on a cash pile getting far less in interest than inflation.

How about a different strategy.
1. Buy back shares place in treasury and release during better times, less shares, less dividends so now covered.
2. Buy into another discounted REIT (if allowed), they should have the expertise to access the value of other REITs portfolio so in effect buying property at a huge discount, use the dividends received to cover the dividend shortfall. IMO you get a better deal in a heavily discounted REIT like SREI, ASLI, BBOX etc than buying property in the market. Sell out when there are better opportunities to buy property directly. Does anyone know if this is allowed?

Culley01

I only hope you and the others who are optimistic are right and the recent past does not reflect the future. However my issue is that the past is important as it the one thing we can use to judge the present management. A manger of football team that has lost the last 10 games has little credibility stating that this year they will win the league. Unfortunately I believe we are only being fed the good news and there are some hidden monsters which will come out in the full figures. My reasoning is that very little information has been given out and if CPI was doing well we have seen proper figures and a much more optimistic report, also the share price has gone down before release so those in the know have leaked the real truth to their friends.

I agree from what we a being told this company can have a good future, the question is do we believe it, I certainly would like to.

The positive side is that it did not go bankrupt and looks like there is very little chance of this happening in the medium term so hopefully there is time to turn this ship around, perhaps it is already pointing in the right direction but not many people can see this, time will tell.

Been in CPI for a very long time, this report seems OK but is lacking on proper figures, CPI have a habit of talking up the prospects in reports only to disappoint when the full figures are released.

Also the information leeks like a sieve, so many times in the past the share price movement before the reports more or less tells you what is going to be reported.

Would like to know where all of the rights issue money, £681 million and money for selling off the family silver has gone, told it was to reduce the debt but a lot seems to have been used just to keep CPI alive and pay directors.

I guess it tells it all when over 4 years after the rights issues the company is worth £260 million less than the money raised in the rights even ignoring for inflation.

Add in no dividends and no prospect of dividends in the near term and the share price close to it’s all time low (down from £13 + rights cash) after more than 4 years of so called recovery you have to question the management, either they are useless or lied at the times of the rights issue. The bitter truth is it would have made sense if it went under without asking for more money in the rights issue which turned out to be good money after bad.

There should be no more excuses from CPI like Brexit, Covid etc, in fact if they were on the ball Brexit and Covid could have been profitable with contracts to handle a lot of the admin.

I like so many on here want to see this recover if only to get back what I put in the rights issue but these jam tomorrow reports do not help, more months of waiting for the next set of figures hoping that there is something to pull this company off the bottom.

Perhaps CPI is grossly undervalued and the City boys have got this wrong (I really hope this is the case) but unfortunately I believe they have got tired of this endless recovery to nowhere and moved on long ago, you can only live on hope for so long.

The only thing CPI is good for at present is a capital loss to use against capital gains which is very useful as the government are reducing the thresholds.

Upomega

Yes.
Took a relatively small position when Kistos announced takeover proposal. My logic was Kistos takes over SQZ and I increase my Kistos holding on the cheap. If Kistos does not take over SQZ value will be enhanced due to the board putting up a good fight by increasing dividends and/or releasing good news and/or plans to make good use of the spare cash as is usual when a company is under takeover threat. Either way a win win.

However was not expecting the board to be asleep at the wheel and just turn down the Kistos offer and get away with it. Also this was before RS became PM so was not expecting more WFTs, I will probably hold for a time to see if SQZ will either distribute it’s cash pile to shareholders or invest overseas in which case I will stay and may well increase my holdings. If the board do nothing or increase investment in the UK I will probably sell up adding more to Kistos or DEC or Woodside or perhaps even Glencore on the dips.

Stevo12

I see you point which is well put, however unless WFT has as floor (as you has stated there is no floor) or there is an end point for the tax it is either lose everything with dusters, pay 75% tax , or course you could lose a % but the % of profit left is still taxed at 75%.

Unfortunately I have no faith in RS, JH or the treasury; after all they got us into this mess it is akin to giving the car keys back to the person who crashed the car. I and many other saw inflation coming as soon as the over generous furlough was announced along with every other support measure financed by printing huge amounts of money. They believe that the way out of this mess is to tax everyone and everything they can find into the ground and give as much money away as they can to other countries and people who do not work. From the Telegraph

https://www.telegraph.co.uk/news/2022/12/09/britains-jobless-crisis-fuelled-benefits-loophole-encourages/

“An anomaly in the welfare programme means someone on Universal Credit could receive a total income of nearly £45,000 a year for doing the equivalent of two days’ work in a low-paid job.

To take home the same amount after tax, someone not on benefits would have to earn nearly £62,000 a year.”

This is also available from other sources.

If they had a brain they would realise tax is not linear, i.e. double the tax rate does not double the tax take, the Laffer curve comes into effect. No need to become an expert just look at history, every time taxes are put up, more restrictions, more government spending and money printing the economy collapses, however reduce tax, reduce restrictions, cut spending and do not print money and economy rises. Look at 1970’s Labour against 1980’s Thatcher, 1930’s US new deal against 1930’s UK polices and post war of UK vs US policies. Not only are there many more examples of this but happens every time. The simple truth that they do not understand is that you cannot tax your way out of recession, only cutting spending, regulation works.

They are also liars about the government debt they only tell you about the direct on balance sheet debt which is around £2.7 trillion, now add in off balance sheet or hidden debt/liabilities and it is £7 to £10 trillion depending on who is doing the estimate. This government and treasury are financially illiterate and can’t even look back at history, with their tax and spend policies there is only one result as can be seen from many examples in history, in fact they are insane by Einstein definition “Insanity is doing the same thing over and over and expecting different results”

Hi Stevo12,

“Hunt and treasury are not stupid but they are making a big bet that the 91.4% of government funding of new projects will be enough to motivate independents to progress new projects”

As already been said assumes no dusters and other costs

There are other issues.

Can this government or most likely next Labour government be trusted to not change the rules or up the tax even higher, IMO tax will not go up but will be a lot of pressure to drop or reduce the allowances (as already put forward by Labour) and I believe this will become a permanent tax or at least until some common sense prevails. We have at present a government playing Hokey Cokey with the tax system egged on by Labour.

Also to get the allowance you have to invest everything in a new project, a duster lose everything (as stated), successful then get the 75% tax on the new project. Of course you can start another new project and offset the tax but this is the same as the last scenario, lose everything or 75% tax. Keep doing this and the eventual outcome is lose everything, equivalent to always betting on black in roulette, if you win bet the winnings on black again, keep doing this until you lose. So pay the 75% now, pay 75% in the future or lose everything.

So from a financial point of view it makes no sense to get involved playing a game stacked against you, once a government does this they lose trust and show they are financially illiterate. The best option is take you funds elsewhere in a less greedy and more trustworthy environment.

IMO either
Hunt and treasury are very stupid
They believe the O&G companies are very stupid
They wish to shut down O&G in the NS for green or other political reasons,

Electricity generation in Britain now at around 1pm

Gas 57%
Nuclear 13%
Imported 12.4%
Biomass 5.7% (I guess a lot of this is imported from USA used at DRAX, previously a coal generating station)
Coal 3%
Solar 2.6%
Storage 2.4%
Wind 1.9%
Hydro 1.8%

Add in the gas used directly in boilers, cookers etc and it is so obvious we rely predominantly which will play an even bigger role at night due to lower temperatures and of course Solar will be zero for most the day this time of year.

Then look at transport, trains rely on electricity and oil, vehicles oil and electricity with of course most electricity coming from gas.

So at the time of greatest consumption and when a reasonable % of the population requires energy just to stay alive the government mounts a concerted attack on UK O&G forcing investment abroad putting the future energy supplies at risk.

Add in the fact we now import gas (which is part of the total) and also the imported electricity which makes us reliant on countries which have their own energy problems and will cut us off when they become short.

You have got to question either the sanity or motives of RS and JH. Is their policy to trash the UK energy sector knowing that the next government almost certainly Labour will be inheriting an insurmountable problem or are they just plain insane.

This shambles of a government who after pressure from Labour have managed to cut the home produced future energy supplies when they are needed most and reduced future tax income in one fell swoop. This will leave a hole in the UK finances, wonder if the OBR or Bank of England will attack Richi Sunak like they did LIz Truss for this black hole in the finances.

Also having to import this energy it will put up the carbon footprint

The one thing that we can see from history is you cannot tax you way out of recession, increased taxes always lead to reduction in economic activity. The only way is to take the uncomfortable step of cutting spending. Unfortunately this government does not have the courage and also does not fit with it's socialist principles. This is not a conservative government but new labour on steroids.

Also the cap on energy bills which caused chaos, most of the energy companies went bankrupt leaving the tax payers on the hook for 10s of billion was another of one of Labours great ideas that the Conservatives thought was too good to miss.

https://finance.yahoo.com/news/total-pulls-investment-north-sea-194114179.html

Extract
French oil giant TotalEnergies has become the first major North Sea operator to cut investment as a direct result of Rishi Sunak's windfall tax.

The €157bn (£134bn) company is to reduce planned spending on new wells by a quarter next year as the levy forces drilling businesses to reexamine their plans.

Its decision will be regarded as a blow for the Prime Minister, who said earlier this year that it was “vital we encourage continued investment by the oil and gas industry in the North Sea” to help protect energy security from competing foreign powers.

Total is understood to be pulling planned investment worth about £100m - 25pc of previously planned spending - with proposals now axed to drill an additional well at its Elgin gas field about 200 kilometres east of Aberdeen.

The Paris-based business is the North Sea’s second largest operator, with fields sprawled from its centre up to the Shetland Isles.

One industry source said this evening that while the Elgin well project in itself was relatively small, the decision by Total was a “big deal… and something the government should be very worried about”.

Jean-Luc Guiziou, Total's UK country chairman, said the windfall tax punishes short-cycle investments such as these additional “infill” wells, which are a vital tool to sustain production at existing fields.

He said: “A competitive and stable fiscal and regulatory regime is vital to investment in critical energy and infrastructure projects that will support the UK’s security of supply and net zero ambitions."

The FTSE 100-listed business Shell last week said it was reviewing plans to invest £25bn into Britain’s energy system, ranging from renewables to oil and gas projects. David Bunch, Shell’s UK chairman, said the tax “brings a strong headwind".

Equinor, the Norwegian oil giant, is due to take a decision in February on whether to go ahead with its £8bn Rosebank project, which it says could account for 8pc of the UK’s oil production between 2026 and 2030.

An Equinor spokesman said: “The Autumn Statement did not help investor confidence and we are evaluating the impact of the energy profits levy on our projects.”

He added: “We are still working hard towards the final investment decision for Rosebank in Q1 next year.”

There are concerns that reliance on imports will rise if investment in the North Sea falls, making the UK more vulnerable to international supply shocks such as that triggered this year by Russia’s war on Ukraine.

Offshore Energies UK, the trade group, has said 2,100 wells are to be decommissioned by 2032. Deirdre Michie, chief executive, urged the Government to help rebuild investor confidence.

Total and others have asked for a review of the levy if wholesale prices fall before its current end date in 2028.

Mr Guiziou said: “The energy industry operates in a cyclical market and is subject to volatile

Total are the second biggest O&G company in the NS, we are get close to a full set.

Government got so greedy they have well and truly sent the O&G tax right over the top of the laffer curve. Well what are JH and RS going to do now, they will have to find someone else to tax into the ground or the OBR model will say that the books do not balance with all the problems that will ensue, could try cutting spending but that is against their socialist principles.

https://www.telegraph.co.uk/politics/2022/11/26/water-windfall-tax-energy-industry-will-collapse-jeremy-hunt/

Second part

Bob Seely MP said he is concerned about the security of oil and gas supply over the next decade, explaining: “We need that supply. There is no question about that. If we get this wrong and North Sea production collapses, a series of very bad things happen. For sure, we need to get tax from the industry, but we need to do so without destroying it.”
Separately, the Association of British Independent Exploration Companies has warned the Chancellor that the windfall tax on energy companies poses an "existential threat" to the industry.
Robin Allan, the association’s chairman, wrote to Mr Hunt arguing that taxing his members at 75 per cent will wipe out the industry “and with it, those jobs and our nation’s energy security”.
In the letter he went on to say that “UK Upstream companies can no longer shoulder this extreme open-ended tax burden”.
Arguing for the introduction of a price-floor, Mr Allan said: “Without such a mechanism and to continue down the path of the current anticipated 75 per cent rate, further investment in the UK has become unviable and so begins a rapid onset of the decline of the North Sea”.