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Stevo12
I have seen your workings before and can understand the mad EPL just about? but am I right in thinking the interest and decommissioning costs are fully deduct able from the 40% tax so effectively we use up less than 40% notional tax from our credit balance, so if we ever got to the stage that we had used them up then the Tax would then be a true 75% . I hope you understand my thinking Thanks
From reading Therapists info it says clearly we have cost oil and profit oil and Enquest use the cost oil to cover the costs and then we share the profit oil and any left over cost oil and we pay Tax on that oil so unlike the EPL we recover all expenditure before we use the formular to share the spoils. I do remember that during the production hiccup we got a refund presumably as cost oil was not enough with the reduced production. That is why Enquest were upbeat about gas sales, increases in production benifit us both after cost oil. A bit like Magnus all costs are recovered before we share the spoils with BP till EPL came along. Malaysia take on the risk unlike UK government.
Thanks for that Therapist
They have a built in EPL that sounds stable and fairer 75% tax is not the problem as such it is the fact that is all or nothing £1 profit accrues 75% tax without being able to claim all costs against it.
If oil goes to $200 I'm happy to pay 80% on anything over $120 for example, but not 75% on $70 oil with marginal profit on it. Unfairest Tax ever? well nearly as bad as Stamp duty a tax you have to borrow up front to pay!
I thought we had a production sharing arrangement in Malaysia, they pay their share of costs I remember when we had the production problem we received money? The arrangement I have felt is a bit like Magnus if it does well we win but if it fails we lose little.
I think it is being held down more by the possibility of M/A if we acquire some one will shares be issued? if we borrow more how much will that cost? if we take on a basket case we take on their debt? if we take on a partner to develop Bressay/Bently we commit to using FCF to the project, Jam tomorrow? of these possibilities I go for develop what we have.
Bentley has huge Tax losses already and its development would accrue EPL relief as well, we have EP a partner with some cash looking for Tax credits could get this huge field producing?
And the extra money coming in is only subject to the 35% tax so most can be used to reduce debt, The employer has a bigger impact on lower profits once we get past $120 a barrel it is an epl below that it is robbery.
If Over 99% accepted 35% of face value of a bond for shares that are below then in pecking order they are on a tax fiddle with related parties , shorts are a related party too. New bond holders will make a killing when repaid at face value alldodgy ding,,?
Stevo12
As a query to Magnus $80m is this not subject to 40% reclaim from Tax credits my understanding was any profit share was after all costs and is subject to to a total $1bn payment to BP for Magnus but as we could use our Tax credits it meant $600m total post tax?
Banburyboy
I agree was a bit disappointed too as I was expecting the $100m to be divided into the outstanding share's on Ex divi date, what is happening to the $7m not distributed is the divi saving on the cancelled share's being included into the buy back? fair enough if it is but I haven't seen that stated at any time?
Found the bit I have been looking for, not sure why we fully draw that in preference to RBL or running with less cash AB never seems to worry about finance costs? Though of course he is lending some of the money so gets some of that interest.
In August 2023, the Group agreed a $150.0 million secured term loan, which ranks junior to the existing RBL, in order to provide additional liquidity in advance of the October 2023 settlement of the 7.00% Sterling retail bond given the EPL-driven reduction in available funds under the RBL facility. This facility, which matures in July 2027 and incurs interest at SOFR + 7.90%, is forecast to be fully drawn in September 2023.
Onedb
That could be why we had 85m shares go through market one day last week, perhaps they have closed? rising oil price bombed out share price with about 4% divi about to be paid, you would have to be brave to keep adding to your short.
Stevo12
Thanks for example, I sort of understand but I do see that by allowing Interest to be allowed against Tax has encouraged companies to issue bonds rather than Equity as dividends are not allowed against it. Have often thought paying 9% to bondholders and not issuing Equity instead and paying dividends, Enquest is a perfect example that the financiers are the only ones making money from the oil.
Stevo12
A question If the Interest and decommissioning costs are deductible from the 40% Tax why should it be from the 35%Tax? not defending the EPL but if you already deduct a cost then why would it matter.