While collecting interesting articles for my share club, I may find time sensitive news and will post it here. These posts will be repeated in my monthly reports before our meetings in the 3rd week of each month.
North Sea. DJ News has commented; The UK tax rise from 20% to 32% could lower the oil majors prices of ageing oilfields and speed up their sales to small companies. Enquest’s CEO said there will be fewer buyers and more sellers due to the deterioration in the tax position, causing a fall in the asking price to a fraction of the previous price before the budget. Statoil, Total and BASF have said they are reviewing the position; Enquest and Valiant believe the tax rise will be to their advantage, presumably only so long as today’s high oil prices apply (my comment). Ithica has recently purchased Hess’s share of 2 North Sea fields at the equivalent of $14.3 per barrel against $17.50 paid last year by Faroe. Ithica thinks this is a good deal as it expects to pay no tax for 5 years due to previous tax losses. Others think the oil majors will delay sale decisions until all the Government’s intentions are known. DYOR before making any decisions!
I may have a small spreadbet on this one.
MadDutch.
What company investment exactly are you proposing? Any view that Enquest and Ithaca benefit overall from the Budget looks very odd.
The value, and so price, of ageing oilfields will obviously reduce after the UK tax changes. But even the reduced cash flows should be valued at a lower rating (ie a higher risk-based discount rate) to reflect the demonstrated willingness of the UK govt to mess about with and increase taxes. It would be understandable for the majors to speed up wanting to exit this increasingly risky geographic area, but the trade sale price of ageing oilfields would have to be low to be tempting to buyers. Analysis is required to judge whether trade prices are sufficiently low to reflect reduced value caused by increased political risk.
