Freestoj
28 Apr 2017
Eland Oil & Gas unveils major reserves upgrade for Nigeria operations According to Proactive: [link] NAV is now worth US$186.8mln, versus a current market valuation of just over £110mln. More than happy to pay 60 cents for $1.
Johandesilva
27 Feb 2017
Re: Help: Tax rate query correction Regarding TAX you only need to see the growth in market capitalisation of indigenous companies to realise the upside. Going back a few years Afren who managed to grow using debt to reduce TAX. I suspect Optimum Petroleum are another growth story.Also agree that UKCS oil company Hurricane Energy is only oil company you really need to be in right now... but diversification is also good.
Johandesilva
27 Feb 2017
Lekoil Fellow Nigerian oil company LEK have a major seller on their driving the share price down on nothing but good news (now a producer). It would be good have some knowledgeable people on the BB.
homerunoil
24 Feb 2017
Next Update/RNS Any guesses as to when the next update / RNS is likely. Thinking it is likely a clarification on shipping method and notification that production / sales has increased to 10-15k barrel per day level? So undervalued.
sufi sb
16 Jan 2017
Re: Help: Tax rate query correction * they r not expected to pay the higher tax until 2019
sufi sb
16 Jan 2017
Re: Help: Tax rate query Contrawise Your missing the point fella, they r expect of the higher tax rate or as they call it pioneer tax until 2019. So apart from any smallRoyalties they might be paying if u look at their website it shows the opuma wells being paid back within days of coming online / production resuming n barrels shipped out. I agree it's at times confusing but with mr maxwell at the helm and it being a Scottish company they will look to exit or move to other assets around stable areas of growth. Interesting to see the Helios fund with 29% holding.
Contrariwise
16 Jan 2017
Re: Help: Tax rate query Hi Dellboy,I agree that Eland is a growth company and is unlikely to ever pay a dividend, but the value of a company is in its distributed or retained post-tax earnings. If Eland is paying 20% oil royalty, followed by 67.5% rising to 80% corporation tax then clearly most of the earnings are going to go to the Nigerian government rather than shareholders. That said, the market seems to be assigning quite a lot of value (and rising) to the company, so clearly it knows more about the tax situation that I do. Clearly the tax take must be lower than I am assuming or the market must be wrong. I have not yet got a reply from IR but will post any reply here when it arrives.I have a small speculative position in Eland, which is doing quite nicely, and I am just trying to understand the company more.
DelBoyTrading
15 Jan 2017
Re: Help: Tax rate query Contrarwise,Eland dont pay a dividend and are unlikely ever too as they are a growth stock.Their end game would be sell up as quickly as possible IMOYou will also have to contact the company regarding the ratios to get a full breakdown of the numbersI am here until 2019 and will then most likely move over to Hurricane Energy if they can secure a good funding deal
Contrariwise
10 Jan 2017
Re: Help: Tax rate query Hi Delboy, thanks for that. I understand that the 85% tax rate will only apply to profits, but that is the chunk that I would expect to get paid my dividends out of. That is all I really needed to know. That means that for every marginal $1 increase in the oil price above breakeven and after the initial 5 year period, the company will only receive 15 cents after tax. Not great.Re the table on page 24, my problem basically comes down to the numbers in the bottom two tables under the $50 and $60 price scenarios for the rows "Capex/Boe", "Opex/Boe", and "Govt take/Boe". As you say the numbers in the cells should be ratios. Why then do the Capex and Opex numbers not change as the oil price does? Presumably opex and capex are fixed and so as a percentage of revenue they should fall as the oil price increases from $50 to $60. Why also does the Govt take/Boe rise as the oil price rises from $50 to $60: i.e. the percentage marginal tax rate rises as the oil price rises? I have tried to copy and paste an image of the table into this post but it didn't work.Thanks for your help on this. As someone who understands this company better than I do, what are your thoughts?
DelBoyTrading
10 Jan 2017
Re: Help: Tax rate query I'm failing to understand where you are getting the marginal tax rate from that slide?The Income tax rate that is applied to Eland is 65.75% for the 5 years that company are exempt from paying petroleum profits tax, and will revert back to 85%. The tax rate doesnt change if oil is higher or lower, the tax they recieve will though, but Eland has about $160 million in taxes losses to claim back firstIt is difficult to answer your other questions without knowing the PSA agreement, however I suggest you review Kirsen Bindemanns thesis on Production Sharing Agreements to give you an idea on how things change, but basically the higher revenue at 20% attributes to an increase in government takeThe company will be subject to 50% in PPT after 2019 and 85% in income tax, however without a full understanding of the PSA, which will highlight that the 85% is only attributed to company profits, it is difficult to explain. It is not 85% of all revenues
Contrariwise
10 Jan 2017
Re: Help: Tax rate query Thanks Delboy, reading it again I see that you are right about the numbers in that section being percentages. I also now understand about the 20% royalty and how it is applied. However, still don't see why the marginal tax rate for Opuama-3 is higher at $60 than at $50.If my understanding is now correct, according to the table, at $50 the % Govt tax take is 36.3%, while at $60 it is 44%. Why?Also, assuming that capex and opex remain constant. Then in the scenario analysis shouldn't the percentage spent on them fall as the oil price rises from $50 to $60 (a smaller percentage of rising revenue is spent on them), instead they remain the same. Hence, my confusion as to whether the numbers in that section were in USD or percentagesWhat I am trying to understand is Eland's tax liability. I see that all oil production is subject to a 20% royalty for onshore development as per p.13 of the KPMG report linked earlier, but I remain very disturbed by the potential 85% Petroleum Profits Tax Ac mentioned in the same report:2.2.2 Petroleum Profits Tax Act (PPTA)Companies engaged in petroleum operation aresubject to tax under the PPTA. Their income isliable to tax at 85% (subject to the incentivescontained in the MOU as relevant), or 65.75%within the first five years of operation duringwhich they are recovering their capitalized preproductionexpenditure. However, for petroleumcompanies operating under PSC terms, theapplicable PPT rate is 50% for the contract area(see 2.2.3 below for further discussion).All expenses which are wholly, exclusively andnecessarily incurred in furtherance of the petroleumoperation of the company are tax-deductibleagainst the company’s revenue beforeascertaining the taxable profit. Expenses thatdo not satisfy the above conditions are disallowedIf the company is subject to an 85% profits tax then it is uninvestable. It is unclear to me what its tax rate will be. I understand from the table that the Return on Investment ratios look compelling, but I would like to be reassured about the tax position.Thanks for your help. Shares doing well today, so the market understands this company better than I do.
DelBoyTrading
10 Jan 2017
Re: Help: Tax rate query Contrariwise,It is a ratio and therefore it is a percentage, as is everyone of that numbers in that section36.3% of a BOE, which is the same as 36.3% of $50 or $60. A percentage is a numberOnly the NPV values on that slide are reported in $What marginal tax rate are you talking about? The only government take on that slide I see is the royalty, which suggests that all the data is based only on thatThe royalty is 20% of all production and the table is title "Flat oil price of $60 ($48 post royalties)" because 20% of $60 is $12, meaning $48 to Eland
Contrariwise
10 Jan 2017
Re: Help: Tax rate query Sorry DelBoy, I don't think that is right. If it were a percentage then it would have a % sign after it, and it does not. The denominator is given as "/boe", i.e. per barrel or oil, the numerator therefore has to be a number, i.e. the tax rate in USD. That would make it consistent with both the opex and capex numbers which are both reported in USD. Also, if you are right and it is a %, then what it still shows is that the marginal tax rate is higher at $60 a barrel than at $50, which is not a good thing. Obviously the tax paid per barrel will rise as the oil price rises, but I would expect the marginal rate to remain constant whereas this report would seem to show a rising marginal rate. Thanks for the explanation of DPIR. The return on investment figures look compelling, but I am still concerned about the tax rate. Is there a fixed royalty payment in addition to the corporate tax rate? Why is the table titled "Flat oil price of $60 ($48 post royalties)"?
DelBoyTrading
10 Jan 2017
Re: Help: Tax rate query Contrariwise,The 36.3 is %, not $. Its a ratioAs previously pointed out the tax take only rises because 20% of a $60 is higher than 20% of $50DPi is the Discounted Profitability Index. It tells you what you receive for every dollar invested
Contrariwise
10 Jan 2017
Re: Help: Tax rate query DelBoy, thanks for pointing out the 5 year tax holiday. I missed that. However, re the Eland presentation p.24, if you look at the figures for the Opuama 3 well. The "Govt Take Boe" under the $50 a barrel oil scenario is $36.3 or 60.5%. Under the $60 scenario the "Govt Take/Boe" is $44 or 73.3%. The marginal Govt tax rate seems to rise as the oil price rises, which is not what I would expect. Anyone understand this?What is a DPIR?
