What about Phase 2, page-132

Hey @FishiesPal,

"Oh let's blame gas prices......... Please. WTH???" I will have a crack at this one. Gas prices falling is not the issue, the issue is falling gas prices in the absence of a floor to the Energy Profits Levy.

There have been enough brokers and posters that have run the numbers at 81p/therm and the EPL and the project is worthwhile and that's not problem. The problem is when prices drop and there is no floor on the EPL. If prices dropped to 65p/therm and the EPL is still in place the project sucks. Even if HHR were brave/silly enough to take the risk on the EPL they would struggle to get debt funding with no floor in place.

If the windfall tax was abated at a reasonable floor it would give HHR a much clearer path to development. For example without the windfall tax the project produces a similar return to the original project at 65p/therm.

It's not so simple for the gov't to re-introduce a floor now without revising the whole EPL. They can't afford to fund 90%+ of capex if they could then lose the windfall tax to fund these capex concessions. It will be interesting to see how the government will handle this. The capex super deduction is not increasing O&G development and the windfall tax effectiveness will be minimal if there is a massive reduction in production. Another case of policy gone wrong.

In the absence of a floor it is much simpler for HHR/RR to hold off the project commencement by 18 months. Then the capex will fall in the super deduction window while revenue commences after the windfall tax is finished.

IMO the market is saying that the project cannot proceed under the current EPL and until that is resolved we will be rated as such.

Thats my 2c but you have a lot more invested than I do. I would be really interested in what your view is. Do you see the project going ahead? Do you think HHR can effectively run their piece? Or do you think HHR are on their way to scrap heap and we should all just be planning for tax losses.