Anyone holding HHR currently is really placing a bet on a change...

Anyone holding HHR currently is really placing a bet on a change in Labour Policy with regard to Oil and Gas. The JV was close to FDP, had funding and would likely have hit FID by June this year. The wheels have fallen off on the back of Labours proposed amendments to the EPL. IMO if Labour amends their policy so that the Investment Allowance is back AND can be locked in for the project the SP would likely return to 2.1+. Effectively the "bet" is paying 3:1.

OEUK and the unions have only really started their media campaign and industrial action. This will only increase over the coming months. There are two major flaws in Labours policy the first being their modelling of the affects on industry and the second is their reliance on Norway's EPL as a model.

Labours own modelling forecast a drop of investment of 0% in 24/25/26 a 12.5% drop in 27/28 and a 25% drop in 29%. The proposition that this policy will cause a 0% decline in capex between 2024-2026 is plainly incorrect. The actual decrease and associated drop in employment and taxes and increase in prices and reliance on other countries for energy are all counter to Labours own costings. Here is the policy for anyone interested

https://assets.publishing.service.gov.uk/media/65c66cbf9c5b7f000c951c82/Opposition_costing_-_Oil_and_Gas_Levy__003__final.pdf

Labour have also referenced Norway's Oil and Gas regime as the basis of their own EPL position. The issue their however is that Labour have only "cherrypicked" the headline rate of a 78% windfall tax and ignored Norway's various capital and Investment Allowances. Norway provides a range of capex incentives to balance the imposition of their own EPL. For example between 2020-2023 projects sanctioned in Norway received a 100% rebate on qualifying capex.

https://globaltaxnews.ey.com/news/2020-5859-norways-government-proposes-temporary-tax-stimulus-measures-for-oil-and-gas-companies

The article @sergeant posted refers to this "Ostensibly this would bring rates in line with that of Norway, but with investment incentives also set to be withdrawn, sector leaders say the two fiscal regimes would not be comparable."

The question is then whether Labour will amend policy in the face of this opposition? Certainly they have already shown that they will amend policy on the run having dropped the backdating of the EPL and abandoning the 28 billion pound green investment pledge. The potential is there for them to amend their policy with regard to Investment Allowances while still being shown to wield a big stick by retaining the 78% EPL.

The market does tend to price things correctly based on the available information and is pricing a 33% chance of success. IMO that's probably not far off correct. The odds are against us but the payoff is there if it works out.

GLTAH
DYOR