Diversified Energy Share Discussion Threads

[apollocreed1] 22/4/2023 22:05

Seems that if you hold these in a SIPP there is no withholding tax, so you get the full dividend.

[wllmherk] 22/4/2023 18:11

thanks Aleman :)

[aleman] 22/4/2023 10:50

wllm - I hold my shares direct. I filled out a W8-BEN and get a Sterling dividend at 85% of gross on the exchange rate specified by the company. I don't understand why anyone would be paying exchange rate costs if dividends come from the company's registrar (Computershare) in Sterling. I declare the 85% income as ordinary dividend income on my tax return. If I am allowed to not declare it for UK tax purposes since I've already paid 15% tax in a double taxation treaty country, then I'd like to know about it!

[cassini] 22/4/2023 00:03

wllm,

Well it seems to me you either need to reconsider your relationship with Halifax or your relationship with US stocks ;0)

Transferring across to another broker needn't be a big faff - ii for instance do all the heavy lifting when transferring an existing trading account to them but I admit I converted a small pension fund I had with Scottish Widows to cash before I transferred it across to ii, just to speed up the transfer, so there's a cost to be paid there to buy stocks again if liquidating them first.

They do pay a £200 bounty for referrals though so if you want to transfer to ii I'll split the bounty with yer ;0)

PS: Halifax are extracting the urine from you it would seem with th£30k W8-BEN...

P.P.S. Unless your trading account is very modest in value, an ISA would relieve you from the faff of worrying about paying income tax on divis as your original post seemed to imply you may.

Here's a wacky idea: take out a <£30k trading account + ISA with ii just for your DEC holding. I think ii charges £5/month for an ISA/trading account under £30k ( it's £10/month above £30k though).

You'd get 15% WTH on DEC instead of 30% and no income tax worries either inside the ISA. Leaving any divi income tax benefit aside as I don't know what your tax liabilities are, you'd only have to hold 2800 DEC shares (about £3k's worth at 106p) to recoup the ii account fees - any bigger holding would start to produce benefits over holding them in your Halifax account, which you could keep if you wished!

I'm only half joking, if your DEC holding is >>£3k but <£30k it'd be worth it for sure! DYOR etc...

[wllmherk] 21/4/2023 21:53

thanks, Cassini, I'm with Halifax, and bizarrely they sent me a W8-BEN form to complete which I did and returned to them, I still paid 30% WHT. It's an ordinary trading account. It seems harsh to pay 30% WHT, Currency conversion costs then UK dividend tax on top. Taking these costs into consideration and my average cost per share of 106p my yield is nearer 7%. Still ok but, there are lots of shares yielding similar out there.

wllm :)

[cassini] 21/4/2023 18:16

wllm,

No further tax to pay if held in a SIPP or ISA (but then, you wouldn't be paying full withholding tax in either of these types of accounts anyway - 15% WHT in an ISA or 0% WHT in a SIPP - unless you're with a bank-derived broker like Halifax who can't handle WHT in an ISA and deduct the full 30%).

However, you don't say if you're holding these in an ordinary trading account - if so then I think the dividend tax allowance was reduced to only £1000/year going forward.

When I've read about WHT the phrase 'double taxation treaty' is used a lot. I think the whole idea of these treaties is to avoid people getting clobbered twice for tax and the simplest way to avoid this happening is to hold US stocks in an ISA (or SIPP) through a non-bank owned broker.

You might be able to reclaim overpaid WHT tax going back up to three years but it sounds a faff.

hXXps://forums.moneysavingexpert.com/discussion/5242726/can-us-withholding-tax-be-re-claimed

[scrwal] 21/4/2023 17:54

Correct but the retirements are significantly different from previous versions because of the shorter time frame now being used with current retirements behind the required numbers but everything can change in the next few years.

[johnhemming] 21/4/2023 17:47

When they did the calculation to mid 2022 they estimated
a) A total of USD8bn in FCF
b) Paying USD1.5bn to cover the debt of buying the portfolio
c) Paying USD 1.6bn to plug the wells.

That meant USD 4.8bn to pay dividends of which USD2.8 were base dividends.

Retirements to year 10 4.5K, 20 19K, 30 38K 40 57L and 50 72K

The figures will have shifted since but the principle remains the same.

[scrwal] 21/4/2023 16:01

Dunderhead
The ARO provision is just that. Yes movements on it affect profits and money that can be distributed. However in accounting parlance accruing does not mean cash is being provided for - it is a book transaction not a cash one.
Currently any retirements are paid for out of current cash generation from operations.

They are "providing" for retirements based on their own model with assumptions in their favour and capitalising a lot of it to reflect the unwinding of it over a long period of time.
They do not have a cash sum held at this point in time relating to future obligations as per their plan.

Essentially the position is Provision $500m , Assets $450 Cumulative charge to profit $50m all are only accounting adjustments.
The provision in reality will be discounted on a cash basis but you won't have that in the bank now, it comes from future cash flows.

It's akin to accounting for a fixed asset when at the end of the day you depreciate the asset to nil but you don't have a ring fenced cash balance for its replacement.

See 2022 Annual Report pages 58, 136 (Natural Gas...Acquisition Costs),138, 141-2, 150, 160-1.
You will need to read the accounts to see where things are derived and where they end up.

[wllmherk] 21/4/2023 15:22

Does anyone know if I hold shares in an American company such as DEC and pay 30% withholding tax on dividends, do I pay tax again to HMRC on receipt of these dividends? I'm also paying currency conversion costs from $ to £. Certainly reduces the headline yield significantly.

wllm :)

[dunderheed] 21/4/2023 14:30

I can't believe that they aren't "accruing" for these costs - can you point me to where this comment is made (pg no. would be really helpful, ahem!) rather than me scrawl through lots of pages etc?
It is part of financial legislation in most countries - especially any new PSC's - the same of course CANNOT be said of earlier ones though - that such liabilities MUST be accounted for and cannae believe in the USA of all places - that is not covered as such!!

[marksp2011] 21/4/2023 14:20

guys

Read the contingent liabilities in the accounts. DEC are clear that as they don't know the total plugging liability they aren't provisioning for it.


It looks like they are provisioning for their short term legal committments and that is the end of it :)

[dunderheed] 21/4/2023 13:40

scrawal - yes but you have to post an discounted unwinding of the "provision" - which is cash based and also put on non-distributable cash basis - making sure that teh cash effect of the provision is taken into account.
Also the provision is accrued in the books and allocated against distributable profits - hence should also "cash preserve" should it not?

In UK the cash balance basis is noted as splitting between being able to distribute and not able to distribute and this element is the amount allocated to ARO - is it not?

I don't really care but I'm confident this method reserves enough cash in long term to cover ARO provisions - as it should at DEC as well, surely?

[scrwal] 21/4/2023 13:26

Dunderhead
The liability is only a provision and is not linked at this point to any cash balance.
What they have done in the past is when acquiring assets they will make say a $50m provision which is capitalised as an asset. The asset is depreciated over its life which is charged against profits. None of this apart from the original acquisition is cash based.
When the wells are retired money gets spent and the provision is reduced by that amount if it relates to those wells - it could be at that point it is decided that the provision wasn't adequate so any shortfall gets charged against profit , conversely any overprovision would increase profits.

The ARO model is set up so that when all loans are paid off the company would then create a cash fund at that point onwards where effectively the bulk of what was being paid out as loan repayments would now be retained as cash to pay for well retirements and dividends.

This is a simplistic view and probably needs refining but you should get the gist of things hopefully.

[greygeorge] 21/4/2023 13:07

dunderheed - I think the issue here is that there are a small number of naive investors wondering why the market hates DEC. They blame previous years' hedging, oh no wait, it's the share buyback programs that ended abruptly..no, no it's the spot price price of natural gas..nah it's that all those experts out there just aren't as smart as us. They grope about in the dark for an answer that they will find palatable. they will never EVER blame themselves for being willing participants in the shell game being played by DEC.

[dunderheed] 21/4/2023 11:52

Guys what's the issue here - correct me if wrong DEC has to legally estimate TOTAL costs in money of day of TOTAL asset retirement obligations.

They then set aside a finance "charge" unwinding this TOTAL LIABILITY in the balance sheet which sets aside NON distributable cash.
So if the obligations are "higher" mid to late cycle - the impact of this is that more cash is set aside proportionately earlier in the process - so covering potential liabilities.
Correct me if wrong - I am not currently a holder in DEC but may go back as like the div - as do probably most holders on here!!
All imHo.

[johnhemming] 21/4/2023 06:17

@scrwal I agree that an updated forecast is needed at some point. It will have to include the most recent purchase.

The most recent purchase is a little complicated because it is still in the early stage of relatively rapid depletion. Hence although the purchase cost is to be approximately half recovered in the first 12 months of ownership, the rest of the purchase cost will take longer to clear.

However, I do expect DEC to public an updated forecast at some stage. They have already published a lot of the figures, but it appears a lot of people don't want to read them.

[oneillshaun] 20/4/2023 17:10

6 month low

[lab305] 20/4/2023 16:23

You can scratch around for excuses all day. The untimely termination of the buy back scheme (after just 28 days) followed by the placing have shafted us. Another bad day .