so "The KRG announced in August it plans to pay around $100 million to oil companies for their previous operations in the region. But although Erbil has paid regularly since then, the debt has grown to nearly $1 billion largely due to expansion of oil production."
So we've had $14.54m historic payments in May-Aug (4 months), I don't think he can be referring to that level of repayment.
We're owed $412m from the H1 RNS so dividing that by something less than $1bn, e.g. $950m means that we have 41-43% of the historic debt. (wow, didn't realise we had such a big share).
So.. does that mean, and I quote "Through credible reform efforts, we want to show you by actions, not words, that we are a worthy partner"
sounds like we might be in line to get $41m to $43m of the historic repayment. I wonder if that might be tomorrow given the timing of two payments to co-incide with the beginning of the London conference... one can only hope...
What would you value something at that produces potentially £157,000 365 days a year. Using the debt markets we could require a 12% return, but the equity has more responsibility and is lower down the pecking order, so lets say you'd want a 20% return. If so, that's a valuation of roughly £1.
Bottom line, if oil goes up from 41 to 49 that's a 19.5% increase using the above figures that equates to a 20% increase in our revenues. If oil did average $55 in H1 next year and using all of the above assumptions, and if we should track the op (which I think I've just started to prove), then our sp should be 12% higher at 112p (based on the "I want a 20% return thing".)
So I couldn't wait until the weekend! Here are some predictions. In case you're worried about my predictions the last two predictions on 21st Nov were within 1% of the actual two RNS announcments made on 5th Dec for September revenues (but then I was working on published data and a couple of guesses).
The average oil price in H2 looks like it will be $49. So how does this translate into a prediction. Well it's a bit murky and we get a contractor monthly entitlement. I will save you all the workings (unless someone wants to see them). We've got two data points from Taq Taq that help us to work it out. And usefully one is at 41.48 op (31 May RNS) and the other is at 48.34 op (27 July RNS). Assuming that there isn't a "fixed payment" and that all the pricing and revenues are variable, we can infer that per volume we get 18.8% more money when the op is at 48.34 compared to 41.48. Adjusting to 41 and 49 it's about 2.5% more, So I guess with rounding errors we could go for 20% more revenues per volume from Taq Taq in H2 than in H1; solely down to the op and not capex.
So.. assuming capex the same assuming Tawke is similar to Taq Taq assuming most of these numbers are variable and not fixed
What does that mean?
We had a free cash flow of 33.1m in H1, we could have a free cash flow of 20% more in H2, i.e. 39.72. So a total potential FCF of 72.82 which at today's exchange rate of 1.27 is GBP57.34m. so each day we add a net 157k into the bank or pay off debt or declare it as a profit (unlikely as we've hopefully got sensible accountants).
So that works out to a FCF figure of 20.6p per share per annum. I'm sorry if I've been boring people about the 19p per share FCF for the year, but hooray, we now have a new figure to talk about 20.6p.
So how do you get that 20.6p? buy something for 73p, and if nothing changes (no ancient debt repayment, no oil finds, no major things) then you'll get that each year. That's a 28% return, albeit not in cash, but real cash in Genel's bank and should trickle into the share price.
What are we going to do with all these $73m's each year (all other things being equal). Well, in 2.5 years we might need to pay off our debt. Net debt is $237m. That leaves us just 55m short. But with our debt trading at 82cents on the dollar we should have no issue rolling it over. We've financed our operations (and KRG of course) at 7.5% interest. It seems that a company with the same four letters in it's ticker and 42bn more on it's market capitalisation is having to pay 12% to raise funds to invest in the region. All in all and whilst we may need to pay more to roll over the debt, we're still sitting on a profitable piece of ground, and who would expect to pay off debt for capex in such a short time frame?
Excellent post and certainly stacks up, the krg have simply not got the money unless they get part of the 5.4 billion loan given to Baghdad. They need oil & gas quick to support their economy and the sooner the better we could be getting some serious akerage/proven reserves.
We all want to see a rise here and many of us are astonished it got to this level again. Here is to £1 pre Christmas it did 14% in one day very recently.
Datafeed and UK data supplied by NBTrader and Digital Look.
While London South East do their best to maintain the high quality of the information displayed on this site,
we cannot be held responsible for any loss due to incorrect information found here. All information is provided free of charge, 'as-is', and you use it at your own risk.
The contents of all 'Chat' messages should not be construed as advice and represent the opinions of the authors, not those of London South East Limited, or its affiliates.
London South East does not authorise or approve this content, and reserves the right to remove items at its discretion.