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Not many Companies can make around $50 Million in cash during a closed pipeline, over a 1 Year period ,
GKP can hold out for years!!!!
Strong Buy!!!!
In a perverse way getting paid only $25 works in GKP favour. Not only are the covering their cost but making $4m profit so can continue to do this. Whereas the Iraqi government are seeing their oil sold for pittance knowing full well that these ‘local’ sales are Turkish and Iranian middlemen who are selling for double what they have paid.
Also note the the bopd given is only up to 26th feb. There are still 3 more days in february not accounted for
Beggers can't be choosers
Be glad to get $25
May as well give the oil away grrr
Thats poor
With all the political shenanigans ongoing in Iraq and any other company would have folded. This little beauty is not only covering monthly costs but is now making $4m profit and this when they are having to sell locally at $25.
It’s still a tough road ahead to get around the politics but if any company can do it It’s GKP.
Atb to all shareholders
28 February 2024
Gulf Keystone Petroleum Ltd. (LSE: GKP)
(“Gulf Keystone”, “GKP”, “the Group” or “the Company”)
Update on Shaikan Field local sales & Notice of 2023 Full Year Results
Gulf Keystone, a leading independent operator and producer in the Kurdistan Region of Iraq, is today providing an update on Shaikan Field local sales ahead of its 2023 Full Year Results on 21 March 2024.
Local sales update
Local sales volumes have rebounded in recent weeks with gross average sales this month to 26 February of c.38,400 bopd, reflecting higher market demand for certain refined products, the easing of seasonal logistic challenges and a realised price of c.$25/bbl. The increase has brought gross average sales in 2024 year to date to c.29,600 bopd.
At current volumes and realised prices, sales for February 2024 are expected to be c.$10m net to GKP, above expected monthly net capex and costs of c.$6 million (breakeven at gross sales of c.22,200 bopd), enabling the continued reduction of accounts payable balances. The Company continues to receive advance payments for its net entitlement of 36% of gross sales revenue.
Looking ahead, while we expect demand in 2024 to remain variable, we see strong local market demand as we enter March and are looking to increase sales above current levels
GKP increasing sales and cash, during a pipeline closure period, income much higher than expected,!!!!
maybe a dividend towards the end of the year ????
RNS OUT
It's why any contract discussions are so important. If the contract doesn't provide for sufficient cost recovery it doesn't matter what JH or the Board does or thinks.
'That's the point innit? It works only if we can recover costs.'
Well that's the bet.
And that's something JH can influence.
If not then we're wasting our time and money.
As I've said before, in the end it's a question of belief.
Belief in the basic premise and belief in the Board to see it through.
Or not.
"It happens when the total payments is equal to or larger than twice the costs, R factor = 2 or more."
Well, yes. But with investment capex the rate of change in the R Factor slows. We are a long way from the baseline level of volume required for tipping point.
"given payment stability and reliability, GKP should load up with capex and follow the self funding premise of the business model"
That's the point innit? It works only if we can recover costs. If they crush cost recovery we can afford commensurately less capex. Funny how costs are being debated heavily in Iraq at the moment...
Quite right.
In fact if poo remains above $70bp, and given payment stability and reliability, GKP should load up with capex and follow the self funding premise of the business model.
Assuming the newly negotiated terms are acceptable in that context.
That's the bet.
It happens when the total payments is equal to or larger than twice the costs, R factor = 2 or more. Could happen fast when payments are made fair (brent -21; for ex.) and on time while production level and poo are high ($80+; 60 kbopd +) and costs kept low. In the past for ex. Opex was @ $2.4/bbl for quite a while and capex wasn't too high.
Best Regards ValueS
Ha! Model when that happens….
"The R Factor is still likely around 1.19 now. So that's a 27.2% share in Profit Oil of which the contractor has 80% i.e. 21.8% now and falling."
Yes, and I shall not forget that the $/bbl falls to $10.51 either when the share in Profit Oil falls to 15%. Thanks for the help and responses.
Best Regards ValueS
Hi C_ockeye, just a simple deduction on my part. Light sweet crude is suited for petroleum distillates and demand will reduce as vehicle electrification increases. Heavy oil is preferred for creating a number of end products such as asphalt & petrochemical feedstocks and demand is expected to remain solid.
Today, must be getting close to good news release,
"The R Factor is still likely around 1.19 now. So that's a 27.2% share in Profit Oil of which the contractor has 80% i.e. 21.8% now and falling."
Just to clarify this once more. The R Factor determines the "Working Interest Share in Profit Oil". Use of the words working interest is now a bit of a misnomer given the KRG/Iraq have an interest in the working interest of profit oil. The Working Interest of Profit Oil is split currently:
GKP 61.5%
MOL 18.5% (ie the Contractor has 80%)
KRG 20%
So currently the Contractor gets 80% of circa 27.2% i.e. 21.8% (with GKP getting 61.5% of 27.2% and then paying 20% of that in cash in the form of CBC). It's the Profit Oil stream from which GKP makes money.
Yes. They align when cost assumptions aren't credible (they previously guided $3-3.4 per barrel and we've had considerable inflation since then) and when capex is so low there is no investment in the field for growth (or worse). :)
I reckon maintenance capex (the amount required to keep volumes constant) is about $40-50 million per annum. I could be wrong on this and maybe an engineer can provide a better estimate but this is my current expectation and I fear, if anything, it is too light.
At any rate, I think you should now see that $12 per barrel is not good versus the current contract terms. And no operator would agree to the FDP under such revised terms forcing both parties back to the drawing board.
(Don't forget to look at the Profit Oil side as per the comment below.)
It is actually $15.287 in my model, however it comes down if opex is reduced from $3.2/bbl to say $2.4/bbl and/or the capex is cut or the realised price decreased.
In any case It is now easy to find the right parameters where the two methods become equivalent to each other.
Best Regards ValueS
Best Regards ValueS
Also, don't forget that Cost Oil shifts to Profit Oil when recoverable costs are less than the maximum that otherwise could be recovered. Your Profit Oil payments are too low.
"the required payment to the Contractor is $14 a barrel - even with ONLY maintenance levels of capex for the field."
Now do it at the Contractor level.
If you look at my numbers for December 24 (when I have production at 50k and $80 Brent as you do, CRP normalised) the required payment to the Contractor is $14 a barrel - even with ONLY maintenance levels of capex for the field.
Here is the re-adjusted model of monthly payments after CPR normalcy for a 50 kbopd and realised price = (Brent -KBT) = ($80 - $32) = $48/bbl of Shaikan crude.
|Month__Cost Recovery_Profit Oil_Payment_$/bbl__|
|Sept24___$9.072 m___$8.91 m__$17.982m_11.982_|
|Oct 24____$9.374 m__$9.207 m_$18.581m_11.982_|
|Nov 24___$9.072 m___$8.91 m__$17.982m_11.982_|
|Dec 24____$9.374 m__$9.207 m_$18.581 m_11.982_|
|Jan 25____$9.374 m__$9.207 m_$18.581 m_11.982_|
The final $/bbl is still under $12 but only just. Should become more than $12 if the realised price is higher.
Best Regards ValueS