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The $20.6 offered is just for cost recovery it's not the total revenue earned.
"20.6/ barrel low" I respectfully disagree, at least in the context of GKP. (Sorry if I misrepresented it, I understand it as a fix payment/barrel.)
The $ 151m is a completely different matter, and there is a further approx $ 40-50m net [for the GKP] in the CRP. So the sum is lets say $ 200m.
Why I would take a $ 20/barrel without hesitation: 50k(Bpd)*30(days/month)*12(month)*20=$360 million.
If we just calculate the share with the Working Interest (61.5%), its over $ 220 million. The OPEX was around $ 3.1/barrel so OPEX is max 50-60m/year, 40-45m in CAPEX is required to keep the production flat + some S&G... More than $ 100m would remain. Beyond anything that we can hope for.
If anything like this were offered (unfortunately I doubt in it...), it should be accepted.
"any fixed fee for reimbursement by federal Iraq is problematic because it doesn't adjust for changes in oil market prices and is inconsistent with the manner IOCs are reimbursed in federal Iraq or around the world."
Yup. As he said.
Even if this is "the deal", there's still lots of questions. Who pays the IOCs in Kurdistan? If it's the KRG then they are heavily exposed versus the contracts with the IOCs. For example, $20.60 per barrel is still too low to pay GKP/MOL what they are owed when they are recovering historical costs (assuming $80 Brent and a $32 discount) - how do they fund the difference? - and offers very little room even thereafter for payment of arrears. And, of course, it's even worse if the oil is sold for better than $48 a barrel down the pipeline.
Likely quite some time before this is resolved.
What is anyone actually doing about recovering our debts from the Erbil famillies ?
Critically GKP are self sufficient and profit generative right now.
Future Cash Flow is profit dependent and in these constrained times JH and the Board have found a way.
Not the way planned, but nevertheless a way forward unless/until there's another way.
The best managers manage what's in front of them.
And right now that's the best PIs can expect.
Strikes me we're in good shape given the circumstances...which will inevitably change.
Then the Board will have to manage the new terms of engagement.
The question is whether investors believe in their commercial integrity...
What are some sensible projections for FCF in 2024 and 2025?
According to the latest RNS we're looking at $40-50m FCF for 2024. DNO (a country peer) told the markets a couple of weeks back that they've almost finalized an agreement with KRG that they can invest in further production (out of pocket) and receive a higher working interest of that production. Sort of a payback of arrears. Nothing signed just yet.
Dammit - so plenty of scope for under and late payment excuses as to continue as before.
I wondered why the Erbil tribals seemed to be accepting SOMO taking over dealing with the invoicing and incoming payments for oil, and seem to remember a load of discussion about Baghdad re-writing the IOC PSCs, but that has been swept under the magic carpet.
Only morcel of good news is that the PSCs and families ruling during non-payment will remain in place and hence can be held responsibl to settle the debts (+interest).
Watch and learn how they wriggle out of it.
Baghdad can’t write new PSCs or deal directly with existing ones under local laws following the FSC ruling of Feb ‘22.
They can however deal with the KRG in terms of finances and let the KRG deal directly with the IOCs under the PSCs as covered by international contract law.
As long as there is commercial equivalence the proposed method is almost irrelevant. What matters is how it will be enforced and how past arrears will be paid - does the concept of a guarantee exist in Iraq?
Sorry 7.3.24
From 7.8.24. We are getting very close now..
The Federal Prime Minister stressed that “there is a positive and clear understanding between Erbil and Baghdad,” noting that “the remaining problems facing the resumption of the export of Kurdistan Region oil are technical problems and are on their way to being solved.”
So still plenty of scope for the tribal rulers to abuse us if they are responsible for paying us as before.
Would have been much preferred if we invoiced Baghdad, and they paid us according to the PSC schedules.
Oh whatever, maybe we can appeal directly to ICG when the cheating recommences….. ?
@Kheldar, thanks for getting to grips with sorting that.
I still cannot get my head around the need for some form of sharing contract to be in place wrt commercial equivalence (as also proposed for Rounds 5+ and 6) where the shared amount varies with the PoO; compared with this apparent focus the Governments have with a fixed return irrespective of the PoO.
If only we knew what they mean by the ‘cost of production’ and how any fixed average cost would be applied to each individual IOC.
It could all be linked back to a proposition that was floated right at the start. SOMO sell the oil, the money raised goes to Baghdad, the budget share gets sent back to the KRG (which includes the total approved costs for all the IOCs under the new agreement between the governments) and the KRG pay the individual IOCs what the PSCs require them to. Any surplus or deficit is for the KRG to bank or fund.
What could possibly go wrong with that sequence?
ERBIL — Turkish President Recep Tayyip Erdogan is set to visit Baghdad and Erbil later this month for discussions with senior officials from both sides, according to a senior Iraqi Foreign Ministry official.
The visit, lasting two days with one day each in Baghdad and Erbil, aims to address several key issues, including the presence of the Kurdistan Workers Party (PKK) bases in Iraq, the resumption of Kurdistan Region oil exports via Turkish ports, and water security concerns.
The official, who preferred to remain anonymous, stated that Erdogan will lead a delegation comprising senior Turkish officials, businessmen, and company owners during the visit.
Among the primary objectives of Erdogan's visit is to find a lasting solution to the PKK presence in Iraq, which Turkey considers a significant threat to its national security. Discussions will also revolve around potential security agreements and border measures to curtail PKK movements. Furthermore, both sides will explore the possibility of a comprehensive security agreement, including measures to halt attacks on Iraqi territory and address the presence of Turkish troops.
The Development Road project will also be on the agenda during Erdogan's talks with Iraqi officials, according to Subhan al-Mullah Jiyad, the political advisor to the Iraqi Prime Minister.
Jiyad emphasized the importance of Erdogan's visit in resolving longstanding issues between Baghdad and Ankara, particularly highlighting the critical water issue amid Iraq's ongoing drought crisis.
Erdogan's visit, originally planned for the previous year, was postponed due to regional developments, including the war in Gaza and political strains between Baghdad and Ankara. Reports suggest that stalled oil exports from the Kurdistan Region via the Ceyhan port also contributed to the delay.
All talk and no action !!
Nothing will as they have saying the same crap since the closure.
Their only intention is to keep it shut as long as possible. Personally I think it will never open again and a alternative route should been found ASAP.
Back to being independent and the IOCs getting shafted by the KRG .
Well they are getting royaly shafted at the moment . Maybe the KRG like the situation as it is who knows. Because someone is making a fortune. Let me guess his name begins with a B ??
This is the article I think everyone is talking about https://www.kurdistan24.net/ckb/story/253495-وەزیری-سامانە-سرووشتییەکان:-سەدا-80ـی-بڕیارەکانی-دادگای-پاریس-لە-بەرژەوەندیی-هەرێمی-کوردستانن
The main crux of the bit translated is as follows:
The Minister of Natural Resources of the Kurdistan Region also noted that "the cost of extracting the Kurdistan Region's oil has reached an agreement with the Iraqi government. Previously، the federal government had decided to give about 8،900 dinars to companies in the Kurdistan Region to extract each barrel of oil، but after the formation of two committees، it was decided to increase the amount to 20.61 thousand dinars."
It looks like the Iraqis are prepared to change cost of oil production from $6.83 to $15.81. Sounds like a good compromise to me but wtf do I know.
This article also explains why the Kurds don't seem to be too bothered about Iraqi government selling the oil.
As Kamal Mohammed Salih put it، "80 percent of the Decisions of the Paris Court were in the interest of the Kurdistan Region. We have no problem with somo selling Kurdistan Region oil and its revenues go to the Youth of the Iraqi Government، but the financial rights of the Kurdistan Region must be provided."
I've used an online website to do the translation so can't really guarantee the translation. :-)
ATB to all shareholders
The Erbil-based Kurdish channel Kurdistan 24 reported on Jan. 28 that both sides are discussing a deal to reimburse the semi-autonomous region $20.60/b for all crude oil produced
https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/natural-gas/012924-crude-oil-selling-price-from-iraqs-kurdish-region-in-focus
I believe the figure of 20.61 came after watching re-runs of countdown, they asked for 1 from the top, 1 from the middle and 2 from the bottom and voila, 20.61 is what Carol asked for. Utter b’lox, no change really.
It is very precise but it is TOO precise for the variable it reprints.
$21 or $20.6 would have slipped through unnoticed but if this is a made up number it’s P44.9999 time
IOCs should reject the offer and ask for £30.63 😂
If this is all made up you have to give credit to whoever came up with £20.61. That is a very precise figure.
Atb to all holders
One word answer Blu:
corruption.
Deal agreed or not ?
The SP should have not been this low in the first place considering we are debt free, millions in the bank, producing close to 40k pbd bringing in 10m plus a month with huge potential once the pipeline opens which will happen soon or later
There was a piece much earlier today on kurdustan24.net for the locals but not the English version.
It simply stated that the two governments had agreed a price.
It did not mention a what the agreed figure was or what part if any an IOC had played in the process.
It implied the KRG was now happy to begin exporting but didn’t say that the IOCs had agreed to anything.
$20.61 is four significant figures, where are they getting that degre of precision from?!
Just had an email to say GKP moving so thought I’d have look. A little late in the day which always arouses my suspicions. I’ve been away for a bit and not paying too much attention so forgive my ignorance but, what has been agreed prior to this potential costs deal, is this the last hurdle before exports can resume.
Apparently there was a presentation??? This was posted on another bb.. If true this will re rate
The natural resources minister of KRG said that they have signed an agreement with ICG ON Production price of 20.61$ per barrel. The agreement was without including IOCs in the signing, but IOCs helped talking with ICG on technical matters.