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As putup tangentially says, the future will be no reflection of the past.
Do not forget that, as SOMO are now in the driving seat and seem determined to reintroduce the Kirkuk Export Blend, only a fraction of Shaikan's output can be accommodated in that blend (it's simply too heavy and pulls down the export blend API). The majority of future revenue therefore will be realised in the local market - with consequences for agreeing the FDP and associated large Capex projects. Note also that SOMO and NOCo will, to a great extent, now determine how that FDP will look, with the MNR relegated to a subsidiary role.
@alexeliasson I recommend you do some work understanding the CRP and it's depletion. You will have a better understanding of just what generated the free cash flow (available for dividends) in the past versus what can happen going forward in a reopening scenario. ATB
Source: kurdistan24.net/ckb/story/256368
"The Iraqi Council of Ministers has prepared an amendment to the 2024 budget law and is waiting for Prime Minister Mohammed Shia Sudani to return to Washington for final review and then sent to the House of Representatives"
Article mainly focusing on the overall budget deficit, no mention of KRG/oil exports... Would think that those issues are baked into the amended document...?
Erdogan's visit will witness signing of strategic agreement which will include process of resuming Iraqi oil exports through Turkey.
https://twitter.com/john78846295/status/1781632368735875391?s=19
My model currently values GKP at £1.08 on local sales forever and with current cash at $90 mill.
When I purchased GKP@ 114 on Thursday I did so in the expectation that the President of Turkey will turn up and appear alongside the Prime Minister of Iraq smiling with regards to an agreement. Friday’s share price however took a different view, just another false dawn perhaps.
Now I’m given to understand that Erdogan will also visit Kurdistan during that one single day. If this is not the long awaited opportunity to announce a pipeline agreement what can it be. Border security perhaps, or nothing substantial as indicated by the current 112 share price, which is very often right.
I’m in this up to my eyebrows so here’s hopping and we shall see soon.
Apparently I'm unable to post links.
According to company guidance we're looking at ~$40m of FCF this year (lower end) and thus the net cash position should reach at least $120m by year end. With that in mind, I do believe we're looking at dividends already in Q3 this year; 10-14% of market cap can be distributed and they will be in the same financial position as when the year started.
If we look at the years 2021 and 2022 their realised oil price was $49 and $74 respectively, and production hovered at 40-44k bop/d. That was sufficient to produce $122m and $266m respectively. In a reopening scenario, it's hard to envision anything less than +50% dividend yield in 2025. GKP will probably earn more in FCF in 2025 than its entire enterprise value going into the year 2025. Wild stuff, to be honest.
On the other hand, the ITP might be shut-in forever or contracts heavily renegotiated to the downside.
With that in mind, I consider GKP being one of the best risk/return cases available in the market.
Are my numbers similar to yours? Let me know. Cheers
Hi gents,
Entered GKP in the mid 90's a couple of weeks back. Sharing an excerpt from my sheet below: building my numbers on company guidance for 2024 and then using equity research consensus for 2025 and 2026. Not only does it look really cheap, the case works even if the ITP is shut-in permanently. IMHO.
Link: [LINK REMOVED]
"Meanwhile, 33,829,000 barrels of oil "
It is actually 34,450,000 barrels. The 1,357 B ID is equal to approximately $1 B, which means average local price of c. $29/bbl, more than half of which goes to the KRG after paying the IOCs (including cost oil) and that is a lot more than $6/bbl obviously!
The KRG Ministry of Natural Resources has provided the following information to the Iraqi-KRG joint financial monitoring audit teams regarding oil production in the Kurdistan Region for the year 2023:
The KRG produced 93,829,000 barrels of oil, of which 31,000,000 barrels were exported through the KRG-Turkey pipeline until March 25th. 11,816,000 barrels were handed over to Iraq, while 16,563,000 barrels were allegedly sold to commercial refineries at a mere $7.5 per barrel, despite being commercially traded rather than for domestic use.
Meanwhile, 33,829,000 barrels of oil are unaccounted for. The Kurdistan Region claims to have sold this oil directly to refineries for 1,357,000,000,000 Iraqi dinars. However, according to Omar, this represents smuggled oil transported by trucks to neighboring countries, concealed under the guise of refinery sales.
The reported oil revenues for 2023 stand at $3.621 billion, while expenditures are reported at $3.67 billion, leaving the KRG with a mere $554 million in revenue for the entire year. Based on the KRG's reported numbers, the Kurdistan Region has received only $6 per barrel sold in 2023.
So tread carefully AKIPUR…. remember that the Bar-z organisation recently registered a specific company to find, recover, process, transport and market hydrocarbon products.
I know that verbal contracts are not worth the paper they are written on but didn’t realise it also applies to written ones with the KRG.
Apart of course if you are DANA and have leverage through very high API oil and condensate, for some reason Shaikan crude doesn’t have the same bargains power.
I wonder are what stage the BOD realised that was the case?
Before signing?!
After X months, where X has a value of ?
So unenforceable contracts with the KRG versus some within the FGI making it very clear that APIKUR is seen as meddling in Iraqi politics and are very keen to show the IOCs the route to the exit door.
"Were they contracts and if so why did the company never take legal action to enforce them?"
The company does not even dare! The KRG doeth what the KRG wanteth to do!
- KBT pricing
- non payments without warning or explanation
- unspecified delays
- not bringing in a third party as well as taking part themselves as per the original PSC.
All happened in the past decade or so of GKP's miserable history.
ALL sides are being economical with the truth...
That’s a Bizarre statement, what are you implying?
That our BOD are hiding something????
Words are important.
It is disingenuous in the extreme to claim that the PSCs have not been seen or given to the Baghdad authorities.
The MoO took copies of ALL the PSCs that were made available (in the early days) to investors by the KRG/MNR; I know this for a fact.
What the Ministry does NOT have - and nor do investors - is copies of all the side protokols, agreements and understandings that put real meat on the bones of those PSCs put into the public domain.
ALL sides are being economical with the truth...
@ValueS, it’s not a theoretical point.
GKP gave up its right to sell the share of the oil produced, and therefore owned through the PSC, via the sequence of Sales Agreements it signed - it NEVER gave up ownership.
Were they agreements but not contracts and therefore unenforceable?
Were they contracts and if so why did the company never take legal action to enforce them?
I believe the last Sales Agreement with the KRG has expired and I also believe there isn’t one with the FGI.
At the moment the PSC is working from the company’s point of view as was originally designed - they are taking their share and selling it at price they find acceptable in the circumstances.
A few more, while sat under £1.10 with cash approaching $100 million in a couple of months GKP is in great shape,
ive written of the past invoices, i wonder if GKP will do the same to get the deal done ???? with SOMO get the pipeline open and start to build the cash and output, we should get a huge re-rate, great for all the stakeholders.
"in the case of the Shaikan PSC circa 47% of the production becomes the property of the IOCs at the stipulated point of delivery on the surface."
In theory only "theory"man, in practice, it is 47% of gross sales not production. If and only if our only customer choose to pay it! As history has clearly shown.
Best Regards ValueS
Apologies, didn’t have my cynical mode on when I read his quote.
He hasn’t seen the contracts 🙄 so he doesn’t know how PSCs work and therefore about the transfer of ownership on the surface.
So how did the FSC rule them illegal if they weren’t available in Iraq?
They used to be findable by searching for Kurdistan MNR Production Sharing Contracts, people on the old iii site had copies.
107p looks like people want to be out over the weekend!!
I keep saying 90s will be revisited and it will be before any pipe ever opens .
Dry powder needed
We have sent a letter to the KRG asking them to hand over the oil produced in these [The Kurdistan Region’s] oil fields to the oil marketing firm, SOMO,” Iraq Oil Minister Hayyan Abdul Ghani told Rudaw’s Diyar Kurda in Washington.”
Maybe a slight problem there, in the case of the Shaikan PSC circa 47% of the production becomes the property of the IOCs at the stipulated point of delivery on the surface.
The IOCs could agree to their share also being transferred to SOMO but if they don’t then it is not the KRG’s to hand over.
Why would they agree? If the new arrangements meet their financial needs then off we go. As straycat has pointed out, each of APIKUR’s members has specific financial needs.
What would happen if they don’t agree? As we are now, litigation, add your own vision…
Not without back payments first and and a reasonable PSC.
I think the stumbling block is money's owed which was stolen by the KRG. But know one will own up to that .
Iraq definitely won't pay it and rightly so.
So it's a big stalemate and has been for months .
Local sales till September 2025 then Iraq have no say.
But it's still the back payments that the krg have to stump up. Catch 22 really .
You deal with thieves and this what happens.
They've already indicated that they will (sorry was a while back so can't give a reference) I don't think they care who it goes to do long as there's an agreement in place and they get paid the appropriate amount. That's the sticking point though in two ways, first, obviously there's still no agreement, and secondly the information is coming from the Iraqi Oil Minister and he's lied and lied throughout the last year, no way if knowing if it's an actual move until there's a separate confirmation.
"Article 13 of the Iraqi federal budget obliges the Kurdistan Region to hand over, on a daily basis, at least 400,000 barrels of crude oil to Iraq’s State Oil Marketing Organization (SOMO) to be exported through Turkey’s Ceyhan port, or be used domestically in case it is not exported"
Is this going to happen, will IOC's hand over the Oil to SOMO