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Operating here is a high risk....
Absolutely Jim.
And since January the risk has been rising with every day that passes.
Think they tried to diversify with Gas and Somaliland etc but for various reasons (contractual with Gas) these have not added to revenue stream yet.
Operating here is a high risk, potentially high reward strategy for Company and shareholders alike.
One day Rodney, we'll be millionaires…….
Still confuses me though that they must constantly consider this reoccurring problem yet have no plan B or revenue stream. This started in December and nothing happens quickly in the oil industry (nor payments!) but they ought to have a fallback of some sort. What do they think will happen to the share price with KRG messing about. Diversification did not work well for DNO but maybe now is the time to take it more seriously?
Great post Jim, actually can see your point
Investors only see silence due to the practicalities of doing business in the KRG. Presumably Genel have known for a while that KRG have cashflow issues, they probably also knew about the developing situation with the inability to release funds from the Lebanese bank. However, releasing news on the financial status of a host nation is not really the best way to ensure good working relationships going forward. There may well be ultimatums being discussed but there's no way a responsible company would tell the world that and hope to continue business in that region. I asked months ago what it would take to stop production - looks like we're getting there but the story will be quiet and private so as to try to retain a working relationship with people who owe us lots of money and who control whether we carry on operating in the region or not! It's not quite the same rules as running a business in Hampshire.
Your probably right Boyo. But an ultimatum surely needs to be presented. This cannot continue, they need some sort of indication from the KRG about what is going on. They are literally destroying this company and investor sentiment and value. Oil and market is bad enough on its own. Genel should be going nuts about this and investors see only silence
Sometimes it's best to sit on hands, Leem - I'm doing that right now.
As far as G is concerned what can they do? Shut down production? It's probably not as easy as that.
Presume Genel just sit on their hands and allow this to continue?
Not sure I want to, Leem.
Not interested above 70 for sure.
Another great day at Genel, what’s your re entry price Boyo?
Once the dividend has been paid, how much is G really worth with no immediate prospect of any revenue?
Although OP must eventually re-balance to $40+ , how long will that take with the current excess of supply and global storage full to capacity? And, even at $40, can/will the KRG pay its IOC's ? Could G be expected to continue operations for many more months with no revenue and low margins for some time after?
Surely we are not gonna see the recent low of 50’s again ?
The Saudi + UAE plan may have evolved to overproduce to the extent that they fill storage sufficiently to supply almost total global demand for a significant period. By capturing such a massive market share they may actually increase their net revenue - albeit by supplying quantities that they cannot sustain indefinitely.
Of course, some of this could simply be bought-up by competitors for resale later - as it will be cheaper than the stuff they themselves are extracting. Either way, the glut could conceivably last a lot longer with the KSA and UAE effectively squeezing all others, including the KRG, out of the market until a significant time after the inventories match demand again.
It makes perfect sense Boyo .... whether it can be done is anther question (stopping production). Some production being taken off the market will be key to rebalanced the price. However we are long way off to the end of this crisis. A lot of companies will go under, companies that were viable before, a lot of people will be laid off ...
It is impossible to say at this stage what the impact will be on our economies, spending habits, travelling habits, etc ....
I agree Ammu. Very premature to call the recent market low the 'bottom'.
Things in the US and Europe are still on a downward path and many people in the UK effectively confined to home for the next 12 weeks - ie until mid summer. The impact has potentially only just begun in terms of scale for UK, USA, Europe and others.
Meanwhile there will soon be insufficient storage space for the amount of oil being produced and the anomaly of oil prices going negative in certain 'obscure' places may become more widespread as there will be nowhere to put it. It would be best for G and DNO to shut down, especially as they haven't been paid and the oil being produced currently will :
a) Simply increase the debt whilst generating little cash for the KRG.
b) Only realise a very low, possibly uneconomic price.
c) Be stored by others to be sold later, consequently prolonging the period of oversupply.
That is some ramping here