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Seems to be irrelevant whether we make a profit or not - the MNR will dream up further excuses to default on the massive current debt, and of course any future payments. Our positive bank balance must be driving them insane - I suspect they consider it as their’s to divii up among themselves. Let’s see if the new BoD have the kahunas to deny them it.........
Theoryman - thank you for your analysis which looks sound to me. The only trouble is this share is beset with so many variables that it is in fact impossible to even hazard a guess at its profit or valuation potential. With a Board buried in its bunker and giving nil info to assess those variables or any support to the share price, anyone holding or thinking of trading the shares are doing nothing more than taking a blind gamble.
Will this change? It is taking longer than I thought but the main hope must be the departure of the Chairman and most of the Board followed by a clean start to running the company and its interaction with the market in a different way to its current disasterous fashion.
Hi, I don’t know if looking at it in this way was your idea or someone else’s but this is how I would present it if it was mine - which it isn’t!
Working from the latest figures in the public domain and making reasonable assumptions and adjustments to make it easier to follow.
Latest total production 36.0kbopd.
GKP’s share is 80% of the Contractors’ share which is roughly 50% of the total production.
GKP’s shares is therefore circa 80% of 50% of 36.0k = 14.4kbopd
There are a maximum 365 production days in a year but there have to be shutdowns for work overs and pipeline maintenance.
Assume there are 15 days lost, leaving 350 days.
So for the year we have 14.4kx350=5.04 million barrels per year.
So for ease of use call it 5 million barrels per year.
Hence every dollar per barrel above/below the break even, changes the profit/loss under the stated conditions by $5 million per year.
Taking break even at $35 with a PoO of $43 would generate 8x$5 million profit for the year. That’s $40 million for the year or about $3.3 million on average per month.
I prefer to use the $21 reduction after putting the production through the PSC. That way I can distinguish which part of the revenue is Cost Oil (getting agreed costs back) and which is Profit Oil ( fresh cash flowing into the company).
Hi, thanks for your input, however, although this wasn't my calculation, i merely amended a few of the figures, i am now slightly confused.
Yes i agree brent -$21 is a better starting point but as RNSed by GKP breakeven is at $35 so doesn't that include all production costs plus admin/salaries etc? So i'm assuming $21 decuction maybe $10 other costs and $4 for internal production and admin costs = $35.
Totally agree forgot the 80% split to GKP so maybe best to use 30k barrels per day.
If i could be so bold could you provide say monthly estimated profit today at $43 per barrel and also at $50.
Thanks in advance
The focus should not just be on the price of Brent, important as it is!
In my model the key number is (Brent-21) to allow for the discount that is applied.
In your way of looking at the effect of exceeding the break even value it is (Brent-35).
The closer you are to $35 the % change in Brent leads to a much greater % change in (Brent-35).
Suppose the actual price was $42.5 when you pictured it rising to $50, you have suddenly doubled the profit.
Working out the numbers for each scenario is the easy bit, the really difficult part is assessing the relative probabilities of the different cases happening.
So if we take $50 as the the price of oil going forward, and just 35,000 bopd, applying no cost cutting that gives $15 per barrel profit. 40% of which gives 76mil in profit per year.
Personally I think both the production rate and price of oil will exceed this in the coming year but even as it is seems good value at these prices
Hi, where in these calcs has the production sharing been applied?
It looks like you have used the total production and not GKP’s share of it to work out GKP’s profitability.
As a rough guide, the Contractor’s share is only 50% - actual figure is 48% give or take a bit.. As a further rough guide GKP gets 80% of the Contractor’s share - actual figure is just over 78% over the year.
So the combined effect is if you work on GKP’s share being 80% of the 50%, the very rough figure of 40% is too high but not that far off.
So unless I have completely missed the point you are making, you have significantly overestimated the yearly profit - try working on it being only 40% of those figures.
As an aside, the last payment was back to being more like what the model I use had predicted - in fact it was $0.1 million higher due to the share of the gross being 79% rather than the more usual just over 78%.
Thanks for the calculation - reminds me why i'm invested. i think you are being a little conservative. Previous RNS said profit at $35 per barrel and brent is c$43 at present. So that's $280k a day and c$100m per year.
If brent gets back to $50, as has been predicted, that's over $500k per day.
Obviously capital expenditure is not included in the above.
profit at 36 per barrel. Current price 41 5 x 35,000 = 175,000 clear profit per day or 63m profit per year on current price of oil and current production costs... is this right?