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It is a bit bizarre saying you are in at 130p with a 50%,chance of a drop to 30p, whilst emphasising the limited upside on the other 50% + maybe odds for a grand national tinker but for an experienced analyst?
Given A and B are inextricably tied (ie they can be summed together) you can even estimate the probability the market places currently on a good (things are resolved before 4Q) versus bad outcome (worth only current cash). Perhaps unsurprisingly, that probability currently works out to be about 50:50.
To say "we're in shape for the long haul" beggars belief in the face of current circumstances. On the contrary, everything is at risk. I'm long and I hope I'm not wrong. Place your bets, but it could go either way.
You are sitting on a 50/50 that could go either way. Something just doesn’t add up with you.
PUTUP: as ever, thanks your contributions.
And you don't think management have been working on it since the pipeline closed? That perhaps they need approval of customers or had to overcome other factors which don't happen instantaneously? Nah, of course it was the messages to IR that gave them the idea and jolted them into action...
The hope is local sales will force a deal. If Baghdad hoped to bankrupt these companies they will have to wait a lot longer as cash balances at worst should remain stable and hopefully rise before long.
They should have done this months ago as some of us have been posting and advising IR.
@PUTUP, thank you.
You've got to get your head around it...
yes
I wish I could say I sold everything higher up but I did not. I took a lot of money off the table by banking later dividends and sold some above £3 and again above £2 (post dividends) but I bought all those shares back around 132p. Doof! When I was accumulating my holding in 2020 all you had to believe was that the price of oil would recover enough for the off-balance sheet and under-recognised CRP asset to be recovered. GKP itself was sound (although had disappointed re growth) had a commercial outlet for production and was being paid. The risks now are very different. But I hope it comes right. Obviously I regret not trading more aggressively above £3...
PUTUP, given my work history and qualifications I thought i was bright but this is gobbledygook to me so to put my mind at rest are you still invested in GKP?
"and a realised average price of $84/bbl"
This is the misleading side - and it's not the company saying this. If only GKP realised $84 per barrel. In Sep '22 BRENT averaged $89.76. As you all know GKP-produced oil doesn't sell at the same level as Brent nor does GKP get 100% of what it does sell for. You have to understand the CRP. In Sep '22 they averaged 44.2k of production and ultimately received $26.9m. Of that approx $21.3m was cost recovery (recovery of direct costs incurred prior to Sep) and approx $5.6m was Profit Oil less CBC. Cost recovery in, as the name implies, compensates for cash expenditure made - ultimately the two net out. $5.6m is left to cover non-recoverable costs and yield some true cash profit. You can easily work out what the $5.6m is on a per barrel basis. Hint: $4.22 per barrel.
The rest of the company's cash flow for that month is simply a factor of the timing difference between costs recovered in that period versus costs actually incurred during that month. In short, GKP spent a lot of money in the past to only recover that money during years like '22.
So, what you need to understand about '22 more generally is that - finally - they recovered a lot of direct costs incurred in prior years; prior year capex that had stacked up in the off balance sheet receivable called the CRP. Because recovery exceeded expenditure, the CRP was declining rapidly and the company was generating a lot of cash that could be distributed. But make no mistake, the company doesn't make a profit margin on cost recovery. It's $ in for $ out.
The bulk of the receivables balance is the same cost recovery.
Currently, albeit to a much lesser extent, the reverse is happening. The company is incurring (recoverable) costs but isn't being paid and the CRP is slowly rebuilding.
Dunno. If total cash burn is $6m a month and they're producing 11,700 bpd then that's $16.54 per barrel. Ok, yes, this includes all costs and capex rather than just direct recoverable opex but you get the idea. It's no surprise that the direct opex guidance was dropped. (Modeling the CRP has been made more difficult but the total numbers are now so low some error doesn't matter too much.)
Of course, the first thing that comes off a sale of a barrel of oil at $30 is the 10% royalty. Then the balance gets split between cost oil and profit oil, GKP's shares of each, CBC etc.
Sept 2022
With a gross operating cost in the realm of $3 (£2.54) per barrel (bbl) – and a realised average price of $84/bbl – there was little question Gulf Keystone would see significant cash generation this year.
@putup,
it's also unclear how many PFs are being utilised - is the whole production coming from one PF or are 2 being used? Same Q re wells - how many wells are presently contributing?
The operating costs for running a PF are, to a great extent, non-linear relative to the throughput - and even more so if 2 x PFs are being operated. I expect the "cost / bbl" therefore to increase quite substantially - perhaps now well over $7/bbl? Too that we must also add some essential well- and PF maintenance work that MUST be done in order to avoid permanent damage to facilities. Your point about the R-factor is timely made.
Just for the record: where did the $151 owed to us (so far) evaporate to ?
For those that can't read, yes.
Management have guided that direct (ie lifting) costs are, in normal times, expected to be $3-3.4 per barrel GROSS. Direct costs are added to the CRP and recovered via Cost Oil. So that guidance helps one model direct costs. Unsurprisingly that guidance is based on actual experience. Unsurprisingly management dropped the cost guidance when production was halted. Other costs are direct Shaikan G&A and Head Office G&A (as well as various non-cash costs).
It's up to you to figure out the breakeven price of oil for a given production level (and costs) given the PSC. It's not hard. Same as it's not hard to work out how much volume needs to be sold in order for the company to cover its cash costs if the oil is sold at $30 per barrel and the company's cash costs are approximately $6m a month. (Hint: use an R Factor of about 1.16.)
"gkp production cost is very low, just $3/barrel"
gkp lose money at anything below $35 per barrel.
this poppy**** that the bod pushes about $3 is completely untrue.
Well at least it covers costs if they're reduced a bit. But nothing for us.
$30 is what I have assumed. It is this number which goes into the PSC formula. GKP doesn't make $30 less costs.
$30/barrel is better than most expected
GKP production cost is very low, just $3/barrel
I suppose a lot of people on here are on other Boards, but just in case...
GENEL ENERGY PARTNER'S UPDATE IS ENCOURAGING, SAYS BANK
Published: 07:48 18 Aug 2023
An update from Genel Energy PLC (LSE:GENL, OTC:GEGYY)'s partner, DNO, indicates growing confidence in domestic Kurdistan sales, even though the revenue contributions remain "modest", said investment bank Stifel in a note to clients.
Operations at the Tawke field have been partially resumed with output averaging about 40,000 barrels of oil per day (bopd).
Half of this production is delivered to the Kurdistan Regional Government (KRG) as its entitlement, with the remainder being sold to local trading companies. Notably, the Peshkabir field remains closed.
The selling prices for the oil have been discounted, averaging just over half of what they were before the closure, assumed to be around $30 per barrel.
Payments are now being made upfront and directly to the operator. Stifel estimates that this arrangement results in monthly cash flows net to Genel of approximately $5 million, which should cover the second half of 2023's capital expenditures and operational expenses at Tawke.
For Genel to match Stifel's net asset value (NAV) projections or its previous cash profile, the export pipeline needs to reopen or domestic sales must expand significantly.
The bank's NAV for Genel stands at 143p per share - that's a significant premium to the current 78p price. Still, Stifel is currently neutral on the stock with a 'hold' recommendation.
https://www.proactiveinvestors.co.uk/companies/news/1023919/genel-energy-partner-s-update-is-encouraging-says-bank-1023919.html
Thanks for the confirmation PUTUP, enjoy the beach!
ValueS
""at the end of the year we are still owed CRP - somewhere in the region of 13p per share assuming a full return to normality in the 4Q and ignoring receivables."
I can't agree with the above because the CRP by definition is the sum of costs that are yet to be paid back, and since the receivables are unpaid invoices which is made up largely from CO stream, then that part of the CRP should remain in the CRP until they are paid. So, if say $120 m out of the $151m unpaid invoices come from the CRP, then that sum is still in the CRP! And it represens about 80% of the estimated (51p ?) per FD share. "
Yes, that's correct. I simply break out the receivables because it is a known figure. (And we wouldn't want to double count.) So the CRP balance is the amount of CRP in the receivables and any balance beyond that. (Obviously.) The fact that we haven't been paid and the pipeline has been shut has put paid to a zero CRP balance end of year (alongside a lot of other things). That much is obvious. It is a symptom of the issues the company faces and, hopefully, it will overcome. And now the beach beckons...
Straycat you really are clueless. I work for me and me only. Have a wonderful day. I'm off to the beach.
Lampedusa
Morbox published the link at 7.34 today. Perhaps overwhelmed by speculation. This is an Iraq oil report but the full story is only available for subscribers.
"The good news confirmed today and not reflected in the share price is the fact that senior politicians from Iraq / Kurdistan and Turkey are at long last negotiating seriously, water / oil and the most important factor, the division of 💰 money"
can you share a link please?
It seems that this message board is becoming a haven for the publication of endless theory, argument and speculation.
The facts however are simple and being lost within a minefield of possibilities;
Kurdistan attempted to achieve virtual independence from Iraq via oil income. Iraq have regained financial power over Kurdistan via the removal of Kurdistan’s sole source of income. The Kurds don’t like it but they do have some powerful cards of their own that they have played in negotiations with Iraq and a pragmatic agreement has been cobbled together. Meanwhile Turkey wish to retain their privileges regarding the export of Kurdish oil, and of course they will not pay a ridiculous fine. It has now taken far too long in our western minds for all of these financial and political interests to be settled as best they can be by so many self centred people. But as we all know the value of the oil is far too high to be left in the ground and we are now seeing that in ‘local’ sales. The good news confirmed today and not reflected in the share price is the fact that senior politicians from Iraq / Kurdistan and Turkey are at long last negotiating seriously, water / oil and the most important factor, the division of 💰 money.
In short it’s all about the power of money alongside idiotic religious and political dogma.
As patience will be rewarded can we cut the crap and wait for the reality to arrive.