Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
FCFY
Why don't you counter PUTUP's arguments with some constructive discussion rather than attacking the person. PUTUP provides his interpretation after digesting the documents - if you feel he has misunderstood perhaps you could provide something more concrete rather than just rasping like a child
“ put 'bidders' in '' for a reason. Meaning there are no better operators to have a contract with than the current. So when comparing their existing contracts with the terms of bidders in round 5 one needs to remember it's "worth making concessions to keep them happy."
- Completely avoiding the questions as you don't understand it.
“ The current PSC are RSC in all but name. Yes, the contractors have a theoretical right to a share of production and could theoretically sell that share independently. But they never have. Instead production has been sold and the contractor has awaited payment of their share. In essence the contracts are being executed as revenue sharing. ”
- Farcically incorrect.
There's now a list of questions you can't answer (You apparently know this investment area, 1800+ post I hear)
The questions are straight forward and meant to help your understanding. Back to goggle for you it seems, I have no more time to waste.
Nobull is clearly correct. ABC’s.
Is there a way to filter?
Putup,
I’ve come to the conclusion you’re incapable of comprehension.
Good luck.
I put 'bidders' in '' for a reason. Meaning there are no better operators to have a contract with than the current. So when comparing their existing contracts with the terms of bidders in round 5 one needs to remember it's "worth making concessions to keep them happy."
Again, you've little to add and can't explain what is incorrect with any part of that which I wrote. Significant quality participants in the round either decided not to place bids in the end or their bids weren't successful. That's a lesson for Iraq should it wish to retain the existing contractors who are best-placed to continue development of the respective fields.
"There's a lot more"
Well, prior to this statement you haven't said anything. More than what?
"It's not just in net entitlement but also in rights." Err spell this out. The current PSC are RSC in all but name. Yes, the contractors have a theoretical right to a share of production and could theoretically sell that share independently. But they never have. Instead production has been sold and the contractor has awaited payment of their share. In essence the contracts are being executed as revenue sharing.
So far I haven't heard anything of substance or quality from you but keep giving it a go. I think you have next to no understanding of the current contract regime and hence no ability to compare it with the summary provided in the paper.
Ah Nobull, any chance to reiterate your misunderstanding of buybacks... That's not the topic of conversation. (And I've already said it's a horse beaten to death.)
There's a lot more,
But another point for you to research which will help your understanding.
There’s also a very material AND legal difference between the contracts.
It's not just in net entitlement but also in rights. You completely missed it, dismissing it as “ nothing more than a technical difference”
When you do some research, you’ll see just how far wrong you were.
Like I say, it's your money. You’ll only make it by being realistic an honest about what you really know.
In fairness PUTUP,
Well done for taking the time to read it and reply. You’re on the right tracks and getting there.
Your understanding of the contracts is still missing some pieces.
“ There are no better 'bidders' than the current operators and it's worth making concessions to keep them happy.”
Explain: How, what and why bids were placed. Why did the majors walk away?
Yes Iraq is getting its wish to to collapse Kurdistan!!
But we all new this anyway . IOCs will never get beck payments front iraq that's a given and always has been.
What now for Kurdistan go back to the original plan and become independent??
Thet can't carry on like this anymore surely.
Local sales indefinitely and all IOCs can do is survive until a new route to market has been sorted .
What a mess but I'm not surprised as history tells us exactly what to expect from these idiots .
Shorts will pile in now on this news
"Give us an example...[ of what is wrong]"
Your idea that a share buyback is just a value-neutral distribution and nothing more.
The only thing I concede is that the NAV drops on a buyback just like with a dividend. But on reasonable timescale (investor's typical holding period) it matters whether you pay £1.20 for £1, and you still don't get it. Only a totally stupid person buys shares above fair value because you are paying £1.20, say, for £1. You have chosen to ignore the wisdom of Terry Smith, Warren Buffet and Phil Oakley of Investors Chronicle. Still, buybacks are the least of our worries here, more like whether we become a cash guzzling binary litigation play and suffer from all the aggression in the ME at present.
"There’s so much wrong with what you’ve just said it's not even worth correcting. "
Give us an example...
I’d do a lot more reading and a lot more to understand what's read PUTUP.
There’s so much wrong with what you’ve just said it's not even worth correcting.
It's your money.
Article 2 hours ago, will we could have told them that!
https://www.iraqinews.com/iraq/iraqi-kurdistan-on-the-verge-of-economic-collapse/
Post royalty post the amount taken up by cost recovery and it's a sliding scale dependent on the R Factor.
Lastly, it's worth noting:
"A number of large companies qualified for the 5th Bid Round, such as ExxonMobil, Total and ENI. However, in the end, only ENI placed bids and it did not win either of the blocks it bid for. Zhenhua also bid unsuccessfully. The blocks were won by two smaller Chinese companies, both new entrants to Iraq (GeoJade and United Energy Group), and by Crescent Petroleum which previously had not had any assets in federally-controlled Iraq (it has contracts with the Kurdistan Regional Government, KRG)."
There are no better 'bidders' than the current operators and it's worth making concessions to keep them happy.
On balance the biggest item is just the royalty fee.
Yes it is worth a read and you should really read it again. If I were you I would focus on, in the first instance, the table of page 14 and compare the structure of the contract with the PSC under which GKP operates. The fact that the Kurdistan contracts are Production Sharing Contracts entitling the contractor to a share of production at the well-head rather than a share of revenue is nothing more than a technical difference with no practical distinction in operation and easily conceded by the current contractors. (Historically and currently, GKP has not sold its share of production independently of the rest of production.) Far more important are the terms which dictate what that share is.
The first notable difference is the level of royalty. At 25% this is significantly greater than the 10% in the current PSC.
Second, note that there is still a mechanism for Cost Recovery. Under the round 5 contracts:
"Begins when commercial production begins; from a maximum share of revenues after royalty, from 30% if oil price is $21.5/bbl or below, to 70% if oil price is $50 per barrel or above."
(One can comfortably assume this the maximum that can be recovery in any billing is the amount based on the formula above and the balance in the cost recovery pool ie a contractor can't recover more costs than it has incurred. Just as with our PSC.)
In GKP's PSC the limit is a flat 40%, well below the percentage when "the oil price" is above $50 but slightly above the limit when the oil price is below $21.50. Below a price of $30 GKP doesn't cover its current period costs so that scenario is a horrible one regardless of cost recovery. Furthermore, looking forward, GKP is very close to having recovered its full historical costs (assuming payment of the arrears). I estimate that (post payment of arrears) GKP's share of the cost recovery pool as of end of 23 as being only $52 million. More importantly, a production base of just, say, 55k and a Brent price above, say, $65 - even with a royalty of 25% - provides a level of headroom for cost recovery of about $197 million per annum. That's way above what is needed and means the contractor together with SOMO can manage field development well within even a 30% limit on cost recovery. GKP should never again agree to invest beyond its ability to recover its costs. $0% provides more headroom for greater upfront field investment than 30% but even 30% provides a lot. Let alone 70%!
Revenue share. 4.55% to 19.99% of revenue (field sales) post royalty. The last month of production GKP/MOL were paid for was September 2022. For that month, the contractor Profit Oil was $8.9 million. That was about 13% of revenue (field sales) post royalty. About bang in the middle of the round 5 range. The big difference here is that the article describes Revenue Share as a percentage of field sales post royalty whereas under the KRG contracts revenue share aka profit oil is a percentage of field sales post royalty post th
"One hopes that the local politicians have a more mature attitude."
You're new to investing in Iraq I take it.
According to reports, the negotiations were aimed at how to change the contracts of the Kurdistan Regional Government "with oil producing companies, which are based on sharing in production, to the participation contract, which the federal oil ministry operates."
As pointed out.
i.e. Bid round 5 contracts. 2-5% of revenue. For those inclined, it's worth reading the analysis and adjust for a new NPV. There's going to be plenty of time to study it still, look how long it took to sign the last bid round 5 contracts after they were issued- 5 years! Oil quotas = Zero imperative at present
Like the boy who cried wolf one day these corrupt, incompetent numpties will 'work out' how to amend contracts and reach a deal. It only took a whole year...
Hxxps://www.rudaw.net/sorani/middleeast/iraq/080120244
The Kurdistan Regional Government (KRG) and the Federal government are discussing how to change or adapt the oil contracts of the Kurdistan Region with the contracts used by the Ministry of Oil, so that Baghdad pays the financial entitlements of these foreign companies.
According to information received by Rudaw from Baghdad, the Kurdistan Regional Government (KRG) delegation held talks with the prime minister's advisors and the oil ministry in Baghdad on the oil contracts.
According to reports, the negotiations were aimed at how to change the contracts of the Kurdistan Regional Government with oil producing companies, which are based on sharing in production, to the participation contract, which the federal oil ministry operates, or adapted to it Kurdistan Region.
According to the 2023 budget law, the federal government's Ministry of Finance must pay the financial entitlements of the Kurdistan Regional Government (KRG) companies, but according to the criteria followed in the Ministry of Oil with oil companies, which is six to seven dollars per barrel.
According to the contracts in force in the Kurdistan Region, the cost of oil production is at least $ 18 per barrel.
The Iraqi budget law, which is for three years, 1 trillion 428 billion 245 million dinars has been allocated to the Kurdistan Region as the cost of oil transportation, while the amount of 2 trillion 689 billion 655 million 172 thousand dinars has been allocated Cost of oil exported in Iraq.
The Kurdistan Regional Government (KRG) delegation will meet with the federal government officials on Wednesday to discuss the budget and salaries of the Kurdistan Regional Government (KRG) employees, a source in Baghdad said.
It's a pity that some people on this board seem unable to have a grown-up conversation without schoolboy insults.
One hopes that the local politicians have a more mature attitude.
It's farcical, get the custard creams out for tea and biscuits then back home to mull it all over again
How many times have we read this .............................
:(
The (KRG) delegation arrived in Baghdad on Thursday to discuss the salaries of the (KRG) employees, the amendment of the budget law and the cost of oil production.", said Peshawa Hawramany, Spokesman of the Kurdistan Regional Government.
Another blow hard who thinks having an opinion somehow adds to the quality of information on the board, and yet another into the filter bin.
No facts. No workings. Just more guff and word salad.
Try harder.
Shorts strategy (and research undertaken)? Don't know as I am not privy to their strategy discussions. Could be any number of strategies involving one or more companies, human or computer driven. And neither do you know unless you are privy to their internal discussions.
I've stated my valuation methodology and the results it produces many times here before. Do some homework for yourself and search my posts. All 1800+ of them.
Putup,
Take sometime to read, take in and understand what's presented before babbling guff, andtrying to sound clever.
“ What's the Iraq governments new stance on flaring?”
That aside,
I still don't see your answers to my questions? I.e the facts.
It's not difficult. What did you find?