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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?
"“While this is correct, you also need to factor in who bears the cost of capex. HINT: under the current arrangements, very little is borne by the Contractor. ”
That's correct, and unfortunately, that's my point. What's the Capex recovery of the Iraq contracts? What's the Iraq governments new stance on flaring?"
In essence, that's the debate at hand. If there is no recovery there will be little to no capex and next to no field development. Best you answer these questions before you proceed further.
"1 penny (in old money)."
That company died years ago. Get over it FFS.
(One year performance -39%.)
Gulf Keystone Petroleum Share Price 6 months.... + 3.85% Terrifying free fall.
However you two bean counters analyse it…. we’re still heading back in free-fall towards 1 penny (in old money).
Putup,
Many thanks for the reply,
You've made a few errors again. I presumed your level of financial literacy and maturity to be at a higher level than presented.
It applies to the NPV given in the CPR and the historic risk discount that the market applies.
Not to repeat myself, but,
i.e."The net monies received over the life of the field come down to net cash flows contingent on contractual terms." , Then discount.
How do you derive it?
You may want to look at NPV at your 20% discount rate; it’s in the CPR already worked out, you'll have to make a few changes but it's easy enough. Then, apply the new fiscal regime. What do you come to?
“While this is correct, you also need to factor in who bears the cost of capex. HINT: under the current arrangements, very little is borne by the Contractor. ”
That's correct, and unfortunately, that's my point. What's the Capex recovery of the Iraq contracts? What's the Iraq governments new stance on flaring?
A few questions:
What value target do you think the investment funds shorting GKP have?
What research do you think they've undertaken?
What fair market value do you see for GKP and how do you derive it?
As a starting point, you might consider that your starting point of £2 didn't just reflect the future free cash flow production but also (a) cash on hand and (b) arrears. Why, for example, would you discount (a) which is in the tin and worth 29p per FD share by 50-60%? Arrears are owed under the current contract arrangements. The face value of these is circa 52p per share. The 'analysis' you provided is certainly not applicable to arrears even though considerable discounting of those would be appropriate for now. The £2 also reflected the unrecovered CRP balance which again would be treated differently.
Keep working.
So what would you apply the noted discount to in order to arrive at your estimate of fair value?
"I discount it from where GKP stood at £2 expecting 50K + production. Hence my own 80p to 90p fair estimate"
Ok but that's incredibly simplistic and assumes the £2 was fair to begin with. I agree with some of your points but I would suggest you put a far greater effort into deriving your view of fair value.
"Don’t forget GKP we’re planning over £200m in Capex to reduce field flaring. That Capex won’t increase production. "
While this is correct, you also need to factor in who bears the cost of capex. HINT: under the current arrangements very little is borne by the Contractor. Only the costs borne (direct, indirect or lost opportunity) by GKP will affect GKP.
Good luck!
"The net monies received over the life of the field come down to net cash flows contingent on contractual terms."
No kidding
Https://www.kurdistan24.net/en/story/33656-KRG-delegation-to-visit-Baghdad-budget-discussions
The reduction in NPV is calculated off the IRR. It’s just facts. You can’t wish for money to come in that is no longer yours to lay claim to. When it’s gone it’s gone and it will happen overnight.
The net monies received over the life of the field come down to net cash flows contingent on contractual terms. The Iraq contracts own a significant amount more of the field and those cash flows.
The reduction (as I calculate it) in Net monthly cash inflows will be at least 50-60% - The operating costs and Capex remain the same and that’s the crux.
Discount to what price? That’s very relevant .
I discount it from where GKP stood at £2 expecting 50K + production. Hence my own 80p to 90p fair estimate (The price was consolidating to that value)
Reason- Fiscal and political instability still remains. Iraq recently missed payments to an IOC Janice even with an Iraq contact the same price discount will remain, possible better is payments are on time.
FCF for further development and expansion will be significantly hindered. It will certainly reduce or eliminate the dividend while expansion happens.
Don’t forget GKP we’re planning over £200m in Capex to reduce field flaring. That Capex won’t increase production.
Let’s wait and see what happens. I can’t see anything meaningful for another 3 months - Finalisation of the 5+ bid round. Contract negotiations will also go through Iraq- IOC lawyers - a lot of back and forth.
"Tempted to sell into this modest strength... "
Well that was a decent call - especially when executed in the couple of days following.
"19 Company (contractor) net present value at 10% discount rate"
Screw that discount rate. Mine is double that.
But it is very simplistic to conclude that one ought to apply a "50-60% drop". In the very first instance, a drop from what? You are much better off drawing your opinion as to the structure of the contract that might be agreed (assuming you conclude it is different from current) and then modeling GKP on that basis.
ValueS,
Many thanks for the reply. I've been using the breakdown from the presentation. It's a bit more intricate than how the RNS makes it seem and what GKP takes home. I'm getting the figures below, but I thought some folk may have already reviewed it forensically.
I'm just being realistic, I'm sure the funds shorting the stock see the same thing. It may or may not happen that we get an Iraq contract but it's likely imo.
For anyone interested in the effect on the NPV refer to this excellent analysis for the Iraq contracts:
https://iraqenergy.org/product/iraq-5th-bid-round-analysis-report/
Handily, on p18 'Table 5 Economic results of 5th Bid Round TSC compared to other systems'
GKP and its Kurdistan contract are used as a comparative example. Look at the effect on the value if issued with an Iraq contract. 50-60% drop in NPV.
It's just the reality. Then, one has to account that FCF for development may be tight, as in Iraq, hence the declining production. Hopefully, something more commercially viable is issued.
FCFY: “ All three countries respected the Paris arbitration courts decision.”
Good to hear.
Care to explain………?
" I get a 50%-60% discount given the contract changes. "
YOU'VE BEEN ON THIS BOARD THREE DAYS ! YEA I'LL PAY A LOT OF ATTENTION TO YOU !
"Does anyone have any figures for the % of net profit/Rev of the Kurdistan contracts Vs the % of net profit from the Iraq contracts?"
There is no 'fixed' % in the "Iraq contracts", but there is 'fixed' amount of $/bbl the IOC gets from its production, and that amount varies considerably from contract to contract. Given that it is fixed regardless of poo, the % varies inversely to poo. A seperate mechanism is made for Cost Recovery.
As far as Shaikan PSC with MNR goes, GKP gets 36% of gross sales as mentioned in the RNS, 80% of which is from Cost Recovery stream and the remaining 20% is from the Profit Oil stream.
For example, if production = 30 kbopd and the average realised price = $30 in a 30 days month, then :
Gkp payment = 0.36*30^3/1000 = $9.72 m.
And it comes from 2 streams:
Cost Recovery stream = $7.776 m (28.8% of sales)
Profit Oil stream = $1.944 m (7.2% of sales)
Unlike what you called "Iraq contracts", the actual amount is proportional to poo.
Best Regards ValueS
All three countries respected the Paris arbitration courts decision.
Hence we are where we are.
The question is now the most likely outcome and the new value of the assets, net to the companies after that outcome.
I get a 50%-60% discount given the contract changes.
The oil majors are on the Iraq contracts, I can’t see exceptions made for the smaller co’s.
Not really, international ruling Vs Indian for cairn reaped rewards, they can't escape the contracts..I say file the suite and call the bluff then see what comes to the table
Free Fall again ;)
A slush fund for the ruling families really is the only solution here.
Remember where we are, and the types we are trying to do business with.
Taking them to Court in London will just be as effective as the Paris outcome:
they just laugh at the decision
Does anyone have any figures for the % of net profit/Rev of the Kurdistan contracts Vs the % of net profit from the Iraq contracts?
I need help finding a solution that doesn't involve a new contract. Iraq deemed the Kurdish-issued contracts illegal and now has all the control and power.
Small oil companies vs the Iraq government, which now owns all the means.
Look at this another way: If this was an Iraq oil company in America, invested in a breakaway region, which you've just brought back to the fold, telling the USA what's right and wrong and what to do or not to do vs their laws, what would the outcome be?
The oil quotas, pipeline ownership and payment control mean there's no rush.
I see the value of production as no halving or more, so I now have a target of .80p- .90p from which we can then build value.
I want to be proved wrong; please do so which numbers.
The frequent management updates are reassuring
Great start to 2024 for GKP by the way.
The drop is relentless now !!
All this rubbish pipeline opening in 2 weeks is pie in the sky.
We might even see 90s in a few weeks ??
Shorts are the only winners here now.
What's the odds on the pipeline not opening till 2025 ??
11p would equate to a nice profit of over 8.5% after costs. A nice return over 2 weeks if you achieve it.
The question then is whether your banking that profit or re-investing it all in GKP to boost your overall share holding.
GLA
LOTM