Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
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PutUp are you suggesting 200 million in dividend is possible?
That's a mind boggling proposition if so!
I mean 10 percent in February, have I truly landed on the gravy train?!
But in any case we're on the right side of the equation as far as we can tell, which was my point.
Not prepared to pay anything today for greater than 55k. Wait and see as, I agree, too many variables.
I had my year end target of £3 on the assumption of 55k and strong oil through 2022 (effectively making the CRP 'near cash' alongside existing net cash). Arguably that should be lowered a tad. And of course I'd mark it circa 17p lower when we go ex-div.
No. It's a big question with too many variables.
I can see £3.00 @ 55k bopd.
But I'm happy with my new exposure at current values.
What's your view?
Straycat, unsurprisingly I agree with you on buybacks (for cancellation or to meet option conversion, eg the VCP and LTIP, in lieu of new stock issuance). Perhaps they will activate it after the stock goes ex-div. Who knows?
One thing regarding the R factor. The rate of change in the R factor can be slowed a little with new capex but not much when we have such high oil prices and consequently great revenues. The size of the capex just isn't big enough.
Of more interest, imo, is the rapid recovery of the CRP that we are experiencing - albeit slowed slightly by the failure to push to 55k early this year rather than later. The company can easily pay out the entire balance of this recovered CRP during the course of this year, albeit I don't expect them to do so fully. I expect another $100m dividend with YE results and another $50m with 1H 2022 results if oil stays strong. Alongside buybacks. Even then they will likely have excess cash. The bond will simply be repaid when due in July '23. Of course the flip side is the remaining company, all else being equal (hopefully things don't stay equal), is worth commensurately less as cash is paid out.
Once the CRP is normalised, which I now expect sometime in Q1 2023 if Brent holds at circa $80 for the year, the company can in effect self-fund circa $300m of capex per annum (at $80 Brent and 55k production). That's the net to GKP. (Basically just work out how much production can be cost oil under the PSC.) Contractor capex could be as much as $374m. So you see there's plenty of 'base' production to meet FDP. Given in this sort of situation capex spent in, say, March 2023 is recovered in May or June, the burden of such is largely borne not by the Contractor but by the KRG. From this you should see that the R factor will continue to push higher rapidly.
Given your investment have you firmed up a view on what value you are prepared to pay today for production beyond 55k?
Re-invested in a significant way yesterday, based on the most recent RNS.
So this is one for the believers.
Calculating forecast cash flows for 2022 and with oil prices above $75 and even at current flow rates, the consequent options for shareholder returns/capex investments are exciting.
I reckon the next phase should concentrate shareholder value by using buybacks as the next shareholder 'press'.
But for cancellation imo.
It can be done in conjunction with managing the R factor by capex . It's a balancing act. And easily affordable up to $200m which btw is more than the maximum required capex to meet 75k bopd target in the year. Total capex to 75k bopd is $450m over three years...
Let's make the Market pay to be a member by shrinking (pressing) the Register.
If so, then the announcement of full year results in March will provide the optimum platform to buyback @ $50m. A 10% reduction in the Share Register at current values. The authority is already granted.
And those Y/E results are going to be spectacular.
Buybacks beginning at or around the AGM in late May if not sooner depending on the ongoing FPD negotiations...
The cash flow projections suggest yet more potential shareholder returns during the year as well, irrespective of capex commitments.
The backdrop to all of this are the ongoing FDP negotiations and their outcome.
But any way you assess it, we're looking in good shape through 2022.
Apologies for previous miscommunication.
All imo/dyor.
Hi Indrid,
Really good to know that you're still around!
Just got back and read what was posted on my behalf while I was away. Stupid. Ignore it.
It's not me and it certainly won't be happening again. Delegation is definitely not the way forward!
On a more positive note, the post was actually intended to reference the possible timings for buybacks (ironic, given our previous exchanges on this!) and I'LL re-post tomorrow.
SC
SC, why do you say May when the RNS says the below
"The interim dividend is expected to be paid on 25 February 2022, based on a record date of 11 February 2022. The Company will disclose the pounds sterling rate per share prior to the ex-dividend date of 10 February 2022"
I reckon the dividend date will be announced along with the year end results in March.
So I guess it will be activated in May, just before/after the AGM.
Unless the FDP negotiations go wrong; then it'll be whenever that happens, but certainly before the AGM!!
One edit to this: the 12 million needs to be net of the 1m in the EBT. So add 11m.
"Shares Outstanding: 212,869,955"
FYI LuckCounts this figure is wrong. As of June 30 there were 213.731m in issue (note 15 to 1H results) PLUS there is probable dilution (for zero consideration) from another 12 million zero cost options (see note 8 to 1H results "Effect of dilutive potential ordinary shares"). Far wiser to use the fully diluted figure which adds those two together.
" this share price reaction is why A BUY BACK MUST BE ANNOUNCED..."
No, buybacks are fraught with difficulty regarding not destroying shareholder value. The Terry Smith wisdom on the matter is they should never be done above intrinsic value. At present we are trading above intrinsic value according to SimplyWallSt. Sure, you can argue about the size of future cash flows and the discount rate used to compute intrinsic value, and we can all have our own differing estimates of intrinsic value. But buybacks, while it might seem obvious in a low interest rate environment to do them, particularly when you consider the concentration effect on eps they can have, they are no good if they lower the ROE. Our BoD got the last load of buybacks wrong (they couldn't have foreseen the oil price crash and the pandemic), and those buybacks are still not value accretive. The BoD is wise to keep the option open, but I can't see them exercising it at present. JMV. Sure, value destructive buybacks can be value accretive for new investors (they get in lower) but our BoD should care about us, the existing shareholders!
Operational & Corporate Update
https://www.londonstockexchange.com/news-article/GKP/operational-corporate-update/15298436