The latest Investing Matters Podcast episode featuring financial educator and author Jared Dillian has been released. Listen 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.
"Please get real."
I am real, and I'd urge you to remember the word 'sinificant' in the expression "significant further investment". In my book it means: when the costs (opex + capex) incurred in a given time period exceeds the costs recovered from the CRP within the said time period.
Please, also remember that before GKP no one ever heard about the 'Shaikan Oil Field' because there was no 'Shaikan Oil Field'! It is GKP who discovered the 'Shaikan Oil Field' and that entitles GKP to certain rights and merits even according to the Iraqi Constitution whoever is assuming jurisdiction over the territory.
This is totally different with other IOCs operating oil fields anywhere in Iraq that were known many many decades ago.
I for one, wouldn't want to be a GKP shareholder anymore if they end up being forced to make such investments without recognising past dues.
Best Regards ValueS
Missed me have you?
You may have noticed the oil has been flowing, as per the FYR that sales are tracking at 43,000 bopd currently albeit @$25. And at that level, given that the b/e is 22k bopd we're making money and the FCF is improving.
‘…an air of desperation’?
Seriously?
This share has done nothing but reward me in spades.
As a shareholder since early 2018, I just care about the future prospects and how they will be best represented by Board decisions.
Don’t you?
Straycat,
Your increasingly long and 'facetious' posts have an air of desperation about them. Has your formerly punchy 'the oil will flow' position lost its sting?
ValueS,
Please get real.
The KRG are being bullied financially by the ICG.
And the ICG feel no natural responsibility for the $151m debt because it was not incurred by them. It's not their contract.
If they're going to take it on, it'll be on their terms. Almost certainly ugly for us. But they probably won't.
And that's what we've got to recognise. A problem.
So let's keep the cash we've amassed and build a sustainable model that means we're accepting realpolitik in the region and dealing with it accordingly.
None of this is easy. If GKP rebuild their model, there'll be plenty of time to review the delinquent debt later.
For now JH has to rebuild the GKP model.
And that's all.
So that cash and any future cash flow will need to be treated a special commodity.
Until we're in less turbulent times.
APIKUR as an entity throws up a few issues IMO - group identity versus individual needs has been covered previously.
Who sanctioned Caggins’ reference to strangling and hands around the neck?
What was the intention? To deliberately mess up negotiations? To provoke the FGI into doing something self destructive? To expose the limitations of what the FGI can do?
Best of luck to anyone having to convince the FGI that the PSCs are a fair return when taking on board the fact that the IOCs and not the KRG took on the risk of failure. All of the other sides representatives are used to TSCs where the Government take on the initial financial risk.
Combine that with survivorship bias in the data set, only those IOCs who found commercial oil are getting rewarded through the PSCs, so their returns will seem way too generous when looked at in isolation.
Might be better to start with looking at the failures, the PSCs and TSCs that didn’t get going 🙄
Morning Invstrat,
Obviously I was being facetious, but these issues are real and will have to be addressed by JH and the Board. And I wouldn’t be relying on APIKUR or Myles Baby Caggins to navigate us through these tempestuous seas…
To address your issues sequentially:-
1) Going forward, inevitably Baghdad imo. Can’t see the KRG having as much influence now the issue’s gone geo, even though they’ve got a strong legal argument;
2) Probably not, but they will inevitably take advice from the IOC’s on the ground, as well as their own advisors. And there’s the rub. Who are those advisors, and what are their private interests?;
3) I think GKP should prepare an alternative plan for performance that does not rely on repatriation of $151m delinquent debt. GKP should pursue that money vigorously but shouldn’t rely on it for commercial viability. Neither do they need to because of sacrifices made by guys like you. GKP live to fight another day DEBT FREE. Not sure engaging in a deep and meaningful relationship with the ICG is the way forward. Could be wrong on this. But if I’m right, of course that would torpedo my investment in GKP because its based on self-funding growth;
4) Not a clue.
I’m currently rewriting the GKP business model based a new set of parameters which protect the independence of the business from external financial influence while retaining its basic proposition.
I know it’s sad and sounds pretentious, but I’m damned sure that work is being done behind closed doors in GKP.
And if it isn’t then we all have real problems…we’ll see.
For those who argue that GKP might be obliged to make significant further investment, the answer is simple: there is $151 m unpaid invoices, get those paid in full with interest and it will be invested in Shaikan. No payment, no further investment.
No need at all to keep excess cash.
Best Regards ValueS
Sounds simple S-cat…. What’s holding these four dreams up then ?
1) PSC - are we under Erbil or Baghdad rule ?
2) Is there anyone on either political camp capable of technically understanding any FDP in order to decide on the ‘best’ option ? Best to accept whichever facilitates the score for pilfer.
3) Firstly: Identify Where the funds withheld from our outstanding invoices evaporate to ? ) ….. that will kick off a shipload of biscuit meets which will outlive most of us on here I suspect.
4) Where, in the Regions comprising Iraq, (extend that to the entire Middle East), could one find a politician not in it solely for personal wealth generation ? Remember where we are attempting to run a n honest business……
All very simple, innit?
I don’t see what the problem is. What’s wrong with everyone? Don’t you see?
All GKP have to do is to navigate the following:-
1) Re-negotiate a PSC which is not currently recognised by the ICG;
2) Redefine the parameters of the FDP which will inevitably change during the re-negotiating process;
3) Somehow arrange a payment plan which enables self-funding growth AND is reliable/trustworthy;
4) Lean into a new set of politicians that can/will/probably won’t be honest to their word!.
Don’t understand the problem. What problem??????
Jesus. I hope JH is being well paid (which I’m sure he is btw…really hope so).
Because he’s got a real job on his hands.
I’m pretty ballsy, and I wouldn’t fancy it.
Yet here we are.
Don’t you just love this share?
Therein lies the rub and why any contract discussions will be so important. Should GKP ever again embark on field development that requires the significant use of its capital? When the company was first formed they spent a bundle of shareholder and bondholder capital on behalf of the KRG knowing that it could only be recovered many years hence. It ended in disaster for many. Should they take this risk again? If so, to what extent? How much investment (FDP) can be conducted within the recovery envelope provided by an agreed contract?
Now that the field is operational, with reasonable baseline volume, my view is that they should not and that they should only invest to the extent that expenditure is recovered within payment terms. If great amounts in excess of this are demanded of them, $30-40 million or so will likely be rounding error. Return the excess now and let us decide if the risk is worth it should we ever be called upon to invest great sums of stakeholder capital again.
IMO it would be foolish to commit to any cash return at the moment.
We don't know what the final situation will be re implementation of the next phase of SH devlopment (we cannot just assume it will be as per the previously advised development as there is now a new top dog runnibg the show), nor do we know what development pressure will be exerted re the Gas Management Plan, nor do we know just what volumes of SH crude will be allowed into the export pipeline and thus gaining a much better $/bbl, nor do we know the outcome of the revised CO and PO determinations.
I would say that every penny should be retained to help cover these issues.
Surely the last thing we would want is another Share- or Bond Issue to cover urgently needed Capex requirements forced upon us by SOMO?
Management are doing what they can. Unfortunately SOMO and ICG have yet to engage with them on a serious basis. They are carrying excessive cash in light of current cash generation and balances. They should return that excess to shareholders via a buyback. That be my view. While I would have preferred them to act when the stock was below £1, I'm happy to increase my relative stake, without deploying additional personal cash resources, at these levels. If management are confident, they should do it. If they don't, that says a lot about their confidence.
Unfortunately 'moping' at home.
Just back from two weeks in Dubai and about to go out again to southern Europe, seeking the sun.
Because I'm a narcissist.
Do it a lot. And as a Brit, which I am, you should understand my need.
Anyhow, my larger point was about the Board and the way it's conducting its affairs right now.
Because that's about shareholder confidence in their direction of travel.
And no, it's not just about whether they should squander precious cash resources in rewarding loyalty...it's also about where they go from here.
Got a view?
Straycat, I don't think the non-executive Board have had much to consider of late. Twiddling their thumbs the lot of them. Management, however, is doing a very good job of controlling costs and managing to eke out a little free cash flow. Well done management and operations staff. That's entirely obvious. Considering the severity of the situation (to belittle it is totally disingenuous) they are doing what they can. Discussions with SOMO re contracts and FDP remain ahead. Let's see how they do. The Board are hardly heading anywhere at the moment.
The fact that local sales are the only thing keeping the lights on will not be lost to SOMO/ICG. If they move to halt those then it really will mean they want to go nuclear... It won't matter whether there's $86 million in cash or $50 million in that case.
So your single point is that you don't want the company to distribute any cash. Ok. I disagree. Was that it?
The weather? Much more pleasant than London earlier in the week. A nice time in the sunshine. Current temp about double London's. The beach looks very inviting... How about you? Traveling as well or moping around home?
Any buyback or dividend should wait until the contract picture is completely clear as well as a plan agreed to past unpaid invoices, in my opinion. Personally I am not in favour of buybacks.
Retain all the cash and keep belt well and truly tight.
Besides, local sales are not guaranteed to remain at current reported levels and we cannot be certain of the pipeline re-opening any time soon. (I was completely wrong last year suggesting that the closure would be temporary).
Actually I would prefer that the company diversifies the business, but that is another topic for discussion perhaps.
'Were there questions in your ramble?'
What the f*ck's wrong with you?
I was opening a discussion about whether the Board were /are heading in the right direction.
And I'm interested on other bbs' opinions.
Don't like that do you?
ValueS may be supportive, but the rest of us just need to get to grips with our current environment...and looking for an informed debate.
In my view, capital returns to shareholders would be plain stupid right now given the current position GKP finds itself in.
I note you posted your opinion at 23.09 last night...what's the weather like in the US right now?
Straycat, thoughts on what exactly? Were there questions in your ramble?
"Oh yes, and we’re sat on an oil field with a twenty eight year expiration date." Well, this bit is wrong but that's been pointed out already.
Your item 6 is where a big chunk of value rests / is at risk. It's a particularly big chunk because it contains a lot of cost recovery.
Re 7, yes, they will consider investment (as opposed to the current minimal maintenance capex) when/if things (contracts, arrears, exports) are resolved to their satisfaction. Not before. "these are choices GKP will make whatever the ICG think or say." A Field Development Plan requires an agreed contract (particularly with respect to cost recovery). Both go hand in hand. The level of cost recovery in the contract scopes the size of the FDP that can be agreed. If the discussions, when they start in earnest, break down fundamentally (e.g. low cost recovery envelope in the contract and large FDP expected) then we are really in trouble. Sure, we have no debt. But we do have a current equity value to lose. What would that be worth if there was complete and utter disagreement with our employer? If you've no business then the existence or not of debt doesn't matter that much.
So, as I've said before, everything is at stake. Luckily, we are still likely best-placed to develop our field (just as the other APIKUR members are with respect to their fields) and so replacing us isn't a sensible option for SOMO/Iraq...although it doesn't have a zero probability should discussions get protracted and ugly.
Absolutely agree with ValueS. They should return half via a buyback.
If YOU were running GKP right now, the very last thing you'd be doing is returning capital to shareholders..
GKP have some difficult terrain to traverse.
And giving up cash to shareholders right now would be a derogation of duty.
Cash conservation in the current climate is king.
Cash amounts to survival and eventual growth, pending decisions outside of GKP's control or remit.
Either way, as shareholders we need to understand its value in the Balance Sheet right now.
You play what's in front of you.
And what's in front of us is change.
We just need to accommodate that proposition without being afraid.
What does it matter what we think they should be doing. The BoD won't be reading this board, that's for sure.
Imo, they should husband the resources/cash until the way ahead becomes clear.
The IOCs are just pawns on a political chessboard, as I am sure the BoD are uncomfortably aware.
It's not sitting there doing nothing if there's another political shift and local sales are curtailed, so prudent to have a war chest, but I agree it would be nice if some of the surplus came shareholders way💰
"Are the Board behaving in shareholders' best interests..."
If the board returns excess cash to the shareholders, then yes! There is no need to keep $86 m + sitting in the bank doing nothing. This is the shareholders money, and I am sure they'll find better use for it.
Best Regards ValueS
Thanks for sharing this, good afternoon.
This for me is the most relevant thing for us to be hearing right now re: arriving at the new settled normal, and gives me grounds to be cautiously optimistic. If the translation is correct, APIKUR have had a meeting - I do wish more context would have been given (I.e. when, after Ergodan?) But also appreciate we shouldn't expect a blow by blow account.
I am encouraged that APIKUR are being included and recognized (my fear was FGI might play hardball and seek to delegitimise them by omission/ignoring, especially after latest FGR comments abo8lut APIKUR "meddling in internal affairs" etc).
Reference to a "coalition" seems ambiguous, might allude to political factions and a coalition of the willing...
I think it is positive. Things are happening in areas which are most relevant to pushing things forward towards the new normal: APIKUR/IOCs/FGI/KRG.
The GKP fundamentals are attractive and remained unchanged (at least to me). Whichever way the PSC falls/is interpreted, I still think there is sufficient time for GKP to realise value - pipeline or not. Market doesn't seem willing to value this below a quid at least for now.
Waiting for AKIPUR update and the all-important GKP RNS...
Wishing you all, all the best.
So we can all assume the pipeline didn't open today ?? Why do people post garbage and get people's hope up !!
Only 17 months to go