Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Crude oil tankers by design travel the slowest through the water most only doing 12-13 knots, so by not using the Red sea can actually add nearly 45 days to a trip to Europe, or a round trip to the gulf for more crude of 90 days.
Not being overly highlighted yet but will lead to a Chronic crude shortfall if it continues which it is likely to do. Iraq wont get any where near any OPEC quota with this happening, so yet another strong reason to get the Turkish crude pipeline flowing to Europe.
https://www.cnbc.com/2024/01/23/more-tankers-divert-from-red-sea-and-its-another-boost-for-us-oil.html
Lot of crude oil shorts closing , believe they think its time to go bullish, lets hope the shorts here decide to try a hold out a bit longer. Might see rises from several directions at once then..
1. Agreement from Baghdad, contracts in effect recognised as legal.
2. Crude oil prices rising due to Ukraine attacks and Houti attacks.
3. USA soldiers killed by drone attacks...increased tension of escalation and further crude oil price hikes.
4. Rapidly increasing crude shipping rates causing all gulf products to be discounted against western and other global crudes by $2 a barrel.
5. Turkey wanting agreement and crude pipeline flows, and holding out on essential water for Iraq flows. Prec-ondition for other investments.
6. Increasingly large financial losses for Iraq with no crude pipeliene flows..nearly $40Ma day now.
7. Delays on shipping as well as increased costs as shipping taking extra 2 weeks going around Afrika...major loss of crude revenue for Iraq, as schedules slip.
8. IOC and Kurdistan pressure, and suppling local markets to keep them ticking over and unlikely to go bust.
9. Already low shareprice, with a lot of shorts being still held by shorters which will have to be closed.
10.Shareholder expectation...Large percentage of "trapped bull", so unlikely to sell until decent return on investment and time realised.
11. Iranian attacks in Iraq has forced politicians who favour Iranian views to pick a side , and they have come down as Iraqis, so now seeing more political will coupled with above necessity to get Kurdistan Crude flowing again to Turkey which SOMO will control.
Certainly looking good for GKP...not a time to sell.
However from the post this quote is new and important. In effect they accept the need for enhanced cost re-imbursement for the Kurdish oilers. Knowing Iraq, bet this is an opening offer??
"Baghdad recognizes that the cost of production is much higher in Kurdistan than anywhere else in southern Iraq and as a result something needs to be done. There are several issues that need amending in the budget law in order that the federal government can pay the KRG share of the budget,"
More confirmation on what we have heard so far...Still some sticking points but certainly moving in the right direction. What we don't know is the IOC's response.
https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/natural-gas/012924-crude-oil-selling-price-from-iraqs-kurdish-region-in-focus
Or put another way,
How long can shareholders bear no divis and crude sold locally at $30 a barrel last???
Going by recent price action on no concrete news and definite signs of stock accumulation at these low prices I would estimate a very long time indeed.
This is because I would view the chances of getting the crude flowing again before late spring at better than 50%, but the potential to stock prices and returns if it does is higher than 100%.
Going to be plenty of farmers complaining in a few weeks in Iraq when the crops start dying through lack of irrigation. The generous water flows from the Turkish dams has ceased.
Hi Putup,
I don't believe the share price reflects selling modest volumes at $30 a barrel over a prolonged period. This is because the price of crude oil is rising due to shipping and warfare. in the gulf and at Russian terminals. I dont think it will be $30 for much longer.
So I believe market believe crude prices will continue to rise. Also your question did say a "prolonged period", so must not forget the huge amount of money that our company is owed for crude exported and sold right now. That also has a major bearing. In addition the pressure that Turkey is now bringing to bear on Iraq must not be underestimated, as they have a major interest in getting the crude flowing again.
You cant really single out just $30 a barrel in your question and ignore all the other intricately linked factors. Just look at the amount of money owed to our company its half our share price.
However I believe its sustainable for a very long time, much more than Iraq can bear the losses for.
Due to disrupted and risk of getting crude from the gulf, SOMO along with other local states has had to reduce the purchase price of all its crude by nearly another 2 dollars a barrel. This is due to the high shipping costs and will continue or get worse.
https://oilprice.com/Energy/Oil-Prices/Red-Sea-Disruptions-Force-Saudi-Aramco-to-Slash-Prices.html
Thats a good few more million $ a day reasons to get the Turkish pipeline flowing.
Also noticeable that there is currently high demand for heavy crude currently.
I'm not party to any paid subscription , however TW has come out in the past as being right more times than not, what concrete reasons does he give for advising his members to sell here at a loss.
So losses must now be of the order of $40M per day or even more, and an eye watering 1.2B a month. Likely to increase further as crude prices continue to rise with every new successful attack.
We know the governments are making small steps towards a export solution, well this might just incentivise those donkeys to make larger ones.
Brent crude is most certainly on a rise already at $83.5 per barrel.
https://oilprice.com/
These rises are coming from two separate directions.
Firstly Ukraine starting to hit and blow up Russian oil and gas export facilities, lets face it , a tank farm is a pretty easy target and their remote attack drone range and technology is growing very fast indeed. (Should hit the electrical sub stations really as much longer lead times). Clearly this reduction in supply is having an impact and markets are fearful as Russia has lots of facilities that are similar and unprotected.
Now last night despite attempts of USA and UK to prevent red sea/gulf attacks we have a tanker on fire from just such an attack. Clearly missiles are coming from Iran, from where there is no shortage, and USA wont want to attack them.
So this export route is becoming dangerous and much more expensive.
This points to more haste in getting the Kurdish crude pipeline to Turkey flowing. Iraq's economy was suffering by a $35M per day loss, before crude restrictions and jump in Brent, coupled with unused pipeline fees of another $1M a day
I have been combing the company house accounts of Dermatonics, which in essence was a Cornish one man band who has managed to get a couple of products marketed in Boots and superdrug. It does throw up questions , whether as I expect SBTX will continue to market these products and whether the brand stores are willing to free up more shelf space in order to market our own. They might say no or have a lot more cost involved. I was under the impression that the company being bought was larger with a lot more reach and influence, and the purchase price does seem to be on the high end. Seems Mr. Market agrees.
I agree with your reasoning chief that warrants are a mixed bag, however I do see a couple of good upsides to this strategy.
Firstly by offering this incentive it keeps interest payments lower than they would have been so preserves cash flow for longer so potentially no need for further rights issues.
Also having a 20p excise price says that there is a good chance that it will be achieved and exceeded. If we take Mr.Markets view on what the company stock is worth right now its 14p a pop. That's potentially a great 30% or more uplift to exceed the 20p excise price and in addition the option to purchase is only there for a couple of years .
With the new acquisition gives the ability to put our stock at the fore front on the shelves, and in effect gain a lot more marketeers by having the acquisition. Great to see it coming to pass.
Dont think we can read much into yesterdays initial meeting between the IOC's and the KRG as reported from the KRG's spokes person alone. This is bound to reflect one side of the discussions, although it was reported from the IOC's that they require hard numbers agreed by SOMO and its now puppets the KRG .
They ask for a timely recommencing of the crude pipeline but do not provide hard data and figures to do so. Don't even know if they have pencilled in a hard timeframe either, not that its not been agreed but just not mentioned.
I expect Iraq to come begging Turkey for water from the dams soon, but expect they will this year be disappointed as quite frankly they all act like overpaid idiots, setting themselves up for grand meetings but after sitting on hands for months despite saying they all have full accord cannot even produce any acceptable or agreed figs or timeframe...Lol rant over...hope a hell of a lot more was said than actually reported . Be nice to hear something from the IOC reps, also a type of joint statement.
Nice post Theoryman, why is Badhdad so worried about the fixed costs and having a price per barrel upper limit. Unless they don't want to actually reward heavy bonus/stage/finders fees/ or other clear payments that everyone in the west would see a clear bribery going to Kurdish officials, but being reclaimed as expenses from Baghdad. SOMO does it, and they know Kurdistan does it as well.
Once you see that it does make things easier to understand. Their own corruption is actually hindering exporting crude via the pipeline. We know Todd was most certainly not whiter than white andexpect all the IOC's are the same...its how business is done in Iraq.
With the IOC's being asked this tomorrow, you can bet they have plenty to say. I suspect they know three times as much on crude production that all the SOMO board put together.
We will welcome your insights and suggestions during these discussions,” read an email sent to the IOCs by the ministry and which Rudaw English has seen.
I actually don't expect breakthrough news to come out of the meeting tomorrow, suspect most sensible investors here also view it the same. However it is the first meeting in a while and clearly in this game of brinkmanship Baghdad as we expected has had to change the amount of contractual payments, or at least put through the bill to allow it.
However its also not out of the question that terms may be acceptable to the IOC's if an understanding and commitment to regular and prompt payment is achieved. Might also be a staggered backpay mechanism for monies owed moving forward. So its not inconceivable that exports start again and we receive additional payments for our arears. Investors who like dividends like myself would be happy with that.
Also feel that GKP has slipped off the radar for many uk investors after such a long period of inactivity, so once we see some decent RNS's, confirming agreements and exports I do think we will see some piling back in here which might give flashbacks to the initial oil strike days.
I certainly am not complaining about market apathy currently with this stock for above reasons but am utilising the opportunity to enhance my investment. Lull before the storm comes to mind.