Member Info for Boyobach

For the upcoming week, it looks like G will have a tough job reaching and conquering 194. One trend and a separate resistance level to beat:
https://invst.ly/c5lgr
Looks impossible unless OP and/or buybacks provide the necessary upward pressure.

Ancient according to Google: 11th April (Taq Taq) a year ago (submits plan)

Boyo 188
Hasiba 198
Hawkey 200
broadland 205
ocelot 215
Withoutt 250

An overnight anomaly with data for DNO (Oslo Exchange) makes this weekly comparison chart of the three KRI producers look a bit odd but, nevertheless confirms that G gained slightly with respect to the others and Brent over the five day trading period: https://invst.ly/c5hey

The routine G v 3x Brent also confirms the same picture and that G is just 4.5 above that particular reference: https://invst.ly/c5hd7 . We are, of course, looking for a substantially bigger margin than that if it is to match its performance leading up the FY results, where the margin was 33.

Buybacks were not a factor during the week and it may well be that these have now ceased even though a substantial proportion of the budget appears to remain. Ocelot has suggested G’s potential concern about liquidity in the stock as the reason. If correct then it does beg the question as to why they bothered at all - to which the simplest response is to point out the 8% gain in sp relative to Brent that has occurred since BBs first started. G at that time was -15 compared to 3xBrent. So, without bbs, todays sp might easily have been around 175 or less. Provided the sp rises from here, they have also acquired shares at ‘value accretive’ levels for use in employee incentive schemes.I daresay that some would quite like to ‘average down’ the per-share cost of their holdings from around 210p.
Here’s a last view of the comparison since bbs started, I won’t return to it unless bb’s resume before the announced end date on the 17th: https://invst.ly/c5i5f

Looking at the usual group since OP peaked in late April we can see that G about the same relative to OP as it was at that time and that it is performing about average as far as that group are concerned: https://invst.ly/c5i86

Cheers Ocelot - makes sense now.

I don't quite get the logic of that Ocelot -if they were concerned about the float then they would have known that the $10m budget was too much - they can never have expected the sp to go much over 200. It does seem that there could be some bb's today as the reaction to the $2 fall back in OP was countered early on.

According to the G website only £4,264,772 of the bb budget has been spent up to Aug 28th. Assuming the $10m budget is equal to about £8m that means that nearly half - about 45% - is still available. However there's been no sign that it's likely to get spent by the 17th - just over a week away. Maybe the judgement is that the objective has been fulfilled although it has not significantly reduced capital in the company and it would be a bit disappointing if the current sp is now regarded as reasonable in value terms. Perhaps they've decided that they need the cash for something else?

190 was more of a support level as the price fell (although these often do present resistance on the way back up). However the main upcoming upward points of resistance seem likely to be at 194, 197 and 203. I think 197 could prove to be be a real challenge unless OP picks up to $63+ or BBs resume with some sense of consistency and purpose - which has been surprisingly lacking. However, OP will rule the day - if Brent was $70, for example, then 210 would probably be plain sailing, with 215 and 220 slowing things down. But I think we are unlikely to see $70 oil for a while.
https://invst.ly/c1vsw

What ever happened to the old G that used to really take off to the tune of 9 or 10% ? The old G was a highly speculative share - with real promise of fireworks if Miran had taken off. That spontaneous enthusiasm has all been killed off now - it's a better understood and frankly rather conventional proposition now. The market does not believe that it will return much more than the cash it is set to generate in the next few years - which is not without risks - so that is how it is priced.

Nothing further to add for this afternoon, G:OP ratio up a bit to 3.11x (based on LCO, which flatters slightly compared to OANDA) but sp still about 8p below a satisfactory level by recent historic standards.
Last 5 days G/GKP/DNO v Brent: https://invst.ly/c1ony

With G popping up to the 190 level it’s perhaps worth a quick look at the long term picture of G v 3xBrent rather than the day by day: https://invst.ly/c1283

From this we can see that G has broken through that orange downward trend that was casting something of a shadow. We can also see where the 3xBrent line has touched 180 (ie when Brent has been at $60) in the past and what the G sp has been on those occasions. January offers a couple of good examples, where the sp managed 197-203p. So that probably gives a fair indication of where our short term target might be until there’s positive news to push it further or if Brent continues to climb on the EIA or other OP news. It seems the US EIA figures are always taken a bit more seriously in the industry and the media than those of the French based IEA, btw,

Buybacks may yet play a part, of course, but I would not count on it given the lack of activity over the last week whilst the sp was markedly lower.

Ha! Well said Hasiba.
Could you nudge Canaccord ? I think they still have over £3m to spend, the clock is ticking, the price has gone up and they haven't done anything for a week

Here’s a snapshot of G v 3xBrent this morning just to illustrate one way to interpret it.
https://invst.ly/c0slu
The height of the pink line is the positive lead of G’s latest price above 3x Brent, which in this case is 190-181 = 9, which is also what you get doing the ‘quick check’ calculation:

G’s sp, rounded = 189 = A
Brent, rounded = $60, x3 = 180 = B
A-B = the score = 9
0 to +15 is average,
+15 and over is good,
(+30 excellent)

Yes bunks - OP up nearly $3 since yesterday’s close and G up 5p - that’s ok but not great in the grand scheme of things. 9p would have been nearer the mark.
In fact the G:OP multiplier dropped back to 3.06x during the day from a high of about 3.15. Never mind - up is always better than down and why is GKP inexplicably down?

Here are the last five days of G/GKP/DNO v Brent(LCO): https://invst.ly/b-k9q

As far as I can see OP is up nearly $2 from yesterday’s close, which would logically translate to a potential 6p G increase - very welcome but nothing too unusual. However, G v OP has been strengthening over recent days to about 3.14x which is certainly a positive.

Here are the last five days for G/GKP/DNO v Brent(LCO): https://invst.ly/bzuz7

GKP has issued an RNS saying their initial $15m phase of buybacks is complete. G meanwhile still has some way to go until the 17th deadline. Although activity has apparently paused over the past few days, it did appear that BBs might have been stabilising G’s price against the fall in OP this morning, although GKP, now standing on its own feet, was also firm .

Looking at the period since G’s bbs first started: https://invst.ly/bzuxq it is clear that G and GKP’s sps are up by roughly 10% with respect to OP - both are slightly up by around 2% over the period whilst OP is down by nearly 10%. For G, the beneficial boost of the buybacks occurred within the first phase whilst the second phase has so far only maintained the improved ratio to OP as the latter has fallen.

A year ago Brent was $20 higher - that’s equivalent to +60p on G’s sp.

Quite agree DHC - I never rely on charts. But I do like to know what the form is.

My posts always clearly labelled - easy to skip.

G is actually very straightforward - but I find it worth figuring out what the main drivers are, especially when I've a few 10s of k at stake. ATB

Utterly correct DHC, market valuation - sentiment - undoubtedly holding G back.

It's sad to say but from an historic trend perspective, things have never really been much worse for G than they are at the moment. Here’s an ‘all-time’ chart of G v OP from the Vallares RTO to today (Brent, as usual is green) with the lowest trend line in red:
https://invst.ly/bzqxf
Also in red are a horizontal and vertical pair that highlight a point in 2015 when the sp was roughly the same as today. You’ll notice the OP on that day was a lot lower - about $37, in fact. That gave an sp:Brent ratio of over 4.7x . We can only dream of that kind of ratio today, as it would put today’s sp at around 280p! To be fair, that was before the state of Taq Taq’s reserves fully emerged.

I agree Whitehat. Debt and the rapid decline of individual wells certainly seem to be the main problems with shale in the US and the reason they are overproducing at rock bottom margins. It’s a downward spiral which only ends when producers go bust. The majors are better placed to match their production to demand at a sustainable price.

Yes Leem - All I would say in defence of G (not a recommendation to invest in it) is that the company has no control over OP. It also has to maximise production - it cannot, for example, choose to cut back when global prices are too low. So Mr Higgs’ hands are tied in those and many other respects. They are already targeting growth and ‘value accretive’ use of capital - what else would we expect? G currently has only one customer and that’s a highly significant disadvantage of being a KRI-only company. It is probably one reason why the market is reluctant to price G higher than it does, other reasons being historic disappointment in terms of investor value destroyed, imprudent/unsuccessful exploration campaigns, big write-downs and failure to develop supposedly high value resources. People perched on the edge of their seat waiting for G to shoot the lights out are almost certain to be disappointed in the short term - especially as we head into an historically weaker season for OP at an already soft price. I'd have to agree, it isn't a rosy picture.

Hi Hawkey, I’d like to engage with a few of those ‘no one knows’ questions, because I believe we do know:

Is Shale a busted flush? Almost certainly not. It may be increasingly uneconomic for highly indebted producers but the majors do not have that problem and the likes of Chevron, Exxon and BP (apparently) are into it big-time: https://www.ft.com/content/518bd114-2627-11e9-b329-c7e6ceb5ffdf

Don’t forget that the US has opened up pipelines that have now improved the routes to export - pushing WTI up and pulling Brent down so that the gap between the two is now only $5. Indications seem to be that there’s going to be plenty of oil in the market for a few years. Hopefully G’s margin will be that much better than the shale boys.

Will Iran, Venezuela oil stay off market? It doesn’t seem to matter does it?

Will Opec / Russia keep supply tight? They haven’t very effectively so far have they? Also, shale’s availability sets both a floor and a ceiling on OP - too low and shale switches off, too high and shale switches on.

Everything I’ve read implies that shale will be a significant factor into the middle of next decade at least.

Will lack of investment worldwide in oil [exploration] over last decade start to show through?

Whilst lack of exploration may hit one day - it probably won’t for a good few years, especially as fossil fuels are phased out in developed countries. There’s loads of the precious and irreplaceable stuff being pumped furiously because the only way to make a decent buck at the moment is by means of volume. It’s totally bonkers and one of the obvious flaws with a commercial and capitalistic approach. At G there is a similar problem: as investors we look for higher production to mitigate lower OP.

The KSA can’t produce enough oil to kill off shale - because as producers go out of business then shrewder operators (the majors) step in. The only glimmer there is that the majors would like to raise the price and can theoretically afford to conserve the resource to make more from it over a longer period.