Value for money #13 Jul 2020 16:27
GKP was admitted to AIM on 8th Sept-2004, having raised $107,880,000 in the process (the 2004 Accounts also show what money the original partners / founders brought into the business).
Checking thru the Annual Results from 2004 onwards, the total amount of money that various investors have put into GKP can readily be found.
Over the years there have been many share issues, and a couple of major bond issues, to fund operations, and we should take a moment to consider the total historical funding picture.
The total investor funds raised from 2004 to the present are approx. $1,375,736,000.
In addition, of course, we also have Oil Sales Revenues that were earned – and consumed – in normal operations. Total Oil Sales Revenues for the same period were approx. $1,002,745,000.
In total, therefore, we can see that from Sept-2004 thru June-2020, GKP had incoming funds totalling approx. $2,378,481,000.
After 15.5 years that figure should give “loyal and long-term holders” quite some pause for thought.
The current cash holdings are approx. $142M ($5M coupon will be paid on 25th July and, assuming June’s sales are paid by then, that sum should be down to ca $139M by month’s end.
$73M or so is still owed for Nov-19 thru Feb-20 sales.
We also know that currently invested, but still-to-be returned Capex (to be paid over many, many years in accordance with the PSC Cost Oil terms), is somewhere in the region of $400 - $450M.
A Dividend of $49.1M has been paid and some shares have been repurchased, at a cost of $50M (money down the drain IMO).
Current bond debt is ca $100M (repayment is due latest 25th July 2023) with a further $200M being available (rate static, but issue price to be determined) as and when required.
So, summa sumarrum, what sort of picture does this paint?
Yes, of course on the positive side the company has a licence to exploit a heavy oil discovery with X barrels, proven and projected, and the licence still has N years to run.
But, all that money has been spent and the field output is still a tad less than 40,000bopd. The two production facilities are not getting any younger, and further substantial sums will need spending on these and on the older wells.
Major, unresolved issues remain to be dealt with – in the next couple of years mainly Gas Production, Sour Gas Disposal & Water Production, and these will cost a LOT more money. Don’t forget also that any future FDP that is written to include the Triassic will need well-filled pockets – and very competent drilling- and subsurface management teams.
So, let us be honest about it all: GKP management has not proven to be the best.
The shares have not been good for LTHs – but they have been particularly good, and continue to be good, for those who trade on the naive optimism of smaller, retail holders. Here I include those Institutions, who trade the pants of it within the notification limits but who are portrayed by some as wiser and more constant “good g
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