The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
I would be ok with a buyback, provided it was set at a higher price than the prevailing share price. Tax rates on capital gains are lower than tax rates on dividend income.
I would also like the board to do more to talk up the value of the company (if they believe it to be under valued) and properly address the excess capital situation in a way that benefits shareholders.
For example, San Leon Energy carried out a very successful and well received share buyback 15/18 months ago. They did this by way of an open tender to shareholders and the buyback price was set at a price much higher than the then prevailing share price.
So could GKP re-purchase say 5% to 10% of the shares at a price say 20% higher than where it is today. Unless, of course there is something else going on the background!
I find it interesting that the driving force behind SLE is Martin Hughes (the "Rotweiller") and perhaps the board or one of GKP's larger shareholders could adopt some of his tactics to achieve greater shareholder value.
Not the PPE that the government failed to provide the NHS but Property, Plant and Equipment owned by GKP and used to produce 38000 BOPD.
I reviewed the 2019 financial statements last night.
We all know the current cash figure is c. $160m and that KRG owe $73.3m but GKP also own (not leased , not borrowed) actually own $407.6 million of PPE.
The disconnect between the assets owned by GKP and its current share price is doesn't make sense.
One more point from the review. I have no problem with the $100 million debt but I have an issue with the cost of it. It cost GKP $11.2m in 2019. Or to put in terms that maybe shareholders would prefer, it costs us $0.052 cents a share, call it 4p. That is 4p I would like to see added to the next dividend and not given away to bondholders.
I also believe $6 of the $35 relates to depreciation(which was $72 million in 2019 and 12 million barrels of oil sold).
So the true cash cost is $29.
it would have been more helpful if JF had stated that GKP's costs per barrel sold were $14 or $8 in cash terms. That is the figure GKP control.
Hello all long term investor but first time poster on GKP.
CCC, I was quite surprised by the $35 break even price which is not helpful to the business case at present.
I looked into it and using the 2019 financial statements, came to the conclusion that it includes the $21 discount to Brent also mentioned in the 2019 financial statements.
If true and I am confident it is (and I have the figures) it seems an unusual way to express commerciality but is also leaves little scope to bring down breakeven to the point you suggest
To be fair to the board, they have put a floor price of 2p on any conversion which caps the 'give-away at 21%. I have seen many toxic convertible facilities where a significant % of the company is given away.
However, the board has implied a valuation of £48 million on commencement of production; so why not put a conversion price of say 4p into the £2 million facility.. After all, if an investor tried to buy 21% of the company on the open market today, I am quite sure the price would escalate quite quickly.
I would like to see a board that takes meaningful action to support the implied valuation not constantly undermine it by agreeing a 2p conversion price and then presenting that as a good thing (14% higher than prevailing share price). But actually 80% below what they are on record for believing the implied valuation to be.
B
Hi t_s
I understand the !.7p as the par value but coincidentally 1.7 p was (give or take) the prevailing share price at the start of the week so I used to calculate the cost of issuing 12 million shares to arrange.
I think we have reached the same conclusion in terms of number of new shares that may be needed and all I am saying is that should Kefi not repay the loan in full then up to 117 million shares will be issued to the lending shareholder.
My concern is that the £2 million funding is being presented as a secured 1 year loan, but it is also structured as a convertible facility that could lead to 21% of the company falling into the hands of the unidentified shareholder. Kefi do not make that risk clear in the RNS.
B
Afternoon all, first time poster and a modest shareholder in Kefi.<br /><br />I have spent a few minutes unpicking yesterday’s RNS. <br /><br />The £2 million loan is interest free but KEFI will issue 12 million shares at 1.7p to arrange (or cost equivalent £204k).<br />The drawdown fee is 5% payable in shares at 2p so 5 million new shares will be issued.<br /><br />The lender also has an option to convert half or all of the £2 million facility at 2p so a further 50 or 100 million shares needed.<br /><br />So, in summary, the board want the shareholders to approve the issue of up to 117 million shares to access this loan and convert it back into equity (it would be remiss of the mystery shareholder not to convert it and how would Kefi repay it anyway). <br /><br />Or, to put it another way, Kefi are asking us to give away up to 21% of the company (based on 552.7 million shares in issue) to access a facility that will also be secured against some unspecified assets of the company.<br /><br />I think our fellow anonymous shareholder is getting a rather good deal at the expense of the remaining shareholders and will be enthusiastically voting this deal through.<br /><br />And that’s before the second optional facility for the same amount (and perhaps the same terms?).<br /><br />I have to say I am not impressed by our dear leader. <br />