focusIR May 2024 Investor Webinar: Blue Whale, Kavango, Taseko Mines & CQS Natural Resources. Catch up with the webinar here.
The major difference now from 3 years ago is while we wait, we’re accumulating significant cash.
Before a clock was ticking as we burned it. A lot of that development was also through Covid. Worth keeping in mind.
Price always drives the narrative. There's understandably a strong sentiment hangover from the exploration and development stage of the company. It was bumpy.
Looking at the selling into low volume starting in June to now, I'd say North Energy ASA has given everyone an opportunity.
It's worth stepping back and looking at TXP with fresh eyes now it's cash flow positive.
IMO,
The funding will be signed off - No brainer.
The CAS-Deep perfs will perform well:
Thoughts from the prior test results:
Pressure: The gas pressure at the bottom was 4,550 psi, which is only 4% lower than when the well was closed. This is a small drawdown, suggesting the gas is flowing easily.
Flow rate: The flow and pressure data and estimated the well could produce 390 million cubic feet of gas per day (MMcf/d) if the pressure at the bottom stayed the same.
Boundaries: The pressure data didn't show any signs of the gas reaching the limits of its underground reservoir.
Skin damage: The well didn't seem to have any problems near the bottom (the sandface) that might be restricting flow, which is good news.
Cleaning up: The pressure data suggests the well might still be getting rid of some fluids or debris that were blocking the flow a bit at the start, which could further increase production in the future.
We could get an RNS with all three in March.
60mmsfcd +
>20mmscf potential from CAS -2 & Cas-3 drilling underway.
Significant resource upgrade from the drilling
Before or after:
Licence blocks approvals and asset swap deal. - Huge, highly prospective acreages adjacent to new proven play types...
Possible gas price negotiation
Thought it good myself.
The loan facility isn't penciled into cash flow estimations until the end of Q1.
The bank is the same that currently extends a credit facility - I can't forsee any problems there given the FCF the company is now throwing off.
It all just happens on T&T time.
The NAV value gap will close with time. Casucudura is still in the ramp up phase.
TXP has never been in a better place.
Absolutely, Elgin. I've been here a few years now. Check my history.
The traders have recently been jumping all over this on the regular pump and dump, were going to the moon and such like nonsense. 9p to near 12p is a nice 30% + profit for them.
For apparently such sought after drilling locations ( If you believe anything Gil has to say anymore).
Zero has transpired in a long long time. It doesn't add up.
Guyana. Given up by our major partner and now under military threat.
Namibia. The adjectnt licence holder just gave up all rights due to ZERO interest. Makes sense.
South Africa. We just have just given away a significant portion of what apparently is a sought afterlicence to help a deal (Makes complete sense)
Check the accounts and see how much Gill and co. are paid.
It will make sense after that.
Be careful.
Roxi,
My speculation only,
The IOCs will end up with Iraqi contracts; it's just a matter of what form.
Previously, Baghdad had no immediate motive to flow the ITP, OPEC quota, political leverage, etc.
But things have just changed overnight. The new Iraq budget is very demanding, so much so the IMF debated it; you can watch it online.
The only way to fulfil it and avoid going bankrupt was for oil to stay above $70 and the 400K BOPD to flow from Kurdistan through the ITP. This just indicates what a fine line the budget walks.
Now, for Baghdad,
a) Iran just seized a tanker taking oil from Iraq to Turkey
b) Has just struck Kurdistan with missiles (It's also alleged they may have killed a Kurdish Oil Tycoon, Peshraw Dizayee)
c) Iran has just stopped supplying essential gas to Iraq
The seizure of the tanker puts a question mark on reliable oil exports/revenue via sea, and the gas supply was readily needed. Iraq's situation has just changed overnight, and they immediately have a motive to get the ITP flowing to safeguard the budget.
This should lead to more expedient and win-win negotiations with the IOCs.
Regarding the payment, Iraq or Kurdistan will pay either from the Iraq or Kurdistan budget, depending on the form of contracts issued and the new oil and gas law - This will be historic for Iraq, and like Dana Gas pre Kurdistan's independence, Iraq will want a clean legal slate on the licences.
Interestingly, Iraq needs locally sourced gas as a priority. Dana Gas, who won their case, was also allowed to continue and develop the field under their subsidiary, Cresent. The gas field is in Kurdistan, but the development contract was Iraqi.
Genel's case also regards gas, which Iraq needs. In fact, it's one of the most significant onshore gas resources at 15 Tscf. Iraq will want the case cleared so the field can be developed. It's now a matter of security of supply for Iraq.
All imo.
LOTM,
Ah, that makes sense. Many thanks for the clarification. Huge FCF yield in that case.
I think the arbitration has been kept quiet due to size and the legal council. "You can say XYZ".
To get an idea, it's good to work through the annuals from 2015. The fields proved up 15Tscf of onshore gas. Gigantic.
The similarity to the Dana gas case is marked.
Agree that Genel is a safer company than GKP.
Its cheaper on a EV per bopd bases. Has less exposure to Kurdistan. $400+ in cash and the court case (From a legal standpoint) looks promising to say the least... The amounts are massive compared to the market cap and EV. The ITP shutdown has created a huge opportunity.
Hi LOTM,
That's as I understand it also, but the last RNS stated “ Genel’s entitlement share of Tawke licence production in Q4 is 13%“
So I worked off that. I think it may be something to do with full production and the situation. One to ask in the meet company presentation on the 24th.
Credits to a user on the GKP BB. Copy Paste.
"DNO reports a Q4 trading update this morning. Gross production in Kurdistan averaged 65.8 kbd and compares to the 65 kbd guided on 19 Dec 2023 (link). With December production likely around 90 kbd, DNO is well positioned to continue the strong ramp-up q/q in Q1, all else equal. All Kurdistan sales are local with payments in advance of deliveries. We estimate that DNO’s Kurdistan business will generate approximately USD 100m of FCF in 2024 if local sales remain at 65 kbd.
from my broker re DNO, hopefully good news for us as well"
imo, higher sales rather than lower. The tanker that Iran sized was transporting oil from Iraq to Turkey, showing Turkey still has heavy demand; some must be going over the border.
Our last entitlement was 13%. If production is still at 90Kbopd then FCF for DNO's Kurdistan ops would be $138M.
As they operate the licence, ours should be more or less 13% of that. (I'm going to presume, given the Red Sea situation, Somaliland will be put on hold and the court case is in Feb.
So around $18m of FCF or £14.4m
Given the Enterprise Value is £75m, that's a 20% FCF yield, which is impressive on its own, nevermind the oil is sold at $35bbl, and production is about 1/3 of what Genel has.
Arbitration case,
After a few mentions of the arbitration case, I took a look. I couldn't believe it's not mentioned more, but the company has kept it quiet, I presume likely due to the amounts involed and sensitivity
Not sure if anyone has posted this article from Reuters?
https://www.reuters.com/world/middle-east/genel-energy-start-arbitration-claim-against-iraqi-kurdistan-2021-12-10/
Genel spent around $1.4B on the licences. Adjusted for inflation $1.8B. So
£1.44B to recover costs. That excludes opportunity cost.
Interestingly, Dana had a very similar case in the same court. They won $2.24B
Article - https://www.reuters.com/article/idUSKCN1BA26Z/
Once the case is heard, then one would expect to hear the ruling within a few months and settle the ruling within the year. Considering today's market cap, that's a 7X return.
From the Enterprise value, it's a 19X return.
If they win, they should pay all the cash-out and leave Kurdistan to run.
All eyes are on GKP for a Kurdistan turnaround, but I think Genel has been overlooked due to the low key approach to the court case.
“ put 'bidders' in '' for a reason. Meaning there are no better operators to have a contract with than the current. So when comparing their existing contracts with the terms of bidders in round 5 one needs to remember it's "worth making concessions to keep them happy."
- Completely avoiding the questions as you don't understand it.
“ The current PSC are RSC in all but name. Yes, the contractors have a theoretical right to a share of production and could theoretically sell that share independently. But they never have. Instead production has been sold and the contractor has awaited payment of their share. In essence the contracts are being executed as revenue sharing. ”
- Farcically incorrect.
There's now a list of questions you can't answer (You apparently know this investment area, 1800+ post I hear)
The questions are straight forward and meant to help your understanding. Back to goggle for you it seems, I have no more time to waste.
Nobull is clearly correct. ABC’s.
Is there a way to filter?
There's a lot more,
But another point for you to research which will help your understanding.
There’s also a very material AND legal difference between the contracts.
It's not just in net entitlement but also in rights. You completely missed it, dismissing it as “ nothing more than a technical difference”
When you do some research, you’ll see just how far wrong you were.
Like I say, it's your money. You’ll only make it by being realistic an honest about what you really know.
In fairness PUTUP,
Well done for taking the time to read it and reply. You’re on the right tracks and getting there.
Your understanding of the contracts is still missing some pieces.
“ There are no better 'bidders' than the current operators and it's worth making concessions to keep them happy.”
Explain: How, what and why bids were placed. Why did the majors walk away?
According to reports, the negotiations were aimed at how to change the contracts of the Kurdistan Regional Government "with oil producing companies, which are based on sharing in production, to the participation contract, which the federal oil ministry operates."
As pointed out.
i.e. Bid round 5 contracts. 2-5% of revenue. For those inclined, it's worth reading the analysis and adjust for a new NPV. There's going to be plenty of time to study it still, look how long it took to sign the last bid round 5 contracts after they were issued- 5 years! Oil quotas = Zero imperative at present
I estimate something similar Sekforde, although many items still need to be clarified. The FCF vs the Mcap is strong enough to support a dividend at 0.5x as ITH has done.
I would like to see a dividend personally; it would highlight the purchase price (Mcap) for the FCF. The leverage means the dividend looks high for a small surplus of FCF. Use the rest to pay down the debt over 2-3 years. Converting the debt balance of the EV to market cap should see a 1-2 X rise in Mcap.
Bressay and Bentley,
115MMbbls + 130MMbbls 2C
Getting the sign-off means mitigating the EPL and turning our end-of-life fields into new low-decline rate production.
Or should we get a T/O offer first?
"Stuart Payne is clearing the way for producers to exploit the oil and gas that still lie under the UK’s continental shelf, which he says will help maintain the country’s energy security for decades to come."
“I am a shameless optimist when it comes to the North Sea,” says Payne. “Being candid, there’s a race to get that oil and gas into production, in terms of the economics involved and in terms of the infrastructure."
https://www.telegraph.co.uk/business/2024/01/08/oil-gas-north-sea-transition-chief-stuart-payne/
Bressay and Bentley will add some significant value.
Sunak and Hunt would know they were going to lose a man, and things would be difficult in the front end.
The public pivot is being worked.
Possible that they looked at the Rosebank approval ratings (78%) and noted the country's realism towards energy security. Positive polling issue.
I'd say the sign off is now a matter of when and not if.
The government has stated that the Bill aims to achieve the following:
Make the UK more energy independent and safeguard domestic energy supplies by increasing investor and industry confidence.
Enhance the UK’s energy security and reduce dependence on higher emission imports from overseas.
Protect the domestic oil and gas industry that supports more than 200,000 jobs.
Realise the UK’s net zero target in a pragmatic, proportionate and realistic way; without unduly burdening families and businesses.[1]
The obligation on NSTA to run an annual application round would only apply if two tests are met: a carbon intensity test, which would be met if the carbon intensity of domestic gas is lower than imported Liquefied Natural Gas (LNG); and a net importer test, which would be met if the UK is projected to be a net importer of both oil and gas over a 15-year assessment period