Firering Strategic Minerals: From explorer to producer. Watch the video here.
PUTUP, thank you. Yes, you are right abt CRP being the main thing (have not looked into a model for a while and got rusty).
But on the other hand, CRP was $224m at year end, still above $200mm and at 50k production @$25, decreases at 7.5mm per mo? this would still last 2.5 years (more at a lower production assumption).
@PUTUP, thanks. Wanted to check - when you say fully valued - what kind of FCF yield do you assume? I agree that the company is fully valued here if there are just local sales, but I am getting higher numbers.
Basically at 40kbd production (optimistic), sold at $25 (would probably think pessimistic), looks like they are making 5.2mm per month (assuming 6mm costs)? So overv $60mm pa. This would go down to 4 and change (as R-factor increases) at some point, but not that fast.
Their current EV is circa $300mm? I would say one would want them to make 50-60mm p.a. at least (otherwise, why not buy Shell) - but it seems to me that 1.2-1.4 price with local production still could be justified ... Am I missing something? (appreciate the above is quite high-level and not precise).
PUTUP, 40% is not high when official inflation is still over 60% (YoY). Actually with Simsek and Erkan they are returning to conventional policy after 4 years of crazy - so I would say there is lower probability that they implode now than a year ago. Also lower energy prices help.
YTD GKP is 42% down (and 47% from 1y ago). Genel is -36% and -41%.
So I would say that GKP was underperforming before (in August -September), while now valuations are more in line.
Originally undervaluation could have been explained by GKP not selling anything and burning cash at $6mm per month. But since August update (when they announced they started to sell locally) this stopped being the case and frankly I find the price drop mid september quite irrational ....
PS I am not an expert on Genel, though - could be missing something
Those are stange accusations. From my side I can say that
1) any investor in GKP should read and understand the profit sharing contract (and this is what PUTUP encouraged people to do)
2) Back last year I have spend a full day building the cashflow model and PUTUP's answers and clarifications were very useful, for which I am grateful.
I frankly feel bad - the guy spends a lot of time giving useful info for free and teaching the same stuff over and over again and gets a lot of s^&t in return. I would have given up long time ago.
PUTUP, this is assuming capex @ 175mm (net)?
never mind - wrt July. It is there (I guess they did not post on the website)
https://polaris.brighterir.com/public/gulf_keystone_petroleum/news/rns/story/xo1j72r
did KRG pay for July? I see payment confirmations for June and August (today) but do not think I have seen the July one (did I miss it?)
thnx
Gulf Keystone Petroleum reports June 2022 oil export payments of $50.7m net to GKP, from the KRG.
from what I understand KRG does not put aside what they owe to Gulf - they spend (and pay) as they go. So essentially they pay for June sales with money from August-September.
So when oil prices go down, their current receipts are lower so they are more likely to delay the payment. Probably more relevant when oil goes from 105 to 85 than when it goes from 125 to 105 ...
DRB83 - it would be positive:
if contractor's share (as per example) is 190mm, under the current regime GKP gets 61.5% (117mm) and pays 20% of that as CBC = 93.5mm net
under the old regime GKP gets 80% (152mm) and pays 40% (60.8mm) as CBC = 91.2mm net
Overall, let me explain the main point - that you (perhaps) are missing. GKP is currently getting (and paying out) more cash due to accumulated old costs (so there is a cost recovery pool) than it would once CRP is depleted - so 2022 payout is kind of a one-off. So the most straightforward way to value it is cash + CRP + new cash it would generate (times the multiplier you want to assign to it). You would need to model this - since it depends on many parameters.
Overall since GKP is a contractor, it differs from a "normal" OilCo in many ways - so the best way to assess profitability is to understand the profit sharing contract.
you can find the general outline here -
https://www.gulfkeystone.com/wp-content/uploads/2019/12/erce_gkp_cpr_2016-08-26.pdf
and the new terms / values are mentioned in annual report and presentations. In my view it is somewhat cheap, but not crazy cheap (e.g. more expensive than some other EM oil producers).
DRB83 - you might find the following thread useful for your modelling (see also the latest posts there - PUTUP was helping me to clean up my model):
https://www.lse.co.uk/ShareChat.asp?ShareTicker=GKP&share=Gulf-Keystone-Petroleum&page=2&thread=A6BCFBB3-3960-495E-860D-272E4D64A059
PUTUP, "I estimate GKP's share of the CRP is down to around $100m as of the end of July production ($127m as of end June). " - this is including the invoiced, but not paid amounts - correct? so you 100mm CRP to GKP (125mm gross) is after payments up to and including July production - correct? If so, I am getting similar numbers (a little higher) ...
PUTUP - thanks, once again. "Remember that costs are added when incurred but receipts come in with a lag (when actually received" - will correct for that.
247mm is as of June 23rd, 2022 - not sure why it comes up as "link removed"
PUTUP, couple more questions if you do not mind
1) I am trying to model R-factor. I take Gross revenue receipts from YE 2021 ($1,478mm), Gross costs ($1,543mm). I see that gross capex is roughly 90mm/0.8 = 112.5mm (as per 90mm net guidance), Opex is $3.1 (midpoint of guidance) per bbl, Shaikan G&A is $4.1mm pa (as per YE2021 results). These 3 items get added to Costs. Gross receipts (e.g. 48.7mm per April) get added to Gross revenue receipts. I see contractor share below 28% now dropping to 26.8% at year end (assuming Brent stays @100, production is at 47kbd). Seems similar to your numbers?
2) wrt Cost recovery pool - I am taking $401mm number as of 31.12.2021 (YE report). using the methodology above and assuming $100 price for Brent till year end and 47kbd production I see that the pool will run out roughly after receipt of the payment for October? as I understand after that current costs will be covered and the rest of the Net Revenue will go into Profit Oil?
After that the receipts should fall down significantly to current costs + share of PO (PO will increase though)
3) In terms of cash as I understand $247mm was the amount as of 23.06.2022. Minus $107mm (bond redemption), minus $75mm (divs) this leaves 65mm. I see the Cost recovery pool after April Payment at around $211mm (dropping to 114 after May-June expected payments). Is it similar to what you expect?
thanks again.
PUTUP, thanks a lot - very clear now. Btw, I reckon the company has an incentive to increase capex - as it will be essentially paid by KRG (via Cost Oil mechanism) and will also slow down the increase of R-factor from 1 to 2 ....
PUTUP, thanks a lot for your commentary - they are very useful.
Could you help me understand how do you estimate future cash receipts from KRG? I think I understand how to estimate the share of PO that belongs to GKP - it is
[(Brent Price - discount ) *(1- 10% royalty)]*Production*[Contractor share (15-30% depending on R-factor)]*61.5%(current WI) *(1-20%CBC)
but it makes up only a fraction of the total - the bulk of the payment comes from Cost Pool. I am not sure I understand how to assess the total amount that would be invoiced.
Thanks in advance.