Member Info for JLB58

So looking at the maths:

10,000 active private customers at £2,400 per annum = £24m per annum income.

Margin at 10% = £2.4m, Margin at 20% = £4.8m, Margin at 30% = £7.2m

20,000 active private customers = £48m per annum income.

Margin at 10% = £4.8m, Margin at 20% = £9.6m, Margin at 30% = £14.4m

Insane!

Sharetrader123

According to X yesterday they are finally assembling the assays that have come in from El Pantano.

BB

As I have stated I am an investor, believe in the potential of the business and will hold long term.

I take a slightly different view that it is not a traditional business - to me it is a traditional business utilising emerging technology.

My take from the RNS is as follows:

Annualised overheads are approximately £7m.

The anticipated gross margin is stated at 34%.

As a result break-even turnover is approximately £20m assuming no significant increase in overheads.

The annualised turnover in March was just over £5m.

In the period from £5m to £20m turnover the company will make losses which will need to be funded.

How long it will take to move to an annualised turnover of £20m is unknown - hopefully it will be relatively quickly but in the meantime losses are being incurred, even if everything is in place and there aren't any significant increases in costs.

This is the reality which I accept and it also sets my expectations.

Accordingly when another fund raise/dilution is announced it won't be a shock or disappointment, particularly if done at the right amount for the right reasons.

OAP

I agree with your thoughts that the company will need more cash.

At what point the additional cash is required is dependent on the speed of growth and the rate of increase in overheads (which from the latest financial report was rapid).

There is a likelihood that the faster the growth is the quicker the cash will be required.

However, once break-even is achieved the company will produce a stated healthy 34% gross margin which will drop directly to the bottom line.

As a long term investor who believes in the potential and understands the risk of dilution at the moment I am prepared to be patient.

What would concern me would be a series of fund raises and ideally I would like to see one fund raise that provides sufficient cash to get to break-even.

I am reminded of the old adage that turnover is vanity, profit is sanity and cash is reality.

GoHF

It's important to consider both the number of shares in issue and the market capitalisation (which is actually more important).

A current market cap of £15.6m for what they have and what they keep finding is not representative of the true value.

Whilst it might take some time given the number of shares the true value should be recognised at which point the share price will increase.

A little patience is required and long term holders should do very well if holding from here.

An alternative calculation based on the last published information:

Production say 42,500 BOPD (mid point) x say $27 per barrel x 30 days x 36% = $12.393m per month

Capex $20m per annum

Operating costs say $52.5m per annum (mid point)

Other less than $10m per annum but say $10m

Annual total = $82.5m = $6.875m per month

Net cash = $5.518m per month for 30 days

For 31 days add $42,500 x $27 x 36% = $413,000 = $5.931m

Approximately $6m net cash per month seems reasonable

To date the business has purchased just over 2.4m shares for a total consideration of £3.3m or $4.2m. If the rate of 125,000 per day continues until the AGM on 21st the number of shares purchased will increase by 875k, a total of just over 3.275m with an estimated value of $5.3m. This is slightly over the maximum amount announced of $10m.

Appears to be a missed opportunity to me.

Will be interesting to see what further activity if any follows the AGM.

Couldn't agree more Rog.

It was logical for the rate of buyback to slow as the share price increased following the initial significant purchases.

There's no logic in maintaining the lower volume of shares purchased each day as the share price drops towards what it was when the buybacks started & at a share price that the board considered the shares to be significantly undervalued.

They have the cash & considerable headroom up to the stated $10m maximum.

There must be a reason but I can't work out what it is.

What intrigues me Rog is the pace of the buybacks.

The volume of shares purchased in the first 3 days was over 1m at an average around 350,000 per day.

In the next 4 days the number of shares purchased totals just under 0.5m at an average around 125,000 per day.

This is a significant slow down in activity.

At the more recent rate there is no chance of the total buyback of $10m being achieved by the deadline.

The initial buyback activity would appear to have mopped up shares held by uncommitted holders & the slow down suggests that there is a reluctance to push the price much above the £1.40s.

Is this what the board sees as true current value or are Peel Hunt under instruction to maintain an orderly market or both?

That's very sound advice Rog & I totally agree.

Although GKP is operating in a volatile (some may even say hostile) environment it has shown an ability to survive & now has a cash buffer of c.$100m to ride some of the potential bumps.

If the pipeline doesn't open & if local sales continue at the same level then GKP is generating just under $8m per month.

Within 3 months or so I can see a further buyback or dividend or even both.

In my opinion the current share price does not fully reflect the potential even discounted massively for the inherent risks.

For that reason I'm staying put for at least 3 months.

When/if the shares hit £2.50 I may consider offloading some but I would take a view on what the 6 months following could bring.

The company has c.$100m in cash.

At the current level of local sales (at the slightly disappointing average of $27 per barrel) the company is generating cash of just under $8m per month as follows:

Sales per day 48,000 barrels - breakeven 21,000 barrels (both rounded) x $27 rate per barrel x 36% entitlement x 30 days = $7.873m per month.

Just over a month to fund the share buyback.

If this level of activity continues it will take just over a month to replace the expenditure on the share buyback & to maintain a cash buffer (safety net ) of $100m.

The RNS hints at further share buybacks and/or dividends in the future, which might now happen a lot sooner than I had originally anticipated.

Despite no sign of the pipeline re-opening this is a very encouraging RNS.

What it will do to the share price is uncertain.

The share buyback, cash position & current production levels are all very positive.

Rog

I agree more patience is still needed & we appear to be slowly edging towards a resolution.

In the meantime I have calculated what I believe our monthly net current cash generation is as follows:

30,000 BOPD x 36% (GKP net share) x 30 days x $30 = $9.72m

Monthly cash outgoings $6m (as recently reported)

Estimated net cash generation $3.72m

This can be flexed according to your view of BOPD & the price of oil.

The reported cash position at 20th March was $86m.

Accordingly we should have approximately $100m in cash in about 6 months time.

Until we have a final resolution of all outstanding issues & given the risks associated with supplying into the local market it would be imprudent & far too early to re-commence distributions either via buy backs or dividends.

At a price per barrel of $25 & 30,000 BOPD the above calculation produces net cash generation of $2.1m per month.

The company has told us break-even is a touch over 22,000 BOPD & I would therefore imagine if we dropped below this it would be a reportable event.

All in all far from a disaster.

Despite some optimistic talk of buy backs & dividends I simply can't see the board contemplating this until everything has been resolved.

Lordloadsoflolly - you seem to have forgotten that TEK has a 12 month lock in from the date of admission. Your last sentence refers.

The most significant information in the RNS, in my opinion, is the excellent management of cash.

Accounts payable have reduced from $44.1m at 31st December 2022 to $26.0m at 31st December 2023 to approximately half the 2023 year end figure currently i.e. c.$13.0m.

This has been achieved whilst slightly increasing the cash balance without debt.

At the current level of local sales (nearly double break-even), a very considerable reduction in accounts payable & lower monthly outgoings (under $6m per month) the prospects for near term cash generation are positive.

All, of course, subject to maintaining the current level of local sales.

Obviously the company is still facing considerable challenges but appears to have coped admirably since the closure of the pipeline.

Unfortunately the 'big pay day' is most likely to be later than sooner. Significant patience is still required.

It is obviously very frustrating. Unfortunately when you have multiple parties, all with their own vested interests, in attempting to arrive at an acceptable long term agreeement for all it is going to take time. Much more time than we would all like. However, compromises will eventually be made as ultimately it is in everyone's interest to reach an agreement. More patience required.

I thought the Genel RNS was somewhat downbeat & uninspiring. Perhaps just realistic? More patience required.

An interesting RNS from Genel this morning. Much increased local sales in quarter 4. Same for GKP?

This is indeed a very disappointing situation.

A company that produced 50,000+ BOPD, got paid on time & with GKP's cost of production & reserves in a stable environment would be worth many multiples of today's market cap.

Unfortunately that is not the case & therefore makes GKP a high risk - potentially high reward gamble.

If (a big if) the many hurdles can be overcome then GKP could have an excellent future.

If the local sales are maintained at the current levels & payment is received in advance then it would appear that GKP has enough cash to survive indefinitely.

It is also understandable that the company cannot give any reassurance about the continuance of the local sales as these are obviously being made on an ad hoc basis and could stop at any time.

How long it will take for everything to be resolved, if ever, is the significant unknown & massive risk.

I expect there will be a few more 'bumps in the road' before everything becomes clear.

Hopefully the potential benefits to all will drive a sensible resolution but it could take a considerable time.

Very frustrating.

If THG got to £2 I would estimate the Kelso share price would be around 4.7p if they haven't invested the cash. If they have invested the £3m cash & got a return on that investment this could be reflected in the share price & so could be above 4.7p.

Just my rough calculation & takes no account of sentiment.