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Bugsy911,
when you are reinvesting your dividend, you are kind of executing your own little share buyback, but in a very tax and transaction cost inefficient way. You would be much better off with the company executing the share buyback for you (and all other shareholders).
In any case, while you are putting your money back to work in GKP, most other holders seem to be keeping their cash. No new marginal buyers. Stock is still dropping …
Since we hit 200p (pre dividend, around mid June) the share price has dropped by a good deal more than the combined dividend paid out since then (drop of about 34p vs 17p received from dividends). Just for the folks that think that dividends are like interest. They are not.
And just to repeat my old chestnut: share buybacks now! If GKP doesn’t buy its own shares, nobody will.
GKP remains a tough gig. All the positive news (Brent > 70, dividends, production to 55k bopd, resumption of regular KRG payments) that I expected to give the stock a bit of a boost have not really amounted to much. It will continue to be tough going until a serious buyback program is being announced ...
RagstoRich, getting to 55kbopd and using that cash to aggressively buy back shares seems the only way out. I don't think that the current risk environment warrants further investment into the field unless management can reasonably prove an ROI >> 25%.
A Chinese bidder has been often talked about for years and never materialized. China has a lot of places it can choose from for oil prospects. Seems like Iraq doesn't float their boat as a strategic partner and it's easy to see why.
GKP is very much like an orphaned child. Nobody out there who wants it. ESG and the vagaries of Iraqi/KRG politics have decimated institutional demand for the stock. Existing stockholders are already all in with no appetite to add. Who is left to buy? Well, if GKP does not even want to buy back its own shares, then the answer is pretty clear … nobody.
Surreyscott’s comment is an instant classic. That buy signal has been working out really well. No wonder so many punters lose their shirts.
The value in GKP is obvious and so are the risks. The latter fluctuates a lot, but at the moment with all the concerns about GKP getting paid over the last 18 months and going forward it’s not all that surprising that the market applies a huge discount factor on GKP’s cash flows. What’s appropriate? God knows, about 25% onwards seems fair.
Lastly, management still doesn’t seem to have grasped that there needs to be a more aggressive capital return policy. At current levels buybacks would be highly attractive to shareholders. One can only hope that major stakeholders make their opinion heard. Unfortunately quite a few of them seem asleep at the wheel as well.
Well, even with oil doing all the right things (i.e. staying above 70) GKP cannot catch a break. The only way to unlock value is to keep investment into the asset at the minimum unless commercial terms & conditions change for the better (unlikely). So last option left is to boost capital return to the max. Buybacks now!
Iraqi/KRG politics is an absolute **** show. Which explains why GKP trades so cheaply and sadly has turned into a value trap. Unfortunately, I cannot see anything in sight that would improve the politics bit. So it's all down to management improving the capital structure. Buybacks are in order!
RNS 13/05: "The annual dividend of $25 million is expected to be paid on 2 July 2021, based on a record date of 25 June 2021. The special dividend of $25 million is expected to be paid on 6 August 2021, based on a record date of 30 July 2021."
LSE stocks work on T+2 settlement date basis. You get the dividend if you are on the record as of 25 June settlement date basis or, in other words, 23 June trade date basis. The following day, 24 June the stock would trade ex-dividend. Hence the 8p and change drop ...
Opu,
To assess the merits of buying back the bond vs buying back the stock, you should have a view on which is a better use of shareholder capital. I don’t know what the yield on the bond is now, but I imagine it is pretty low. Probably around 7% give or take. I personally think the stock will do better. Hopefully another 25% or more into year-end, if we get to 55k bpod and receive regular payments in full.
Btw, buying back the bond doesn’t really change the interest expense that the company incurs. You will have to keep paying the coupon until the bond matures.
"restructured it away from complete failure" - Agreed. The restructure was successful. The company is on a good financial footing (except for risk exposure to the vagaries of KRG politics). But the negotiators representing bondholders back then set a laughable hurdle rate. Just wonder why. Not exactly in their own best interest either ...
I'd certainly not vote for any board members in the upcoming AGM that were involved in the VCP.