Ryan Mee, CEO of Fulcrum Metals, reviews FY23 and progress on the Gold Tailings Hub in Canada. Watch the video here.
Think we need to see at least 3 consecutive monthly payments without the usual fuss to get some semblance of confidence back. Also the perception that all the IOCs have no strong bargaining position vs the KRG is not helpful. IOCs should be a lot more vocal and organized to collectively pursue their interests. As some have pointed out the KRG is very dependent on cashflow from oil sales. IOCs at some point need to learn how to play hardball and draw a red line as to what the acceptable T&C for payments are or else ...
No amount of dividends will help the stock price unless confidence returns that GKP gets paid in a regular and reliable manner. In particular, if there is no payment by the KRG by the end of this month we will get another dump.
I just received the voting sheet for the AGM. I’ll be voting against the re-appointment of all the legacy directors. Way too much dead wood on the board. They have been supremely ineffective. I’d encourage all other shareholders to do the same and vote them out. That’s the only way to get some change.
PUTUP: “Nope. The company is carrying over $200m in excess equity capital. The $50 million is a drop in the bucket, less than two months receipts. More pressure to come.”
Absolutely agree. The crux of the matter is that return of capital has not been aggressive enough. At this juncture both dividends and buybacks are in order. If GKP does not become the marginal buyer to improve the stock price, nobody will in the foreseeable. And in the 160s it would be a good level to start doing so.
(1) The Special Dividend is really the least they can do. Given the downdraft in the share price it might actually be better to return capital via a buyback.
(2) Change in payment regime is not great but not totally unexpected. But it reinforces the fact that GKP is 100% exposed to the whims of the KRG without any recourse.
(3) The money is probably there if it didn't get siphoned off into questionable bank accounts. It might be worthwhile for the IOCs to hire some specialist investigators to trace the money and apply some real pressure on the powers that be within the KRG. I imagine they might become a lot more IOC friendly if they feared that their offshore bank accounts could be frozen.
FH1, on the contrary, fundamentally I’m very bullish on GKP. I still think its fair value should be around 300p. I know, some of you think that is a “bearish” view. From my POV it’s nearly another +100% and that is great potential. The bit where I’m getting increasingly more pessimistic is:
(1) KRG. Can they ever get their act together? As long as any investor has to keep fearing on a monthly basis whether GKP gets paid or not is incredibly damaging to sentiment and will increase the risk premium put on the share and hence depress the share price.
(2) Management. I’m not sure they can deliver shareholder value. A large part of the problem is not their fault. They have zero power over the KRG. Communication hasn’t been great. Mostly it’s crickets. There has to be a strong statement delivering a capital return via buyback and/or dividends. Any business that can pay out a cashflow yield >10% will find investors. Growing the business is less attractive in IMHO. Spending capex without any certainty that you get paid? Why bother ...
FH1, yeah bounce looks impressive when compared to the point of near collapse. But I don’t any of us got in at March 2020 lows. So big deal.
In any case, we can discuss the merits of the company until the cows come home. Unfortunately it’s turning into a value trap. Nobody would reasonably dispute the value opportunity presented by GKP, but at the same time there are no investors willing to be the marginal buyer bidding up shares to, say, 200p and beyond. Oil price is not the issue anymore, but the regional issues of the KRG are. I’m giving up hope that Iraq and KRG will ever sort out their issues. Payment track record is a big problem and hence no marginal buyer is emerging.
Lol, what are the positive points one could post these days? Brent POO has been playing fairly nice but unfortunately the company is stuck with one exceptionally bad client. And the stock price does, well, what it does today ...
Main issue with GKP is that at the moment there is no marginal buyer willing to stick their neck out to buy the share up to 200s GBp level. What needs to happen? For a start, GKP itself could become that marginal buyer that lifts the share by initiating a substantial share buyback program. Unlike the previous buyback campaign, the macro backdrop is far better this time. Unfortunately, it is unlikely that GKP will attract other deep-pocketed suitors for now. ESG has killed a lot of the institutional demand for oil investments. IMVHO the only catalysts that can lift us higher for now are buybacks and potentially some upside surprises on production. Not putting much faith in upside surprises by Iraqi politics - but you never know.
As PUTUP has elaborated many times before, it does not matter whether we get a buyback or a dividend as both actions are equivalent returns of capital. What matters is your reaction as a shareholder to the events. If there is a buyback and you don’t like it - sell some shares to bring you back to the same percentage holding as before the buyback. If there is a dividend and you don’t like it - take the cash and buy more shares.
My vote would be for a buyback up to a limit price in mind, paired with a dividend. But as outlined above, in some sense it doesn’t matter because as a shareholder I can adjust my holdings accordingly to create the desired outcome.
I can think of 2 very good reasons not to empty the corporate cash kitty: (1) oil price in 60s is not a given as we should have learnt in 2020, (2) our one and only captive customer doesn’t have the best track record of paying on time ... or paying at all for that matter. Why would GKP or any company willingly put itself in a corner and risk a liquidity crunch?
@ PUTUP
Why not share your fair value price view? Exchange of opinions is what makes a BB interesting and creates value for everybody concerned.
No doubt some idiots will take the opportunity to take potshots because they cannot bear a differing opinion. But I doubt potshots bother you ...
@ LS
Reserves don’t matter per se in this case. GKP doesn’t own the oil, the KRG does. GKP is just hired help for a fee (via PSC) to get the oil out of ground. Your valuation method only works if GKP actually owned the resource.
What matters are GKP’s earnings and cash flows. Work those out and share what you get.