The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
The thing is, dummy, PUTUP, theoryman, Broadford Bay are realists, not lazy stupid optimists like so many posters here and across the road.
Anyone expressing a cautionary sensible assessment of the situation is met with scepticism, derision or outright abuse.
Even Bigdog says much, between the lines, which is worthy of consideration.
Nothing here is certain. But I believe APIKUR will pragmatically accept an agreement which asserts that the $150m outstanding receivables (GKP) will be the subject of further negotiations following reopening of the ITP. I can’t see the FGI accepting the debt, whilst the KRG has neither the means nor incentive to do so under the SOMO regime. In the short term this seems an irresolvable impasse, but there will be some, partial at least, resolution.
So let’s get the ITP reopened, with guaranteed payments.
I still have large holdings here and in GENL.
And no I’m not any of the aforementioned posters!!!!!!
Ah sweet $10m buyback. That will improve Mr Market’s sentiment towards the cratered share price. It’s not a huge amount but a grand gesture of confidence.
PUTUP was always a proponent of buybacks but I was not, until the price collapse on the ITP shutdown.
As I said previously, at this level the buyback is surely value accretive. But what if the situation worsens contrary to expectations? Well we’d never see that $10m anyway so go ahead with it, and more.
As for dividends (or buybacks), yes maybe they pay out a little of their excess capital. “But the hint is in the words "pay out" - the value of the company decreases when funds are paid out and all else being equal the market cap reduces accordingly.”
Ah yes PUTUP but the market is not entirely cold blooded. Even the most sanguine accountant would see some value in the sentiment of capital returns, through dividends or buybacks.
As I said to you previously I now favour a buyback. The share price is low enough to offer the prospect of value accretion through capital expenditure in that direction (unlike previous occasions).
PUTUP I now agree that buybacks at this (low) point would would be a welcome initiative towards some share price recovery. Surely value accetive at this level. $25m would be enough to spark the apothecary’s magic. And let’s face it, if the company is doomed we will never see that cash anyway.
Buybacks and then a positive statement from AKIPUR on the ITP would bring springtime sunshine, like the clocks going forward in Wales.
PUTUP, theoryman, Bigdog across the road, and a few others provide realistic views and analysis (a little too unvarnished in Bigdog’s case).
Don’t get offended just because they’re not waving “takeover tomorrow” flags. There are severe risks here, pointing them out with a purposeful sense of realism should be accepted without faux indignation.
PUTUP I agree that buybacks would now be a positive step. Surely value accretive at this hollowed out cost and a strong signal of business longevity.
Some of the cash in hand would be well used. In the present state of things we will not see it being returned to us any other way.
RNS
No surprises. With local sales, treading water financially.
Debt slightly reduced (could/should have done more imo)
Morocco/Somaliland continue to progress at glacial speed.
Bina Bawi court hearing set for 2 weeks in February. The KRG has a history of fighting hopeless cases (see Dana £2b successful action for the same sort of thing).
BUT, here’s the big point, talks on ITP have seemingly made dramatic progress in the past few days (outside scope of today’s RNS, hence yesterday’s dramatic sp rise).
So fingers x’d.
PUTUP yes those are the immediate questions which have cratered the sp., but are the culmination of payment defaults extending, on and off, for several years.
I mentioned the debt-free status because it gives the company intrinsic strength to weather a storm which all-but wiped out shareholders in 2016.
I see the sp rallied late in today’s session. I’m hoping the professionals have sniffed good news before it gets down to our level.
PUTUP I agree with your sanguine analysis.
Baghdad cannot immediately cancel the IOC contracts in N Iraq, to do so would lead to stultifying legal proceedings and damage its reputation even further.
In the long term they will want SOMO controlled consolidations. And with it, contracts to their liking.
In the meantime I think the IOCs will get paid, but maybe not everything. How much is a calculated gamble from our point of view.
The company is debt free. It can produce 55k bopd and the pipeline will re-open. Soon.
This news should, I think, create a relief rally on Monday. Good for those brave souls who bought the lows last week.
Bravery which may however be further tested as KRG liability for the $6b debt pile owed to Vitol, DNO, GKP, Genel, Shamaran etc is debated.
Fingers firmly crossed, hopefully the KRG aren’t just waving two of them at the IOCs.
Opu spouting rubbish again, after another 10 dollar top-up presumably.
Iraq exports only 75k bopd through the pipeline to Ceyhan. The rest of Iraq’s circa 4m bopd goes through Basra.
KRG sends its entire 400k through the shut-in pipeline.
So the loss is shouldered almost entirely by KRG.
Plus, who do you think holds the budget purse strings?
There will however be some pressure on Baghdad to resolve this impasse, but they seem to have played their hand deftly thus far.
PUTUP thanks for the calculations.
But you must admit that further share-buybacks, as called for on numerous occasions by yourself, would now be proved to have been utterly disastrous.
We have had on huge dividends, invested sensibly elsewhere, to ease the pain of the slow, now steep, share crash.
As I pointed out previously, share buybacks are value accretive device for solid blue chip companies. Not this one.
Anyway enough of the I told you so’s. I agree with you in all other respects. Particularly the question of arrears payments for which the KRG may not have any incentive now, and certainly not the means, at present.
But at least the company has no debt overhang to bring it to its knees now, unlike 2016.
https://www.rudaw.net/english/middleeast/iraq/26032023
Rudaw claims Baghdad and Erbil have agreed oil exports through Cayhan will resume "in a day or two" with KRG continuing to sell its oil until federal budget law is passed, then the mechanisms set within budget law will be used to resolve this issue.
"We will definitely reach an appropriate solution with Baghdad and this issue will end."
When?
Soon.
Either through a collapse of the KRG or agreement on the national budget, oil revenues and IOC contracts.
It’s too late to sell.
At least, as PUTUP says, the shares are worth a quid using banked cash. But keep an eye on the b.o.d. fleeing with bulging suitcases.
Alliance News
Gulf Keystone Petroleum said that higher oil price and production allowed it to generate "record" profitability in 2022. The Iraq-focused oil field operator posted a pretax profit of USD265.8 million in 2022, up from USD163.7 million in 2021. Revenue for the year totalled USD460.1 million, up from USD301.4 million the year prior, as the company's average realised price per barrel jumped 49% to USD74.1 from USD49.7 the year prior. Gross average production for 2022 totalled 44,202 barrels of oil per day, up from 43,440 bopd in 2021 and in-line with annual guidance.