Member Info for Nobull

Surreyscot, "We will be even more OK when GKP is sold on the back of a re negotiated PSC."

Where will our extra bargaining power come from to change the terms of the PSC unilaterally to our advantage and at the expense of the KRG? We get 16% , ignoring the recovery of our capex, right? Why would the KRG give us say 20% instead?

Just a small private shareholder, but I'll be voting against our Chairman next time: he's a truth shaver and he shows no confidence in the Board's production volume growth plans. Yesterday' s dilution announcement was awful.

Tom247, Okay, but I don't have a choice in the path I am on until I have obtained probate. Thanks. The short term downside, leaving aside permitting risk going bad, is limited to zero eps growth and no increase in production volumes, no interim div and a small amount of reputation damage to the Board (they aren't exactly going out of their way to make SH-13 sound a sure fire cert, are they? They aren't buying in the shares for cancellation before an obvious increase in production, are they, and the RNS is ambiguous about whether they are completing the well (in the oil and gas sense of casing the well) or completing the drill to target depth, a choice of words that is unfortunate. If they go down to £1.20, then so be it - not a lot I can do about it.

GKP has better prospective eps stream, and divs but GKP is higher risk in some respects, and trades on a lower multiple than Genel, on a like for like basis. Genel has less control over timing (no controlling interests,; it's just a minority interest farm-in partner?), but it is less likely to suffer from permitting risk going bad (its partners include the KRG on some projects). I should really have asked what GKP's strategy was behind its positioning of SH-13 and SH-I - was it more about defining the limits of Shaikan or more about increasing production? How was the trade-off between these two competing demands decided? Genel has 4 high impact appraisal wells to come in H2, so it's a bit of gamble, like GKP's SH-13 and SH-I are. JMV. In short, I don't know. I am making a comparison table, but it will take some time to finish.

"I am pleased to announce we are making good progress in accelerating our production growth" JH, speaking at the AGM. GKP have now been at it for 7 weeks, so an operations update on SH-13 should be possible soon. The only puzzling thing is why our Chairman doesn't buy shares (surely he has some loose change from riding to work on his Gazelle or Batavus?) and why the company does not do buybacks if the progress is so good, particularly when the earnings yield on 12 month rolling forward basis is currently 15.5%, using the rolling forward 12 month consensus eps forecast of 25.4p. Some mixed messaging coming from our company, I think.

Well said Kaaran. Thanks.

Kaaran, GKP has flip flopped between momentum trap and turnaround a few times in the last few months, which I think proves any rule system is going to be defeated occasionally by the share price having to have the freedom to move randomly to properly discount news, and I do wonder if Stockopedia's classification takes into account such big dividend adjustments on the xd date. Value trap? I don't think so. A 14% yield requirement (just for being in this business in the KRI) is equivalent to a PE of about 7.14. We are trading on a forward 12 month rolling basis PE of 8.3 today (using today's exchange rate), and 5.0 in 12 months' time (which generates a price target of 263p in 12 months' time). I don't think Peel Hunt have updated their forecasts of 10 cents FY 2021 and 51 cents FY 2022 since the KRG cut out two monthly payments in FY2021 for the change from 15 days to 60 days payment system, so yes, there is masses of scope for forecasting error in these models! Our chairman seemed to indicate the buy back facility was only there just in case it was needed. I can't imagine he has any plans to use it. No, I don't like my dividends being taxed at a trust rate and would prefer buybacks instead of dividends.

Freudian slip: "unpick his untruthful posts" should read "unpick his posts that were untruthful". Sorry.

Thanks for that interesting news, CCC. I hope I never come across SS again. Thanks to all those who helped unpick his untruthful posts. Fingers crossed for SH-13 to come good.

Arsenal, see today's RNS from REA about the revised scale of deductions for cpo exports. CPO reference price for July is 1094.15. The Indonesian authorities seem to have lowered the levies on palm derived products too.

Arsenal, yes. The Rotterdam CIF price for CPO was $1,020 on 28th June. One reason they might be able to afford the reduction in levy is because less subsidy is needed to make biodiesel when Brent crude is around $75 a barrel. It will be daft if we have to pay more export levy on a reference price just below $1000 than on one set at slightly over $1000. I expect the authorities will have to re-think the whole scheme as they can't just change one export deduction in isolation from all those set on derived products like palm stearin and olein, surely? We will find out soon enough.

An extra $147 a tonne coming from lower export tax and lower export levy?
https://www.spglobal.com/platts/en/market-insights/latest-news/agriculture/062821-new-indonesian-crude-palm-oil-export-levy-structure-set-to-be-effective-early-july-letter

TM,
"Fairly obvious we see things from very different angles". Yes. One can't be both be Church of England and Roman Catholic at the same time, although I expect some will happily draw on DCFs and charts without any concern for the contradiction.

Fingers crossed for SH-13 to come good (an event to change the next eps), for some title risk to come out of the share price (the passing of the Hydrocarbon law) (an event to make the eps stream more certain) and for some liquidity risk to come out of the share price (the Budget to be implemented and swifter payment of the arrears to ensue), the last event being one that might improve the payout ratio.

P.S. Our lower EV to barrel of oil produced compared with Genel is, I wonder, due to the lower quality of oil we produce (a sign of market efficiency?). I explain the anomalous EV to 2P ratio as being due to the market having doubts we can get all the 2P reserves out before mid 2043 at our current production rate. I hope this will change if we successfully get to 55k bopd. Let's see.

"which means rule based investment strategy will consistently give superior returns if the profits arise from risk taking"
should be
which means a rule based investment strategy cannot consistently give superior returns if the profits arise from risk taking

In short, so out of $28.9m (a figure that has already suffered pipeline transport and quality discount), the contractors are only getting 16.2% ($4.67m divided by $28.9m). That’s a very low net back (if that is the right jargon) considering the KRG have only had fiscal jurisdiction over where the oil is: can you imagine the British Government levying profits taxes totalling 83.8% on North Sea operators? GKP shareholders long ago took all the risk to discover Shaikan.

The cost oil, the lion’s share of the monthly payments we get, is just the return of our own money previously spent, albeit in a very delayed fashion, delays which are exacerbated when oil prices are low. Straycat says we should change the PSC to give the KRG even more – not that my view matters one jot, I agree with his analysis that the FDP is being held up because they want something, but I don’t agree with giving them an even bigger share. Yes, I can see there can be no brown bags under the table to solve the impasse either.

“It doesn’t matter how frequently Charts are right, what matters is do you make more money overall from the ones that work compared to the ones that don’t. I have no idea which trades will work and which ones won’t but I have a system that I use to evaluate the value on offer.

“To me it’s just the same as rolling a dice. If there are 10 faces on the dice, 3 say win and 7 say lose but the payoff if successful is 4-1 then there is value.”

I trust your maths on that – you are a physicist, so I trust you of course.

“I agree about randomness being a lot more patterned than people realise. In fact that is one of the basic ideas used in fraud detection but don’t tell anybody.”

But the whole legal system around disclosure of share price sensitive info is designed to ensure financial markets are efficient, so it is likely share prices incorporate everything that is relevant, and given share price sensitive news is randomly good and bad, share prices must move randomly, which means rule based investment strategy will consistently give superior returns if the profits arise from risk taking (profits from privilege are different?).

On a less controversial note, I hope your real life name isn’t Antony Bolton or Warren Buffet or I might have to eat my words on that. Am reading Brian Nelson’s Valuentum investing at present – he does claim to have found stocks trading below their intrinsic value.

…” Beware any mathematical approach which says it can differentiate in matters like this, if it does then find the hidden assumption”

Sound advice.

“GKP’s share price is dependent on many factors, the simple ones such as production levels or (PoO-21) seem to be swamped by the others. We could both probably come up a list of what those other factors are, chances are though we would come up with two different lists, different rankings and different levels of significance even if our two ordered lists were identical.”

Underlying all the reasons people give for GKP’s price movements are just 3 simple things as far as I’m concerned: the next eps, the eps growth rate and the payout ratio – it’s the only page I read in the whole book “Random Walk down Wall Street”. I’ve no idea if the rest of the book is worth reading.

I like that explanation because it seems consistent with the maths implicit in the fact that a risk-averse person doesn’t pay more than £100 for a promise of £110 in a year’s time (assuming there is no default risk) if they can earn 10% p.a. in the meantime. I expect that fact is a bit controversial for some posters here, but I can’t help that.

“The PSC is reasonable when compared to others, what you don’t like about it is just a by-product of how it works. “

I don’t have the data to show that the PSC is unreasonable. It is very time consuming to find it, but in about a year’s time, I may be able to come back to you on that (why do textbooks mention commodity price gearing if it doesn’t exist?). Sure, the oil price affects our cash flows but not in a way I understand the meaning of the expression "oil price leverage". If I find a pure producer with more commodity price gearing (excluding all other types of gearing and other share price driving events apart from oil price rises in £s),the project will probably have higher expropriation risk. A short term benefit from high net back payments can be taken back by a nationalisation at a later date, below market value, Hugo Chavez or Mossadegh style, can’t it? Yes, I get that: the Kurdish people need to be happy with the arrangement.

“…I focus on the revenue from Profit Oil received by the Contractors divided by the Total Production that the Contractors achieve. That gets around the circulating costs through the Cost Pool and the costs reimbursed directly to the Contractors by the MNR.”

Total profit oil for February was about $26m (60% of net revenue). To get the profit oil figure before deduction of the 10% royalty payment you have to add back 60% of the 10% royalty payment, i.e. 60% of $4.8m, which gives a pre royalty profit oil figure $26m + $2.9m = $28.9m.

Starting with that $28.9m figure and deducting profit oil’s 60% share of the 10% royalty payment ($2.9m), the 70% share of net profit oil going to the KRG($18.16m) and the 40% capacity building charge (let’s call that corporation tax to the KRG)($3.1m), one is left with contractors’ share of profit oil of $4.67m, a figure that has then to be shared 80:20 between us and MOL.
continued...

Thanks for that confirmation.

TM hi,
"The model I use for the PSC is working to within 1% and has done for a long time."

Yes - I probably use the same model - I too got it almost exact for the February (or January?) payment.

What I mean by commodity price leverage is if the oil price goes up 100%, the share price goes up, say, 150%. With GKP it is maybe a case of if the oil price goes up 100%, GKP goes up only 50%.

I think this is because the present value of the future cash flows changes in that way due to the disadvantageous terms of the PSC that give the lion’s share of profit oil to the KRG even though they are free carried. Cost oil is really just the return of our own money (discovery cost and past capex), so I don’t really count that (it’s like repayment of an interest free loan by the KRG back to us – nothing to do with our share of the oil sales proceeds)

Our BoD’s continual trumpeting of low opex seems to me to be a way of fooling people into thinking the PSC gives us a high net back (if that is the right jargon); the low opex definitely does not because we have other costs that international oil companies operating in other countries don’t have: I am sure our share price would move in a much more leveraged fashion to oil price movements if we had a high net back.

I am a believer in near efficient markets, so charts, momentum based investing, factor based investing (using seemingly cheap value ratios such as price to book, price to sales, price to earnings, EV to 2P reserves, etc.) simply are of little interest to me. (Charts will be right 50% of the time, but the problem is you don’t know which times they are right – sure, if SH-13 comes good we might get what a “cup and handle” chart predicts, but it is all dependent on SH-13 adding 5k bopd to production, and on no other random possible negative events occurring in the same time interval (pipeline shut down, oil price crash, license cancellation, etc.).

A consequence of a belief in random share price movements (because news is randomly good and bad, and, btw, repeated sequences of good news, so called ‘trends’, count as random to me) is surely that no system works for any length of time, because if it did, it would soon be discovered, and the advantage it conferred be priced away: even Buffet has a rule that he can disregard his own rules, recognition that markets are efficient, and proof to me that his comment “I wouldn’t be this rich if markets were efficient” is just a case deft self-promotion for the unsophisticated?

Yes, our business model benefits from other types of leverage but I just wanted to keep things simple.

Srodgers, you are welcome. The more I think about it the more likely it is you will get the dividend, perhaps not at the same time as everybody else, and the cheque may not be drawn on the same bank account as everybody else's, but I am sure you will get it.

You surely entered into a contract to buy the product that was being traded on that day, the cum dividend purchase of GKP; anyone buying today is buying the ex-div GKP share 'product'. The settlement date is irrelevant: it is surely to do with whether the price agreed included the dividend. There is no way a seller can sell a cum div GKP share and then expect to keep the div as well just because he wasn't removed from the share register in time before the Record Date. The mechanism and the extra paperwork incurred by your broker in fulfilling the contract are not your problem - it is surely the broker's problem. JMV. I hope it all works out okay. Others, (TM?), may have a better answer from actual experience. I have not had experience of this, yet! Finally, if you bought the share cum dividend, I wouldn't expect the contract note to say so, but if you bought it xd, I would expect it to say so.

Surely if you paid a cum dividend price, then you get the divi. Sure, you might not be on the company share register on the record date, but that's not your fault: the broker will have to get the divi off the seller and credit you with it. I can't be sure about that, but at least my answer is logical and is fair to both parties, the seller and yourself.

TM I'll answer your Q shortly.