Member Info for PUTUP

Still no payment for October. More important than a swift reopening of the pipes. Price still doesn't fully reflect risks.

Toppy Oppy needs to get on a plane to Kurdistan to collect our future dividends...

I wouldn't overstate the pressure. It's not airline seats. The oil is still there. It's just a time value of money thing. There's certainly pressure but Iraq will likely take the time necessary to get a solution they feel is the best they can achieve for the foreseeable future.

The IOCs still have their costs on a daily basis. How much do you think of the $3-$3.4 per barrel gross operating cost for Shaikan is variable? (Very little of direct Shaikan G&A and corporate head office G&A is likely to be variable.) But again those direct operating costs are recoverable from Iraq. So I'm sure there's additional pressure on the IOCs from SOMO to reduce costs during this period yet the IOCs can simply fill into the CRP.

Does Genel have 54p per share of outstanding invoices to the KRG?

"while GKP being played by Algo Bits "

LOL. There's always some deep-state conspiracy at work when things don't go the retail investor's way....

Yes. We get about $3.37 a barrel.

"SOMO will aim to have an Official Selling Price (OSP) for the KBT kurdish blend - as it has for the other 3 Iraq blends."

Agreed

"My own estimate of SH crude value is currently Brent - $28/bbl. but the new transportation fees/tariffs will need watching and could seriously affect this estimate."

versus the Brent - $34 we are currently paid. The question is "how much are we being charged per barrel for transportation?" (and is it a variable per barrel cost?" Greater transparency is needed here. Deloitte audits of KRG cash flows for its oil business might provide some insight...

I think, unfortunately, KBT is dragged down by the price of Russian oil and the price cap imposed thereon. Those expecting a big bump in the price at which Shaikan oil is sold are likely to be very disappointed. Only time will tell.

BTRSTF coming up....

"We get a fair and uncorrupted price."

Shaikan oil is sold at KBT less $17 at the moment. The $17 includes transportation costs. KBT sells for circa $16 less than Brent. I wonder:

- how much per barrel do you think is the cost of transportation and what might happen to this cost as a result of present discussions?
- how much per barrel represents the requisite discount for Shaikan heavy oil vs the KBT blend (in a more normalised marketplace)?
- how much of the discount to KBT is because of political issues that can be resolved by SOMO?
- how much do you think the discount for KBT oil versus Brent can be recovered if SOMO is in control?

Can you quantify (even roughly) what you think 'a fair and uncorrupted price' is?

I don't know the answers to these questions but I think they're gravely important. Maybe you do...

(Strangely enough - not - an increase to 85k production from 53.5k doesn't double cash flow...even in a 'steady state' scenario where the company isn't investing heavily on behalf of SOMO and thereby pushing profit oil to cost oil.)

KBT vs Brent discount. GKP realized price vs KBT (incl cost of transport)
Sep 22 $17.76 $16.44
Oct $18.40 $16.8
Nov $19.42 $16.78
Dec $17.92 $17.28

Jan 23 $15.46 $17.74

The discount to KBT of the realized price for sales from Shaikan (including transportation costs) has been increasing.

Arma from Wednesday:

"I subtracted today. Just 12 percent. Glad someone bought. Bought some Rio and BP. Happy to stick out with remainder. Fingers crossed lths"

Algo Bots my ar$e

Invrstrat, best wish for a better result. 3Q 22 and 1Q 23 invoices are 23% of my fair value estimate as of end 23 (and 26% of that fair value as of end of this month). And those 'targets' assume a very swift return to normality (and a KBT discount of $9 amongst other things). Writing off those receipts would hurt a LOT.

But will it recover the $154 million +/- owed? That's a key question. And will the discount for KBT pricing recover to zero from the $6 in February ($10 in January)? Remember this was responsible for the initial leg down. We had some recovery due to better production figures but that all went out the window with the pipeline closure. (The fact the company is debt free is largely beside thee point given cash balances.)

BB, I would have thought there little incentive to alter the Cost Oil component. It is already the lesser of 40% of production and the CRP. Given the pool has almost normalized, with a balance of a mere circa $57 million +/- gross as of March invoices (GKP 80% share), ie legacy expenditures largely recovered, Iraq/SOMO ends up 'paying' in cost oil for current direct expenditure only. Were the percentage lowered I'd fully expect contractors such as GKP to simply throttle expenditure to only that which could be recovered so if SOMO wants field development (necessary to maintain and grow volumes) they need to provide for a suitable/commensurate level of recovery.

As for the Profit Oil component, this is of course where GKP makes money (something so many here still fail to grasp). Profit Oil - CBC for March was likely around $3.37 a barrel and so hardly a huge take from the gross field proceeds. But of course everything is likely up for grabs. My base expectation, however, is that existing arrangements will be grandfathered so as to ease the transition into the new 'regime'. SOMO needs contractors to settle into compliance with them (vs the KRG previously) and need the oil moving. All bets are off when it comes to contract extensions and renewals though.

Published April 3 post OPEC announcements and factoring them in.

Period Old New
2Q 23 90 85
3Q 23 95 90
4Q 23 95 87.5
2024 95 85

See the full report from Martijn Rats for the detail. Quite an interesting read.

I still believe they will get paid - eventually - or at least I hope they will be. If I really thought they wouldn't be I'd sell for sure. As I've said here before, I am neither a buyer nor seller at current levels. I have only sold twice. Once just above 320p and unfortunately not enough there. I didn't reinvest any dividends since that time which reduced my VAR considerably as well. As I have mentioned here before I sold at 207p ahead of the KBT announcement (post Genel's announcement). About 10% of my remaining position. I had intended to sell up to 30% but hesitated. Silly me.

"How to sidestep these missed/redirected/reduced payments will be the focus of the tribal ruller’s minds right now.
Baghdad will not feel responsible to compensate us as they probably know where the money ended up and are cautious about naming names incase it threatens the bigger picture and invokes the wrath of those entitled to sign on behalf of the KRG.
I guess we will just have to eat the loss for the greater good. Again."

That circa $154 million, circa 54p per share, would be a big loss to eat. The current share price doesn't yet factor a complete loss of these payments IMO.

Three factors brought us down from the 207p level: KBT pricing adjustments, followed by pipeline closure and lastly the potential to lose 54p per share of payments. Even if the second is resolved swiftly the other two are likely to linger for quite some time unfortunately. We need to watch all three.

And that the discount for KBT narrows. The additional $9 average discount hurts. I’ve no idea if the last month discount of just $6 is indicative of what we should expect going forward. For now I’m using the average of the disclosed discounts. Would be good to know the KBT average for the month of March.

A good day so far but feels a little like everyone’s getting ahead of themselves. I will take the mark up in VAR for now though. Here’s hoping we get a pipeline reopening announcement and a payment for Oct ‘22 production otherwise this has a feeling of a proverbial feline bounce. I don’t doubt the resumption of production near term and that’s definitely in the price now. I do worry about prompt recovery of the very large receivables balance. Only time will tell. Not a seller here but not a buyer also. GLA. Let’s enjoy the refreshingly positive tape.