Member Info for PUTUP

Oops I have a typo in Oct. Net $28.5. All else the same. (And my stupid keyboard likes to send two for ones on the letter e.) Re cost recovery, obviously GKP's share of the Contractor recovery is 80%.

Oct: Net to GKP $28.5 m of which circa $5.8 m is Profit Oil less CBC and the balance Cost Recovery. In October production the Contractor recovers about $8m more in costs than those incurred so a reduction in CRP of the same.

Well it seems it's drivel time here over the last few days. Loads of complete cr*p spouted by usual suspects.

Exports will resume in time. SOMO has the potential, albeit no guaranteed, to be a better party to GKP.

What about our receivables? Hopefully the KRG make a payment soon as this will be a very good sign.

Given all the KBT stuff it's perhaps worth reviewing what's owed for Q4. My estimates +/- :

Oct: Net to GKP $25.5 m of which circa $5.8 m is Profit Oil less CBC and the balance Cost Recovery. In October production the Contractor recovers about $8m more in costs than those incurred so a reduction in CRP of the same.

Nov: Net to GKP $23.3 m of which circa $4.7 m is Profit Oil less CBC and the balance Cost Recovery. In November production the Contractor recovers about $3m more in costs than those incurred so a reduction in CRP of the same.

Dec: Net to GKP $22.3 m of which $4.5 m is Profit Oil less CBC and the balance Cost Recovery. In December production the Contractor recovers about $2m more in costs than those incurred so a reduction in CRP of the same.

I'm still refining the cost recovery figures for the FY results but my estimate of the CRP balance as of 31 Dec was a mere 3% off. Not bad given the complexity of estimating it. So the above aren't going to change much.

4Q costs and capex have been spent and so the cash when received flows too the bottom line of free cash flow but thee above should show you that most of receipts coming in is merely compensating for money going out. GLA. GKP never fails to surprise. Price the risk accordingly.

There's the risk of curtailed, or even halted, production. That's already happening and so far is a bit of a repeat of the effects of the earthquake on GKP's production. Personally I think there's too much at stake for this to not be resolved reasonably quickly (within weeks at most). Then there's the risk associated with getting paid for 4Q '22 and 1Q '23 to date. That's about $154 million +/- of what was 'near cash'. That's about 56p per share that's now almost certainly riskier than it was before. IMO the risk on this is far greater than the risk associated with production delay.

With respect to the future the KRG don't have a leg to stand on. SOMO will now sell the oil. The questions I have include the following. What happens to our PSC now? Is it replaced with an identical document with the Iraqi central government and SOMO? A contract with worse terms? Can our PSC with the KRG still operate under the new regime? If all returns to the status quo but with our contractual partner and creditor being SOMO, as I've said before, I think we are better off. But there might well be a lot of uncertainty with regard to that transition. Lots of questions for management even though they may not have the answers....

Very likely zero

Only time will tell if that's the right strategy. I still have a lot here. This could be one of those times when one has to "put up (buy) or shut up (stop whining)" just like it was in 2020 when I entered the stock and created my moniker here. I'm unsure. My little model was flashing red pre the KBT announcement for the first time since the stock was over £3. At these levels it shows some value again (although not as much as many would hope for) although that assumes monies are paid. That said, I'm not yet sure it's time to pile in and add given my existing exposure. I'd like to see the KRG make the next payment...

What incentive is there for the KRG to make the payments for 4Q 2022 and 1Q 2023 while oil isn’t flowing? These total about $154 million net to GKP. This, frankly, is my biggest concern. Everyone needs future oil to flow. The KRG already has the proceeds for this production (at least until some point in March) and has little incentive to rush to pass it on. There’s a lot of historical CRP embedded in those production months which won’t be there in future ones. GLA. Risks like this is why I demand a 20% expected rate of return.

"lol this share returned 41%yield last year and already 11% this year"

At what price THIS YEAR did anyone buy, or mark their position to market to, such that they've received an 11% yield on their investment THIS YEAR?

It's repatriating excess capital. There's more repatriation to come when payments for last year have been received. When they are paid out it will come out of the share price. The share price can be broken down into about 43p reflecting cash on hand, 28p for 4Q 2022 invoiced but not yet received production, about the same 28p for invoiced 1Q 23 production, and the balance which is the implied value for production over the next 9 months of 23 and beyond. The balance, about 74p, has to do a lot of work (appreciate a lot in value) to make up for paying out from the first three items.... Let's say they pay out a further $50 million on top of the announced $25 million. That's roughly 27p out the door. The 'balance', currently valued at 74p, has to appreciate a whopping 36% to make up for the payout...

There's an old adage "buy the rumour, sell the fact." The stock rallied into the announcement from the low 160s so maybe this was a factor. Trading strategies can dominate the short term but fundamentals typically prove out over the long term.

Those who doubted the 7% should note E minus F on that slide

Note $213m is the gross amount (GKP's share is 80%) and the figure is flattered in that the company has billed but had not yet received the cost recovery associated with Aug - Dec 2022 (as of 31 Dec) which is about $136 million gross. Adjusting for this the balance pro forma for those receipts is $77 million gross. My model estimates $66 million so I have a modest discrepancy theres - even though my expectations for the R Factor were bang on the company's disclosure.

Take note fellas. Study it well. The company has even provided notes to help you. (I'd note that their use the term "revenue" in stages 1 and 3 is a bit misleading/possibly confusing. Better IMO to have used gross and net "field sales".) Note footnote 2.

BB, I meant as I expected ie no extension to PSC. All of 1-4 were as per my comments. I added 5 and 6 with 5 as expected/hoped. 6 was a plus from my point of view.

Interesting that production guidance for the full year of 46k-52k wasn't raised. Perhaps more comfortable with higher end of range?

1. PSC extension - as expected
2. FDP - as expected
3. CPR upgrade - yes but not impactful
4. Dividends - as expected

"5. Production update - here where we might, hopefully, get some proper good news". Good news indeed. Celebrate.
"6. An update on KBT impact for February". Here some good news also

Production x price less costs. Good news on the first two!

I hope you've all sent your questions in...

1. PSC extension - very much doubt it but who knows (but that's cashflow 14-15 years or more out so not worth a lot today except the messaging value of confidence in he partnership with GKP)
2. FDP - possibly, although I don't think this is big news (once properly digested) as they are already investing as if it has been approved (it's the approval of additional capex that's important)
3. CPR upgrade - possibly, but we already believe there's a good deal of oil there; the issue is getting it out
4. Q2 Dividends - yes. I expect $25m (which will come out of the stock price when the cash leaves the company) and mentions of further repatriation of excess capital as payments received (no surprise there). Maybe we get more but dividends are paid out of cash...

More importantly...

5. Production update - here where we might, hopefully, get some proper good news
6. An update on KBT impact for February

If capex and opex are being reimbursed in very quick fashion then financial risks are low. What's not to like? It might not be worth what Arma thinks it is or produce the free cash flow Itsaponzi dreams about but GKP have a ride on a field with purportedly great potential. You just need to get your mindset around the right way with respect to the company's role, financial dynamics and potential value.

Oh Arma. The ultimate muppet.

"110,000 barrels of oil per say at 100 dollars turns over 4 billion a year."

Last disclosed volume was less than 50k. Hopefully we get good news in this regard. The current price of our oil is about $75 - 34 = $41. That's a very long way from $4 billion in gross field sales.

"Even at 20 percent of 4 billion we're worth our share price per annum. Maths is great keep it simple."

Maths is great when you get the numbers right.

Profit Oil less CBC is currently closer to 7% of gross field sales.

GLA

There have been countless examples shown here on this board of how to estimate monthly receipts and their main components: cost recovery, profit oil and capacity building charge. You should do your own calculations based one your estimates of volume, oil prices, R factor etc. In recent past, receipts have had a very high cost recovery component as the company had finally found itself in a position to recover prior capex and operating expenditure. But very soon (for the most part, now) cost recovery for a month has normalized to recovering current capex and opex. (There's a lag but in essence that's the case.) To get to free cash flow from operations you need to take the receipts from operations and deduct the cash expenditures from operations (opex, direct G&A and capex). So cost recovery and opex/capex expenditure net out against one another, leaving Profit Oil - CBC.

There's no wonder or "inside info" to this. It's plain for all to see. Why do you think the company made reference in its recent update to "capitalising on the attractive returns resulting from the quick payback of investment under the PSC following the recent recovery of the majority of our historic costs." The words beginning with "following" are the most pertinent here in this regard as well as "quick payback" (they spend but are reimbursed via cost oil - thankfully, or rather hopefully, quickly). It's what the company does and the reason it exists. They execute the field development, get their capex and direct operating costs recovered via Cost Oil and make a sliver called, funnily enough, Profit Oil from which they pay a Capacity Building Charge and any non-recoverable costs such as corporate overhead.

There's more dividends to come because we've still got to get the receipts for last year when they were flattered by high cost recovery (greater than costs incurred) and, of course, they can pay dividends from Profit Oil - CBC - other costs. But dividends don't create value.

What happens, say, 14 or 15 years from now doesn't matter that much today. $1 received in 15 years time is worth just 12c today if discounted at 15% - 6c if discounted at 20%. (24c if you are foolish enough to discount it at 10%.)

"Surely spending billions on Capex over the years then just walk away with no. reimbursement from the KRG."

They are being reimbursed each month. Only about $58 million +/- of Gross recoverable costs (80% of that for GKP) won't have been recovered with billings for Feb 23 production.

"How many billions will gkp generate in the next 15 years ??"

Who knows? At the moment free cash flow from operations is very roughly $5 million a month from which they must pay corporate overhead and any other non-recoverable costs. It should grow but it might take awhile to accumulate $1 billion..