Member Info for PUTUP

One very simple way to think about it is that on March 6 the reference price of oil for GKP was Brent $86 less $23.2 = $62.8. Now it is $72.53 - 23.2 - 11.6 = $37.73. For a producer getting Brent the price change for field sales has been 15.7%. For GKP, the price change for field sales has been a whopping 40%. Luckily, over half of GKP's current equity value is sitting in cash unaffected by oil price changes or in receipts which, while affected by the additional $11.60, have not been affected by the move from $86 to $72.53. Nonetheless, it would taking a whopping circa 30% increase in production just to make up for the value loss of the $11 hit. Here's hoping the discount narrows and production rises strongly.

But the actual additional discount was $11.60 for the period (albeit $10 for the disclosed month) and oil prices have fallen dramatically since. Assuming $70 Brent in perpetuity now might well be very optimistic. That suggests....

GLA we can do with some good news.

(Credit Suisse? Ha. Dumped everything I had in that dog in 2003 and never looked back.)

6th of March when GKP was trading at 208.50p, I said:

"If I apply, for example, an additional $9 discount to Brent in my valuation model it whops about 35-40p off the target share price of GKP."

GKP RNS was 9th of March.

Now the dust has settled a little the stock is down circa 38p. Hmmm.

It hasn't been a fun week but hopefully oil prices recover from here (my current expectations look optimistic with the current spot) and we get good news on production with the YE results.

"the answer is simply about volume output"

Volume and price

There was a big hit to price. You can easily work out how much more volume is needed to make up for the loss of price. I've done that work; have you?

GLA I'm glad I trimmed recently above 207p (and previously above £3 - and in between via not reinvesting dividends). I still own a lot. And, no, I wasn't dumb enough to own this company prior to its bankruptcy, oops restructuring, in 2016. I bought in 2020 when it plunged and the market failed to recognise the off-balance sheet asset called the CRP. That play is almost over. Now it's simply about volume growth and price (against a slowly declining share of the pie). Here's hoping the hit to price declines via a narrowing of the discount for our heavy crude and that oil prices strengthen more generally, and our volumes grow strongly (2022 was dismal in this regard but I'm betting 2023 will be much better). Enjoy your week.

"I've been here since 2009"

Such a badge of honour. Not.

Back to your old self aye Arma? Or just on another Sunday ******?

I just do my homework. How about you? DYOR

Divide the guidance given for net capex by 12, calculate GKP's share of lifting costs per barrel ($3.20 per barrel gross), add an amount for direct Shaikan G&A, add about $1m for corporate overhead costs. What do YOU get? Sometimes you have to do a little basic mathematics.

(I inadvertently gave the gross figures first and corrected it for net.)

no idea who you are talking about

"for which all the expenditure has already occurred"

I mean in relation to the last disclosed cash figure of $151 million as of Jan 28 from which you can pro forma...

Capex guidance is $160-175 million net versus a production figure for the year of 46-52k.

"$85-$90 million: Continued expansion of production facilities, targeting by H2 2024 an increase in total field capacity from c.60,000 bopd currently to 85,000 bopd and installation of water handling capacity, potentially enabling the increase in production rates from constrained wells"

So $85-90 million is for increasing production facilities and water handling capacity in preparation for greater volumes. It would be foolish, IMO, to assume that isn't spent in 2023.

We still have circa $75 million to come in from 2022 production and possibly another $25 million for Jan '23 for which all the expenditure has already occurred.

I don't disagree with you on the potential for more dividends but of course that's already in the share price. Pay them and the company is worth commensurately less.

They posted a figure of $151 m as of 28 January. From that you need to subtract the dividend, opex and capex for Feb/Mar, and add the receipt.

As I'd mentioned the other day the fall to these levels matched the bigger drop in the 'fair value' estimate from my inherently conservative and simple model. How is my model conservative? Basically I forecast for the current year and then calculate a 'terminal' value at the end of the year which says "what if the company went into a steady state with only maintenance capex, no further production growth, in perpetuity @ $70 Brent?" (BTW the terminal value equates to about 5x steady state free cash flow.) I use a solid discount rate of 20% (but also model the impact of changing this and other assumptions). So the 'terminal value' is conservative. Yet this model has served me well since I first bought into the company. It produced sell signals only twice: when the stock was over £3 and the other day when I embedded an additional discount for the move to KBT. For the current year, I have Brent averaging $85 for March through June, $90 for July, $95 for Aug-Dec. I have steady production growth from January's last disclosed figure of 47.8k up to 50.2k for Dec. This works out as an average production for the year equal to the mid-point of the company's most recent guidance. I have an $11 additional discount to Brent throughout for the move to KBT.

So what are the potential upsides? Well, they include:

1. Oil prices, in general, strengthen above my forecasts
2. The discount for the company's oil/KBT to Brent closes
3. Production turns out better than the mid point of company guidance (I think this very possible and this would raise my simply terminal value as well)
4. The company manages to secure a reduction or elimination of the CBC (this would significantly offset a lot of the cost of moving to KBT)
5. You might be happier with a lower return than 20% (a reduction of discount rate to 15% adds roughly 25p per share)

Obviously with forecast Brent well above the $70 assumed in my terminal assumption adding another year to the forecast period vs terminal assumption would add value as well.

The good news is the bad news with respect to moving to KBT is finally out there. The company still has to explain a lot regarding the composition of the discount but I'm sure they will in investor Q&A. I would hope that, now the move to KBT has been agreed, the KRG will catch up on the backlog of payments but we will have to wait and see. And hopefully there's good news regarding production.

Just saw BB's post. +/- I guess one should subtract some more from my number for the two weeks of March so BB is closer to being correct.

There's still a decent amount of money to come in from the historical CRP. The increase in capex coupled with the lower receipts has pushed normalization out to around September/October this year. The company can throttle capex if they're not being paid (as opposed to the new pricing formula). With respect to the new pricing formula, remember that the old one also reflected the discount KBT/our crude had to Brent. It's just that this has widened dramatically recently. You can't really blame the KRG for wanting to bring the payment structure closer to what the production is yielding. With luck, the discount will narrow again (or even better). It's notable that GKP posted figures for January which showed some improvement. It's incumbent on management to fully explain the differential and its components and the drivers of such to provide insight and reassurance to the market.

FWIW cash will be closer to $133m than $185m. (151-25-20+27)

"PUTUP, this is assuming capex @ 175mm (net)?"

You could easily check the answer to that question yourself. Midpoint of guidance for capex ($160-175 million net) and midpoint of guidance for lifting costs ($3.20 gross) plus direct Shaikan G&A (net). All adjusted to net for my corrected figure. To that you need to add corporate overhead costs.

" Yes if you bought at the high of over £3. I, along with many others did not. Me and many others are yielding much much more than 4%. "

But you could have sold there.... Any sensible investor recognizes they can mark their portfolio to market each day (at least) and make buy/hold/sell decisions at each point. You decided to hold when the stock was above £3. How's your yield based on that decision?

Apologies. Spending about $19-20 million net

Don't forget they're spending about $24 million a month

So GKP actually did slightly better - by 1% - than I was expecting for September.

I had 44.1k bopd average production leading to a total net receipt of $26.6 million comprising $21.2 million in cost recovery, $6.8 million for profit oil less the CBC charge of $1.4 million.

Using my numbers that's profit oil less CBC of $4.12 per barrel (from which we much pay corporate overhead costs which are presumably largely fixed). Without the additional $11 discount, profit oil - CBC would have been $4.93 per barrel. So basically our real return from operations per barrel was whacked about 16.5%.

Of course there are. The bulk of that receipt is reimbursement for the cost of lifting (opex), direct G&A and capex. Then there's corporate overhead. It's not like all the receipts hit the bottom line.