Member Info for PUTUP

Well, well, well.... I'm glad I sold a whole bunch above 207p. The stock bottomed today at bang on my expected support level as well (which btw equals the fair value price from my current inherently conservative model which hasn't let me down yet).

"How many barrels were produced in September 2022 ?? "

I believe about 44.1k bopd

$80 Brent? Depends on production volumes, the R Factor, the amount of CRP etc. You need to understand the formula in the PSC. There have been PLENTY of posts here over the last couple of years working through that for various production months which have broken down the expected receipt between cost recovery, profit oil and CBC. Scroll back and work through a few. You should be able to easily calculate the profit oil per barrel for a given month (eg September 2022) and understand how that is affected by whatever additional discount to Brent you chose to use.

"Even if GKP loose £2 million a month, GKP are still making good money per year"

It's the delta/change on the amount of Profit Oil that matters most. We don't make a profit margin on Cost Oil.

Looking at receipts alone is a mistake. Receipts - capex - direct opex - direct SG&A is what's available to cover head office costs. In the short term this calc is still flattered by historical cost recovery...

"Very keen to keep adding new wells and it will only be lack of payments that dials that down. "

No surprises there. It's not GKP who pays for them. So if you can drill and be reimbursed quickly you're going to want to drill. The only cost to GKP is financing the working capital plus the lost profit oil for the short period production is pushed from profit oil to cost oil. The contractor will always be pushing for more drilling (particularly now that they CAN* be reimbursed quickly).

* Can - not will

That presentation was packed full of "well, duh" moments.

I'm amazed. Genel announces an $11 whack to the pricing they receive ($12 for Oct, $13 for Nov and $10 for Dec) - that would be more than a 50% increase in the discount to Brent if GKP were to take the same hit - and the stock barely moves... Either people don't care about the price the oil is sold for (which would be extremely odd as the hit to profit oil is very significant) or the hits were already priced in. Or maybe it just takes a good while for a retail investor dominated share register to figure things out. Anyone know anything about the quality of oil produced by Genel versus that by GKP?

Interesting that no one even bothered to ask a question regarding the move to KBT-based pricing! These guys are getting a very easy ride and are not being grilled at all by attendees (although there didn't seem to be many).

"The change in pricing formula results in an adverse impact on September realised price per barrel at field level of $11/bbl, with the impact on our working interest per barrel being $2/bbl. This has impacted our proceeds by $1.9 million for sales made in September. Should the new pricing mechanism have been in place across 2022, the impact of the change on realised monthly price per barrel at field level would have ranged between $6/bbl and $13/bbl, with the impact on working interest between $1/bbl and $3/bbl.'

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. Hopefully GKP is able to secure SOME degree of compensation via cessation of the CBC or in some other way.

Correct Theoryman. The added complication is the transportation and sale of the lifted oil. This is inextricably entwined with the KRG. The Contractor simply has no practical ability to peel off "it's" share of production and transport it and sell it independently of the KRG. Hence, it is rather "stuck" with awaiting its share of production as sold to be paid by the KRG in cash. It is a risk central to GKP. I'm sure shareholders and management would prefer different options, but I very much doubt a practical one is available. So the Contractor "owns" a slither of production as produced (a large proportion of which reimburses the Contractor for direct costs and capex and a small proportion of which is Profit Oil) but have no other choice other than to hand it over to the KRG for transportation and sale. IMO a reserves report/CPR isn't worth much more than confirmation the field has reserves enough to sustain its projected production for the forecast period (with some "terminal" value). Yet anything out past 10 years isn't worth much anyway. ($1 generated 10 years from now is only worth 16c today at my discount rate of 20%. $1 generated 15 years out is only worth 6c.) The near-term is much more important.

Good luck thinking the Contractor can peel off a portion of production and sell it independently of the KRG...

Depends on each of the contracts they have. ExxonMobile did extraordinarily well in Guyana for example (and Guyana have vowed not to make the same mistake again).

The right to receive a share of proceeds from sales is still worth something. If another company thought it extraordinarily cheap to buy that right by buying GKP then they might approach the company regarding a sale. They'd look closely at the present value of the Profit Oil stream (which of course depends heavily on volumes extracted and the price they're sold at). The share of proceeds that goes to GKP is determined by the PSC. Best understand it well... Have a good weekend.

"I don't really understand this situation if we sell the oil how come we do not get the money and then pay the government tax from our money?"

Because we don't own the oil and don't sell it. We are paid a percentage of profits to lift it.

"I have my suspicions that these payment delays are due to the ongoing "discussions" over switching from Brent to KBT as a price per barrell. "

Well, yeah.... If it were neutral or advantageous the discussions would no take long. Draw your own conclusions.

Share consolidation 100:1 on 12 December 2016

"They are talking about 55-60 dollars a barrel."

Production being sold at $55-60 per barrel is a good deal less than the formula currently used for GKP's receipts (Brent - $23.2). If production is instead sold at $55 (no further discount) and the PSC remains as is, GKP's Profit Oil - CBC is about $4 a barrel (50k bopd production rate) from which they must pay their indirect/unrecoverable costs (corporate overhead etc).

Ask the KRG. Maybe they think they hold all the cards - which they do. Don't forget that alongside the Profit Oil less CBC is the larger payment for reimbursement of capex and direct costs so the quantum of payments isn't small - only the bit that can be distributed to shareholders is once the CRP is normalised. As for the Board, this is more of a management issue and, particularly, the CEO. I agree with you in that management need to be very firm with the KRG that investment can only occur on the back of timely payments/reimbursement. I'm sure there's lots of eyeballing going on to see who blinks.

Let's assume for the moment that the current pricing and payment mechanism is intact (the following would likely be worse if not) and look at January 2023. Brent averaged about $82.46 per barrel and production was around 47,800 (maybe a little more) bopd. If production was sold at a $23.2 discount to Brent the field generated gross sales of about $87.8 million. GKP's profit oil less CBC is $6.5 million from which it must pay it's corporate overhead and any other indirect costs not recoverable under the PSC (about $1m or so a month). I think it entirely unrealistic to think that the KRG really cares too much about how this small slice of the pie is spent...

"diversify"

Dreaming. I like the pure play. I can diversify any time I want (and do). GKP just needs to do it better.

Anything discounted at a mere 10% isn't worth the paper its written on IMO

I'm absolutely with you re not spending significantly without timely reimbursement. The arrangement works both ways. The company needs to be paid/reimbursed in a timely fashion (remember they make no margin on the capex/direct opex except via profit oil) in order to want to spend and the KRG has to permit the company to spend (given their obligation to reimburse they are really the ones spending).

What would you have the board do other than restrict spending until reimbursement is more timely? I'm sure it's a very delicate situation. P*ssing off the only client is unlikely to be in shareholders' interests. Cash as of end January less the dividend to be paid is only worth about 47p per share. All the rest of the share price is at the whim of the KRG.

Only the company and the KRG know. The substantial increase in 2023 capex guidance vs 2022 suggests a desire by the KRG to keep things rolling. Also, any FDP discussions will no doubt be inextricably entwined with any move to KBT as the reference price for payments under the PSC - something that doesn't seem to have favoured those that have agreed to it - plus discussion of the company's CBC, even the prior revision of which still hasn't been properly documented. We shall just have to wait and see.

Don't worry, Toppy Uppy Opu has underwritten the company receiving more than $60 million a month so all is good...

"We now estimate Brent to trade in a $90-100/bbl range in 2H, lower than our previous estimate of $100-110/bbl."

For the detail, read Martijn Rats report released just now.