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$800-925m was an estimate of the field investment (gross) for the FDP over a period of 36-42 mths. (I note the numbers and timeline were dropped from the latest presentation.) That is NOT the amount of capital required by GKP.

If GKP is refunded capex on a three-month payment schedule they don't need anywhere near that amount of capital. If they choose to keep investing when they're not getting paid then obviously they need greater capital. I suggest you run some numbers with whatever scenario you feel appropriate.

Here's a hypothetical one but make up your own: 40% of the mid of that estimate, $276 million NET, is spent in year one. $23m per month. There's plenty of base production and Brent is considerably above the level needed to provide this amount of capex per month through monthly cost recovery. (Do your own analysis of just how much can be cycled for a given production level and Brent price.) How much capital is needed by GKP in year 1 if they have to fund 3-month payment terms? Answer: about $69 million. What if 4-month payment terms? Answer: $92m. 5-months? $115m. If they haven't been paid for 5 months do you think they should invest in month 6 or curtail things considerably? Again, do your own numbers with whatever scenario you feel comfortable with. You're obviously MUCH more bearish than I am.

Stop with the scaremongering around a $900m CAPITAL need.

Let's say they decide to fund it with expensive equity (or debt is unavailable). They can still pay out circa half the $300m in cash 'n invoices they'll have at the end of this year. Particularly when we recognise they keep receiving profit oil next year. Why on earth do you think they have the confidence to pay out the dividends thus far? They're paying out the CRP. It's not capital that is needed going forward. And the last thing you want is for the KRG to be saying "you can invest even if I don't pay you because you have a ton of cash on your balance sheet". In short, the company is working towards tighter, more responsible, capital efficiency and deployment. That's a good thing.

Now let's look at a brighter scenario. It might not happen, but I like to consider the upside as well. Let's say the KRG recognise they need better payments discipline (or other events unfold to ensure it happens). That potentially opens up possibilities for using other forms of capital to fund the investment cycle rather than expensive equity. And, yes, working capital facilities can exist alongside healthy returns from true profits (funnily enough, Profit Oil less indirect costs) to shareholders. My cost of equity for GKP is 20% (prob should be more). If they can fund cheaper than that and give me more of my equity back then great.

The main pt is they don't need $900m in capital. If they cont. to 'invest' beyond, say, 5/6 mths' payments without a magnificent explanation the stock would be a swift and ugly sell. Good luck and cheer up - no need to be so dour! Ciao

PS thanks Slings

PPS if you want to dwell on conspiracy how about pondering why we haven't had an updated shareholder analysis since end July? They used to be published monthly. Woohaha...

Ah Straycat you're in fine form today. LOL I simply can't stop laughing. And yawning.

They don't need $900m, not even close. And if they're not getting paid they should halt expanding investment - why would anyone spend when they're not being paid on agreed terms? Whether they fund the required working capital with equity (by retaining cash on hand) or are able to do so (at least partially) with debt is yet to be seen. But if it's the former it's yours and my capital they will be using - and mine certainly doesn't come cheap. And, yes - obviously - debt requires consistency of payments. Duh. If they're forced to retain equity to fund the working capital then be assured their cost of capital will higher and value less than otherwise.

I'm not even going to debate the other individual points in your post because you really haven't put enough thought into it and instead lapsed to an abusive rant. (Funny how when there's little of substance to comment on people feel the need to fill the void with conspiracy.)

Hopefully management are focused on what matters - making progress on production. And hopefully they're getting some results. Clearly it hasn't been easy, as JF knew for some time. (What's your expectation for 4Q production?) They don't need a new FDP anytime soon (nor likely even at all). All they need is incremental approvals to make the necessary expenditure to move forward on each step in growing production. It's good that they seem so far to be getting the approvals needed. [If you don't think major capital expenditures (with or without an FDP) have to be discussed with and approved by the KRG you're delusional. The KRG is the one who has to pay for them from subsequent sales.]

Currently I expect that at the end of this year the company will have about $300 million in cash and invoices (obviously dependent on whether my assumptions re Brent and production hold good). If they are paid up to and including September's production, cash could be about $185 million of that. And, yes, I expect at least half of that to be paid out in dividends over the forthcoming year. The very last thing I want management to do is to plow that cash into investment and not get paid back. I think you are going to see much better capital discipline than in days of old. We certainly should hope for it...

So we now have IEA data for Brent through October. An average of $93.396 per barrel. We don't have company disclosure yet on volumes but, for now, I have an average daily production expectation of 47k (up 500 bopd on my expectation for September and up considerably from the last disclosed month's production of 44.8k for August). On the basis of this assumed production that would be a receipt for October of approximately $37.6 million of which about $8.2 million is Profit Oil less CBC withheld).

Summary of 2H production receipts so far:

June production $50.7m received (production known)
July production c$45.7m expected (production known)
August production c$39.4m expected (production known)
September production c$34.1m expected assuming a rebound in production to 46.5k bopd
October production c$37.6m expected assuming production of 47k bopd

We will likely be able to refine expectations for Sep/Oct prior to receipt following an update from the company. (I wonder if No Clue Opu still expects $65m a month...)

Still good CRP recovery going on leading to further cash to pay out. I reckon that with the receipt for October production the company/contractor will have recovered all direct costs from project inception up to and including those incurred in July this year (and part of August).

(Pete640 should now realise just how wrong his projected cash position for year end, for receipts to September but costs to year end, of $400 million is likely to be given an end August cash position of $112m pre the dividend payout and receipt for June. The company's current operating cash costs are about $16-17m a month.)

BB, I noted the money that went into the direct cost pool - in other words that which went directly into field development. Cumulative gross costs of $1.543bn as of December 31, 2021 which I forecast to have grown to circa $1.67 bn as of end October. As far as I'm aware that is all the direct costs from the very beginning of the project. This is how much the KRG has spent (or will have once it has fully reimbursed the contractor when it pays for January 23 production). On top of this are the indirect corporate overhead costs incurred by each of GKP and MOL and the dilution imposed on shareholders of free penny stock options.

Invstrat, "over enthusiasm" / (including that of many here) would be up very high on the list

Invrstrat wins the prize for the most (only?) pertinent remark so far. With c$1.7bn in direct costs sunk into the field so far, the field is producing 45k bopd. Far better to wish for higher production success than some Hail Mary dreamland bid.

More popcorn please!

The (even slightly) clever folk are going to need a lot of popcorn watching this thread. How fitting that it pops up on Halloween...

" I like FCF, I think GKP can for the mid term future clear between $7.5m and $10m FCF a month. Assuming ~50 K bpd. Brent at $100"

At $100 Brent and that production figure I'd agree with you on FCF generation. (Although personally I'd struggle currently to justify paying up, in the share price, for $100 Brent for any length of time.) Any good finance director would take those assumptions and have an idea of present value. ;)

(They'd further realise that returning excess capital to shareholders has a commensurate impact on the value of what's left unreturned and that only the capital at work can generate value for shareholders, ignoring the pitiful deposit interest rate that excess cash can receive.)

When a company is sitting on large amounts of excess capital it is necessary to 'value' that excess capital separately from the 'going concern' component. (I write 'value' in inverted commas because we are just talking cash and invoices and hence the task is simple.) That's not a 'sum of the parts' in the sense one might sum individual values for the components of the going concern business. I merely asked for your view on the value of the going concern component - the value you'd pay for your $7.5-10m a month, $90-120m per annum, of expected future free cash flow generation. It's impossible to decide whether GKP is cheap or expensive without a view on this.

Since you offered your experience/background..... One of the things I have done for over 30 years is advise finance directors - and CEOs and boards - on strategy, financial strategy and valuation. It's a pity to not extend this discussion into the all-important question of valuation but that's fine. Good luck!

:)

So what do you think the future Profit Oil stream is worth per share?

"No idea on cost pool"

This is at the very core of the GKP investment case since restructuring until receipts for production until the end of this year. Expect the announcement of more repatriation of excess capital (CRP) before year end. The PSC and Profit Oil is going forward.

"Sorry to hear you think that but as a finance director with 10 years of experience there is no way you want to keep excess cash on your balance sheet as it paints a target on your back This is not in anyway a controversial opinion. Excess cash can only be used for three things (1) "investment" i,e actual or wasted (2) returning to shareholders (3) paying down debt. If your not doing one of those three your finance function is not doing what it should be doing."

On this we agree (except for "paints a target on your back" unless you simply mean a target for criticism about capital inefficiency). If you don't need the capital, return to those that gave it to you (either lenders or shareholders as the case may be.

" The fact that they are paying out excess cash tells me (1) they don't have investment )(2) they don't want to be picked up"

Here's where we disagree. With respect to (1) it's not that "they don't have investment" but rather GKP isn't - for the most part - the one doing the investing. There's a lot of field investment opportunity in the coming years. It will require, as the company has outlined, a lot of capital. However, the bulk of this is borne by the KRG and only a relatively small proportion by the contractor. The contractor DOES have to fund the investment, but only for the short period until reimbursement. This is a peculiarity of the PSC and the role the company takes. Effectively they advise and execute for a slim share of the profits.

With respect to (2) cash on the books of the acquired doesn't fund the purchase by an acquirer. The buyer still has to pay for the net cash asset that exists - they don't get it for free. Or put another way you still have to raise capital to buy the cash. The fact that GKP is returning cash to shareholders says nothing about whether they want to or will be acquired.

GKP is a relatively unusual situation. The excess capital has arisen because the company went through a restructuring which wrote off a lot of capital - now it no longer has to be repaid. Furthermore, at the same time, there existed a substantial off-balance sheet asset called the Cost Recovery Pool. As this asset has been monetised it has created excess capital that can be sent to shareholders. This situation will normalize by year end.

"Paying out excess cash is extremely defensive when trying not to be acquired."

What a complete load of b*llocks

Gee Straycat you're starting to sound bearish. Paying out excess equity capital is never defensive. Holding on to it would be. I take the opposite view to you. Management understand that their current base of production provides a great platform for funding (until reimbursement a few months later) 'investment' - a bit of a misnomer given the bulk of the investment is made by the KRG and not the company. I also don't believe formal FDP approval is holding up anything. They're still to reach the targets under the current FDP and any incremental investment needed (eg water handling or whatever) can be managed via ad hoc approvals with the KRG. Management are merely dealing with the complexities of getting production up. It has been, and probably always will be, harder than anticipated. It's a grind and JH is learning just what JF had to deal with. The price of oil is good despite economic downturn/possible recession headwinds. They just need to get more of it out of the ground. In the interim, the current share price doesn't likely fully reflect current production left alone increases thereto.

"I note that GKP took that advice and restructured their debt twelve months before the due date. "

The reasons were rather obvious. Running cash balances in excess of the outstanding debt meant it was costing them $10m a year and adding no value. The lower penalty associated with early redemption made the cost of fixing this more reasonable. They're right to be debt free while they have excess equity capital. That's also why they're returning excess equity capital to shareholders. They don't need this level of equity capital to execute the next FDP (and don't need a new FDP in order to keep progressing on field development). Expect more excess capital to be returned.

All eyes on an update with respect to September production. I reckon or rather hope it will have bounced back significantly from the depressed levels of July/August. Currently I have 46.5k bopd (versus August production of 44.8k bopd) which means a payment due of circa $34.1 million (profit oil less CBC withheld of $7.4 million) given a Brent average of $89.76. We shall have to wait and see... Onward.

Only a fool waits until a debt is actually due to restructure it

The debt for equity swap wasn't causal. Taking on too much debt in the first place was the issue. In essence, the company was bankrupt and had no other choice but to restructure its capitalisation. Equity holders pre restructuring were thrown a bone to grease the wheels of that inevitable requirement. Be thankful you ended up with any stake in the restructuring. Reminiscing of "old money" stock prices is utterly ridiculous. You were peddled a BS story that had a harsh collision with reality. Now the company is a much more sensible footing. The equity is cheap but prior valuations serve no realistic guide as to a realistic future. Look forward and good luck.

A good estimate would be $50 million more than the number BB gave a couple of days ago (pre receipt)....!!

rounding

"And as the SP falls, the dividend payout as a percentage increases"

Maybe one day you'll learn that this ratio is meaningless (particularly when a company is paying out excess capital rather than a small percentage of its 'normal' cash generation).

"Basically if the powers that be want to devalue a share they'll find a way to do it. "

" Looks more and more than was an engineered drive up for those in the know to offload before the coming storm,"

Always looking for someone else to blame; an obscure actor working in the shadows responsible for your misery....

"We were at that for about 30 minutes. "

The stock traded above 3 quid long enough for anyone here to sell their entire stake. Coulda woulda shoulda.

The company earns $ revenue and has $ costs (except the small head office expenses) and accounts in $. It's merely an oddity that the stock is traded in pence. Far better to look at valuation, and stock price, in $. How has it performed since early June?