Member Info for PUTUP

From one pocket to the other

"Cat got your tongue old girl.

That's pretty much doubled what you thought, in one payment.

Must try harder ."

Try to keep up.

Exactly as expected. Yawn. (FWIW my exact forecast was $50.6 million. Close enough.) Payments for July and August production are also calculable with very good accuracy. For September we don't have a production figures published by the company yet.

"Cash now down to ca $60M or so."

Likely more like $80 million or a bit more. Still way, way more than they need to hold. But, yes, payment for June is way overdue now. And June's receipt is the best ever at about $50 million. Shame we won't get close to producing such an amount again this year - despite what No Clue Opu would have you believe. (September's receipt will be closer to $34 million assuming a BIG rebound in production. Profit Oil for June circa $13 million. Profit Oil for September circa $9 million - a 30% decline over June.)

Not a bad call made at 193p so far. (Particularly for a $ buyer.) Here’s hoping it continues.

“As the pound continues to fall (even ignoring the plunge in Asia this morning) as Brexit realities bite GKP is really looking cheap again, even if the oil price weakens a little. Selling above £3 cum dividend was a gimmie but now sitting on the bid looks smarter.”

Morgan Stanley lift their expectations for Brent for Q1 next year by $5 per barrel to $100 on the back of OPEC cut. Expectations for all other periods out to 2024 remain the same. ($100 2Q23 and $110 thereafter.) Ho hum.

And likewise the rampers don't like hearing facts or more balanced views

Took a quick look. Using my expectations for net receipts and estimated CBC for April/May/June (and adjusting for the $2.1 tariff charge) I can reconcile to less than 1% of the 1H trade receivables due from the KRG.

It's a shame receipts peaked in June.

*difference MIGHT be

Using $23.2 as a discount yielded an expectation of $38.2 for April (net of CBC) versus an actual of $38.1. (The difference be the then small impact of the R factor.)

For April I had expected $45.9. The result was $43.9 net of a pipeline tariff for 2021 of $2.1. So again the difference vs actual is rounding error.

TBH I haven't bothered to look at it. I believe April, May and June will have been booked in trade receivables ($138.7 million). April and May receipts are now known so the difference is/ought to be June. $138.7 less the net amounts received for April and May would be a receipt of $56m. HOWEVER given the "amount due from the KRG includes past due trade receivables of $40.2 million... related to April 2022 production" and the net receipt was $38.1 it suggests they book the gross revenue amounts (not net of CBC withheld) to trade receivables. So the $56 is too high. I just haven't had the time to do the rest of the computation (using gross of CBC numbers for April and May) even though it would take just a couple of minutes. I expect a receipt of very close $50 million net of CBC withheld for June (and it will only be 'news' if the amount if materially different from this).

FWIW I use $23.2 now as remember some of the pipeline tariff cost is now a percentage of Brent.

You can check the amount by looking at the 1H results...

Morgan Stanley's recently revised forecasts (as of Sep 12) for Brent:

4Q22 $95
1Q23 $95
2Q23 $100
3Q23 $110
4Q23 $110

I'm pretty sure Martijn Rats has a good grasp of SPR dynamics. We'll have to see how things play out. If you want to punt the price of Brent alone then the futures market is much more liquid than GKP stock.

"Structural vs cyclical – updating price forecasts: The oil market's structural outlook remains one of tightness, but for now, this is offset by cyclical demand headwinds. Following the recent correction, and with a slight tightening in our 2023 balance again, we suspect the majority of the decline has now played out. A renewed oil price rally is not imminent as long as macro-economic conditions remain so weak. Yet, after recession comes recovery. Once demand picks up, the structural issues will emerge once more. We lower near-term oil price forecasts, but see a firmer market again from 2Q 2023 onwards."

The only thing that pulled the pound if its knees today is the expectation of an emergency rate rise (as soon as today). Downing Street have effected another massive (poorly directed) fiscal stimulus at a time of rising inflation. This will force the BoE to act but I've no doubt the UK government wants a sharply lower pound with a view to achieving better competitiveness for UK exporters. But the cost will be borne by everyone consuming imported goods or who'd like to spend abroad. It will also be borne via higher mortgage rates. What's more, it's unlikely to work. To coin the phrase, winter is coming. At least GKP is a $ asset and people shouldn't lose sight of that. GLA.

Nah you're good. Opu is a blind fool who doesn't even realise dividends take money from one pocket and put it in the other. And he's never shown any understanding of the financial drivers of the company. The markets backdrop is going to get a lot worse before it gets better and will undoubtedly drag on GKP, but it offers value here IMO. It ought to offer also some shelter from a pound that I certainly expect to continue to fall. Hopefully GKP lives up to those expectations. Onward.

As the pound continues to fall (even ignoring the plunge in Asia this morning) as Brexit realities bite GKP is really looking cheap again, even if the oil price weakens a little. Selling above £3 cum dividend was a gimmie but now sitting on the bid looks smarter.

"In any case, reducing capex to $0 does NOT impact the net cash inflow by much."

Not quite. GKP still incurs a cost of capex via the lost profit oil share (less CBC) as oil is transferred from profit oil to cost oil for capex recovery. It's just a lot smaller than the headline capex figures would suggest. They bear circa 20% of the capex burden (depending on the R Factor). So when thinking about thee possible value of production level x it makes sense to have a level of capex required to maintain that level (rather than a number more closely associated with investing for growth).

In sterling? Nope. You're forgetting about the dividends received.

In $ terms it is off 39% (adjusting for dividends received). Given the company is a $ based business that's a very harsh correction considering Brent remains relatively firm.

(My $ calculation assumes you managed to convert the £ dividends back into $ at the same rate the company did its conversion at - a steep task and hence why management have been pressed to offer the option for dividends to be received in $ this time.)

Net income (accounting) is different from free cash flow (but accounting NI is a dangerous concept for this company)

A lot of Shaikan Direct G&A will be fixed costs (but you'll find this assumption immaterial to outcome)

Capex would not be so high if they've stopped investing for greater production in the future (steady state)

The pace of R factor growth, and contractor WI in PO decline, slows significantly when the CRP normalises. I suspect, but haven't calculated, 15% is a long way out.

No Clue Opu: "so on your thinking the next $100 Million Dividends are also in the Sp, when they are announced?!!!!!!"

Yes. They come straight out of the cash on hand, a component of the intrinsic value of the share. Dividend paid -> cash goes down -> intrinsic share value goes down. Dividends don't make money. They're paid out of cash that is generated from the operation of the business.

The operation of the business is/has been recouping the CRP - which is almost depleted and worth only about 8p per share at 2022 year end - and earning revenue via Profit Oil from which it must pay its non-recoverable costs. The company has been paying extraordinary dividends as the CRP has been recovered. An easily-recognisable off-balance sheet asset -> cash in the bank -> cash paid out of company in the form of dividends -> value of company declines commensurately.

The value of the 'Profit Oil less Unrecoverable Costs' cash flow stream is the critical variable in the valuation of the business - and it is this cash flow stream which must fund any long term dividends (and as those dividends are paid the cash on the books will decline and the intrinsic value of the share will fall accordingly).

There's still a bit more of the CRP to be recovered in 4Q and a big chunk of that will be paid out. But unless the value of the Profit Oil less Unrecoverable Costs stream increases to offset it, paying that money out will lead to a lower intrinsic share value.

The good news is, I believe the Profit Oil less Unrecoverable Costs cash flow stream is still being undervalued by the market. A better market valuation of this component requires, however, greater confidence in production gains and greater confidence in the medium to long-term price of Brent in the face of global recession fears.