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I put 'bidders' in '' for a reason. Meaning there are no better operators to have a contract with than the current. So when comparing their existing contracts with the terms of bidders in round 5 one needs to remember it's "worth making concessions to keep them happy."
Again, you've little to add and can't explain what is incorrect with any part of that which I wrote. Significant quality participants in the round either decided not to place bids in the end or their bids weren't successful. That's a lesson for Iraq should it wish to retain the existing contractors who are best-placed to continue development of the respective fields.
"There's a lot more"
Well, prior to this statement you haven't said anything. More than what?
"It's not just in net entitlement but also in rights." Err spell this out. The current PSC are RSC in all but name. Yes, the contractors have a theoretical right to a share of production and could theoretically sell that share independently. But they never have. Instead production has been sold and the contractor has awaited payment of their share. In essence the contracts are being executed as revenue sharing.
So far I haven't heard anything of substance or quality from you but keep giving it a go. I think you have next to no understanding of the current contract regime and hence no ability to compare it with the summary provided in the paper.
Ah Nobull, any chance to reiterate your misunderstanding of buybacks... That's not the topic of conversation. (And I've already said it's a horse beaten to death.)
Post royalty post the amount taken up by cost recovery and it's a sliding scale dependent on the R Factor.
Lastly, it's worth noting:
"A number of large companies qualified for the 5th Bid Round, such as ExxonMobil, Total and ENI. However, in the end, only ENI placed bids and it did not win either of the blocks it bid for. Zhenhua also bid unsuccessfully. The blocks were won by two smaller Chinese companies, both new entrants to Iraq (GeoJade and United Energy Group), and by Crescent Petroleum which previously had not had any assets in federally-controlled Iraq (it has contracts with the Kurdistan Regional Government, KRG)."
There are no better 'bidders' than the current operators and it's worth making concessions to keep them happy.
On balance the biggest item is just the royalty fee.
Yes it is worth a read and you should really read it again. If I were you I would focus on, in the first instance, the table of page 14 and compare the structure of the contract with the PSC under which GKP operates. The fact that the Kurdistan contracts are Production Sharing Contracts entitling the contractor to a share of production at the well-head rather than a share of revenue is nothing more than a technical difference with no practical distinction in operation and easily conceded by the current contractors. (Historically and currently, GKP has not sold its share of production independently of the rest of production.) Far more important are the terms which dictate what that share is.
The first notable difference is the level of royalty. At 25% this is significantly greater than the 10% in the current PSC.
Second, note that there is still a mechanism for Cost Recovery. Under the round 5 contracts:
"Begins when commercial production begins; from a maximum share of revenues after royalty, from 30% if oil price is $21.5/bbl or below, to 70% if oil price is $50 per barrel or above."
(One can comfortably assume this the maximum that can be recovery in any billing is the amount based on the formula above and the balance in the cost recovery pool ie a contractor can't recover more costs than it has incurred. Just as with our PSC.)
In GKP's PSC the limit is a flat 40%, well below the percentage when "the oil price" is above $50 but slightly above the limit when the oil price is below $21.50. Below a price of $30 GKP doesn't cover its current period costs so that scenario is a horrible one regardless of cost recovery. Furthermore, looking forward, GKP is very close to having recovered its full historical costs (assuming payment of the arrears). I estimate that (post payment of arrears) GKP's share of the cost recovery pool as of end of 23 as being only $52 million. More importantly, a production base of just, say, 55k and a Brent price above, say, $65 - even with a royalty of 25% - provides a level of headroom for cost recovery of about $197 million per annum. That's way above what is needed and means the contractor together with SOMO can manage field development well within even a 30% limit on cost recovery. GKP should never again agree to invest beyond its ability to recover its costs. $0% provides more headroom for greater upfront field investment than 30% but even 30% provides a lot. Let alone 70%!
Revenue share. 4.55% to 19.99% of revenue (field sales) post royalty. The last month of production GKP/MOL were paid for was September 2022. For that month, the contractor Profit Oil was $8.9 million. That was about 13% of revenue (field sales) post royalty. About bang in the middle of the round 5 range. The big difference here is that the article describes Revenue Share as a percentage of field sales post royalty whereas under the KRG contracts revenue share aka profit oil is a percentage of field sales post royalty post th
Shorts strategy (and research undertaken)? Don't know as I am not privy to their strategy discussions. Could be any number of strategies involving one or more companies, human or computer driven. And neither do you know unless you are privy to their internal discussions.
I've stated my valuation methodology and the results it produces many times here before. Do some homework for yourself and search my posts. All 1800+ of them.
"“While this is correct, you also need to factor in who bears the cost of capex. HINT: under the current arrangements, very little is borne by the Contractor. ”
That's correct, and unfortunately, that's my point. What's the Capex recovery of the Iraq contracts? What's the Iraq governments new stance on flaring?"
In essence, that's the debate at hand. If there is no recovery there will be little to no capex and next to no field development. Best you answer these questions before you proceed further.
"1 penny (in old money)."
That company died years ago. Get over it FFS.
(One year performance -39%.)
As a starting point, you might consider that your starting point of £2 didn't just reflect the future free cash flow production but also (a) cash on hand and (b) arrears. Why, for example, would you discount (a) which is in the tin and worth 29p per FD share by 50-60%? Arrears are owed under the current contract arrangements. The face value of these is circa 52p per share. The 'analysis' you provided is certainly not applicable to arrears even though considerable discounting of those would be appropriate for now. The £2 also reflected the unrecovered CRP balance which again would be treated differently.
Keep working.
So what would you apply the noted discount to in order to arrive at your estimate of fair value?
"I discount it from where GKP stood at £2 expecting 50K + production. Hence my own 80p to 90p fair estimate"
Ok but that's incredibly simplistic and assumes the £2 was fair to begin with. I agree with some of your points but I would suggest you put a far greater effort into deriving your view of fair value.
"Don’t forget GKP we’re planning over £200m in Capex to reduce field flaring. That Capex won’t increase production. "
While this is correct, you also need to factor in who bears the cost of capex. HINT: under the current arrangements very little is borne by the Contractor. Only the costs borne (direct, indirect or lost opportunity) by GKP will affect GKP.
Good luck!
"The net monies received over the life of the field come down to net cash flows contingent on contractual terms."
No kidding
"19 Company (contractor) net present value at 10% discount rate"
Screw that discount rate. Mine is double that.
But it is very simplistic to conclude that one ought to apply a "50-60% drop". In the very first instance, a drop from what? You are much better off drawing your opinion as to the structure of the contract that might be agreed (assuming you conclude it is different from current) and then modeling GKP on that basis.
You're nuts if you think you are going to get a dividend before the company gets some of the arrears owed. They need to manage their liquidity very carefully until everything is resolved and there's a path to arrears payment.
"I'm following in the opinion of PUTUP."
To be clear, I'm rather well invested in GKP. I just don't have fanciful ideas as to how quickly things will be resolved and as to how much upside there is when they are.
"I'm putting more into Bitcoin!"
Christ! That's nuts! (Have a look at BluNord. A badly executed block trade smashed it through technicals but the fundamentals are still good. In fairness I'm in at around 155NOK but I think there's upside to well over NOK600 in the 1Q. Could be worth a crack and likely much more sound than Bitcoin.)
"$15 ps and I’m like outa here"
LOL. You're going to be here for a long, long time
" update on December sales at 40k plus"
That would have to be an enormous second half of the month given: "and c.21,900 bopd between 1-11 December". You should do the maths on $30 per barrel in perpetuity. Not pretty. The status quo isn't sustainable and the current stock price expects much, much more. Here's to making some actual progress at some point in 2024...
Me? I don't day trade. The only time I was a trader was many, many moons ago and I traded money-market-FX arbitrage and interest options (short term and long-term swaptions). It was, at times, exciting but generally boring.
How much GKP do you actually own?
"0.50% short layed on today !! "
Put on yesterday...
"I never said Genel. "
Apologies. DNO. My mistake. Replace "Genel" with "DNO" and my statement still stands. It's clear that "they" in your reply to Arma referenced his mention of DNO. But I'm glad you've realised the need to correct your statement . Maybe you should have used all caps in your correction as well (and perhaps referenced the 40% that your statement needs to be multiplied by).
Money is why we're here. Perhaps you'd prefer to take the money you have in GKP and donate to the Salvation Army or similar?