Member Info for PUTUP

The pound has a lot further to fall medium term as the UK continues to slide into obscurity. And the cost of Opu's little beloved cruises is going to rocket as a result.

We will likely be repaid for the extra capex by January.

The company should limit capex to that which doesn't rebuild the CRP beyond 3 months terms. If, for whatever reason (non-payment, declining oil price etc) only a lesser amount can fit under the 40% cost oil window then capex should be throttled to that lower figure. It is, however, a big window at $80-90 Brent.

@straycat Luckily it's not us who pays for the capex. We just miss the opportunity for the extra profit oil share. But I will bet the KRG aren't happy about it.

@solarfire Indeed. Hopefully it goes well. No Clue Opu can rant all he wants about dividends (from cash already in the tin or in invoices/CRP and hence already in the share price). But share price growth within the company's control can only come from raising production and increasing the value of the profit oil stream. The KRG are the ones that spend the money and the FDP is their call. I can't imagine them rushing their approval while issues such as water handling are causing issues with the company meeting the current FDP expectations.

As the pound slips yet another big figure. Result: stock goes ex for no gain or loss. Who would have thought... And that while Brent traded up.

Where to from here? We need better production. Dividends distribute value. We need production to create it.

Opu, you really are FoS. Remind us again when, according to you, the company starts receiving $65 million a month (revenues less CBC withheld)?

I don't expect FDP this year either, although for very different reasons. In any event, the next FDP is irrelevant when the company still hasn't achieved the current FDP.

Considering, even adjusting for dividends received, GKP is off 30% in USD terms (remember this is a company generated product sold in USD and paying costs in USD that, rather perversely, just happens to be quoted in pence) since its high in early June, it would be great if the stock found support at these levels.

Brent remains strong (albeit not at the fanciful levels projected by the likes of Opu). Morgan Stanley expects Brent to average $95 for the 4Q of 2022 and for it to appreciate mildly next year.

Payments from the KRG are back to a degree of regularity. Payment for June production should hit soon but the amount is known and already booked in the 1H accounts. The invoices for July and August production have also been sent and the amounts can be estimated with good accuracy (given we know the price of Brent and average volumes for the months).

The falling pound is one factor continuing to support the optical level of the share price. It's likely to fall a lot further in coming months. But a steady share price in the face of a falling pound sterling doesn't make us wealthier.

Where the company has failed miserably is to lift production. We need to hope that production in September post the maintenance activity of July/Aug recovers to that of June and considerably more. JH was hired to do exactly this. It's a task not yet achieved. Bottom line: the company needs to do a lot better on production.

It doesn't need pointing out. But they are a very helpful gateway. Simply Wall Street is nothing but a computer algo (and a poor one).

Yes. The IR department is very helpful.

I guarantee not a single person from Simply Wall Street has ever spoken to GKP management. I wouldn't pay one crashing £ for their 'research'.

Plenty traded above £3. Anyone who bought cum dividend above 255p and held now has a negative yield. Anyone who sold out cum dividend above that level has done better. 'Dividend yield' all depends on your entry and exit price. You have no idea what the 'vast majority' have or have not done.

What's the yield for those that bought cum the last dividends above £3?

"he purports to have no interest"

Lazenby, you can't have been around much. I have a significant financial interest in GKP. I don't think anything said on a BB such as this has any real ability to influence the GKP price over the medium term. Investors far, far bigger than the average participant here fully understand the dynamics driving the company (in sharp contrast to many here) and it comes down to company performance, the oil price over time (not just the short term) and (their) risk preferences. Good luck!

"Any recovery of this $260m is all cash inflow."

Ignoring the $ amount for a moment, I agree. That's why I have said the best way to think about GKP's value is as the sum of (1) current net cash and invoiced receivables (2) GKP's share of the remaining CRP post these invoices and (3) the value of the Profit Oil (only) stream less 'indirect' costs. Things get simpler as (1) is paid out in dividends, (2) is received, paid out and normalises to current period costs. (2) used to be big but is now (as of end Aug) rather small.

My point was that focusing only on receipts and not considering the cash (and non-cash if you must) costs that need to be deducted from it would be foolish. A chunk of that which is received is merely compensating for deductions (in the same period) further down the P&L.

I'm talking cash. There is no cash margin, no cash earned, on capex. Depreciation causes a timing difference/distortion but at the end of the day you can only depreciate what is spent (net zero).

Errr... assets are assets and sit on the asset side of the balance sheet. Each accounting period management are required to consider whether there are events which would impair the book value of assets. They considered this recently in light of the dispute between the KRG and central Iraqi government. (Read the section titled Key Sources of Estimation Uncertainty.) While it was decided that an impairment was not necessary at the present time, the point is that the book value of assets (basically ONLY built up due to the misalignment of capex, capex cost recovery and non-cash depreciation) is irrelevant to the cash generation ability of the company. If they were to lose the license they're not going to get paid for capex more than once (once via cost recovery and once again by the book value of assets at termination - the book value will be depreciated/impaired in one fell swoop). The P&L, and all metrics which derive from it (most notably PE ratio), is heavily distorted by cost recovery and depreciation. It's not only distorted as a result of prior capital write-offs which have lead to capex recovery against no liability but also current capex and the mismatch between recovery and depreciation. Cash is king. Non-cash accounting not.

GKP has a lot less, currently, than $260m in the cost recovery pool. Firstly, that is the Contractor figure - GKP's share is 80% of that. Secondly, that figure accrues all the capex and expenses to 30 June, but only the recovery up to and including the receipt for March production. The receipts for April, May and June arrived after June 30. In order to consider what's left in the pot, ie that which can be recovered in the current month, you need to deduct out also the amounts invoiced as cost recovery up until then. That is, to get to the balance o/s at then end of June that can be recovered in July alongside July's costs you have to deduct the amounts (from 80% of the $260m) in the invoices for April, May and June. Likewise, to consider what can be recovered during September you have to further deduct the additional amounts invoiced in July and August.

The receipt for August (as with any other month) will include cost oil recovery, profit oil and CBC withheld. I gave an estimate of the net and the amount of profit oil less CBC. The rest relates to cost oil recovery which is currently at max recovery (40% cost oil). In the income statement Revenues are booked as receipts gross of CBC and CBC is part of cost of sales (both the 20% withheld and an additional 10% of cost oil). Also deducted in cost of sales are (cash) lifting costs and direct Shaikan G&A. Plus the non-cash depreciation which is distorting the P&L as noted above. (After CoS you have head office expenses, share option expense and finance costs e

That's an accounting distortion. They don't make money from it. And even with the amortised accounting only the amount incurred is amortised - not the amount plus a margin. (And if they lost their license today how much of the fixed assets do you think they'd recover if they've already been reimbursed for the expenditure? Note the annual discussion/assessment relating to impairment.)

I think the answer to your question is entirely obvious. The deductions for the items in cost oil occur slightly lower down the P&L statement in cost of sales. Your "net" is merely revenues less CBC withheld. Focusing on revenues and not deducting expenses would be rather foolish.

It's also worth noting that September production is now recovering capex and direct operating costs that were incurred in the months April through September - this year. Everything prior to that has already been recovered. Cost Oil is dollar out, dollar in with a delay - no margin is earned on it (in fact a negative margin is incurred as the delay in receipt must be funded with capital, either debt or, in our case, much more expensive equity).

With EIA data now published for the end of August we can take a look at receipts for August production. Looks like circa $39 million net to GKP with Profit Oil less CBC being about $8m or so of that. All eyes now on September. Hopefully the company will get out of its production quagmire for here onwards.

(The next actual receipt, for June production, is known with high certainty and already booked in the 1H results [DR receivables, CR revenue]. Receipts for July and August production are also now known with high confidence.)

Clearly not big enough...

And those non-recoverable costs include a 20% capacity building charge of 20% of profit oil - so take the $10 to $8 immediately - and all those (much less variable) corporate head office costs...