Member Info for PUTUP

"So if JH doesn’t announce significant shareholder distributions on 1/9 he will have to answer some difficult questions. Like what he’s is going to do with the massive cash surplus he’s building.
More pertinent is how he will redistribute and at what level."

More distributions - the return of existing capital to shareholders (and there's a clue in that) - are highly certain and largely 'not news'. In any event you have that capital in the share price already. All those distributions are doing is giving some of your share price back. One pocket to the other.

Of far greater importance are any updates with respect to those things that actually generate capital, e.g. progress with respect to increased production. There's a lot here that hasn't gone to plan over the last two years (or even longer). Hopefully they've got some good news to report on this front (in addition to sugaring announcements with capital distributions).

"More shares than me - that you may do"

It was you who claimed I had none

"ps I’ve been in since 2008 "

Not at all a badge of honour

Carry on. While I doubt very much you will ever see the £10 you are so confident of (but without basis) there's still a little more left in this stock yet.

Simple views with no real basis will only get you into trouble... And, yes, it can be hard to use your brain.

Even considering just the exploration component of Shell.... If Shell lifts and sells a barrel of oil what percentage of the sales proceeds does Shell get? If GKP lifts and sells a barrel of oil (actually the KRG sell it) consider (1) at what discount to Brent is that barrel sold at? and (2) what percentage of the discounted sales proceeds are passed to GKP?

(I'm pretty sure I have more shares than you do.)

"So the big question is why does GKP share price get discounted 75% on value of oil produced to that of SHELL who operate in very stable political countries - NOT."

"First lesson in investing and valuing things" is to not listen to idiots who have no idea how to draw comparisons between two companies...

"Profit Oil: small potato; but REAL chips ;)"

It's the only 'chips' the company makes

"Just GKP (80% WI) and Mol (20% WI)"

Actually the WI in Profit Oil is split GKP 61.5%, MOL 18.5% and the KRG 20%

"All of your dividend- and free cash scenarios mentioned so far assume nice, stable outputs and omit the danger posed by a crash in crude prices - don't you think that should be mentioned as an important qualification? I certainly do. "

"It would be a bold investor that paid up today (in the share price) for $100 Brent in perpetuity though."

Of course they can only pay what they have made ie determined when and only when the cash is in the bank.

Re how much capex can be "afforded" without building beyond a receivable-period CRP, I suggest you and others do the maths to work out just how much can be front-loaded. It's quite substantial at current prices and volumes. The company has provided guidance as to the cost of the FDP. How much investment can be pushed through one year's Cost Recovery given current or near-term production and a particular price of Brent assumption?

But that doesn't detract from the overriding message which needs to be one of fiscal discipline for management. They should not and must not build a substantial CRP (beyond the receivables period amount) again. Even if gas moves up the priority list. It will cost the KRG more and things will take longer. It doesn't need to cost GKP more. That's the discipline that needs to be in place, in great contrast to days of ol'.

Inadvertently I wrote "GKP's WI in profit oil" below. That was incorrect. That's the total WI. This WI is shared 61.5/18.5/20 between GKP/MOL/KRG.

CCC. the company doesn't need substantial cash reserves for the FDP. Just regular payments and if they're not getting regular payments they should halt investment. The Contractor doesn't fund, ultimately, much of the investment; the KRG does. (For the Contractor, the funding need is just short-term working capital. I'd prefer, by the way, that they don't fund that with my expensive equity capital.) And, no, the CRP doesn't start increasing. At the current base level of production there's plenty of room for the cost oil component to receipts to cover the investment required (money spent and recovered in payment-terms months later) assuming they're getting paid.

IF the company generates free cash flow of, say, $120 million a year there's still a lot that can be returned to shareholders. It would be a bold investor that paid up today (in the share price) for $100 Brent in perpetuity though.

What do you think the answer is Arma?

Accounting profit isn't a particularly useful metric for GKP, largely due to the distortions created by depreciation vs cost recovery and stock options. (And were GKP to have its license terminated or not renewed what do you think are the assets that could be recovered?) Far better to look at annual/monthly free cash flow. To figure that out (or profit for that matter) you need to make a number of key assumptions beyond simply the price of oil. These include:

- average daily production (let's say 50k - well above current levels)
- opex per barrel, capex and direct Shaikan G&A -> thankfully assumptions re these don't affect the answer too much because they're recovered 1:1 via cost oil although they do affect how much profit oil there is
- GKP's WI in Profit Oil. As you know this declines from 30% to 15% as the R factor rises between 1 and 2. I reckon the WI will have declined to 26% by the end of this year. Let's assume an average of 23% for the year 2023.
- the level of Corporate G&A (GKP booked $9.5m in 2021 - it will no doubt be higher this year and next)
- residual finance costs (if any)

Crunch all that at $100 Brent and GKP likely generates roughly $10 million a month in free cash (+/- depending on what you assume for some of the items above).

It's not a hard 'model' to do (just 20 lines in Excel). I suggest you do your own calcs.

Damofarl you can't make that extrapolation. (Even assuming constant production and constant oil price.)

* I'm assuming you are taking 7x $46-47m and adding it to the $233m. The CRP runs out well before then.

So with the latest publication of EIA data we can narrow down estimates of production sales for July. I'm expecting the company to announce between $46 and $47 million based on an assumed average daily production figure of 46,400 barrels per day (an increase of 500 bpd over June) and Brent of $111.9257. Circa $10 million of this is Profit Oil less CBC - the rest is recovery of prior costs incurred. I estimate that as of the end of July the company's share of the remaining CRP is down to approximately $100 million.

It's interesting to see the stock price fluctuating so much with the oil price. If one looks at the position as of the end of July, the company has circa $233 million in either cash or invoices for May-Jul production sales. Given a fully diluted market cap at £2.10 per share of circa $571 million, fully 41% or so of the company's market cap is completely impervious to fluctuations in the price of Brent. A further $100 million of CRP is also largely impervious to modest fluctuations in Brent (it takes a very large change in Brent to affect the timing of recovery of this off-balance sheet asset significantly). So, basically, fluctuations in the price of Brent don't matter a damn to 58% of the company's current value. The price of Brent really only matters to the balance, the implied market value of the Profit Oil stream which is a long term cash flow stream and not a near term one. It will be interesting to watch as the company pays out the first two items (58% of current value) leaving only the Profit Oil income stream.

Don't worry all, according to Opu the company will soon be raking in $65 million a month...

(where's that laughing out loud emoji?)

Have said it before and will say it again, No Clue Opu.

GKP doesn't need a lot of capital to develop Shaikan. They don't own it and don't pay to develop it (when the CRP is normalised). They are the employed contractor for Iraq. The reason why the FDP isn't approved has nothing to do with GKP. It has everything to do with the factions that make up Iraq and the KRG who has to forego present receipts in favour of higher future ones to fund development. Given the dispute between the KRG and the central government that might well mean giving up current receipts to the KRG in favour of higher future receipts for the central government of Iraq. No wonder the KRG is dragging its heals while that debate is going on. Meanwhile GKP should remain very firm that they don't invest (on the KRG's behalf) without regular payments and hence recover the costs of such investment swiftly. GKP is still recovering last year's capex and should be in no rush to build a big off-balance sheet receivable with additional capex.

"(KDP PUK/ UAE and UK elite). They own 95% of GKP"

LOL! This fellow doesn't seem to have a good grip on the share register.

Stupid metric for GKP. Earnings is heavily distorted by Cost Recovery (and the mismatch between capex, cost recovery and depreciation).

Not necessarily. If there's a balance o/s on the debt they won't have excess cash to pay out.

At any rate, they don't need $90 million sitting in cash earning nothing let alone increasing the balance from there.

They don't need the cash for the FDP. The current $90 million sitting in cash is losing shareholders (assuming your cost of equity) $13.5-18 million per annum.

I'm not suggesting they swap one debt for another one. I am suggesting they swap 'debt 'n cash earning zero' for short term debt when needed. Pay all the $90 million, and more as it becomes available, back to shareholders. (And no, they wouldn't need lender approval to pay out excess cash as dividends.)

Straycat, what's your cost of equity? You had previously indicated 15-20%. When your equity is sitting on the balance sheet earning nothing you're losing that. Better that they return the equity to you so that you can redeploy it elsewhere. But of course, GKP still has to manage fluctuations in its liquidity. Far better that they do that with a debt facility, only used for short periods when needed, than a buffer of your equity. The current debt was costing 10% even though it was not in use - they effectively borrowed at 10% to place the cash in the bank for basically 0%. It wasn't the debt that was the problem per se, but rather that all the did with the money was leave it in cash...

Solarfire, skill is needed to develop the field, yes. But the contractor doesn't have to have deep pockets. The KRG is funding the development. Yes the contractor incurs the capex but they are quickly reimbursed by the KRG via Cost Oil.

Why would the stock fly on that news? (a) it's been expected for ages (b) it doesn't change fundamental firm valuation (the debt has been offset by cash on hand for a couple of years now). Again, they're returning excess capital and finally removing the interest expense associated with capital they weren't using. More equity capital to be returned shortly as well.