Member Info for PUTUP

"11p..."

47p

Back to a "Buy"

"Can't help feeling I've offended you.
Was it something I said?"

No not at all. Of course, everything I say is my opinion. Just like everything else here. I've done my own work; many others haven't.

I was sincerely wishing YOU luck. You won't be surprised to hear me say that I feel less about certain others. ;) See ya for now.

They should return more equity capital and add a debt working capital facility to fund expansion.

As always the company is dependent on its one and only customer. Whether they can finance the needed working capital with debt or have to retain much more expensive equity capital to fund it will depend on just how bankable that customer is. I'm sure the CFO is already looking at this.

I'm not sure why people feel so uncertain and anxious about the FDP. It's just a matter of time and detail. The problem is people have been thinking it's a near term event since last year. I've always said it's a 2H '22 thing. An FDP will be approved in some way shape or form, but people need to remember who bears the cash flow burden of it and hence who is in charge. Again, it's our one and only customer. For now we haven't even succeeded in meeting the expectations of the current FDP. Chug, chug, chug to 55k oops I meant 50k. And, concurrently with this, the company is already spending money to lay the base foundation for further expansion of production facilities to handle production above 55k. It's not like approval of the next FDP is a critical path item.

Investing on the basis of everyone else around you being equally or more stupid has never been a recipe for long term success in my view. Sometimes a casino isn't worth betting in (eg Tesla and Bitcoin) unless you want to be a fleet-of-foot short-term trader, particularly when sponsorship is evangelical rather than based on any fundamentals. The next six months has potential for the stupid factor to rocket in GKP. They key is not to get caught up in it. Good luck Straycat.

"Putup, how do you value a company like Tesla based on your numbers game?"

I wouldn't touch Tesla stock with a barge pole

"But IF there is FDP approval, well that's another matter altogether.
That'll cost $850m - $950m to take production rates up to 85bopd-95kbopd and that's over a four year period.
However, on the back of such news, then I'd expect a complete re-rate of the Company's prospects as well and that would show in the share price too."

They don't need the capital for the FDP. They need short term working capital. If they use equity for this short term capital then you ought to be super critical of management. Do the exercise I suggested. Value 50k bopd profit oil. Then raise the production assumption to 90k. What's the free cash flow generation?

By all means get giddy. Please!!

No. I do. But I understand that doubling production doesn't double the company's value when half the current valuation is in net cash and the historical CRP. I also understand that doubling production is going to take a long time and will require getting a lot right. As the company makes progress I would revise my valuation. But my current valuation assumes 50k of production and we've not even hit that yet.

I greatly encourage you - Straycat - to go through the exercise I suggested a couple of days ago. The company's value is comprised of net cash, the CRP balance which can be considered 'near cash' and Profit Oil stream.

The company isn't generating value from its net cash position. Quite the contrary as there are still interest payments on the bond due between now and maturity and these wipe out any interest earned on cash. So really one should penalize the net cash component for these near term financing costs.

The CRP balance doesn't pay a return either. It's just a cost recovery mechanism - you don't get anything more out than you pay in. In fact, the CRP costs money because the company needs to fund expenditure (incur financing costs) until recovery - thankfully this period is getting shorter. [Once the CRP balance is normalised it goes up by opex, capex and direct Shaikan G&A and these are recouped over time, but on the other side of the company obviously spends opex, capex and direct Shaikan G&A. From a cash point of view they net off.] In theory one should discount the current level of the CRP to a lower valuation because it isn't yet cash, but since it likely will be over the next six months I credit it with full value.

Before figuring out what you think Profit Oil is worth do the easier exercise and add up the value of the two former items (net cash plus CRP). [You can do this as of the end of April pro forming for the expected receipts for Feb/Mar/Apr in which case cash goes up and CRP goes down or pick some earlier date. If you choose an earlier date you're just missing out of the monthly Profit Oil - CBC receipt for those months and will have a commensurately lower value. It is easier and likely more reliable to pro forma to the last disclosed cash position date - end March.] Then, note just how much of the current market cap isn't earning anything to cover the cost of capital. This is why the company is paying this excess capital back.

Once you've done that, look at the balance of the market cap and compare that with your own methodology for valuing the profit oil - CBC cash flow stream, recognizing you've got to deduct cash corporate G&A and financing costs also. Good luck!

Yes indeed.

I should clarify that the 20% from here expectation is on the Profit Oil stream alone. Obviously the net cash and the near cash that is the CRP aren't generating that return - not even close. These two latter items represent circa half the current market cap...

I bought my holding to average 85p in the end including reinvestment of some of the earlier dividends. I've taken roughly half my investment off the table by banking the last few. In my view the stock is a Hold, meaning I'm not going to add fresh money and expect a circa 20% return from here (perhaps a bit more if management make great progress on expanding production but I'm cautious there, as we've discussed, since we've still not hit the original 55k). If it blows too high at some point I will obviously view it a Sell and exit.

I referenced sentiment in my post below. Obviously sentiment can push a stock above and below my personal view of fair value. If it pushes it too high above it, I'll regard it a Sell. If, as in 2020, it pushes it too low I will consider it a Buy (as I did so). It's easy to forget that one year ago oil was in the mid 60s. It's taken a war on continental Europe to push it above $100. I'm bullish on oil near term but I'm mindful of the old adage "buy when there's blood on the streets and sell when there is irrational exuberance." I bought when there was blood on the streets. Let's see what happens from here. Just my 2p.

"Your target's starting to look a tad anaemic..."

All targets give that false impression when they're reached. But that belies the hard work and grind that it took to get there. From the higher 40s to 269 plus all the dividends in between - it's been quite a ride so far. I certainly wish I'd bought a lot more than I did early on (and maximised my 5% of wealth limit). As we've discussed, it can still be profitable from here with a slow grind as production increases over the next 3-4 years and beyond and we earn also (hopefully) the annual rate of return used as a discount rate. But the spectacular stuff is behind us. That said, this stock has been prone to exceptional hype in the past and that might well happen again. But if it goes too far I will be happy to miss it. Last time around it ended in misery for many.

Oh gee. The £ is down further still today. An absolute pig over the last month. On that I could edge up my target to 290p. But a few pence is neither here nor there. Either way the stock is, IMO, a Hold. I do hope you disagree. Maybe soon there'll be a price at which we can exchange shares rather than just barbs.

How short your memory is. I was very vocal when the stock was well below a £1 also.

Oh I think there's a decent likelihood it will overshoot, particularly with the numb nut views here. Just as it absolutely crashed below fair value 2 years ago. (And just as it got massively overhyped pre 2016.) But I won't be bidding it up there. (FYI as the pound continues to fall, and the general UK populace gets poorer, my target price edges up a little and, of course, all else being equal it moves higher with time by virtue of the discount rate.) If it goes too far then I will sell the lot and bank the very healthy profits. Tah very much.

EC1 - haven't worked there for years now. And I only sweat when exercising.

On the contrary. I own a lot of it. Currently up almost 4x despite taking profits in recent dividends. But sometimes - well, often here - a dose of reality is needed to offset the BS here. If you actually did any analysis you'd understand.

"The Problem is"

Well, that's not only NOT a problem but rather obvious. For April the price of oil was adjusted downwards. I'm expecting Brent to track upwards again to circa $130 a barrel. Even at $130/bll Brent and 50k production GKP doesn't invoice your expected $65m a month. And once the CRP normalises (currently expected early in 4Q) receipts almost halve. Roughly half the value of the company is in its net cash and CRP. The former is being paid out while the latter is rapidly being converted to cash and paid out. You're then left with just the other half.

"Loving the dividends"

Good. If oil holds firm the company could pay out another $300-350 million this year. (I expect them to smooth things into next year, however.) At some point (soon) you'd be wiser to focus more on what's left in the company...

We now have updated pricing data from the EIA.
Average Brent for the month $104.5753 (versus $117.2452 for March).

For now I am assuming average daily production of 45,500, a slight uptick on March. My current expectation is (+- $0.25m):

Cost oil recovery of prior capex/opex $32.8 (versus circa $11.3m of costs added to pool in month)
Profit oil $11.4
CBC withheld $2.3
Net to company $41.9 million

(so profit oil net of CBC is 21.5% of receipt)

Do you not think the company would already be at 50k or 55k if they could? Without the FDP. And do you realise that we need an expanded/new production facility to go much beyond that point? These aren't short lead-time items. This is why the company provided guidance of 3-3 1/2 years (from approval) for phase 1 of the proposed FDP. It's been in the interests of the company to expand production regardless of recent geopolitical events. But they can't raise production with a snap of their fingers. The only people truly "in the right place at the right time" are those with spare production capacity now.

Carry on, steady as she goes. Let's see how long it takes to fulfill the ambition of the current FDP first. In the interim, a recession in Europe is almost certain. When accompanied with a Covid-induced contraction in Asia (affecting all manner of global supply chains) and a consumer expenditure pull-back in the US, that has the potential to be quite damaging.

The time to be giddy was in mid 2020 when the stock was an absolute gimmie. I called "put up or shut up" then. Now it's time for cooler heads... GLA

Google unfortunately picks up crosses after market hours regardless of the trade flags. LSE should always be the reliable source (including Special Conditions).

Up 13% in 4 trading days on no fundamental news is quite a nice change in sentiment. Hopefully it continues through to my fair value target (amended to 285p following the nice surprise on pg 12 of the annual report).

Any exercise is likely pointless for you.

In contrast, Nobull might well find it worthwhile.

Before you do I suggest, for informing purposes, you work through an example of a buyback of GKP stock at, say, £2 per share where each and every shareholder participates pro rata to their ownership. Work out ownership before and after the buyback. Then do the same using a price of £5. Use the same total £ purchased. In each case how much did each shareholder receive and what was their ownership pre and post the buyback?

That can only manifest itself in value for shareholders via the ones I mentioned. Another reason for doing the exercise: you'll have a far better grasp of how much the company can pay out in dividends once it has paid out the current CRP...