Member Info for PUTUP

"Sp falls when people sell"

Share prices go up when people sell also. If no one sells, the share price remains the same.

I don't participate on ADVFN. Never have. In fact I've never even looked at the site at all.

Barrik, share here and grow. That's what this board is about. Then more than I can learn from your wisdom. (FWIW, I'm in the east coast of the US for the bulk of the week.)

I asked a question of Opu and expressed a view that the damage to risk appetite might very well outweigh the benefits of a spike in the oil price. He has yet to respond. It's my view that if an invasion happens it's unlikely that we will be celebrating a spike in the oil price. If you guys think that an invasion of Ukraine is all one-way and positive you need only express that view and perhaps express why. You're very welcome to have a contrary view. There's no need to resort to childish name-calling.

Care to discuss your view rather than hurling insults?

I've spent more than enough time in both countries to form my own view. But, as I said and you also, no one truly knows what Putin will decide to do. For now, my own view suggests a great deal of caution. Of course I could be wrong. Of one thing I am absolutely certain, the greater and longer the real and sustained conflict on the ground the worse it will be for global equities. From an equities investor point of view, if it is to happen best it be swift, decisive and over quickly.

+10%?
I think if he invades he might well want to amalgamate Transnistria in Moldova and form a land bridge to Crimea. That swallows Odesa. The buildup in Belarus is concerning. Who knows. They could occupy the entire country in a matter of days although maintaining that occupation could bee very challenging. Certainly a complete destabilization of the Ukrainian government is a goal. No doubt we will find out soon enough.

What do you think happens to overall risk appetite if Putin actually does invade Ukraine? I'd expect European equities to drop at least 10% on the open. And, at least in the short term, O&G stocks with them. Global equities, and especially US stocks, are primed for another sharp sell-off. If the spark is war in Europe then European equities won't be a great place to hide either. Let's see. We're already in the midst of a mid-cycle growth slow-down as we experience demand payback (a sharp contraction in demand for those goods and services that exploded during Covid lockdowns) and inflation not experienced for decades. US equities need to fall another 10% for value to present itself. European equities are cheaper but I doubt would withstand the sentiment impact of war on the eastern flank. The last thing we need is a war, even if only a proxy one. If you think it's a high probability, you ought, imo, to believe there will be better entry points for stocks, including this one. Personally, I'm not reinvesting the latest dividend just yet. Will be very happy to be proven wrong.

"Straight to the FDP. That's where JH goes."

The FDP will come when it comes. I'm not expecting any great developments there this quarter. Could be wrong. It's not as urgent as getting SH13 fixed. Once and only once we cross 55k and start banging up against process capacity - adjusted for the lead times associated with expanding such - do discussions regarding the FDP become urgent. So maybe second quarter, maybe third. On the more immediate time horizon is an update on SH-13/14/15 as well as SH-12. Steady as she goes. In the interim we continue to pay out excess capital (more dividends or returns via stock buybacks but a commensurately less valuable stock as a result).

Now you can get back to focusing on things that create value rather than merely distribute it

"putup, i would never look further than a 2-3 year period, so much can change over a longer period, who knows what will happen tomorrow , never mind in ten years?????
if it helps my assumption over the next 2-3 years is that oil price will remain above $80 for quite a considerable period of that 2-3 years,"

Given stocks are future cash flow discounting machines one has to have a view over the long term. Ascribing zero value beyond 3 years would be very punitive. I had asked for your view beyond 2022, ie from 2023 onwards. We all agree 2022 should be a great year for GKP as it monetises and distributes the CRP. That's already in the share price. The harder question is the period beyond this year and figuring out how much of that is already in the price.

FYI I reduce my year end price target to 275p to reflect (a) the current dividend and (b) slower progress to 55k

You only own the shares when you have settled the transaction. Ordinary share trading is (currently) conducted on a forward basis - 2 days out.

T+2 settlement

Not confusing

Opu, yet again you didn't answer my question... I will repeat it. What do you think is a reasonable assumption to use for Brent for the 10 year period from the end of this year? 2023-32

"What most seem to be missing..."

I don't think people are "missing" these factors at all. It all comes down to a question of degree, and for how long, and then to how much you are prepared to pay for in advance today.

The smart cookies over at the US Energy Information Association updated their short term forecast in a publication yesterday.

https://www.eia.gov/outlooks/steo/

Here's their summary re oil but you would do well to read the entire report.

"We expect Brent prices will average $90/b in February as continuing draws in global oil inventories in our forecast keep crude oil prices near current levels in the coming months. However, we expect downward price pressures will emerge in the middle of the year as growth in oil production from OPEC+, the United States, and other non-OPEC countries outpaces slowing growth in global oil consumption. This dynamic leads to rising global oil inventories from 2Q22 through the end of 2023, and we forecast the Brent spot price will fall to an average of $87/b in 2Q22 and $75/b in 4Q22. We expect the Brent price will average $68/b for all of 2023. However, low inventory levels create an environment for potentially heightened crude oil price volatility and potential risk for prices to rise significantly if supply growth does not keep pace with demand growth. Global supply chain disruptions have also likely exacerbated inflationary price effects across all sectors in recent months. How central banks respond to inflation may affect economic growth and oil prices during the forecast period."

Hitting $100 isn't the same things as sustaining $100 (or above) for any length of time. (And when everyone thinks it's all one way traffic often it turns out not to go that way.) I like that we have strong oil today (except when I fill up my guzzler) but no way am I prepared to impute anything like today's Brent prices into a model of GKP cash generation over the next 10-15 years and hence pay for it today. If the EIA thinks Brent will average $68 in 2023, what do you think is a reasonable assumption to use for Brent for the 10 year period from the end of this year?

I think the Contractor would have a tough time arguing that they couldn't calculate the R factor. It's not a hard calculation for them to maintain month to month. Interesting to note that it's calculated 6 monthly and not for each payment period (ie monthly). That slight lag helps a tiny little bit.

In addition:

100% WI
Do they have to share their production with the state of Alaska according to a PSC?

Or, more to the point IMO, if we have poor visibility of growth beyond this year - for now - we should make sure we understand what the current production level is worth for a given oil price. 2022 isn't reflective of what 50k/$85 will produce in free cash flow going forward. 2022 is already largely in the share price. How much of 50k (or 55k, or our current production processing limit) in years thereafter is?

(management should be seizing our destiny each and every day)

"4) In negotiating terms, the fact that we could press on with investment without increased production approvals can only enhance our position at the table. In fact I would advocate it because it makes the KRG position more and more ridiculous;"

Strategy. GKP are almost maxed out on production capacity. I would reiterate that it would be foolish to invest $200m without an approval to develop the field further. I imagine such agreement will be forthcoming at some point this year. We seem to disagree about any "stick" (or carrot) JH has in discussions regarding the FDP. I think the KRG are smart enough to realise they bear the bulk of the capex burden, foregoing near term cash flow for more in the future. Of course JH wants to push on with the FDP, as GKP bares less of a burden in pursuit of future gains.

"5) Your advice on how I remodel is welcome...patronising person!!! Made me smile though;"

It wasn't intended to be patronising. If you have already done such modeling then great. Perhaps you can post your calculations so we can compare notes. In the very recent past we've had guys touting total field sales as being GKP revenues only to slowly, and begrudgingly, accept that GKP revenues is an entirely different number. Every investor here should, IMO, be getting a better handle on free cash flow generation by going the next 5 or 6 simple steps. (The next thing to realise is that doubling, for example, the production assumption for 2023 and beyond (ie from 50k bopd to 100k bopd) doesn't double the current value of the company...)

Lastly, I think it only sensible when discussing how great 2022 could be to flag that 2023 is a whole different kettle of fish. Yes, 2022 is in the title but is that enough?

@Straycat

You and I both realise the value of 2022 if $85 Brent and an average 50k bopd is achieved. I would just counter on a couple of points:

- I think it erroneous to label investment capex as a cash release. Quite the opposite, it is a cash injection into the business. Yes, it could be funded by internally generated cash flow this year but it consumes a big chunk of that 2022 free cash flow rather than releasing it

- the phrase cash cow would normally be reserved for companies producing a lot of free cash flow from ordinary operations. With GKP the situation is somewhat different. We have an off-balance sheet asset called the CRP. It was paid for, in large part, by pre-2016 shareholders and it was one of the assets purchased at great discount by those who participated in the restructuring and those who have and are buying shares post that point until now. 78% of monthly receipts are the monetisation of this asset, the balance of which is being reduced swiftly. It has been topped up by monthly capex and direct operating and G&A expenses and reduced by circa 78% of monthly receipts. 2022 will likely be a big year for bringing this balance down towards zero (or rather to the level of expenses incurred in the billing cycle). Thereafter company free cash flow plummets. So at best you could say it is a "2022 cash cow."

- while we may not need KRG approval to invest ahead of their deliberations one would be very foolish to invest $200m without the FDP. I expect a burn focused solely on maintenance and SH13/14/15 until we have clarity on the FDP and can begin investing, firstly, in additional processing capacity.

- as we both know, when a company pays out cash it is worth commensurately less as a result. So our focus should continue to be on those events which help generate additional cash rather than events which disburse it. Progress on 13/14/15 and other production metrics, the price of oil (both short term and expectations for medium and long term), FDP and any renegotiation (if any) of the PSC etc.

I think you've begun to get a handle on cash receipts for 2022. I would suggest you take that model a little further and work out your expected free cash flow generation for the year subtracting opex, direct G&A, capex, finance costs, corporate overhead. Then of course subtract your assumed dividend/buyback disbursements from this free cash flow plus existing net cash. Also have a crack at estimating the CRP as of end 2022. Then do the above for 2023 with the impact of a far lower CRP balance in mind (and recognising there's also a debt payment due that year). From that number you can make a call on how much the company can disburse per annum post 2022.

Addendum: I just saw your last post. I don't think it is lost at all on the KRG as to who pays for the bulk of investment capex. They know they do.

"2-3 years of Dividends like we are receiving "

LOL

"Apart from when it was over 4 billion dollars do you mean?

Today's mcap is 20 percent of where it has been and that is down to the infestation in the board room that like to call themselves oil men"

That company died. Flat out dead on the operating table. The guy that sold you that pipe dream is in prison, having had to plea guilty to tax evasion in order to avoid greater charges of fraud, embezzlement etc. Stop living in la la land. Be present, look to the future.

Using 45k I get $29.8 and $6.7 for arrears so we must have a different formula there...

(Price-50)*Days*AvgeBOPD*0.2*0.8/1000000

where Price = $81.05 and Days = 30