Member Info for PUTUP

Good. Because the tone of your post to LongStrong suggested otherwise. Still working on a response to the questions I asked?

"Explosion wasn’t even in Iraq.... it was in Turkey"

Surely you realise that it doesn't matter where the explosion was if it stops the flow of oil down the export pipeline?

Hopefully they get the fire extinguished, the pipeline repaired and oil flowing again quickly. GKP is pushing over $3m of production a day down that pipeline.

More importantly, what happened just before then as people became more and more concerned about the fact that they were late? The bounce you alluded to was a bounce off depressed sentiment. "And one would not expect GKP to trade 1:1 with spot/near term Brent."

Tell me this: (a) What is your expectation for receipts from each of November and December oil sales? (b) How much of each of these do you think is embedded in today's closing price? Clearly you think (b) will be less than (a) but by how much?

And you think people don't account for expected future monthly receipts? You think they only count them into the stock price when they arrive giving zero value to them until then? Their arrival was expected. As are the receipts for Nov and Dec sales... and certain expectations (discounted or otherwise) for sales throughout 2022...

Truthsayer, something to take a look at it. BZ=F last peaked on the 25th of October 2021 at $86.72, closing at $85.99. Then GKP closed at 210.50p. Yesterday, BZ=F finally reached a similar level again, closing at $86.06. GKP closed at 211.50. Plus ca change... Today, BZ=F has rallied a little to $87.24. GKP has rallied a little as well to as close of 216p. And one would not expect GKP to trade 1:1 with spot/near term Brent.

Ok I have considered my position and stated it. Let me know when you've finished yours. The good news for anyone considering the stock today is that it doesn't yet impound, in my opinion at least, the current or near term level of operations readily achievable.

On the larger issue, first and foremost, some people don't like the answers. And yet they can't challenge the analysis in any substantive form. That's their problem. Most often those who have cried foul the loudest are those least likely to provide any form of informative post of their own. I don't need to motivate them, particularly when any form of realistic, rigorous analysis is dismissed as a scheme to talk the stock down. (It's not.) So who pokes who? To take your "serious business" analogy for a moment, you will appreciate the very first job of a new manager is review his/her team and to consider who to motivate and who to simply 'let go', that wondrously understated phrase we use for 'kick out the door'... Have a good evening!

"And yet he steadfastly ignores p12 and p15 of that same presentation which describe the Field Development possibilities and their potentially transformational impact on GKP over the coming years. Particularly when they are self funded."

Hi Straycat. In reference to the above, no I don't. I'm just not prepared to set a valuation today that impounds much beyond 55k (which is a milestone that is yet to be reached). That's me - for now. As and when we get better visibility that may change. As Highlander1970 is apt to remind us, there's been a long history of not delivering against expectations here. I'm sure management will find their way eventually through the challenges but given the juncture we find ourselves at today I will take a wait and see approach for now.

Tell me, now that I have given you my answer, how much do you think one are prepared to pay per share today for opportunity beyond 55k? What percentage does that represent in your own price target?

"it is undervalued"

Yes

"( but not by much )"

Depends on your view of "much". I'd say the discount is significant. An expected 41% appreciation isn't small in my view.

"the ONLY way to value the company is (My WAY ) only on cash generation"

Your words not mine

"no chance of a takeover "

Again, your words and not mine. Could the company be taken over? Of course it could. Is that probability high enough to justify basing an investment on it? In my opinion, no. Would a buyer over pay? No, I very much doubt it.

"I'm a yankee doodle dandy but I wont admit it"

You're so wrong it's hilarious

"Just like my mate theoryman"

Never met him so I couldn't say he is a mate. But he does seem level-headed.

As to JMarsh1, you claim there has ben a statement that's factually incorrect? Ok, if I have a fact wrong I'm happy to hear it and amend my opinion if need be. But you've so far been unable to articulate what you deem is incorrect.

I challenged DubiousInvestor's calculation and he asked for the workings that led to it. And so it was posted. It was merely an extrapolation - 'times 12' if you will - of an accurate estimator of monthly receipts, applying that same methodology to a day count of 365 rather than a particular month's number of days. It's not a difficult analysis. If you think something was wrong, point it out - specifically. Of course it requires a number of assumptions, not least is what you decide to put in for Brent. I used DubiousInvestor's assumptions. My own ones might well be different. I'm bullish on oil for 2022 and think it can appreciate some more. But I'm not banking on it averaging $85 (a level it has only exceeded on 9 days in the past 7 or so years) forever.

" As I said, I have flagged content on this forum with GKP and been told it’s factually incorrect."

Such as?

FlyingHorse1 you really seem to have no idea. Do you really think anyone posting here is going to have a significant influence on the share price? Do you think the Blackrocks of this world bother to read this forum. Even the ultimate ramper GoodnightCharlie with all his avatars couldn't ramp the price despite endlessly posting one conspiracy theory and BS 'analysis' after another. When someone posts some actual solid work that doesn't resemble hype you think they're working against you in some sort of underground cabal hellbent on diddling you out of the money in your pension account? Please. If you think my views on valuation are wrong then by all means scrape together whatever you can find in the back of your couch and bid the stock up. I think it's undervalued and that's why I own it. If you think its worth more than I do then I will sell you my stock at my target price if you want. I'm willing to bet I own a bit more than you do now but that will give you the chance to significantly lift the size of your position. Alternatively we can debate forecasts and value using analysis. If you have one at all then please present it.

That was if you assumed $85 oil in PERPETUITY. That would be a rather foolish assumption on which to base an investment decision.

Ah there's no helping some people... Good luck. It sounds like you and a few others here are going to need it.

"Canaccord Genuity reiterated their BUY recommendation for GKP, raising their target price from 295.00 to 315.00."

This valuation is inline with mine. Scroll back a ways and you will see me posting a price target range of £2.50 to 3.00. This was at a lower oil price and with less progress made on 55k bopd production. These have now moved my target to the top of my earlier range.

Canaccord and I get there by endeavouring to understand the company and its cash generation capability. Not from blah blah blah. Over half that target value comes from net cash on hand, the CRP and arrears. The balance, and smaller portion, comes from generating profit oil post 2022. In 2022, I expect the CRP will likely be fully monetised to cash and the arrears should be recovered. A lot of this cash will be paid out of the company to shareholders as people clammer for dividends and buybacks. When it does, the value of the company will, all else being equal, fall and price targets will reduce accordingly. If you think you have a better analysis than mine and Canaccord's then post it. Else you're just blah blah blah.

Don't look up!

Good post demofarl. A few points to consider:

"the receipts for September/October do not track the increase in oil price, compared to say the receipt in April"

It's worth remembering that while Brent was up 15% in September versus April, production was down 4%. Revenues less CBC withheld (ie ignoring arrears) were up 17%. In October Brent was up 29% and production was up 4% versus April. Revenues less CBC withheld were up 55%. You're not going to see a directly linear correlation in large part because of the $21.1 discount. Compare the numbers again but this time looking at how much Brent - 21.1 changed. That discount is fixed and not proportional to Brent. As Brent rallies GKP does increasingly well (and vice versa when it falls).

As you can read in the 1H accounts, hedging only went out as far as September sales. Furthermore, the receipts for each month (before and after September) fit with unfettered Brent - 21.1 so you can see there's no upside being left on the table. The cost of the hedging is deducted in the accounts before getting to Revenues (see the 1H accounts).

Your $100m figure is about right for a GKP with a normalised CRP (so that's post 2022 as you note) producing 55k no longer investing for growth and, importantly, with Brent averaging $85. There's not many other assumptions you need to make to model that out. (Maintenance capex, contractor direct operating expense per barrel eg $2.40, an assumption re direct Shaikan G&A (say, 2x 1H 2020 figures), debt interest expense, say $10m or so, and other corporate G&A.) The tougher assumption is what R factor to assume. FWIW free cash flow generation of $100m equates broadly to an R factor such that the Working Interest in Profit Oil is 22.5% - midway between the current 30% and 15% as the R factor goes above 2.

The interesting question is what's a company that produces $100m per annum (or whatever other number you propose) worth? How much should I pay for it today?

"and never add any value"

"instead of wasting it."

Why would you expect something that pays money out of the company for nothing in return to add any value? Just as you would never expect a dividend to create value. They both pay value out.

Returning something shareholders own back to them isn't wasting it. Sure, it says "we can't put it to good use so we're giving it back so you can" but they're not wasting it.

I was hoping it was going to push through the recent high of October 24 at $86.72 but it didn't. It got to $86.50. $86.72 is exactly the post 2014 downdraft high set in September 2018. Here's hoping it pushes through on Monday rather than turning sharply back like it has twice before.

The calculation below is nothing more than what many have been doing for months to estimate (with high accuracy) monthly receipts, but applied to a day count of 365. Receipts are Revenues less Capacity Building Charge Withheld (assuming no hedging costs).

Dubiousinvestor might well look closely at the following line given the commentary around the level of the Cost Recovery Pool and its eventual normalisation.

i. Contractor Cost Recovery: 0.4*g = $462 million

j. GKP Cost Recovery: 0.8*i = $369 million

What would happen if the CRP was less than $462 million and so production was diverted from Cost Recovery to Profit Oil? What would happen if the CRP had normalised and so only the year's direct costs and capex could be recovered via Cost Oil? Well, just redo the numbers for whatever scenario you might like to examine.

Here's one. 55k bopd is 20.075 million barrels a year. $2.4 a barrel = $48.18 million in direct costs. Capex guidance or 2021 was $55 million in an 'expansion' year. Let's round that up with a bit of direct Shaikan G&A morn whatever and just call it $110 million. What if only $110 million can be recovered via cost oil and not $462 million. What is the impact of $352 million shifting to Profit Oil? (Again, you can devise any scenario you might like to.)

If $352 million is Cost Recovery GKP gets 80% of it: $281.6 million of Revenue. But if it is Profit Oil they get a lot less. (They've recovered all their direct costs and are now collecting their share of profit oil.) Assume for the moment the R factor is still less than 1 (it won't be which will make things worse but...). If so, the Working Interest in Profit Oil remains 30% of which GKP gets 61.5%. So we have Revenue of $64.9 million (versus $281.6 million). From that, 20% CBC will be withheld leaving a net cash inflow of $52 million (versus $281.6 million). So that's a cash flow impact of $(230) million.

Note also that the $110 million in costs the Contractors did recover is opex (and deducted from revenues along the way to calculating Earnings) and capex (for each split 80:20). Both of these were cash outflows during the year. They offset each other: $ out = $ in. GKP doesn't make margins/profits or cash flow out of Cost Recovery once the CRP is normalised.

This is why the astute here are keen to get a better idea of what's happening to the CRP. You can have your own crack at modeling the CRP from month to month....

GLA

As nice as that would be that would require Brent to be well above $150 (assuming no change from today's market cap).

Yes, I am absolutely sure.

Don't confuse how capex and opex and, in return, cost recovery are split between the contractors with how the Working Interest of Profit Oil is split. Read the penultimate paragraph under Sales Revenue on pg 117 of the Year End 2020 Annual Report and Accounts.

"There - you have everything you need to complete the figures for the full year scenario."

a. Brent average for year $85 (your assumption)
b. Discount $21.1
c. # Days 365
d. Production bopd 55,000 (your assumption)

e. Proceeds from oil sales: (a-b)*c*d = $1,283 million
f. Royalty (10% of e) $128.3 million
g. Net proceeds from oil sales: e-f = $1,155 million

So that's what the field produced for the year and that's what is available for division between GKP, MOL and the KRG according to the "Production Sharing Contract".

h. Total Profit Oil: 0.6*g = $693 million

i. Contractor Cost Recovery: 0.4*g = $462 million

j. GKP Cost Recovery: 0.8*i = $369 million

k. KRG direct share of Profit Oil: 0.7*h = $485 million Remember for simplicity we assumed an R factor less than 1 which means the "Working Interest" in Profit Oil is 30%. The balance goes straight to the KRG.

l. Working Interest Share of Profit Oil: 0.3*h = $208 million. This is shared between GKP, MOL and the KRG.

"As has been stated often before, the WI is split 61.5% GKP, 18.5% MOL and 20% KRG. "

m. GKP Profit Oil 61.5% of l = $128 million
n. GKP CBC withheld from receipts: 20% of m = $26 million

o. GKP Revenues: j+m = $497 million

p. GKP Net receipts (post CBC withheld): j+m-n = $472 million
q. % Cost Recovery j/p = 78.3%

So for the scenario you proposed ($85 Brent and 55k bopd, plus assuming the R factor <=1 and sufficient CRP toallow fully 40% of production to be cost recovery) we have Revenues of $497 million. This assumes no hedging costs which would be deducted before getting Revenues. See the 1H accounts.

From revenues we need to deduct:

opex
depreciation
capacity building charge
share option expense
other corporate overhead
finance costs (net)
taxation

to get to Profits aka Earnings.

"Dmitry Peskov, Putin’s spokesman, told reporters that the talks had been “unsuccessful” despite “positive elements” on issues Russia did not consider central to its demands. “That’s bad,” he said.

“If we don’t hear constructive response to our proposals within reasonable timeframe & aggressive behaviour towards Russia continues, we’ll have to take necessary measures to ensure strategic balance and eliminate unacceptable threats to our national security,” said Russia’s OSCE ambassador Alexander Lukashevich, according to the Russian mission’s Twitter account.

It could all get very wild - for both oil and risk assets