Member Info for PUTUP

Revised estimates for Feb's billing. Revised downwards to reflect lower production.

GKP cost recovery of $13.9m and GKP profit oil $6.3m. Plus arrears repayment of $5.8m

Revised estimates for March (assuming 43,400 bopd production and an average oil price of $65.50 to be updated once EIS figures published)

GKP cost recovery of $17.2m and GKP profit oil $7.7m. Plus arrears repayment of $8.3m

February and March receipts are enough to cover all of 2021's capex. GKP is running far too high a cash balance, leading to an overly high cost of capital. Disappointing announcement. Hopefully they gain confidence as the year progresses.

'weak holders'

my definition: all those who sold below today's price - and there were many - and likely those who will sell a bit higher also. When the stock is much closer to my view on fair value (and I see no benefit in saying what that my view of that level is except to say it is a good amount above the current price) it would be harder for me to view sellers as weak holders. Your view may differ.

"intention of awarding themselves the shares by whatever means they were plotting"

The share-based compensation was awarded anyway. The company could simply have issued more stock at par to cover the awards. Two entirely different things.

@IAm what I am saying is that in essence they're the same thing. While there are subtleties such as the personal taxation position of each investor, the company is returning capital. In one, the dividend, participation is compulsory. If you don't want to reduce your capital at work (or value at risk if you prefer) you have to reinvest the dividend. Do nothing and take the dividend and your value at risk reduces. With the other, a buyback, participation is voluntary. To participate in the return of capital (ie receive some) you have to sell shares while the company is buying. If you don't want to participate you do nothing. From the company's perspective (as a whole) the price of the buyback doesn't matter any more than the price from which the stock goes ex-div. It does matter for each investor depending on their views at the time - and particularly so if they don't act accordingly. Don't blame management for a decision that is yours and yours alone to make. (The fatal mistake is to think the company incurs real gains or loses depending on whether the stock goes up or down from the buyback price.)

Yes, you can take your profits by participating in returns of capital via dividends. You can also sell your shares.

GN boys, it's getting late.

It was never intended to support the stock price.

If you had sold into the buyback you would have the money in your bank now. You didn't.

If you don't reinvest your dividend (special in particular) you are reducing your investment. Just as if you sold a few. Are you a believer or not?

IAmNotAnAnalyst scroll back about a month and go through the relevant posts then. Yes, they can have different tax implications, but again that depends on an individual's tax situation. Anyone thinking the stock is cheap and wanting to remain invested would hate a dividend because they're forced into initially taking some money off the table, possibly paying tax on the receipt, and having to reinvest that net dividend by buying stock incurring brokerage and other charges along the way. (If you bank the dividend you're reducing your investment in the company.) And I stated that one of the benefits of returning capital via a buyback rather than a dividend is the weight the buyback can temporarily place on the bid, removing weak holders (quite arguably a good thing for GKP). But that bid won't stand in the face of changing fundamentals, obviously. But too many think of buybacks as if the company is trading in its own stock and that the price at which is conducted is relevant to the company as a whole (blaming management for 'buying high'). It's only relevant to each shareholder depending on their personal view of the stock. In aggregate, the price doesn't matter just as the price from which a stock goes ex div is irrelevant.

Carry on folks. You'll get there one day. Maybe.

I've advised on and executed every sort of buyback imaginable. Open tender, fixed price tender, VWAP (or otherwise) open market purchases, derivative buyback structures etc. And for all sorts of strategies and motivations. Regardless of the strategy by which they are implemented or the reasons driving the decision to undertake them, two things are constant across all of them. 1) They are returns of capital to shareholders (just as are dividends). 2) Those shareholders that participate get some capital returned to them and those that don't invest/own more of the company at the price the buyback was conducted at. YOUR responsibility to yourself as an investor is to understand these things and make investment decisions accordingly. If you don't participate, don't complain about the missed opportunity to take some money off the table. If you do participate, don't complain about the missed opportunity to (re)invest at that price. The decision is up to each and every investor. Time will judge YOUR decision. It's rather basic really and yet some still struggle with it (sometimes even those 'in the room'). The company is merely returning capital to those who participate, nothing more nothing less, and letting each investor decide whether to participate or not. Some shareholders may have particular reasons for participating or not and may even influence the capital return strategy. But that doesn't prevent any individual shareholder from participating - or not - as they see which fits their own interests.

(Those who are uber bullish on the tens of billions they think the company is worth would surely, based on such confidence, reinvest their dividend at today's prices rather than taking profits (or, for some, locking in losses) by collecting it. This is similar to deciding not to participate in a capital return via a buyback.)

Yes, many, many times.

Arma, another who doesn't get it. Applying 20-20 hindsight and expecting others to make the right big boy decision for him. Man up. A buyback is a return of capital, nothing more and nothing less. If you choose not to sell and collect your share of the capital return that's up to you alone. And it can go both ways...

"No buy back please. That has been a disaster. With small capex plan needed for 55kpd and no FDP then expect all spare cash to be returned to shareholders"

He still doesn't get it. A buyback is a return of capital to shareholders.

Has been for a long while. My average is mid 80p area. Don't confuse realism with lack of enthusiasm. They will diverge at a higher price than where we are today.

Won't be long before we get an announcement of an estimated $18.7 million +/- net for February plus $6.1 million +/- net of arrears (on top of January's $19.8 and $2.6, respectively). March is currently tracking around $22.4 million and $8.5 million of arrears. Plenty of cash flow for some good dividends and buybacks.

(All eyes on an updated R factor and cost recovery pool figure with the results announcement. Should still have headroom for now.)

"How would YOU value 13.8 Billion barrels OIP that doesn't include the permian zones?"

A hair past a frog's knuckle. Zero if it can't be extracted and sold for profit. One needs to understand both the extraction economics and how the spoils are shared. For now the stock is cheap but it isn't worth the mega billions often touted here. It doesn't need to be to make good gains from here. Let's get those gains first. If only all the babblers here had decent money to put to work.

I haven't posted a valuation

"Im not sure the current Contract Regime offers sufficient reward for the risks they will be taking. "

Et voila

@ LongStrong be careful when using the word "you"

"my money and my mouth are firmly aligned thank you very much"

Clearly not enough else the stock would be higher. Glad you have your view although so far it's far from being proven good (and the fact that you're underwater just reinforces how wrong you've been thus far). IMHO it's very foolish to use a reserves based valuation for GKP, particularly given the structure of the PSC. But, to each his own. £3 would be a healthy gain from where we are now. Let's get there first.

"Cutting to the chase well north of where we are 2bn values us at approx 9.5/share"

Please put your money where your mouth is

"Thats not how resource company's are valued."

"I have stated frequently that I never comment on Corporate Finance issues because I an not qualified to do so . " (sic)

'nuf said

"due to constant CAPEX and OPEX"

Are you sure OPEX is added to the cost recovery pool? This is one thing I'm not sure on.

At current run rates GKP is recovering costs at $15m+ a month (almost $18m for March) versus an expected capex for 2021 of $55-65m. After 2021 in RTR's example capex is minimal (maintenance only) as the capex to reach that production level is done in 2021.

RTR, what did you assume the company was worth in 2043 (future, terminal value)?

"Thanks PUTUP, can you do the maths for us then ? Just to make it clear on what you are saying?"

You are asking me to do a calculation on a model I don't have. What RTR is doing is discounting future unlevered cash flows to determine a fair value (as of today). The rate at which those cash flows should be discounted at for this type of valuation is the company's weighted average cost of capital (as previously discussed). That provides an 'enterprise value' from which can be extracted the equity value (enterprise value less net debt - in the current case net debt is negative and the equity value exceeds the enterprise value) and the 'fair value' price per share (equity value divided by FD shares in issue). This can be compared with the current stock price. If the cash flows are discounted to some future date, the price per share calculated is a 'target price'.

An IRR looks at things slightly differently. Here you would typically look at levered cash flows i.e. cash flows attributing to equity holders only. The 'present value' is the price at which the equity can be bought today and the IRR is the rate which discounts the future cash flows to the present value (the -ve present value offsetting the discounted future cash flows to a net zero). One can then compare the derived IRR with the return one demands for investing equity in such a venture (the cost of equity capital).

GKP is long cash in excess of its indebtedness but is still paying interest. It needs to either invest cash for high return (currently it has limited opportunity to do so) or give it back to shareholders ordinary dividends, special dividends or buybacks). When part of its capital is sourced from net debt rather than equity (all else being equal) its WACC will fall. Looking forward to the results announcement.