Member Info for PUTUP

Blubble, blubble, blubble? No doubt!

Victor, it is extremely unlikely that transaction - were there ever to be one - would be done for cash. A merger today, at current prices, would see GKP shareholders owning roughly 26% of a much stronger, and strategically important, combined company. (Assuming no consolidation of GENL which would make huge sense given their management contribute nothing but a postal address in reality.) Alas, any such deal is likely quite some time off - if ever. (I don't even expect an Oslo listing this year as conditions are not yet ripe for its birth.)

Very good update. I wouldn't call it boring unless by boring you simply mean good news, very solid progress and no calamities. Steady as she goes.

Overly inflated expectations coupled with a lack of understanding (stupidity) will almost always disappoint Invstrat. Just look at how many people here haven't even understood the terms of the company's contract... Staggering. I see the filtered muppets have been cackling away today also.

Hold steady and eyes on 2027 and beyond.

Extra 2-3 days is rounding error

Fundamentals are still the friend of this stock. Just expect a much slower grind from here (as noted a while back).

I'm assuming 42.5k for the month as a whole (might be too high) and $65 Brent. (According to EIA data up to and including the 27th Brent has averaged $64.47 so my Brent assumption is likely 50 cents too high as well.) I assume $25.20 discount (old $23.20 plus $2 for KBT). This is the biggest unknown variable of significance. WITHOUT arrears recovery that would be about $12.4 net to GKP. Back out circa $7.5 million of direct (recoverable) expenses less a bit of cash corporate overheads to get the free cash generated for the month. That said, this invoice will likely have re-invoicing of costs-in-arrears so maybe another $6.4m (of arrears recovery) for the month. Now the fun starts with the consultant and SOMO...

Small increase in quotas announced today but, for now, pausing thereafter

I believe the company will re-invoice (and has been re-invoicing) for as long as there isn't a separate arrangement, but once there is they will no longer be able to do so. The plan was that they'd agree a separate arrangement during this 3-month provisional period. We will have to see how that pans out. Importantly, I did not want to colour the argument/example regarding 'self-funding' of field development with the wrinkle around re-invoicing arrears.

Of course, 'self-funding' is a bit of a misnomer. A better term might be 'not funding' or 'minimised funding'. When the company deploys recoverable expense faster than it can be recuperate, they are forced to fund (some) field development on behalf of the KRG (for later recovery). When expenditure and recovery is in balance it is the KRG/ICG who are funding the development. Even then, however, there's still a portion of the 'funding' or burden borne by the IOC because (increased) cost recovery displaces profit oil, some of which would otherwise flow to the IOC. (Once again, the contractors make no margin on recoverable costs.)

"new all operation" => new WELL operation

"Also - are you suggesting the new water handling facility will possibly increase production to 50k??"

If current production is around 42k as I assume, yes, I think water handling and well work-overs can close a good amount of the gap between that and 50k. (Look at their guidance in this regard.) Guidance re water handling is that it's operation by end 2026. Certainly the gap can be closed with 1 (or defo 2) new wells. As management have noted, they already have the necessary equipment for the first well and most of it for the first 3. So extra capex there is modest. But they need to order a rig. Lead time from ordering a rig to new all operation is, I understand, circa 9 months. I wouldn't expect them to order a rig until they've received some payments and have cleared this transitional period involving the international consultant. So late Q1/early Q2 at the earliest. 2026 is going to be affected by PF shutdown (postponed from this year) as well. Have to ride all that out, plus potentially a challenging oil price environment, to get back to 50k ish by YE 26.

Hence "focus on 2027" and being prepared to value in today 50k production. As they make progress throughout 2026 (hopefully) then would look to embed more growth.

But what do I know?

Not sure what you mean. The CRP ex arrears was normalised back in March or so of this year. I expect the arrears to come under separate arrangement. My example assumes that or, in other words, excludes "capex headroom" being crowded out by costs-in-arrears recovery. I still expect capex and costs to remain suppressed for the next 6 months or more.

Just to emphasise, my example figures were PER ANNUM. They also grow as the production base grows (or if sales prices are higher). (Compare with prior presentations regarding the FDP.) So, yes, absent a collapse in the oil price (which would mean investment isn't worthwhile at any rate) I think there's room for a LOT of capex without growing the CRP. Of course, if realised sales prices are low for any other reason, e.g. oil isn't exported but has to be sold locally at depressed prices, then headroom falls. But that's not my base assumption. Individuals here (even those challenged by arithmetic) will have to make their own expectations in that regard. We can agree to disagree.

Just to repeat, however, I don't see significant investment happening anytime soon and for any that is done to kick in before 2027 (or 4Q 26 in best possible scenario). But if we get regular payments, a payment programme for the arrears, ratified contracts then there's the foundation to invest back into growth. For now, I assume 50k production in my model which means it's assuming about 20% production growth from current. Even that is quite a bit.

Let's work through an EXAMPLE. Change as you desire. 50k production (yes I recognise this is currently above current), $60 Brent, sales at $25 discount to Brent, 10% royalty, $4.20 per barrel lifting costs, $7m of Direct Shaikan G&A. How much opex, capex and direct Shaikan G&A can be recovered in a year? (60-25)*0.9*50k*365*0.4 =$230 million. Back out the opex plus direct Shaikan G&A and you have $145 million of recoverable GROSS capex per annum. Quite a bit. Sure it squeezes out some contractor profit oil (and some dividend paying potential as a result) but at least a good deal of investment can be made without building the CRP - not "VERY LIMITED." (This is something I had to explain time and time again to Straycat before he finally got the message.)

FWIW, regarding "new FDP", the KRG remain in charge of field development (not SOMO/ICG)

"GKP's future is predicated on being self-funding, and with extremely low crude prices on the horizon, any "agreement" to pay producers anything like $16/bbl will completely collapse - no matter what cast-iron legal agreements say; self-funding then flies out the window."

I disagree with your final statement BB. Yes, we know that were it not for the cost recovery stuck in the arrears GKP/MOL would not receive $16 per barrel under the existing PSC contract (they're due a number closer to $13 pre the CBC that GKP has to pay from their share of profit oil). But even that lower amount per barrel provides headroom for continued investment in the field from within the current cost recovery mechanism. That is 'self-funding' in that cost expenditures in a 12 month period are recovered in the same 12 month period (with the only buildup in the CRP being due to the lag in payment terms). This isn't a surprise and the amount of capex which can be afforded is easily calculable.

That said, I do not expect JH and team to invest significantly until they have some payments under their belt, an agreement regarding arrears recovery and properly ratified contracts. The investment in water handling is the one exception and note that this was done as a lease in order to avoid upfront capex (investment in the CRP).

The ramifications of this are that there will likely only be modest well workovers during this year and early next to continue to try to slow the natural decline in production capability and, hopefully, a rig ordered in Q1/early Q2 for new production to come on-stream early 2027. The outlook for oil prices is more positive in 2027 vs 2026 as well. All eyes on 2027...

Hmmm. Doesn't look like support at 175/6 is holding. The next support level is 159/60 which would be good value. Let's see how things unfold...

"The market is corrupt."

No it's not. But if you don't understand it then you may well think that way. The man in the street is often just lazy and tempted by hype. Do the work.

1st of October 2025

After the Rally, What is Now 'In The Price'?

Oil prices rallied sharply after new sanctions were imposed on

Russia's oil industry last week. Whilst the precise impact remains

uncertain, we estimate what supply disruption is now discounted

in the Brent forward curve.

We leave our Brent forecasts unchanged

Key Takeaways

Calendar spreads have historically shown robust correlation with OECD

inventory cover. This provides a route to answer the 'what in the price' question

On Monday last week, Brent calendar spreads were broadly consistent OECD

stock cover. Following the rally, they now discount stock cover 6-7% below the

5yr avg

This would equate to a decline in OECD inventories of ~184 million barrels; to

achieve that over, say, 6 months, OECD stocks would need to decline by 1 mb/d

OECD stocks have trended up by ~0.6 mb/d in the last 6 months. To cause such a

sharp reversal, the majority of newly sanctioned oil would need to be disrupted

Whilst the precise impact remains uncertain, historical precedent suggests

caution that such a large disruption will indeed emerge

FWIW I have been assuming and still assume $65 Brent for 4Q. October is running right in line with that. As I said before, pressure is more likely set to bear in 2026.