Member Info for PUTUP

"Apparently, the KRG manages its multi-billion $ oil ops using Excel sheets."

Nothing wrong with Excel. More people see should use it.

A nominal dividend yield is with reference to the current price. But that is irrelevant for most. YOUR yield depends on your purchase price and your also need to bear in mind any potential loss or gain on sale if you were to monetise at the current price. Dividend yield is a fool's metric.

" I’ll dare say we’re still making enough to pay decent dividends."

Define "decent"?

What's the yield for those who bought just ahead of the last dividend?

Brent down 3.7% in early Asian trading. $59 as I type.

Squeeze out high-cost competition. Short term pain for long term gain? Will be interesting. Especially with global demand falling (and Chinese demand in particular forecast to weaken further). Even at $62.50 Brent, exporting and existing contract terms, GKP would only be making about $3 a barrel (a bit less) pre corporate overhead. BUT that is still a good deal more than we are making under $27/bl local sales (pre one-off arrears collection***). Every little helps but if Brent heads below $60 we best pray for continued strength in the local market.

*** A big problem with re-invoicing the cost oil in the arrears rather than it being paid under separate arrangement is that it crowds out the extra profit oil we'd otherwise be receiving now. We recover some arrears, but will never receive the extra profit oil (less CBC) that we would have earned had cost oil been lower. In effect, arrears are being recovered at a substantial discount. The profit oil less CBC per barrel is about 1/3 lower than otherwise would be the case. That's a big whack to profitability in order to recover some arrears.

From the FT:

Eight Opec+ members, including Saudi Arabia and Russia, announced a second consecutive monthly increase of 411,000 barrels a day for June, even as oil prices continue to slide because of fears of oversupply and economic weakness. 

The oil cartel surprised the market last month by announcing a jump in production of the same size, more than three times as much as was expected. The combination of increased Opec supply and fears that US trade tariffs will dampen the global economy saw benchmark Brent crude fall by nearly a fifth since April 2 to $61 a barrel, near a four-year low. 

The move by Opec+ to again pump more oil into a falling market marks a significant change of approach, said Jorge León, a former Opec employee now at energy consultancy Rystad.

“Opec+ has just thrown a bombshell into the oil market,” he said, adding: “Last month’s decision was a wake-up call. Today’s decision is a definitive message that the Saudi-led group is changing strategy and pursuing market share after years of cutting production.”

Next week's OPEC+ meeting will be important

Yes (although I have dropped my assumption for local sales to $27) the impact of falling Brent is to drop overall fair value rather than near term cash flow. The stock continues to trade extremely well (ie expensive) versus current oil prices. Hold for the medium term (at best).

Getting whacked again. Ugh.

As I said. Maintaining the dividend is in part dependent on collecting the receivables and the historical excess cost recovery. The latter, thankfully, was recouped Q1 which helps this year significantly and the former is trickling in now at about $3m a month - if oil prices remain where they are. The rebilling needs to remain ‘low key.’

It’s pretty clear I know more than you. Stick your head in the sand if you want but reality is what it is.

If you can't stand facts, get out of the kitchen. Reality rules.

The current dividend rate (if we assume 2x $25m per annum) already exceeds normalised free cash flow generation at current oil prices, i.e. excluding the last of the historical arrears recovery earlier this year (about $10 million) and any recovery of arrears, even if exports resumed imminently. Investment for growth depletes FCF generation further, in the short term, although not as much as one would expect in an ordinary situation because of the very fast recovery of investment (assuming the present contract terms hold). Maintaining the current dividend rate is very much dependent on export restart, arrears recovery and international oil prices remaining at least where they are now.

Good luck! Iraq (and Kazakhstan) have already been increasing their quotas while the burden of restrictions has largely fallen on Saudi. The previously announced increase was in response to this. Meanwhile, estimates of demand keep getting revised downwards. The good news is that GKP has been trading neatly in line with the impact of lower oil prices with no tantrum to the downside yet.

(At a 50k production valuation, a $5 change in the oil price is worth about 23p per share. We've had a circa $10 fall since 2 April. Plus the 9p dividend immediately prior.)

OPEC+ meeting. Potential for Saudi to raise production (again).

All eyes on May 5

If I was to completely write off the arrears it would take my YE fair value estimate down by 45p to 125p.

"On one hand Iraq are saying that Kurdistan is a part of Iraq, therefore all oil sales must go through SOMO. On the other hand they seem to be saying that the money that Kurdistan owe to the IOCs is not Iraq’s responsibility. Hypocrisy"

Not hypocrisy when the Kurds got the money from the sale of that oil. FWIW I am now assuming a 30 month (versus 24 previously) payment period for the arrears.

Ugh! From the FT:

"Oil prices slid more than 2 per cent on Wednesday as traders weighed the possibility that Opec+ will accelerate production increases in June amid continued tensions between key members of the cartel.

Eight Opec+ members, including Saudi Arabia and Russia, surprised the market in early April by announcing plans to boost headline oil output in May by 411,000 barrels a day, up from a previously targeted increase of 122,000 b/d.

When the members meet on May 5 to set output targets for June, Saudi Arabia was likely to push the group to increase headline production by a similar amount, two people familiar with the kingdom’s thinking said, adding that no final decision had been taken."

Bang on my YE fair value discounted to end April. And I assume export restart in June (although which month matters far less than the assumption that exports have resumed for the terminal value calc).

For those who prefer multiples, that's 6.7x 2025E recurring FCF from operations.