Member Info for PUTUP

Latest from Morgan Stanley's Martijn Rats (updated yesterday)

Tariffs and OPEC

With tariffs and counter-tariffs creating uncertainty over oil demand, we had expected OPEC+ to extend production cuts once again. However, following yesterday's announcement, that appears not to be the case. Our updated S/D now looks looser than before. We adjust price forecast accordingly.

Key Takeaways

US imports tariffs on Canada, Mexico and China have gone into effect, which are likely a headwind for the oil-intensive part of the economy, and hence demand

However, OPEC+ announced yesterday that the unwind of voluntary cuts will start in April, as per the existing production agreement

Still, seasonally, demand growth tends to be concentrated in April-to-August; it appears that OPEC wants to use this period to test the market for higher supply

OPEC+ has indicated it will remain sensitive to market conditions; it is possible that production will only see a few monthly increases, not the full unwind

Still, our updated balance are looser than before; total oil liquids are likely in surplus from here; we lower our Brent forecast $5/bbl for 2Q-4Q.

New forecasts for Brent:

1Q $75 (vs $75 old)

2Q $70 (vs $75 old)

3Q $67.5 (vs $72.50 old)

4Q $67.5 (vs $72.50 old)

2026 $70 (vs $70 old)

"the krg can then go it it's own way and use the pipeline without agreement"

And what makes you think this is possible?

Good to see stabilization today. Currently my 2025 assumptions ($75 for 2nd quarter and $72.50 for 2H) look optimistic and in need of lowering. My terminal assumption of $65 from YE onwards looks vulnerable also. I've generally not tried to change this much as it represents an assumed average over the next 10-15 years. In general, I've kept it approx $10 below the 14 week trailing average. That average still sits at $75 but is moving lower.

As a rough rule of thumb, a $5 change in oil price assumptions hits my FV of GKP by about 20p per share down to circa 160p... (It would be more if one was bullish on growth.)

Brent getting pummeled

It will be very interesting to hear what management have to say in two weeks' time

Maybe oil will flow just as prices plumb four-year lows

No dip yet...

GKP stock is holding up very well all things considered. Discount my YE FV target back to end March and you get 182p. Considering the current weak oil price (which threatens my terminal assumption for Brent of $65), the clown show in the White House and the shenanigans in Baghdad it could easily be a lot lower.

Brent back below the support level that has held since May 2021. It has dipped below this support line on just three days since then, and recovered shortly thereafter each time. Will it do so this time? I hope so. Trump is doing his best to pursue a global recession.

If it isn't then there's a bucket load of something else priced in (growth, higher oil prices, lower return.... you choose).

No itsa. I said “yet” and would maintain so as of the time of writing. If there was concern you’d see that 50p wiped off very quickly.

"minimum of contracts legal with Iraq government and all past money to be repaid"

They haven't asked for more

Discussions finally start. And there's a gulf between offer and asking. Why people find this surprising is beyond me.

Receivables recovery makes up 50p of my end '25 FV calculation of 202p (cum dividend).

Agree there's no sign of market panic yet...

"Roll on September "

There's absolutely nothing special about September

Agreeing FDPs and budgets will be key of course. It will be interesting to see just how much is allowed before these have been fully, reviewed, negotiated etc. One of the reasons why I don't expect a quick return to investment in the field.

" If historical, do we start at what's now owed from the cost recovery pool"

As I said before, it is very convenient that the cost recovery pool, apart from the receivables, is now basically zero. So the starting point is a clean slate.

BB, rightly or wrongly, I see their process as more of an audit of costs/CRP (against an agreed FDP) and computation of the recovery formula in the respective contract. So a relatively straightforward process or certainly much more straightforward than suggested below. Of course, before they can do anything they need an agreed FDP, audit the current CRP (luckily in our case this is basically zero now) and agreed contracts. Remember that even now the IOCs present budgets and plans for agreement/approval to the KRG MoO. People here forget that they execute the resource owner's plan (constructed with their input/counsel). They don't just do what they want because it is the resource owner that ultimately pays for costs.

Just bin him. I have. He has absolutely nothing to contribute and a green 'filtered' message is much more pleasant.

Still expecting April restart of exports. Happy for it to be sooner - only if we have agreement on arrears recovery. We collect the first arrears in the coming weeks with local sales. Very relaxed about my profit taking at 189p (10% of position). It's been a ride and a half for >4x. Will trim some more if we move much above £2. Let's see what management have to say in a couple of weeks. End-Feb should see a cash position of circa $112 million, a touch higher by mid March. Still expect a $30 million dividend as the company pays back the CRP to investors. Back to sleep as the shenanigans continue.

"U.S. piling pressure on Iraq to resume exports"

But also doing their best to plunge the world into another recession

For now I have April but a shift to, say, June doesn't affect value that much. So long as FULL exports resume and the receivables are recovered promptly. (I make it that we begin recovering the latter from next week or the week after with local sales.) Lots in the price already. Reopening is so well televised now that you have to wonder "who are the buyers sitting on the sidelines waiting for an announcement before buying and pushing the stock price higher?" Not many me thinks. Risks are skewed for disappointment. Hopefully management and APIKUR secure the full wishlist with great clarity. I think they will but risks abound. Not the least of which is that only a portion of our oil is exported going forward. The biggest upside potential comes from a reduced discount for our oil but this is most uncertain.