And while it's a distribution of value and not a creation of value it's the bid we desperately need in this stock. On top of that, it might squeeze the shorts in a way the inzy winzy tiny weeny top ups from those here cannot.
Volumes are good news as it helps keep the field ticking over. Pricing is a shocker. Current cash flow still flattered by historical cost recovery. But good (modestly) to slowly whittle down the CRP balance and keep the lights on. Current share price still demands a return to exports in the very near future. Shame there's no update in that regard.
"It happens when the total payments is equal to or larger than twice the costs, R factor = 2 or more."
Well, yes. But with investment capex the rate of change in the R Factor slows. We are a long way from the baseline level of volume required for tipping point.
"given payment stability and reliability, GKP should load up with capex and follow the self funding premise of the business model"
That's the point innit? It works only if we can recover costs. If they crush cost recovery we can afford commensurately less capex. Funny how costs are being debated heavily in Iraq at the moment...
"The R Factor is still likely around 1.19 now. So that's a 27.2% share in Profit Oil of which the contractor has 80% i.e. 21.8% now and falling."
Just to clarify this once more. The R Factor determines the "Working Interest Share in Profit Oil". Use of the words working interest is now a bit of a misnomer given the KRG/Iraq have an interest in the working interest of profit oil. The Working Interest of Profit Oil is split currently:
GKP 61.5%
MOL 18.5% (ie the Contractor has 80%)
KRG 20%
So currently the Contractor gets 80% of circa 27.2% i.e. 21.8% (with GKP getting 61.5% of 27.2% and then paying 20% of that in cash in the form of CBC). It's the Profit Oil stream from which GKP makes money.
Yes. They align when cost assumptions aren't credible (they previously guided $3-3.4 per barrel and we've had considerable inflation since then) and when capex is so low there is no investment in the field for growth (or worse). :)
I reckon maintenance capex (the amount required to keep volumes constant) is about $40-50 million per annum. I could be wrong on this and maybe an engineer can provide a better estimate but this is my current expectation and I fear, if anything, it is too light.
At any rate, I think you should now see that $12 per barrel is not good versus the current contract terms. And no operator would agree to the FDP under such revised terms forcing both parties back to the drawing board.
(Don't forget to look at the Profit Oil side as per the comment below.)
Now do it at the Contractor level.
If you look at my numbers for December 24 (when I have production at 50k and $80 Brent as you do, CRP normalised) the required payment to the Contractor is $14 a barrel - even with ONLY maintenance levels of capex for the field.
"I am proplexed that you think it takes a whole 8 months to ramp up production from 30 kbopd to 50 kbopd"
Never before has the field and operations been so starved of investment and personnel. Maybe I'm being conservative. If they do ramp up faster then the CRP will normalise even sooner...
(Frankly, a return to export by the end of March is looking aggressive...)