Member Info for PUTUP

The question is "how much capital will it take?" That is currently very uncertain. I want as much of the money as possible currently tied up in receivables and cash returned to us. When we have clarity on contract terms and (a revised?) FDP we can determine how much field development can be done without investing significantly in the CRP (or how much capital is required to be tied up in the CRP and of how long). Only then can you sensibly think about growth.

"Got to question your motives on this bb..."

Stop with this cr@p. It's beneath you.

@Straycat "Not invested in the potential in the Field at all. "

Oh I am. But I need to see the results of contract discussions. And then I need to see performance by management.

The cost recovery mechanism is a huge part of what determines how much capital GKP needs to invest in the CRP. Under current contract terms and, say, a conservative $65 Brent and a $32 discount sale price, 48k production provides headroom for about $125 million or so per annum of Gross capex without building the CRP beyond payment terms (say 3 months of payments). (Have you even bothered to work this out?) A big chunk of that is required to keep production constant. If contract discussions hack the cost recovery percentage then the required investment in the CRP to achieve growth with the same investment increases dramatically.

GKP only ever has capital invested in three things: cash, working capital currently dominated by the receivables and the CRP. The CRP is close to being recovered and it is this recovery which has fueled the return of capital to shareholders. Unfortunately, the receivables haven't been recovered and haven't been returned to shareholders as well. And GKP retains excessive cash given uncertainties. 'Investment in the field' is, for GKP, the CRP. It goes up as they spend capex and direct (recoverable) costs on behalf of the field owner and goes down as those costs are recovered via a share of production sales. A lot hinges on cost recovery, as determined by contract terms, and it is these very terms which have caused great anguish in Bagdad.

So you are bearish on an asset that is clearly defined - the receivables. I'm bullish on recovering that asset to cash. You are bullish on potential that cannot be defined and which is under threat as a result of contract renegotiation. I'm more conservative on that, particularly in light of the current standoff and the historical challenges of growing production. As the share price still hasn't reached my YE target, based on a conservative no-growth but recovery of receivables scenario, I'm not being asked to pay for growth.

In the interim (and, for that matter, going forward), I want GKP to operate off a much lower capital base and thereby be much more efficient with respect to return on invested capital. It has always struggled to achieve an adequate ROIC because it has had way too much capital deployed for slim return. They need to keep returning cash to us to lower their 'invested' capital. (I use ' ' because the capital tied up in the receivables and cash is hardly 'invested' and isn't being paid much if any return.)

Forgetting about the $151 million of arrears is hardly being an optimist!!! We will get the money. The question is over what time period.

Investing to double production isn't self-funding if the cost recovery is stretched out longer. More capital, rather than less, will have to be invested in the CRP the more recovery is stretched out. You fail to understand how capital is deployed within GKP.

The current $80 million of cash, pro forma for the dividend and buyback, is still more than necessary. I estimate there's about another $17 million to be gathered this year. Then there's the $152 million tied up in the arrears. They can invest that when it comes in IF all has gone well regarding contracts and export restart.

More cash will (and should) be returned to shareholders.

Key takeaways

Concerns over a potential disruption in Middle East supply have driven prices higher. As uncertainty seems likely to persist, we raise near-term Brent forecasts.In the meantime, however, the underlying balance has continued to weaken. Demand has come in weaker than expected, and supply has been stronger.In our previous update, we saw the oil market 0.7 mb/d oversupplied in 2025; by now, this estimate has increased to a surplus of 1.3 mb/d. With such an outlook, prices usually fall to drive a rebalancing. However, as long as supply risks keep price supported, the 2025 surplus remains unresolved.With that in mind, we now see slightly lower prices further out and reduce our Brent forecast to $70/bbl for 2H 2025.

No surprises (except the weak production in October so far). The company continues to have excess capital, a lot of which is tied up in no-return assets. Good that they are distributing more of what they can. The largest impact on my fair value calc currently is the swing in Sterling.

No it hasn't. That's simply complete BS. The LTIP and DBP determine the stock-based compensation of management - completely independently of whether there is stock in treasury or not. If the company has obligations under its stock-based compensation schemes and has not stock "in reserve" for such purpose, either in treasury or the EBT, they simply issue new (primary) ones. Either way the stock comes out. The two things are completely independent of each other.

Did you vote against the 2024 stock compensation plan? Unfortunately almost all shareholders voted for it and we are stuck with it for another 10 years. Whether there's stock in treasury or not.

(Potential dilution from stock options is currently 4.5% of issued capital. Use the large number in your valuation calculations.)

You spin me right 'round, baby

Right 'round, like a (broken) record, baby

Right 'round, 'round, 'round

Maybe now there will actually be another meeting with the IOCs... They've still got a lot to work on. For now, I keep my assumption of export restart beginning of January 2025 but the clock is ticking ever more loudly.

"As per the net. How is the closing price of a share determined? In simple terms, the closing price is the weighted average of all prices during the last 30 minutes of the trading hours. "

Once again. This is incorrect. The LSE has a very specific process, an auction, ahead of and post normal trading hours. The closing auction determines the closing price.

They're distributions of cash. Your error is thinking they are more than that. A distribution of cash out of the company rarely creates value within a company.

Only if you didn't take your share of the distribution. If YOU didn't then YOU decided to buy more at the buyback price.

If they don't ever invest, extract it and sell it then it will never be worth anything.

Three months since the last meeting and nothing further yet in the diary. It's like watching paint dry.

Waffle waffle.

Two or more parties decided to trade at a substantial number of shares at 60.10 via the closing auction. That's it.

Every single trade is both a buy and a sell. To label any one or the other is nonsense. Beware such interpretations.

"Profit oil. Not my preference. "

It's still both profit oil and cost oil. Just not excess cost recovery. Costs recovered = costs incurred.

Yes, he needs to get the job done. Nothing has changed there.

I had said very early on in our conversation on this topic that if the KRG continued to manage sales then GKP would probably be allowed to recover costs until they were actually paid. I'm not convinced that persists once SOMO takes over (either as a result of export restart or taking control of local sales). In that case, SOMO would naturally argue that the KRG received the proceeds of the field sales pertaining to those months and hence the obligation to pay the invoices (comprising both cost oil and profit oil less CBC) is theirs and theirs alone. Hence, some form of payment plan with the KRG will be required, separate from invoicing oil sales. And for now I assume SOMO takes over from the beginning of January with export restart. (That assumption may need to be adjusted yet again...) And even if the KRG remains in control of sales they may well agree a payment plan in lieu of rebilling (although you might naturally expect this to have to be more favourable to GKP for them to agree).

In any event, my assumed repayment plan is conservative under an export scenario and quite closely matches, as mentioned previously, recovery via cost oil recovery. Where I am more bullish than you seem to be is (1) export restart and (2) I assume all receivables (cost oil and profit oil less CBC) are recovered over two years not just the cost oil component. In an export scenario they ought to be recovered even more quickly than two years (and so I'm splitting things down the middle somewhat). We will have to see how things pan out.

What I don't subscribe to is Straycat's bearish scenario of only continued local sales without recovery of the receivables.

2024, even in a difficult environment, has been blessed by one-off excess cost recovery (costs recovered > costs incurred). 2025 ought to be blessed by the (partial) one-off recovery of receivables.

Straycat, then - under those conditions - you have to assume they can recover only the costs incurred each month. The "36%" yardstick no longer applies as Cost Oil is no longer at the allowed maximum and more sales are Profit Oil.

However, making such an assumption (which of course you are entitled to do) would be extremely conservative. For as long as GKP is dealing with the KRG (i.e. local sales only and SOMO hasn't stopped in to takeover these) they can continue to invoice costs until they are recovered, ie actually paid. Doing so would (obviously) whittle down the outstanding receivables in arrears.

Once SOMO runs the oil sales (whether on export restart or by taking over local sales) things will likely change. (This is why, because, for now at least, I assume export restart beginning of January 2025, I use a payment plan (and have chosen equal payments over 24 months as a working assumption for now). If I push off export restart then I'd continue the invoicing model I use for 2024 ie add the invoiced costs back into the CRP for as long as I assume local sales only. I hope this makes sense.)

Large block crossed

Under those assumptions (local sales only @ $27) you're looking at circa $30 million FCF only for 2025