Member Info for PUTUP

I never said sell at 92. I said local sales at $25 or even $30 a barrel forever would mean the company was fully valued there. As I made clear then, and now, that's not my assumption. Only a complete dipsh*t would misread what I wrote.

Haha. Posted by someone that can't read properly.

"That stock has in effect vanished as well, increasing the value of remaining stock. "

LOL. The cash has gone out of the company as well.

Shares bought and cancelled. No longer exist. Cash distributed out of the company to those who wanted it. So far a £450k dividend to those who wanted to reduce their exposure at these levels. Those that didn't bought more of the company at same without doing anything. (Distribution foregone in return for a higher ownership percentage.)

(Oh and there's nothing wrong with buying in the 90s, and below, and selling in the 130s. Great trading.)

"for no tangible improvements to our business ?"

You should duke it out with Bugsy911 who thinks management's update was "amazing". Perhaps a little WWF match (or UFC cage fight). "Invstrat the Invincible" versus "Mosquito Bugsy". He'd likely choose "Roxy The Ramper" as his number two. Who would you pick as yours? A little light entertainment relating to GKP would go down well. 🤪

Swell, the highest 14-day RSI since June of 2021 was always very likely to mean a reversal of momentum for a period.

"lets also remember GKP hit 55kbop/d a couple of weeks before the ITP closed. "

Indeed they did. And also note that as of two days ago they estimate the production capacity of the field to currently be between 45 and 48k. Ergo, they have to invest in order to regain their prior high. Currently I don't see them investing much until there's contract ratification, exports, a plan regarding the receivables and recovery in full of any remaining CRP. Hence my comments in posts below.

Good luck. With respect to estimating 2025 cash flow a lot depends on when/if the receivables come through. $150m of receivables plus $50 million of cash flow generated from actual 2025 lifting slightly exceeds your number. As I noted, I have not included the receivables in 2025 cash flow but have accounted for it separately. Same goes for the little bit of CRP left which my model has as a 2024 cash flow. If you assume that exports don't begin until next year then there will be a small amount of CRP (in addition to any in the receivables balance) which you will pick up in 2025 rather than 2024 (as I do currently). Hence, as I have always explained, I model value as cash on hand, plus receivables, plus net cash generated for the rest of this year (ex receivables), plus the value of GKP's share of any residual CRP at end 2024, plus the present value of the free cash ex the foregoing from then onward. If, for example, you include the receivables in 2025 cash flow then obviously you can't account for them separately, ie double count them. Furthermore, you'll have higher cash flow in 2025 but applying a multiple to that non-recurring component would be very, very stupid.

The 2025 FCF assumption is then simple. I assume the current contract terms. (Straycat is more bearish but for now I keep this constant until we get further information. It would help to get discussions on contracts started.) The formula is straightforward. You need additional assumptions than those you stated:

Discount to Brent for Shaikan oil: as noted I currently assume the previous $23.20 and $9 KBT discount per barrel.

Royalty. I've left this at 10%.

Lifting costs per barrel: I assume these return to prior levels with a 10% inflation uplift. The assumption doesn't matter much though as they are recoverable.

Direct Shaikan G&A. Again recoverable. Whatever you assume with come back lower down the calculation.

Contractor capex. Again, we have to invest to keep volumes constant. It's recoverable and so the assumption doesn't influence the end result too much.

Working Interest Share in Profit Oil. (Not GKP's. GKP has a share of this share.)

With that you can calculate GKP's receipts - share of cost oil (no more than costs incurred) and profit oil, net of CBC.

Then subtract out again GKP's share of the costs/capex above to get operating FCF. (Of course there's a timing lag here. We incur in month 1 and recover, say, 3 months later. But this all evens out and for the sake of simplicity I don't worry about it.)

Lastly, subtract out GKP corporate cash costs to get actual FCF. (I assume a little less than $6m corp G&A. I've ignored deferment of costs from current and previous years.)

We can debate the assumptions, but - on assuming the current contract terms - the calculation is very, very straightforward. (Even breaking out each step yields just 20 lines.)

Again, the answer lies in the CRP. Historical receipts (as I noted earlier today in a post I'm now sure you've read carefully again) have been heavily flattered by cost recovery. "Back in 2021" (or 2022) is meaningless. You asked for my 2025 model and I gave it to you. I also noted that it assumes that by then the CRP has normalised. Current FCF is still flattered by historical cost recovery and deeply suppressed costs (unsustainable when we return to normality). [Direct costs, however, don't have that great an effect on the outcome since they are.... recoverable.]

Should I heed Theoryman's advice or not? Hmmm...

You should start with the Gross CRP as of end 2023. Subtract out the Gross cost recovery embedded in the invoiced but not yet paid receivables. You then need to subtract out the Cost Recovery in the billings so far this year and, since we are talking 2025, subtract that which will be recovered in the remainder of the year. Apart from the lag in the resumed receivable period you should end up with a balance of zero if you adopt my stated assumption of a restart to exports aka normality a few months before year end.

Remember, there's a ton of cost recovery in the receivables. You can't count the receivables AND not adjust the CRP for those invoices. (As I stated in conversation a few days ago, there's the interesting question of whether, assuming the KRG truly default on the receivables, whether SOMO would allow the cost recovery embedded in those invoices to be recovered from them. This may indeed be part of an 'elegant solution'. We'd take the hit for all the Profit Oil component but still be allowed to recover the costs - so a c$30m hit instead of c$151 million. You heard it here first.... That would push the cost recovery out of the overdue invoices into invoices that might extend into 2025. BUT, these are still one-offs going forward. For now I continue to value the delinquent receivables 100 cents in the $ and show my value with and without receivables.) So as I stated, I'm assuming that the CRP has normalised before 2025 (largely in the receivables and the little remaining in the 4Q). (I estimate GKP's share of the CRP ex receivables as of end May to be about $41 million.

Based on my current assumption of a return to exports from September I am of course assuming full normalisation of the CRP this year. In 2025 cost recovery = costs incurred, i.e. a net to the Contractor of zero. (The little remaining balance in the CRP is a one-off captured in 2024.)

"what's your net profit assumption for 2025 under the following scenario:

- Exports open

- 45kbp/d (current levels)

- $70 realized oil price

- Current CRP"

No, I likely simply missed the direct and specific question. To answer, of course there are a lot more relevant variables than those you listed but in short free cash generation of c$50 million. (Assumes cost recovery in receivables is recovered before 2025 or isn't billable again, a WI in profit oil of 26% and other necessary assumptions regarding costs and capex some of which impact the answer more than others.)

"you called it fully valued at 92p two months ago"

Perhaps this is why I don't respond to you. You portray a complete inability to read what I say. I had said that then current production via local sales at $25 per barrel in perpetuity (with no recovery of receivables) would mean it fully valued there. Why don't you go back and read it again rather than misquoting me (likely on purpose). A conversation requires you to read and listen with at least some modicum of care. It goes without saying that this isn't my assumed scenario.

Not a rant. It's just tiresome endeavouring, in good faith, to answer your questions with some detail in my explanation. Perhaps I should no longer bother.

'Sell proposition'? Whatever do you even mean by that? No, please don't answer.

Believe? So says the guy who just sold 🤪 It's not about belief. Faith investing, divorced from realities, is a dangerous game. I want evidence of fundamentals to support the price. I'm not at all surprised to see the stock turn back from 140p. And I don't have stupid expectations of what it can achieve without very real progress on the factors I laid out.As for the Board, much of what I laid out isn't within their control so, no, I'm not expecting them to be massively influential in the short to medium term. They can take the summer off for all I care.

Keeping things real...

You keep asking me the same question (more or less) and so I will give you the same answer (more or less).

First, this isn't 2020, 2021 or 2022. Buying from March '20 was an absolute no-brainer. One risk variable of consequence: recovery of the oil price. Confidence in vaccines was all that was needed. 2021/2 was all about a strong oil price and great cost recovery. We had contract confidence and a good oil price leading to great receipts backed by high cost recovery. No growth, but - and you will recall that many at the time, including yourself, took some convincing from me - considerable investment for growth could be executed without additional capital. (The base of production was sufficient to support a high level of capex with fast recovery - the so-called self-funding model.) We got an inkling of growth early in 2023 but then things started turning south. Nonetheless that period was a very different risk profile to the current one. Maybe then it was sensible to begin paying for some growth and increasingly we began to price in 55/55k...

Then there was the intro of the KBT discount, followed not long thereafter by pipeline closure and very amped up SOMO etc. Today, our contract is in doubt, we have no exports, a lot of capital is tied up in unpaid receivables, and no platform for investing for growth. May 24 production has crawled back to that of Jan 23 but, make no mistake, a lot more is discounted in the current share price than a continuation of local sales at $27.50 a barrel. Make no mistake, local sales, even at max field capability, don't support a share price in the 130s. Not even close. Local sales as a 'basic business model' is not one I'm interested in.

The backdrop is very, very different from a couple of years ago. To ignore such reality is just plain stupid.

Right now, forget about growth. There can be none without contract ratification and export reopening. The asset is currently be sweated to the absolute best of management's ability without investment. Production is at the very high end of management's view of field capability. Thankfully, you are not being asked to pay for it. Were the current share price much north of £2 today, based on the current situation, I'd sell my entire holding. You are, in my view (as is clear from my earlier post), being asked to pay for export reopening and contract ratification. (Or some bit of those and a little receivables recovery depending on how you want to view things.) Without a strong view on the contract and exports it's IMPOSSIBLE to have a solid view on an FDP and growth. Let's get those sorted plus a path for receivables recovery (the money for 'investment' is locked up in that) before we even begin to worry about what might be achievable from FDP/investment (self-funded or not) and whether or not we should pay for it now in the stock price (rather than waiting for some success to shift the stock higher).

Angst? Nothing further from the truth. 28C currently and heading to 35. All is gooood mon!

(Perhaps you didn't understand the "meow" reference.)

"142p gets breached, resistance level cracked, indicators scream Buy, the herd join in, leaving behind two unclosed gaps - a runaway wooosh trend continuation. Anyone Short hiding above 142p would get caught in a Short Squeeze adding more fuel to the fire as they buy back. "

Meow!

All shares (and any other risk asset) is a risk/reward share. The statement is a stupid one. Appetite for risk ultimately needs to be backed/fueled by fundamentals. Things can ebb and flow but without delivery on fundamentals they will falter. You are bearish on 1, 2 and 3. 4 and 5 will have to work hard to make up for them...

Let's see how things unfold. For now, it's giddy again.

"My fair value assuming 1 and 2 are certain is 131p."

To clarify this, my model's (based on all its various assumptions*) year end value is 203p of which (giving full credit to) the receivables is 52p. Discount that to end May at my discount rate of 20% yields 183p and 131p ex receivables, respectively.

* I run sensitivities to various key ones

The model has served me very well over the last 4 years.

JH needs to "achieve" at least the following key milestones: (quotes because most if not all is out of the company's control)

1. Export pipeline reopening (I'm currently modelling a full restart by September 1...)

2. Contract ratification on at least equivalent terms to current (assumed in my model for now)

3. Recovery of receivables (you've written them off; I haven't)

4. Improved pricing relative to Brent. The first leg down for GKP, how quickly we forget, was the additional KBT discount. (I'm still assuming $9 per barrel.) That was on top of the $23.20 previously (which I still assume in my model).

5. Growth. No way this happens until 1/2/3 at a minimum plus the full recovery of the residual CRP (although the latter happens basically as soon as the pipeline reopens). One would be foolish to pay too much today for growth given the abysmal track record and challenges. As stated in the recent operational update, the field is already producing at the high end of estimated capacity. Capex is required to raise levels further. A lot needs to happen before GKP will be prepared to expand capex.

So what's already discounted into the current share price? (This is a question too many here fail to examine.) Certainly 1 and 2 are already factored in at current prices. (My fair value assuming 1 and 2 are certain is 131p. Actually that assumes 50k production which exceeds management's estimate of the high end of capability.) 4 and 5 seem a long way off. Progress on 3, dependent on 1 and 2, is required to fundamentally support the stock in the near term. The recent update was disappointing with respect to our dearly hoped for improvement in fundamentals. We continue to wait.

(In the interim, 140p was my short-term trading target and 122p ish my expectation for retracement.)

"Just sold my profits on another £20k investment, cheaply as it turns out. £1.34."

You'll be fine ;)

"so easy with you sensitive Americans because you don't get British humour."

The funniest comment yet. I'm not American. I am a British citizen. And, yes, I do get/enjoy British humour. Why wouldn't I?

So you've sold out of your holding. At what level do you expect to buy back in? (FWIW I still hold all of mine.)