RE: Investors Chronicle20 Aug 2023 14:54
"and a realised average price of $84/bbl"
This is the misleading side - and it's not the company saying this. If only GKP realised $84 per barrel. In Sep '22 BRENT averaged $89.76. As you all know GKP-produced oil doesn't sell at the same level as Brent nor does GKP get 100% of what it does sell for. You have to understand the CRP. In Sep '22 they averaged 44.2k of production and ultimately received $26.9m. Of that approx $21.3m was cost recovery (recovery of direct costs incurred prior to Sep) and approx $5.6m was Profit Oil less CBC. Cost recovery in, as the name implies, compensates for cash expenditure made - ultimately the two net out. $5.6m is left to cover non-recoverable costs and yield some true cash profit. You can easily work out what the $5.6m is on a per barrel basis. Hint: $4.22 per barrel.
The rest of the company's cash flow for that month is simply a factor of the timing difference between costs recovered in that period versus costs actually incurred during that month. In short, GKP spent a lot of money in the past to only recover that money during years like '22.
So, what you need to understand about '22 more generally is that - finally - they recovered a lot of direct costs incurred in prior years; prior year capex that had stacked up in the off balance sheet receivable called the CRP. Because recovery exceeded expenditure, the CRP was declining rapidly and the company was generating a lot of cash that could be distributed. But make no mistake, the company doesn't make a profit margin on cost recovery. It's $ in for $ out.
The bulk of the receivables balance is the same cost recovery.
Currently, albeit to a much lesser extent, the reverse is happening. The company is incurring (recoverable) costs but isn't being paid and the CRP is slowly rebuilding.
Sign In
Follow the stocks
