Member Info for RagstoRich

The KRG are broke. They are struggling to pay the millions and millions of people in the public sector which I imagine is their top priority to avoid some sort of protest / escalation. They simply do not have enough money (partly due to the amount of corruption in country too)

Who are the shares being sold to if there are more sales than buys? Or vice versa?

Chippy - two things:

- Every transaction has a buyer and a seller. People do say there are "more buys than sells" but its sloppy language. What they actually mean is more people want to buy than sell, which isn't the case here. If there are more sellers then the price drops to allow the sellers to sell to buyers who wouldn't have otherwise bought.

- The chart of buys & sells is automatically generated by LSE, based on the price difference. So not always accurate.

Bottom line is, you cant have more people buying than selling (not on good ol' hard shares), if there is no buyer then a seller cannot sell (not at the price he's asking anyway).

A 10 bagger would require something fundamental to change, beyond what I think oil price is capable of (you'd need $200/bbl +). It would need the PSC to completely change (probably into something that is not a PSC) along with a high oil price.

I've probably done more investigation into this share than any other I've held in the past. GKP is undervalued, but not hugely. i'd say maybe by ~£200MM or so, which is signifiant. That's based on a 15% cost of capital. What we seem to be trading closer to a 25% cost of capital, which seems crazy but maybe that's what investors see the payment risk as.

The biggest value driver for us right now is getting these payments back to a regular and more reliable pattern.

they have provided updates on what they are doing India wise: Cairn have started the process to have the award recognised in several countries as part of the move to seize assets. What else do you want them to clarify?

How can they tell its a monster when the flow testing has only just started...

Happy, have a look at Tamar, it will produce for decades to come (2040/2050+) so it is far from old. It’s also one of the most efficient fields in the world, I think the wells produce 1 TCF each! So not that capital intensive at all.....

Personally this ticks all the boxes for me, disconnected from what has been and I believe will continue to be a volatile and/or low price Brent market and into gas which will play a huge part in the energy transition and provide a much more stable income source.

Fingers crossed there is substance to the rumours.

That’s another complication. The fact that we have agreed to but never ratified a reduction in our working interest, which is stuck in limbo!

Lemming, the PSC was actually from the MNR website. They publish all the signed PSC's. For whatever reason all the links seem to be dead (might be my browser as it states on the website that you can still download them).
https://gov.krd/mnr-en/publications/contracts/

I actually painstakingly took 121 screenshots (each page ) and placed them into a very large PDF which I have saved on my desktop (you could only view the pages via flash player as images).

In terms of the cost pool and costs in the R factor, here's the relevant paragraphs:

What costs go into the cost pool:
25.5 For the application of Article 25.3 and 25.4, the CONTRACTOR shall keep a detailed account of Petroleum Costs in accordance with the provisions detailed in the Accounting Procedure. Recovery of Petroleum Costs shall occur in the following order:
a) Production Costs
b) Exploration costs (inc appraisal costs and further exploration within the contract area)
c) Gas marketing costs
d) Development costs and
e) Decommissioning costs

For the R factor heres the paragraph on what defines "Cumulative Costs":
"Cumulative Costs" means all Petroleum Costs in the Contract Area, actually incurred by the CONTRACTOR until the end of the relevant Semester, determined in accordance with Article 26.7

Article 26.7 is just about the contractor having to provide a calculation of the R factor by each semester....

Here is the bit that I dont think my model captures about lifting costs:
26.14 Any costs or expenditure incurred by the CONTRACTOR, its Subcontractors or suppliers relating to the lifting of the GOVERNMENT's share of Petroleum by the CONTRACTOR shall not be considered Petroleum Costs and shall be charged to the GOVERNMENT according to terms to be mutually agreed between the CONTRACTOR and GOVERNMENT.

So if I understand the above correctly, only the lifting costs of the contractors share of oil goes into the cost pool? I'm assuming that is only the profit oil and not cost oil. Also does that mean we get reimburse the lifting cost of the gov oil every month? This part makes things much more complex!

https://gov.krd/mnr-en/publications/contracts/

https://gov.krd/mnr-en/publications/contracts/

I dont have much time to look at everything in detail from this morning, but I thought this comment was interesting.

Reducing scope 1&2 emissions by 2025 is effectively halting any flaring, it would be great to get some more detail on this (costs & timing). If anyone has come across anything could you post it up? The field has the potential to be quite "green" - I think emissions right now are 0.38kg/boe so half that and it becomes a very low emissions field. Which actually does carry a lot of weight and importance in todays world when it comes to financing etc!

I assume the above is tied in with the gas management plan.

$25MM / 210million GKP shares in circulation = 0.119 cents

= 8.7p per share for a $25MM dividend.

p.s. I'm using $22 discount so that will be the difference.

Hi Lemming,

Good to have some numbers to cross check mine with.

In terms of net revenue I get $253MM net for 2021 but I dont include the back-payments. This equates to ~$179MM net profit.

So there's about $15MM difference (if I include the back payments) assuming your number is net. Not miles away....

They aren't really calculations, they are numbers straight out the PSC (cant really argue against them).

For your benefit at $35:

1 bbl oil produced = $35
Minus quality discount ($22) = $13
Minus 10% Gov Royalty = $11.7

Oil now split between profit and cost oil (40/60):
COST OIL (40%) = $4.7
BANKED BY COMPANIES
PROFIT OIL (60%) = $7
Minus gov share (70%) = $2.1
Minus capacity building charge (40%) = $1.26
BANKED BY COMPANIES

TOTAL COMPANIES PROFIT FOR 1 BBL = $1.3 + $4.7 (Profit oil + Cost Oil) = $6
GKP 80% share = $4.8

OPEX is just under $3 a bbl.

That would be fantastic news however I’m not holding my breath with anything to do with Kurdistan / Iraq politics....

Another thing that would be helpful is for the KRG/MNR to come up with some sort of quality bank, currently we’re a bit blind regarding what the Triassic light oil is worth for an upside case.

It looks as if quite a few people aren't familiar with how a PSC works. So I've taken the liberty of explaining below. This is for THE SHAIKAN PSC - so the exact terms for GKP. This is actually available online which is what Ive used to base my model on. I can provide the link if of interest (its somewhere on the MNR website).

so here we go with 1 barrel of oil valued at $72 (take make maths easy)

1 bbl oil produced = $72
Minus quality discount ($22) = $50
Minus 10% Gov Royalty = $45

Oil now split between profit and cost oil (40/60):
COST OIL (40%) = $18
BANKED BY COMPANIES
PROFIT OIL (60%) = $27
Minus gov share (70%) = $8.1
Minus capacity building charge (40%) = $4.86
BANKED BY COMPANIES

TOTAL COMPANIES PROFIT FOR 1 BBL = $4.86 + $18 (Profit oil + Cost Oil) = $22.86
GKP 80% share = $18.3

Now the cost oil makes up the huge majority of the profit, this is money GKP have spent so it isnt really profit.... its just them getting their investment back.

So for those valuing the company using a 2P resource x $ you can see it does not work. GKP get ~$18.3 per bbl of oil profit at $72 oil. After the cost pool is used up it will be just over $3.9 per bbl profit per bbl .

Quite a horrible PSC, my valuations are based on the finances not the reserves. Since that is what matters!

So you cannot use a 2P resource x

96% now useless....

Struggling to keep up with this board..... A shame 95% of what is written is completely useless

NUFC9 FYI I have re-run my model and it has given me a £20 per share valuation!!!!

Sadly this is with an oil price of $560 a bbl.

CCC - the model assumes 55k flat production (i.e. no expansion to 75k or beyond).

Appreciate the cost pool will never be completely empty due to constant CAPEX and OPEX, but it will be minimal ~2024 in a 55k scenario.

As I said, I plan on playing around to add in a 75k-11k version. But I'll just be guessing as to when to start the CAPEX spend for that. It will be a CAPEX project of 10years+ going by the timeline on the GKP website.

Sorry oil is $60 not 50 - mistype