Member Info for RagstoRich

All - sorry quite busy with my day job right now so not on here as much as I would like.

NPV calculated until 2043.
Production rate is flat 55kbpod, so nowhere near producing all the 2P volumes.
CAPEX is assumed at ~£15-20MM a year after the 55k expansion is complete
OPEX is $2.8/bbl.
Oil is $50 flat (pre-discount) - depending on your oil price thoughts this is conservative.

So all very simple. It basically just works out the R rate and rate of cost pool return, I plan to play around with it a bit and add in an expansion to 110k case with the CAPEX etc as listed on the GKP documents.

So with the above it shows a bumper years from now-2024, after which the cost pool is diminished and we decline fairly quickly into a £60MM to £50MM a year profit company.

If you think we are on our way back to $100 oil being the norm - then $$$$$$$$, but I ran this as a 1P type case.

I have a simple model (based only on a flat 55kbopd production and no ramp up to 110k). This gives me the following rough NPV estimates at $60 oil:

NPV10: £760MM
NPV15: £620MM
NPV20: £530MM

I dont expect the ramp up to 110k to have a huge impact on the NPV, because it would be so far down the line that the discount would knock most of the value off.

The value isn't the multi-billions people keep posting on here, but it does show the company is undervalued at the current SP.

I’d bite the arm off the company if they offered £1billion......

I’ve created a full model for GKP until 2043, based on only 55kbbl/d and no further expansion. Any company would be looking at NPV15 at least. You are living in a dream world if you want multiples of billions.... Do you believe oil will get back to a norm of $100?

I think there is about 1/4 of the award priced in....

Enforcement wise, your right, things will not be straight forward but we should continue to push and make clear to the Indian gov that this isn’t going away. It’s not necessarily about taking the higher value assets, but also about targeting things which would be an embarrassment and give a lot of media coverage...

Mrc - I’m not saying there will be no demand for heavy oil, I’m saying the financial world, investing and borrowing money is becoming (at some pace) far more heavily linked to emissions and ESG in general. We are exposed to an unlimited upside with oil via the deal too, so do capture some of the price rise.

Regarding the award and it being recognised in various countries. That has already happened (there’s a link I posted a few days ago in here somewhere). It is now recognised in the US and a few other places. Value wise correct, it will be discounted massively. But it will still be worth $400-500MM or thereabouts I’d think.

I'm sure they mentioned they had been approached by 3rd parties about buying the debt? So obviously some people do want it and there is value to it.... The fact we havent sold it on is a good sign and shows we think we might be able to get more of it back ourselves than sell on.

Long term wise - the sell out of the Kraken is a good one IMO, heavy oil and a massive emission per bbl. The UK gov will beef up CO2 taxes eventually if they want to meet their emissions targets. Also I think emissions will become more and more important going forward with debt prices becoming more and more linked with it. Kraken production is going to drop off imminently and ABEX costs will start to creep into the picture. They stated they are working on additional asset targets so I think its an exciting time to be a long term holder!

Loads of cash
Gas focused (a fossil fuel with a much brighter future compared to oil)
Working on additional asset purchases
A massive upside from india

What is not to like?

I can see why there has been such a negative response to the news today, but I suppose its a short term vs long term view.

Short term: Kr & Catcher are raking in the rewards of a higher oil price. But how long is that high price going to last? This is an artificially propped up market with 7million bbls of oil held back by OPEC. People getting excited about the next "mega cycle" need to have a reality check IMO, we are nowhere near a balanced market yet and I expect COVID to have a longer impact on demand. Kr & Catcher are also approaching the decline phase, so we realise value before we have that risk too.

Long term: We swap two assets starting decline for a large, longterm gas position in Egypt, with multiple growth options and a country with aspirations to become and LNG hub. Forward gas forecasts are far more bullish long term Vs oil. It also brings the companies emissions right down on scope 1,2 & 3. All very good "future proofing"

Additionally, there was hints that more is coming... so watch this space!

JEF_NIC: looks like its already been recognised in the US court, and elsewhere:

https://energy.economictimes.indiatimes.com/news/oil-and-gas/us-uk-3-other-courts-confirm-1-4-billion-arbitration-award-against-india/81394820

This board definitely has two extremes - the group of people who's insight and analysis I find very helpful and insightful. Then the group of Brick Tamlands (the Weatherman from Anchorman) who constantly shout TAKEOVER!!! and $7Billion valuation!! Or more unusual posts like below that I cant even understand.....

that's unexpected, OPEC to hold production at current levels?

@FH1 - I have a very simple model built for GKP. I calculate ~$1128MM net cash generated (undiscounted) in 15 years for GKP..... based on the following assumptions:

- $55flat PO
- 55kbpd production
- $20MM CAPEX this year then $12MM every following.
- $0.28 per bbl OPEX

I havent included corporate of financial costs. I'm not sure how your figure in 15 years is $3Billion?

TM: "will the company be allowed to do nothing" - this is something in the back of my mind too. However right now the constrain on production (55k) is imposed by the MNR, they are the ones who have turned down FDP's due to gas management and they are the ones who have included "no planned flaring" in the PSC.

I feel a bit like a broken record, but no matter who has this field, with however much money it will not get developed beyond 55kbpd. The only thing that will allow that is

a) The government provides infrastructure to allow gas to be taken to market
b) the MNR have a sudden change of heart and scrap the "no planned flaring rule" which with all the ESG focus recently (Iraq being the worst in the world for emissions per bbl) is unlikley to happen.

So in short, the only option (right now) is for GKP to do nothing! If the MNR want more production they are the ones who have to act.

I'd 100% take $700MM now (i.e. cut the amount in half). Anything material would be good. Anyone who expects the $1.4B in full anytime soon is hoping for too much. India have already set out their stall.

It seems mad that they continue with this clown show (the gov of India). Surely they must understand how damaging this is to future investment in the country. No large company will invest anything in India if it carries this type of risk!?!

The ridiculous thing is that the whole retro tax rule was put in place because of Vodafone and Cairn has just been caught up in the net. Meanwhile Vodafone have got off relatively scot-free and Cairn are $1billion + in the hole!

The appeal they are lodging is that the arbitration doesn’t apply to this matter. So they are appealing the whole process rather than the ruling. There is no appealing the ruling. It is final and binding. The Singapore (Vodafone) case is different.

This is of course after them taking part in the process and openly stating they will abide by its ruling.... couldn’t make it up. This is a country that says it wants to be a good place for foreign investment.

Exactly, Cairn are now moving very swiftly with cases lodged in the UK, USA, France etc, to start the process of the ruling being recognised in those countries and begin the process of seizing assets. The USA has already summoned the Indian government. I expect Cairn to agree to a discounted payment from India (i.e not the $1.4 billion, but something close to it hopefully)

Beef, the Dutch court ruling cannot be appealed and is final, different from the Singapore court ruling.

Out of interest - what would people be happy with? Hardly any of the money is in the current market cap now. $600MM and run?

p.s. thats including a corporate tax of 15%

Circa $20MM a month for your first question (~$16.2MM CO and ~3.8MM PO).

I cant help with the $73MM question