Member Info for RagstoRich

Great thanks. Glad to see some sensible posts here. I am quite excited at the potential here if oil price is to spike (as a few analysts are saying may happen now). A high oil price would massively accelerate the cost pool return here which is a real upside.

All in the hands of OPEC.....

Ah yes. Just to balance this out, it is a horribly high take PSC, and with an R factor of >2 things get even worse. But right now with 55kbopd GKP would make ~$81,444,000 per year on profit oil alone. Which is why I am here.....

p.s. does anyone know what the R factor currently sits at? I did a very rough calc using historic revenue and CAPEX only and worked it out to be ~1.28 which is what I used in the above calculation.

sorry I seam to have used $63 oil and did x by 365 then divide by 12 to get monthly revenue, so thats probably where it differs

CCC: I thought it was 40% for cost recover? I also dont quite follow your maths. I can try and break down PUTUP's example below:

55kbopd x $65 oil = $68,589,556 gross revenue
- 10% Royalty = $61,730,640

40% of this goes to cost recovery and 80% of that belongs to GKP - (FINAL COST OIL $19,753,792)

60% of this goes to profit oil = $37,038,360.
Assuming an R factor below 1 GKP's share of profit oil is 30% = $11,111,508
80% of this belongs to GKP = $8,889,206
minus corporate tax (15%?)
(FINAL PROFIT OIL = $7,555,825)

FINAL PROFIT OIL = $7,555,825
FINAL COST OIL = $19,753,792

Not exactly the same as PUTUP's calculations - not sure where we deviate....

Davieboy: True, but as is said over and over. GKP cannot ramp up above 55k without a plan for the gas - that needs to be implemented before ramping up production. Unless the MNR change their stance on the strict "no regular flaring" then this will not change. GKP currently have a temporary dispensation to flare.

I think its actually $450-525MM to expand to 75k? However, the timeline for this was recently increased to 5 - 5.5 years. So $85MM a year in CAPEX (I cant remember if these are net or gross numbers). GKP spent $86MM gross on CAPEX in 2019 . So a sensibly managed development is possible, especially if oil prices continue to trend up.

Its a question of what investors want. The CAPEX pay back will take quite a long time for expansion, which isn't what markets want right now.... Sticking at 55kbopd and providing a good cash return every year may sound far more appealing for now?

The focus is on the 55k expansion, which should be complete by 2022? Then they can start looking towards the 75k which needs something external to change infrastructure wise (or ESG wise). The 75k expansion is also 5 - 5.5 years (the last update I have?) for the 75k expansion, and $450-525.

Does anyone have any idea of what kind of gas rate is expected at 75kbopd? I believe there is 305BCF (2C) forecast for the Jurassic. If (a few years down the line) this gas pipeline does get built and hooked into Shaikan, it could be a nice stable addition to the income stream.

The £75MM doesn't really have much of a value, certainly no where near £75M of value. I dont think anyone here expects that money back anytime soon? It will be paid back over a very long period of time which destroys most of its value.... Saying that that £75MM should be treated as £75MM of value in the company market cap is crazy talk.

Most companies operate with a 10% discount per annum, so value gets destroyed fairly quickly.

It would be nice if this place could be a sensible place to discuss the company, with sensible values and points? I hold here now and bought in recently, and see upside as I have stated. But I dont like people quoting that this will be a double or triple bagger based on poor information.

I’ve placed an estimate which gives this a £100MM undervaluation? So I’m not sure why people keep repeating that I believe there is no value here.....

I should have stated that my values I put down are risked.

I'm not saying its not worth anything. Its under valued at the moment, but not hugely like people seem to be inferring. A few facts below which seem to be missing off of here:

- The Jurassic oil is 11-18 API
- Oil is discounted by $22 a bbl, which is huge. Although this does include all transport etc
- The lack of quality bank in the country is a huge issue in assigning value to Shaikan, what is the lighter liquid actually worth, what discount will be applied?
- Capital investment is not the issue here in getting rates over 55kbopd. The lack of any gas mangement solution is the issue. This will likely need a political solution rather than one from GKP. Re-injection was bold in a fractured carbonate, but has proven to be non-feasible because the field is too poorly understood. We need gas infrastructure to be build, which is in the pipeline (see an earlier post I wrote here about the US pushing for this). Unfortunately this seems to have stalled because of politics (the Russians have a contract to build a gas pipeline to Turkey but its not even started yet).

I've done some rough sums are I'd say a correct value for GKP today is about £400-450MM . This doesn't include the arrears.

Cheapest takeover target for a reason.... the asset doesn’t tick a lot of boxes for what companies are looking for in an asset these days ( advantaged barrels is the new buzzword).

Complex field, but big. heavy oil with a very poor emissions rating, huge discount price vs Brent, payment risk from the gov, high tax region. No control of oil sales. Not that advantaged....

The above means there are a lot less likely buyers for GKP out there, but I believe there probably are still interested parties. But I don’t think this is a super cheap bargain. It’s under valued yes, but for a reason - because of the current industry “trend” where it’s not only about oil resource numbers anymore

https://www.business-standard.com/article/economy-policy/india-in-talks-with-dutch-lawyers-to-file-an-appeal-against-cairn-verdict-121020801787_1.html

Dont know what the end game is for the gov... they are doing more damage than $1.2bn is worth.....

https://www.business-standard.com/article/economy-policy/india-in-talks-with-dutch-lawyers-to-file-an-appeal-against-cairn-verdict-121020801787_1.html

I dont know their end game here, they are doing more damage than the $1.2bn is worth......

Hardly any of the award is factored in. Cairn is sitting on about $600MM of cash I believe? Plus catcher and kraken...

Great asset, sat out in the arse end of nowhere.... What do you do with the liquids once out the ground? Where is the nearest port facility etc to run operations from? Not going to happen.....

I’m afraid I think HUR is too risky and their assets are too specialised for a company like CNE. So I doubt it is on their radar. There is a huge amount of assets on the market in the N sea, so a lot of choice for a company like cairn

That looks more like it.

For the very distant future 110kbopd case: to add complexity (and give a slight upside) the Triassic liquids which will make up part of the 110k should be far less discounted since the oil is very light. But due to the lack of quality bank I'm not sure what the discount change would be. But it should give a small increase in the net profit.

A bit missleading as GKP operates in a state that takes a huge stake. In addition you have the $22 discount you need to add in too.

I'm not trying to de-ramp etc etc - this is a nice little cash generating company. But it is not going to ten bag anytime soon (or anytime...)

Look at the 2016 CPR for some realistic figures on annual net revenue. At peak you are talking ~$500MM (a large proportion that is cost oil). Profit oil will peak at ~$200MM. These peaks are years and years away, the country needs to build the gas infrastructure to handle the gas output associated with the high production numbers 1st (~5 years away IMO)

The project will never provide billion $ yearly returns!

Agreed its a country scale project - but unfortunately it looks as if the expansion up to what the field is capable of hinges on it.

The question is, are the MNR are happy with GKP flaring until that infrastructure comes along? I suppose there is no other option? In which case production stays in limbo at 55kbopd, which isn't too bad . The company is cash generative at these rates and probably undervalued for the 55kbopd production alone (+ the upside of the arrears from KNG).

If the price can stay low until the new tax year I think I will put in my ISA's allowance into this and join the ride.... (currently not a shareholder)

p.s. A few synergies with the U.S. looking to ween Iraq off Iranian energy imports - potential for help with funding and building the gas infrastructure in Kurdistan?

Very recent webinar on exactly that below:
https://www.washingtoninstitute.org/policy-analysis/gas-iraqi-kurdistan-market-realities-geopolitical-opportunities