Member Info for Straycat

I think it's time you melded the CRP into the published accounts for a more nuanced view.

'Profits are much less than 20% of receipts. Note I said: "the bulk of the cash available"

As per 2021 accounts:-
Revenue - $301m
PBT - $164m
Cash receipts - $222m
i.e. profits @ 74% of receipts.
Not 'less than 20% of receipts'.
Am I missing something?

Unfortunately that analogy doesn’t work.
Because it ignores the profit imperative.
Eventually, without tangible and demonstrable profits to plough back into the ‘cash machine’ then sooner or later it runs out of cash and needs replenishing from elsewhere. Typically new/existing shareholder support in one form or another.
Internally generated profits are the antidote.
And guess what? GKP is awash with profits right now. Record profits. Soon to be revealed.
Like a self-funding ‘cash machine’ with no debt and an oil price to pit prop its ongoing performance for the rest of the year.
And JH has to decide what to do with his excess cash...

Oh no, not you and numbers again.
You don't even know the difference between an invoice and a payment.
i.e. a Profit and Loss account and a Balance Sheet.
Remember?

To get into a discussion with you about how your spreadsheet works would be both tedious and tortuous.

We'll know in a couple of weeks what the direction of travel is.
And the precise amount in the bank by the end of September is hardly the point.
It might be $200m (as I have previously suggested). Equally it might be $250m depending on payment schedules.

Critically, JH has to manage the trend of surplus cash inflows and what to do with them for the rest of the year.

The latest Op Up states:-

‘Year to date production has averaged c.44,900 bopd. We are prudently managing our wells to avoid traces of water and, as a result, we are tightening 2022 gross production guidance to 44,000 – 47,000 bopd. The installation of water handling facilities will unlock upside production potential and we continue to explore acceleration options in a supply constrained market. In the near-term, we continue to progress our well workover and intervention programme to optimise production. While timing of approval remains uncertain, we also continue to make positive progress on the FDP as we prepare to resume drilling and ramp up production.’

On that basis, with oil prices remaining at current levels, a declared net capex of $95m for the year, $190m in dividends and a $102m debt repayment (plus accrued interest), nevertheless by the end of September GKP will have ca. $250m in the bank.
Doing nothing.
Except that JH will have to do something with it. And I reckon we’ll be the short-term beneficiaries in his 1/9 announcements which will most likely take effect a month later.

‘While the timing of approval remains uncertain, we also continue to make positive progress on the FDP as we prepare to resume drilling and ramp up production.’

A fascinating use of oblique language to mask a whole world of negotiating pain.
The implication is that, with approvals, ramping up would be no problem.
And, according to the text, it’s only the timing that remains uncertain.

2022 was always going to be a BIG year for GKP.

This from the 2022 AGM & Operational & Corporate Update as 24/6:-

‘Assuming timely payment of invoices and strong oil prices, we expect continuous robust cash flow generation in 2022 providing flexibility to consider further shareholder distributions and an increase in capital expenditure to resume drilling’

Well, with a couple of weeks to go to the H/Y results, GKP have regular invoice payments including full delinquent debt recovery.
Also very strong oil prices to the half year with every prospect of that continuing through the rest of 2022.
So if JH doesn’t announce significant shareholder distributions on 1/9 he will have to answer some difficult questions. Like what he’s is going to do with the massive cash surplus he’s building.
More pertinent is how he will redistribute and at what level.
On my figures, GKP will have at least another $100m to release by the end of September (which is when any announcement will likely take effect).
We’ll see. But 2022 was always going to be a big year for the Company.

And then there’s the FDP…any progress there would be fundamental to GKP’s market positioning.

(I'm pretty sure I have more shares than you do.)

Why do you engage in this childishness?
You don't know anyone else' s holdings unless they have been declared under FCA disclosure rules.
Or unless the shareholder stupidly declares them publicly.

But now you've opened that Billy Big B*llocks can of worms (yet again) do you think you have more shares than me?

Let's see if you can 'walk the walk'....

Truth is, we'll never know.
And that's the point.

Stick to what you're good at P.

The First Half Results will be announced at the start of September (Thursday 1/9 maybe?).
A significant date.
And they will look something like this:-

Revenue $200m - $220m (2021 - $131m) + 50%/60%;
Profits $110m - $120m (2021 - $70m) +60%/70%;
Record sales and record profits. Again.
So let’s have a look at that what might mean for us PIs in terms of potential returns…
2022 Opening cash $170m;
1st half receipts $270m including late debt repayments;
Pro forma April – June receipts $140m i.e. will be received by end September;
Total $580m including pro forma receipts.
Outgoings :-
Dividends $115m, with another $75m to come in the second half before end September;
Net capex $45m, with another $45m to come in the second half;
Debt repayment of $102m to come in second half before end September;
Put another way, by the end of September (four weeks after the announcement of the half year results) if GKP wished to, it could have paid off all its current commitments for the whole year and still have something like $180m - $200m in the bank after admin and other costs.
Which of course GKP wouldn’t/shouldn’t do. You don’t pay a year’s capex in nine months unless you have to. Equally you don’t pay your wage bill three months in advance.

However, ignoring that, GKP will/would still have cash balances totaling some $200m by the end of September. More likely $250m. Four weeks after they announce their results.
With three more payments to come in the year totaling ca.$100m.

All of that suggests further distributions to shareholders coming soon. Probably when they announce their record results.
Not whether, but how much and in what form(s)?

Looks like some of us are re-investing some of our dividends...all good stuff.
Belief and confidence are the watchwords of the day.
Belief in the trajectory of the business and confidence in the management to look after our best interests.
What a turn of events!!!
When I bought in (early 2018), neither of those features were in evidence.
Credit to the remaining LTHs for staying the course.

(And no, they wouldn't need lender approval to pay out excess cash as dividends.)

Well for that to be the case, the lender would have to have the luxury of a more general charge over all the assets of the business...surely you're not suggesting that?
Otherwise any lender would be keenly interested in what was happening to his only secured assets, the cash and the unpaid invoices.

The trouble with invoice discounting/debt factoring (or whatever fancy labels you want to use to cover the same basic financial instrument) is that unless the lender has a general charge on all the commercial assets, the lender will be keenly concerned with the way his only security is being used.
Say the Board decide to return $50m to shareholders in the form of dividends under the new lending facility. If the lender feels his security is weakened or undermined by that decision to return cash which is earmarked as collateral for the revolving loans, then he's going to have a view.
Also GKP would be lucky to get 75% of the value of the book debt, given the KRG's payment record.
And the lender would exact a serious price for the lending, typically 15%-20% and not the 10% unsecured we've been used to.
All in all it's a very messy and very inelegant solution.
And wholly unnecessary currently.
And compromising for the future independence of the business.

My 'cost of equity' is also my investment equity.
That is, my investment in the future of the business; whether I want my money back now, or whether I'm comfortable with it sat in the bank as a platform for self -funded growth in the future of Shaikan.
My judgment call is that GKP is fundamentally well positioned to deliver on its strategic self-funded plan IF it's given the relevant FDP approvals. Then that cash becomes very important. And it needs to be unencumbered.
If not, by which I mean if we don't get the approvals this year, then raping and pillaging the P&L makes much more sense to me.
But not right now.
Either way, swapping an unsecured debt for one secured against GKP's most valuable assets, it's bank balance and its unpaid invoices seems stupid. And also, we'd have to go to the lender for their approval to pay out dividends or make any other shareholder distributions because they'd own the cash/debt asset...it doesn't make sense.

A revolving debt facility would bring new commitments including a charge on the book debt.
So why would GKP pay off one unsecured debt then replace it with another which tied part of their asset base to a third external party? And at a premium cost? That debt facility, because it would depend wholly on future payments from the KRG, would come at a serious discount to the book value of the debt...much more than 10%. Plus the cost of the borrowing.
Just so they could release more distributions to shareholders?
Pro forming the Balance Sheet on the basis of assumed future payments and then selling that book debt onto others is wholly unnecessary and financially irresponsible.
No problem with raising capital for growth.
But raising capital to fund shareholder returns is another thing altogether.
Particularly as we can continue to do it out of cash flows until the early part of next year at the very least.

Effectively bombproof now.
Great defensive play.
Well done JH.
Now can we please get the production volumes up?

You're forecasting cash flows pro forma on three month forward assumptions for receipts.
I'm not. I'm looking at what the Balance Sheet will say as a cash balance for the end of 2022.

'GKP will still end the year with around $370-380m in cash (post divis and bond retirement).'
Really?
2022 opening cash was $170m.
Dividends are ($190m).
Bond retirement is ($100m)+a bit.
Net capex will be ca. ($85m-$95m).
Admin/Other costs will be at ca. ($30m).
= ($245m)
So for GKP to end up with $370m-$380m in the bank at the year end, it would have to receive ca $625m in the year from invoiced sales.

Don't think so, not on my analysis anyway.

Well I get your point, but for me it ends up being about:-
1) Your wider portfolio exposure;
2) Your appetite for risk; and
3) Your belief in the fundamentals of the business.

I didn't really get involved with GKP to trade the shares (although I have on several occasions).

Morning CCC,
Why are they mutually exclusive events?

Hi Tygra,
So you think there's an appetite to re-invest the dividends do you?
Well given what happened on the release of previous dividends this year and the surprising resilience of the sp, I reckon you're right.
We'll see. I'm certainly re-investing some of mine.

And what do YOU read into that?
At least give us a clue as to YOUR own perspective and not ones expressed by others on another bb driven by other motives...
What do YOU think Pete?

There is absolutely no strategic need for another NED.
But Jaap Huijskes has a serious problem of credibility with his major shareholders.
He received only 69% approvals at the 2022 AGM for his annual re-appointment. The 2021 AGM results were about the same.
Under Corporate Governance Rules which GKP have signed up to, Board re-appointments need 80% approval from shareholders as an absolute minimum. If you don't get that shareholder backing then you've got six months to explain to them how you're going to make a difference.
Jaap Huijskes can't get that shareholder support to happen naturally. Not now, not anytime since 2020 either, following the share buyback debacle of 2019 which he orchestrated and ended up costing GKP $50m.
Garrett Soden (who had been an independent NED but was then 'let go' because of his other commitments which were apparently limiting his functionality within GKP) was re-installed as a non-independent NED to protect Lansdowne's interests a couple of years ago.
That was the price of Lansdowne's continued support for Huijskes. Jon Ferrier ( former CEO ) was gone soon after, at the end of 2020...he also suffered from lack of shareholder support at the 2020 AGM.
Soden's obviously been doing a good job of curtailing the Chairman's excesses at the same time as protecting Lansdowne's interests.
So either Lansdowne have demanded another NED for their ongoing support for Huijskes, or Jaap has appointed a friendly face to the Board to shore up his position in the Boardroom. Or both.

It's all about accountability at Boardroom level.
You've got to ask yourself why Garrett Soden, a non-independent NED is necessary in the first place.
Why do Lansdowne regard him as necessary to protect their interests?
Clearly there's a lack of major shareholder trust at Senior Board level for one reason or another.
Thankfully Jon Harris doesn't suffer from this malaise because he wasn't involved previously.