Member Info for Straycat

Well, as Napoleon once reputedly said -
'I know he's a good General, but is he lucky?'

2018 s/b 31,563 bopd (-11%)
and I should have added 2017 @ 35,298 bopd.
Apologies, but this information just accentuates my point.

Ha!
But unfortunately, you’re not joking, are you?
May I remind you:-
a) 2021 Full year results per JH-
‘I am pleased to report a year of strong operational and financial delivery in 2021. With a 19% increase in gross average production to 43,440 bopd…’;
b) 2020 Full year results under JF-
‘2020 average gross production of 36,625 bopd, exceeding revised guidance and the highest average production rate to date from the field.’;
c) 2019 Full year results under JF-
‘Average gross production in 2019 of 32,883 bopd, in line with original guidelines.’;
d) 2018 Full year results under JF-
‘Full year gross average production of 31,563 bopd (2017; 35,298), at the upper end of guidance.’

So:-
2021 – 43440 bopd (+19%)
2020 – 36,625 bopd (+11%)
2019 – 32,883 bopd (-8%)
2018 – 35,563 bopd.

GKP now tracking @ ca. 46k bopd, some 26% better than JF’s last year at the helm.
In 2022 alone JH’s announced/already distributed $190m to shareholders in the form of dividends.
And the sp resurgence speaks for itself.
All in his first eighteen months in post.
Don’t be ridiculous.
If you’re arguing that he has much more to do, well I would agree with that.
But he’s started well, and to suggest that it’s all down to JF is frankly absurd.

You winding me up?

Per RNS of 25/5/2022:_
‘Gulf Keystone will be seeking shareholder approval at the Annual General Meeting (“AGM”) on 24 June 2022 to pay total dividends of $75m, comprising the previously declared $25 million annual ordinary dividend and the $50 million special dividend declared today.’
The expected payment dates are 15/7/2022 for the $25m and 29/7 2022 based on a record dates of 1/7/2022 and 15/7/2022 respectively.
And look at the sp response. We’re in uncharted territory.
So just suppose JH’s dividend strategy is only part way implemented this year.
Just supposing at the AGM, or some time soon after, he announces another dividend and/or other shareholder capital returns.
We’re just going to keep on keeping on because we’re well and truly hooked.
And as for the sp, well who knows?
Dividends at this level are like a drug.
Continued strong performance is a given and all the other caveats apply, but like I say, just supposing his share price strategy is a continuum…he’s certainly gathering GKP support right now.
Impressive stuff JH.

Upcoming AGM, Resolution 2:-
'THAT Mr Jaap Huijskes, be and is hereby re-appointed as a Director in accordance with the Bye-laws.'

Probably don't need to specify how I voted on this Resolution...

So you're advocating short term revolving finance up to, say, $100m to cover any 'blips' in capex need outside of what can be naturally managed within GKP's own self-funding proposition.
And that enables the continuation of shareholder returns throughout the FDP period of 3/4 years and $900m capex funding.
Okay.
So that whole argument rests upon what the cost of equity in GKP is valued at. You say it is at or around 20%.
I'd be happy with a 15%-20% return on equity during the expansion period. No material difference UNLESS you're seeking the flexible financing you suggest.
Whether it's factoring, invoice discounting or any other hybrid bespoke lending product, inevitably that revolving flexibility will come at a price.
First off, the book debt will be needed as security, since the facility will need an anchor. At the moment our facility is unsecured and less flexible. But it is fixed @10% p.a.
Secondly, GKP would be lucky to get between 70%-75% of the book value of that debt.
Thirdly, right now the cost of debt is on the rise and GKP might struggle to find competitive rates.
However, there is another argument.
The benefit of gearing the business with debt to help fund the FDP also means that we're sharing the risks inherent in that development over the next four years.
And I quite like that; but it would come at a price.
Anyway, the Board have repeatedly stated their belief in self-funding growth. And they recommitted to the $100m debt facility in 2019. So they clearly believe that they currently have the facilities in place,with the right terms, to see them through the next capex phase.
My only problem is that instinctively I'm with highlander1970 in wanting to save that $11m interest charge oin our books.
But that might be short-sighted.

Hey Damo,
You read and post like a reasonable man and on that basis, forget about C0ckeye.
He’s yesterday’s news spouting yesterday’s views.
Post Restructure pain has warped his sense of understanding, whether it be with regard to Russia’s influence on geopolitics or GKP and it’s post Restructure potential.
I reckon he’s a decent enough bloke, but he doesn’t get the new GKP reality.
And on this GKP bb PUTUP is part of that new reality. His views have equal merit to anyone else’s and until he takes his profits and leaves this community that will remain the case. And good luck to him.
Btw, I don’t recall ever seeing a truly positive C0ckeye contribution on this bb.

SC.

P,
I need to explore your assessment of how best to develop funding for the next phase of the proposed FDP.
Are you suggesting that it is cheaper to use what would effectively be invoice discounting of book debt to fund the whole three/four year investment? Instead of utilising ongoing free cash?
Or are you just talking about funding the possible spikes in the capex injection curve?

SC.

Okay, I confess… it was me!!!
I’m done with this share; it’s got no future.
As my posts will attest.
Sauron will one day rule Middle Earth and then Smeagol (PUTUP) will be rewarded for his sly duplicity and greed by an Orc brigade of sexually frustrated footOrcs.
Good luck with that P!!!!!
But back on planet earth, you’re right. Who’s selling?

JH has a clear vision of future dividend policy for 2022.
He knows cash receipts for 2022 are presenting a major opportunity in at least five respects:-
Shareholder returns;
Re-investment as per newly defined FDP criteria;
Debt reduction;
Outside interest;
All/any of the above.
At the moment though, all he can see with any real clarity are his forecast cash receipts. Up to $400m on my count. Plus the money in the bank at 2021 year end($170m).
So by utilising a multi-tiered 2022 dividend approach he is making any shareholder ‘dislocation’ a very confusing/difficult prospect.
Who’d sell now unless there was a specific requirement for cash? Not many.
Hence the sp resilience.
And we all know that this year, oil price and regular payments notwithstanding, there’s much more to come.
He should use that surplus to wash away the unnecessary $100m debt facility as well as his other options.
There can be no doubt that lenders would be queueing up to lend him funding if he felt it necessary to follow through on the revised FDP.
BUT.
This is THE year for strategic decision making.
Otherwise he’ll take tactical decisions that are shareholder favourable. Which is also good for us.
Great place to be, but only for now…
Watch out for buybacks!! They’ll almost certainly form part of the mix.
Sent while away by i-phone, not ideal so apologies for any grammatical inaccuracies…fat fingers!!
I’m not fat (in my view) but my fingers are definitely I-phone clinically obese!!!

PUTUP,
If you're trying to groom me, then you're going to have to get to know me better...loads of Wonga always helps. Or sex, if you are a really attractive younger woman!
As for Putin'sgothisC0ck(inyer)eye, well he'll have to answer to his own conscience sooner or later. Not my problem.

I think your broad assessment is right.
But it does beg the question; if the sp is still undervalued (for now) what's its true value this year?
I'm still at £3.00/£3.25 in 2022.
Ignoring the snipers, you were @ £2.75; any revisions or are you going to play safe?

Hey PUTUP,
You're 'like the sixth former with a weak position in a debating class'.
Whereas I'm just 'a teenager with a weak argument.'
I'm cut to the quick!!!
Oh well, never mind...

Do you think JH's two tier final dividend strategy has influenced investors to stick around for the second tranche, or is there a better understanding of what this year's GKP proposition represents? Or both?
Because the sp is definitely standing the test of XD time, and in unfavourable current stock market conditions.

Wow!
Now that’s what I call a proper rant.
A tirade of unsubstantiated propaganda.
No factual content, but delivered with a real passion.
Almost Talibanesque in its dedication…
Look C0ckeye, we could now embark on an exhaustive examination of modern European history covering the last 150 years and Russia’s part in it.
But that’s not what this bb is for.
And it would inevitably leave you hunkered down in your own small foxhole, screaming abuse at the unfair way Russia has suffered at the hands of the Neo-Fascist Capitalists that pepper the key political and commercial positions and interests in the so-called Free World.
As I write, it’s already happening, given bb poster reaction and your responses.
But I’m not going to do it. There’s no point.
I wish I could at least say I respected your position, given your particular circumstances, but I don’t.

Let’s get back to GKP eh?

‘Good. He's right to block it. The west and NATO have betrayed all former promises to the Soviets and Russians about eastern expansion of NATO membership and the accompanying military bases. The Americans wouldn't tolerate Russian bases, or missiles in Cuba or likewise on the Mexican border, why should the Russians?’
This is a perverse re-write of history if ever I read one.
Do you know what? I can’t even be bothered to give you a lesson in modern history and why NATO was originally conceived. Nor the background surrounding the Cuban Crisis.
It’s just not worth it.
However, it IS worth pointing out that neither Finland nor Sweden had any intention of joining NATO before Russia’s (Putin’s) completely unprovoked attempted invasion of the Ukraine.
And as for Erdogan and his PKK problem, well I bet that gets sorted very quickly now that Putin has put the Finnish and the Swedish in a mood to negotiate.
So the Finns and the Swedes will most likely join NATO now, giving Putin an even bigger border to ‘protect’ from Western ‘attack’.
What attack?
So badly misjudged.
BTW, the Cold War was long gone, part of our wider post war history until Putin chose to resurrect it, completely misjudging the unifying effect his actions would have.
He just never came to terms with the collapse of the Soviet Union (Empire).
It appears that he’s now running the war himself from Moscow. Him and his acolytes.
Good luck with that without key Field Generals…

'cannot be understated' s/b 'cannot be overstated'.
Apologies.

‘I haven’t seen any figures suggesting the present situation will extend past production for Dec 2022.
Have you got a different view?’
No.
On my analysis, with capex fixed in @ $85m - $95m in 2022 the CRP will probably be exhausted by the back end of the year.
But I pose a different scenario:-
What if we get FDP approvals to 85k bopd – 95k bopd?

That demands a three to four year perspective and an associated $850m - $950m investment.
Then there are several different scenarios, all relating to funding. I will highlight two.

Self-Funding.
To be self-funded, GKP needs an oil price that remains strong (the stronger the better) over the investment period.
And it needs a cast iron commitment to regular payments by the KRG.
If either of these fails, then self-funding becomes problematic.

Investment support.
At the moment GKP ‘enjoy’ an unused and unnecessary $100m loan facility which is due for repayment mid-2023. From memory there is a further back-up $100m available if required as part of the overall arrangement. This loan facility is unencumbered i.e. there are no consequent charges on the assets of the business.
It currently costs GKP $11m a year and has no current commercial justification.
But it was felt necessary in a different, very nervous post Restructure time, when regular payments had been a massive issue.
However, if required, taking on additional debt is clearly a possibility given GKP’s rejuvenated position. Certainly there would be plenty of interest and at commercial rates…probably from the same lenders.

Other options include JV’s, sale etc etc.

In any event there is clearly scope for GKP to pursue the Holy Grail to 95k bopd.

And on the above basis, FDP approvals provide a platform for further growth as the whole investment model is reset, on current PSC terms.
Of course there would have to be more nuanced Board considerations concerning the allocation of cash and future shareholder distributions, based on what can be afforded given the massive and protracted investment commitment.
And that would be the case whether the whole project was self-funded, or part of a broader financing proposition.
But that’s what’s called ‘Growing Up’.
It all depends on your outlook, your appetite for risk.
The consequences for GKP of successful Field development cannot be understated. But it’s not straightforward, not financially, nor in the Field.
However, clearly JH is up for the additional investment given his previous statements on the matter. And if that’s right, then he’s had plenty of time to arrange any additional finance he deems necessary.

What do the other bb contributors think? In the right conditions;
To invest or not to invest? That is the question posed.

Quite right C0ckeye, apologies.
Just trying to illustrate (badly) how far GKP have come in the last 8/9 years.

Brent Crude is currently tracking as follows:-
Q1 - $101;
April - $105;
May (mtd) - $108;
June (Forecast) – (min) $100.
First Half forecast $103. So let’s say £100 - $105 for the first six month average.
Other assumptions:-
46k bopd.;
Maintenance of 90 day terms;
No further deterioration in Sterling;
Capex spread across the full year;
No geopolitical upheavals.
Then the Half Year P&L looks something like this:-
Revenues - $200m - $220m (2021 : $131m), PLUS 50%/60%!;
Profits - $110m - $120m (2021 : $70m), PLUS 60%/70%!;
Receipts - $160m – $180m (2021 F/Y receipts were $221m).
And the Balance Sheet will have improved by some $30m-$40m AFTER distributing the first $65m of the latest dividend package.
No wonder the sp is standing up to market scrutiny.
£2.62 as I post, up 10% on the XD price. Tracking 9% above year end Balance Sheet net asset value. Unusual, given market scepticism of all AIMs.
In my opinion there must be more to come on any extrapolation of these figures for this year.
Next year depends very much on extraneous events.
But not this year.
I find it difficult to lose my enthusiasm for GKP right now…

You perpetually avoid issues relating to the calibre of management decision making.
Engaging in an esoteric debate about what drives a business in terms of its essential requirement for cash (which must be profit driven to have any sustainability) ignores the key matter at a at hand.
And that's how able the Board are to perform their duties under pressure.
Because that's what we're paying them for.
And history speaks volumes as to previous performance. Vis the share buyback debacle.
But JH is different gravy.
He gets it.
And about time too.

That 'cash is king' philosophy can only ever work if it's supported by regular and underlying profitable performance.
Otherwise you eventually run out of cash and go bust.
So for the Board to deliberately trash the P&L and the Balance Sheet to the tune of $48m was unforgivable when they had other, much more viable options. Particularly when, at that time, the loss was equivalent to ca.10% of the net assets of the business and 2020 was turning into a very bad year.
For example, they could have held shares in treasury knowing that they would be needed for the vesting of future share option plans - between 9m-11m on my count. THEY MUST HAVE KNOWN THIS.
That would have at least alleviated their hapless position.
But they chose not to.
And the problem was all of their own making.
Ridiculous. Schoolboy management.

Never. Not on my watch anyway.

That's drivel. And here's why.
They must have known the volume of shares required to satisfy share scheme option plans (because I did) when they cancelled in 2020 under severe shareholder pressure.
If they had reserved say 10m in treasury, those shares would have remained on the Balance Sheet valued at the lower of cost or net realisable value. And they could have satisfied the VCP requirements with no difficulty.
But by cancelling virtually all of the bought back shares (19m of them) as they did, there were two consequences:-
1) The P&L AND Balance Sheet took an immediate $48m hit;
2) They then had to recreate the share facility for those options later, this time using a block listing as the mechanism. And diluting the share base as a consequence.
Ineptitude on a grand scale. And at shareholder expense.
You must stop trying to defend the indefensible.