Member Info for Straycat

kaaran,
I spent some considerable time in early 2019 trying to decipher the VCP. Bravedog too.
We both concluded it was a mechanism for enriching JF and SZ which under its own convoluted terms it signally failed to do.
When it was scrapped as being unfit for purpose I reckon JH was looking for something simpler, a scheme he could apply using his own hoard of treasury shares accumulated under the share buyback scheme.
After all, he had previously awarded options for just sticking around for three years!!
By the way, great posts!

PUTUP.
Do you detect an element of animosity in this bb’s response to your posts? Let me explain why that might be.
You need a lesson in the difference between corporate theory and corporate practice.
Go fix yourself coffee, settle down, and let me explain. The following points are all FACTS.
1) In May 2019 the chairman asked for authority to buy back GKP shares into Treasury.
2) Ten days later Sami Zouarri, the then CFO, was ‘stepping down’ without any explanation;
3) Huijskes’ stated reason for buyback was to provide for the vesting of staff share option plans. Specifically NOT as a capital return to shareholders. GKP had entered into contractual agreements with certain staff employees providing share options as rewards for performance (though they weren’t always performance related in fact);
4) The shareholders were never advised as to how many shares would be required. Only GKP knew, and they never mentioned it anywhere (we tried to find out but it proved impossible). In fact only ca. 2m were needed to cover all eventualities;
5) The Resolutions were duly passed at the AGM but by that time had morphed into a general facility to buy back up to 10% of the Company’s Common Shares (29m at that time) before the next AGM;
6) Subsequently GKP went on a spree, buying back ca.20m shares when in fact (as we now know) only 2m were required for staff option vesting purposes;
7) They didn’t cancel those surplus shares as they had committed to do in the original buyback authorisation request. Instead they horded them in treasury where they sat for many months, doing nothing, just sitting there;
8) By the 2019 AGM ON 19/6/2020 the shareholder revolt was in plain view. 28% of shareholders votes were cast against the reappointment of Jaap Huijskes as Chairman and a similar dissenting vote was cast against the reappointment of Jon Ferrier;
9) At the same AGM the Board finally resolved to cancel the unneeded treasury shares, 18m of them, leaving 1m for residual staff share option purposes;
10) Seven days later JF retired;
11) On the 14/7/2020 Garett Soden was formally reappointed to the Board as a Non- Independent Non Executive Director representing the funds managed by Lansdowne Partners GmbH Austria. Lansdowne had insisted he was there to protect their interests. They now own 15.5% of GKP’s share base following cancellation of those errant treasury shares.
These indisputable facts inevitably lead to conjecture as to what the Board’s real purpose for those treasury shares was.
Was it, as you say, a simple return of capital to shareholders?
Or did the Board plan to redistribute those treasury shares to key employees as they had previously tried using the vehicle of the disastrous VCP?
Banging on about the technicalities of what a share buyback represents adds nothing to the debate.
Because the real discussion concerns the Board’s true motives for their actions.

You’re fighting the wrong battle old son.

IMO/DYOR.

‘There was never any intention for those shares to return into circulation.’

Have you read the Chairman’s letter when he was asking for buyback authority back in 2019 pre AGM?
It states:-
‘the Company will hold Common Shares in treasury to satisfy the vesting of staff share option plans.’

What do you think happens to those shares when they vest? Let me assist. The option holders receive them and decide whether to hold them or sell., i.e. they are returned into circulation.
The only way to prevent that was to cancel the unwanted treasury shares immediately, thereby reducing the available share pool. They had the relevant authority under Resolutions 12 and 13.
But the Board didn’t do that. Not until many months after the buy back ended.
Because of this they are culpable imo, and, as I have said, other major shareholders clearly have their misgivings about the management of the GKP asset base by both Ferrier and Huijskes.

And don’t you worry your pretty little head about my sleep patterns PUTUP, instead concentrate on the argument at hand.

‘{Share buybacks} are a return of capital to shareholders just like a (more tax efficient) dividend….’

Share buybacks can only be of shareholder benefit if there is a resultant boost in the share price creating a capital gain, as opposed to an income gain arising out of a dividend.
If the share price had responded favourably to the buyback initiative then, just as with dividend payments, the shareholders could have either sold out to the (capital) gain, or alternatively reinvested.
But this never happened in GKP’s case. In fact, from the moment the buyback was announced in the form of Common shares returning to treasury rather than being bought for cancellation, the share price fell consistently, back from ca.£2.60 in April 2019, to just over £2.00 by that year end.
My issue has never been about whether buybacks are a return of capital to shareholders.
Rather it is about how to engineer the desired result in the best interests of those shareholders.
I believe the 2019 buyback was ill conceived and badly orchestrated.
So did the shareholders at the 2019 AGM.
Huijskes had to sacrifice his own CEO to stay in post.
Then he had to suffer the ignominy of having a non exec inserted into his Boardroom to placate his biggest shareholder.
And even now there is a big question mark over his own future, because the vast majority of shareholder votes were against him being reappointed.
Not exactly a ringing endorsement is it?

With you on that Chaz.

Sorry to the bb for the repetitions, that's country life for you, with broadband speeds to match!!

BB,
The Auditors aren't involved yet because the impairment only appeared in the 2020 Interims, which are unaudited.
Credit to Weatherdon for insisting GKP recognise they may have a problem with that $73m and depressing first half performance to take account of $13m of it.
That debt is specifically itemised in the accounts as being unpaid and a problem under IFRS 9; hence the impairment.

With you on that Chaz.

BB,
I don't want to get all technical on you, but IRFS 9 is a stipulation that the Board MUST RECOGNISE they have a problem with that KRG debt. As a consequence the Board have had little choice but to recognise at least $13m of the debt as impaired, i.e. may not be repaid.
The Auditors haven't yet been involved officially because the 2020 Interims are unaudited. Credit to Weatherdon for taking the initiative and insisting on the impairment and its consequent negative impact on first half performance.
However, there may be more to come.

Broadford,
You're making the same mistake you made last time.
Revenues are invoiced sales; cash receipts are payments for those invoices.
The two are not the same thing at all.
One's a P&L item, the other's a Balance Sheet item.

Broadford,
You're making the same mistake as you did last time.
Revenues are invoiced sales; cash receipts are payments for the invoices raised.
The two are not the same things at all. One's a P&L item, the other's a Balance Sheet item.

2020 y/e cash s/b $140m.
Typo. Apologies.

JF recently reported that:-
‘Average gross production for the year is expected to be at, or slightly above, 36000 bopd, the top end of the guidance range.’
Armed with that insight, and actual monthly Brent crude prices for July-December 2020, the year end figures look something like this:-

$m
Revenues - 110
COS - 120
Impairments – (13)
Sub Total – (23)
G&A – (10)
Operating Profit/Loss – (33)
Finance - (10)
Other – (1)
Profit/Loss – (44)
Assumptions:-
1) 36k bopd throughout second half;
2) Net Realisable price at $22.5bbl
3) No further IRFS9 impairments for $73m unpaid debt.

The Balance sheet reflects this:-
1) 2020 Net Assets - $430m (2019 FY $520m)
2) 2020 Y/E Cash - $160m (2019 FY $191m) but (2019 HY - $302m)
3) 2020 Net Capex - $45m (2019 - $80m)

Net Assets are down by $90m or nearly 20% in the year.
And between July 2019 and December 2020 Cash Balances have nearly halved.
Major Reasons:-
a) $49.1m dividend/special dividend payments paid out of cash balances;
b) $50m in share buybacks paid out of cash balances;
c) $13m impairment effect of IFRS 9.
Note : The new IFRS 9 rules introduce the concept of ECL (expected credit losses). This means that GKP will have to regularly review its exposure to the debt owed by the KRG and impair the accounts according to its findings. One of the criteria used is the age of the debt. So unless a solution is found, GKP will be required to continue assessing its impairment provisions and increase them accordingly until the whole debt is recognised as written off.
Of course, if the position with the KRG is satisfactorily resolved, and the debt repaid, then those impairments will be reversed.

For the reasons stated above, now is not the time to be paying out dividends imo.

However, there is an argument for further buybacks, cash flows permitting. Only this time the message to the market must be clear and unambiguous.
The Board should be buying back to cancel (and not to Treasury) as a tangible demonstration of belief in the underlying Corporate strategy. And a statement of intent that the shares are massively undervalued given the position of the business and its ambitious self funding plans now under way and laid out for the next few years.
Ironically, one of the reasons for the sp rally is that there are fewer shares available to buy now the unwanted treasury shares have finally been cancelled. The share base is now 9% smaller than before the buyback commenced. That should have been the original share buyback rationale, and cancellation should have been the mantra apart from any outstanding employee share option commitments. I argued this at the time. It was a lost opportunity imo.

But any further buybacks should only be initiated if GKP can afford to do it AND maintain their other cash/capex commitments.

IMO/DYOR.

And new shareholder interest!

Hey Jens, Merry Xmas and a HNY.
How many regular contributors do you think there are to this bb?
Sometime in 2019 I had reason to estimate for posting and voting purposes, and I reckoned on ca. 30-35 at that time.
Got a view?

I’ve been off the site for a few days and I came back to this interesting take on historical events provided so sanctimoniously by our good friend PUTUP:-
‘Shareholders prior to the restructuring are lucky to have anything at all. You were tossed a bone and likely one you you didn’t deserve. You took the risks. And lost. Now new LTH have to listen to the bleaters’ pipe dreams of recovering their old money. It gets old fast. Likely it would have been better to have cleaned the decks completely. ‘
If anyone else is appalled at this patronising, gloating series of insults to true LTHs then let’s show him by recommending this post.
Happy New Year PUTUP, you sorry sad excuse for a human.

Hey Darientaylor,
An attempt at sarcasm that missed the mark then.
No way this Company goes bust under any set of sensible trading assumptions, even with this Board in place!

'There was no cash loss, just a return of capital (just like a special dividend).'

Ha! Excellent!
So can we have a few more share buyback returns of capital like the last one?
You know, the one that drained the bank account by $49.1m with no upside.
Another five or six like that and we'll be bust.

By the way, I'm a keen advocate of share buybacks in principle. The only issues I ever have are concerning timing and rationale. But I prefer cancellation when a share is so patently undervalued. Unlike the Board who clearly have very different reasons for their actions.

Oh Dear PUTUP.
That loss wasn't just an 'accounting entry'.
It was a pure cash loss resulting from the Board's complete mismanagement of the Company's assets; in this case those precious cash balances.
Swapping cash for shares is one thing; pouring cash down the drain by cancelling 19m unwanted shares is something entirely different.
Why did they buy so many more than were required in the first place? That requires explanation. But neither Huijskes nor Ferrier have seen fit to explain themselves. And their silence is pretty damning.
This goes to basic Board competence, because the beneficial management of the Company's assets in favour of the shareholders SHOULD BE their primary concern.
It's a simple principle of corporate governance...look it up.

But any questions over Board motive will always reflect in the confidence and value investors place on the Company.

For anyone who’s even considering listening to PUTUP’s kindergarten analysis of share buybacks, consider this.
He insists the decision to run with the buyback, as it was proposed, was a decision for each and every shareholder.
And that is an undeniable truth.
But it is also simplistic drivel.
When those shares were bought back into Treasury they could/should/were recognised in the Balance Sheet as assets, valued at current or net realisable value, whichever was the lower.
BUT when the decision was taken to cancel them they suddenly had no value whatsoever. As a consequence they could/should/were removed from the Company’s asset register resulting in a LOSS of ca. $49.1m (without any formal RNS confirming the timing of the cancellation btw!).
That was a shareholder loss too. And which shareholder, large or small would have willingly voted for a 10-20% reduction in net assets within 18 months had they been aware of all the facts back in 2018!
The shareholder revolt was massive, resulting in JF’s ‘retirement’ and the reappointment of Soden to protect his employee’s significant interests.
I would suggest there is no shareholder confidence in the Board as currently constituted, and if I’m right, there will be no restoration of market confidence either.
Not until Huijskes goes and another Chair is appointed. No wonder JF’s replacement is long coming…..Huijskes knows he’s next.
Put another way the Company is now worth nearly $50m less than it was before the buyback was initiated.
So what really happened? I don’t know, but try this.
Does anyone really think any of this was done for the benefit of the shareholders? The Instie’s would not have voted for such a stupid play if they had known what was really going on.
What was really going on was that the VCP had been an unmitigated disaster. It was closed in early 2018. And the accumulation of those surplus 19m shares into Treasury was simply a prelude for extracting more employee benefit from a Company caught in the embrace of the KRG.
Is it a plausible defence that too many (19m too many) shares were bought back by mistake?
Of course not.
If not for Covid, more and more option shares would have been created for distribution to the management cabal and others, probably under a revisited ‘key holder’ bonus scheme or such.
When SZ discovered in Spring 2018 what was really behind the buyback he resigned imo. Even though he would most likely have been a key beneficiary. Note; he was on his way just 12 days after Jaap Huijske’s open shareholder letter requesting buyback approvals.
That just leaves the bottom fish like PUTUP.
Ignoring his patronising and dismissive tones, his posts lack any understanding of the underlying issues that make this share such a frustrating conundrum of competing ambitions.
He won’t, but he should take some time to delve into the post reconstruction history of the Company for a more rounded analysis and a better informed assessment of the Company’s future