Member Info for Straycat

IF the maximum number of shares required to ‘satisfy staff share option plans’ is 11.6m, then surely that’s been done?

At close of play last night there were 11,517,350 common shares held in treasury. Add to that the 582,000 vested shares that have recently been released to employees exercising their option share rights and the total buy back of common shares to treasury since inception on 8/7/2019 is 12,099,350.
And yet the programme goes on, every day, buying back into treasury when:-
1) My calculations suggest GKP have now covered their exposure to all staff share option awards granted;
2) Anyway most of those shares won’t be required for year(s) to come;
3) We’ve been warned of payment delays in January and the MNR are still delinquent on October payments (November payments haven’t yet been mentioned).
4) The Board are acting direct contravention of Jaap Huijskes’ statement in his Chairman’s letter of 23/5/2019 that GKP would cancel any surplus treasury shares.
Furthermore they’re not buying back for cancellation despite announcing in their Further Buyback Programme of 10/12/2019 that the ambition was:-
‘to focus on capital allocation and will be an accretive use of funds whilst not impacting the Company’s ability to continue the execution of its existing investment programme.’
Well somebody had better tell JF that buying back to treasury isn’t working. In fact buying back for treasury has not worked as ‘an accretive use of funds’ at all.
Witness the stubborn resistance to change that’s shown in the share price since 8/7/2019, the initial commencement date.
The way to concentrate value in the sp was/is to buy back for cancellation.
Okay, so let’s say that they really needed to buy back all those shares to cover staff options. Well they’ve done that now so why are they still pouring hundreds of thousands of shares into treasury every day where they do nothing for the sp at all?
Why aren’t they now buying back for cancellation?
Special Resolution 13 was specifically designed for this purpose and provides for both cancellation and treasury options.

One option is that maybe they’re preparing to launch another staff incentive scheme, rewarding valour and achievement in equal measure. Just like the SRP which had a three year vesting period with zero priced options and required no performance AT ALL, just the ability to turn up regularly for work every day.
After all, they must have some purpose for this share acquisition policy, otherwise what are they doing? Because we’ve already seen what happens to the sp when you take the shares off the market without cancelling them…..nothing.

Incidentally, I wonder what everhopeful’s view of another unconditional staff share option programme would be?


IMO. DYOR.

I reckon that 'vesting of all staff share options' = staff option shares ever granted.
My figures suggest that this = 11.6m.
Anyone got a different, justifiable figure?

On 28/10/2019 Cairn updated with:-

‘The Arbitral Tribunal has indicated that it expects to be in a position to issue the Award in the summer of 2020, but has clarified that to avoid any misunderstanding, the Tribunal did not intend firmly to commit to a specific Award-release date, nor is it yet in a position to do so.’

Proceedings commenced in 2015 and final merits arguments were concluded during 2018. Simon Thomson seems very confident of the outcome and it’s worth $1.4bn.
That doubles Cairn’s net worth at a stroke.

As a potential Newbie, and before I jump in before the Ops update on 21/1/2020, I am I missing something about that arbitration outcome?

Any feedback greatly appreciated.

She was awarded those options on 12/12/2016 under the newly initiated SRP.
175k in total.
The fact that she’s only redeeming 90k suggests that, as Head of Finance, she has confidence in GKP.

attyg,

I have tried and failed to open that link but I agree, if there is a 15% tax charge on non-residents that might go some way to explaining their behaviour.
Incidentally after I posted, and right on cue, today's buyback announcement included a reference to the release of a further 410,000 shares from treasury to satisfy vested options.

Willy,
In the MoU of 26/11/2019:-
‘estimated that there is a substantial Oil Initially In Place volume of approximately 675MMboe.’
Last substantive paragraph in the RNS.

In the circumstances I think that is an excellent full year performance, with 2019 production up 25% on 2018 despite a collapse in Q4 2019 production levels from VAS-10 which was 14% down on the prior year.
MEX-119 was spudded in Feb 2019 and by 8/10/2019:-
‘the well is producing at a stabilised flow rate of approximately 5.0 MMscf/d of gas and 193 bbl/d of condensate (1,070 boepd in aggregate)’.
Run these performance figures through the whole of Q4 to year end and MEX-119 production represented 26% of total Q4 MEX-GOL & SV production.
Put another way, it suggests that in the full year 2020, MEX-GOL & SV 2020 production will up 24% on 2019 full year figures.
And that assumes no further development work on SV-54, no more drilling in the SV field and no recovery of the disappointing current production rates at VAS-10. However, it’s worth noting that in his full year operational summary, Sergii Glasunov stated that:-
‘We look forward to further progressing the development of our fields in the coming year.’
Add to this a successful integration of PJSC Science/Ukrnaftinvest at forecast production levels (with OIP @ 675 MMboe) and imo you have a business transformed out of all recognition from the one we are currently invested in.

Yes it’s a very bullish outlook, but in the end I reckon 2020 could be a very interesting year for RPT.

On 16th Dec 2016 the Board awarded 1.4m options to employees under the newly created Staff Retention Plan (SRP). These shares were unusual in two respects:-
1) They were awarded at zero price….they cost the employee nothing when they vested;
2) They were awarded without any performance conditions attached except for the requirement that the employee remained in employment during the vesting period, which was three years.
These options all vested on 12/12/2019.
Yet only 72,000 have been taken up in the last month. (There are another 90,000 which have vested and have been claimed from treasury, but it is unclear from the RNS of 7/1/2020 whether they are part of that initial SRP award or not).
Either way the balance of the SRP vested options remain in treasury, idle. The employees who are entitled to redeem them have chosen not to. Even though in electing to leave them in treasury they are depriving themselves of future dividends as these become due.

Can anyone offer any explanation as to why those employees are resisting the temptation to redeem their shares?

The fact that the markets price GKP at little more than its balance sheet net asset value has been the cause of constant irritation on this bb.

The ability of Shaikan to deliver sustainable production increases has never been seriously questioned as far as I know.
The cash build has been there for all to see for the last eighteen months to two years.
It feels like the plans to grow organically have been around forever, but this whole issue was brought into sharp focus at the Capital Markets Day on 28/3/2019 with an anticipated $1.2bn - $1.4bn specified spend over the next seven to eight years. All self funded.
And the work has now begun in earnest during 2019, with an anticipated capex spend of $180m - $200m in the year.
Moreover, though details are patchy, the break through to 40k bpod and beyond seems to have been achieved.

So why are the markets so begrudging in their praise?

I’m left to conclude that it has much to do with the region and the geopolitical risks inherent in operating out there. This coupled with GKP’s questionable recent financial history mean that the professional investment community are waiting for clear evidence of performance, nor just prevarications and future plans set out in a powerpoint presentation.

This means that the next operational update and the provisional production outcomes for 2019 will be highly significant in forming opinion as to where the sp goes from here.

The production target of 55k bopd is now a pivotal performance benchmark imo. Not least because it is the first real and tangible signpost on the way to 75k bopd and beyond.

If, instead of merely promising increased production, we can deliver actual sustainable performance uplifts at 40k+ bopd moving us materially closer to 55k bopd, with no more significant delays, then I reckon GKP will be subject to a major re rate.

Last year GKP gave guidance on output for 2018 along with their outlook for 2019 in an RNS dated 16/1/2019.
Using the same time frames as before then the operational update for 2019 is imminent.

Not long to wait for a glimpse into the future.

Let's hope the Board understand this as well.

‘It’s absolute nonsense to say that Oil Companies are sold according to their Asset Value – in a perfect world that would be the case, but we are certainly not in such a world, or area, or time. ’

BB,

You’re conflating two different issues:-
1) What a business is IN FACT worth – In GKP’’s case this is a function of its balance sheet value both now and in the future (via the CPR). Typically the only real disagreements here are when it comes to valuing intangibles like the brand name, or the weight to be placed behind a CPR for example;
2) And what someone wants to pay for those assets – this is a function of the competing claims of the buyer and seller as to what they each THINK the assets are worth TO THEM. How much they want to pay. Their thoughts on this will be driven by their own judgments on all sorts of considerations, from geographic location right through to availability of finance.
They will not necessarily correlate with the actual established asset values which are more easily assessed.

But they will ALWAYS use the balance sheet as the start point for ANY negotiation.

The payment terms being practised appear to be determined as end of three months following date of invoice.
Accordingly, the 12 month payment pattern looks like this:-
Jan 21 2019 October 2018 invoices – due
Feb 2019 No payment received – 1 day overdue
Mar 1 2019 November 2108 invoices – 1 day overdue
Mar 19 2019 December 2108 invoices – due
Apr 26 2019 Jan 2019 invoices - due
May 2019 No payment received - overdue
June 12 Feb 2019 invoices – 12 days overdue
June 28 Mar 2019 invoices - due
July No payment received – 6 days overdue
Aug 6 April 2019 invoices – 6 days overdue
Aug 28 May invoices - due
Sept 19 June invoices - due
Oct 16 July invoices - due
Nov 2019 No payment received
Dec 2019 No payment received

Apart from the most recent missed payments, throughout 2019 there were only two other material payment delays. Those were for February and April invoices. In both cases a double payment was made in the months of June and August by way of ‘catch up’.
In light of this experience it is likely that September invoices will be paid in January, and to sit within terms, October invoices should also be paid this month.

As dodger55 said, ‘…whether we do remains to be seen…’
/

Of course that's where our argument fails because it relies on payment terms being adhered to, and the MNR have only just finished showing us how little they care about that.

Proffit,

In the 12/12/2019 RNS, the MNR stipulated that both August AND September would be paid in January.
And dodger55 is right when he states that October's invoices should be paid in January as well, given recent payment experience.

The MNR have told us that we’ll get paid sometime in January (no clue when) for August and September invoices.
But October’s invoices also become due in January and if you take those three months together we’re looking at $70m-$75m owed this month.
Without that cash flow and a return to regular payments we risk jeopardising our 2020 capex spend which is likely to be c.a. $200m for the year. Equally, our plans to repeat the 2019 dividend payment structure totalling $50m will come under pressure as will Jaap’s desire to continue the next phase buyback of $25m, or at least the remaining $20m of it.

And on that note, why haven’t we paused the buyback programme pending receipt of those outstanding payments?
Why is it seemingly so important to get those common shares bought back into treasury right now, irrespective of the payment uncertainty?
We know what running low on cash looks like; surely we don’t want a rerun of 2014/15?

It’s nearly a month since the MNR dropped the bombshell and we’ve never been told why the payment schedule has been disrupted.

A bit of guidance from the Board right now wouldn’t go amiss.

BD,

'...a big shareholder will not mess up the next AGM with questions about the dividend paid to treasury shares or ask if the choice of the CFO creates a conflict of interest.'

Why would the appointment of the new CFO create a conflict of interest?

So Mikey,
Under the Bermuda bye laws if any Company has its shares listed on the AIM then:-
168.2 A shareholder shall, to the extent that he lawfully is able to do so, comply with the requirements of DTR 5.’

This is all relating to the disclosure of voting rights.

DTR 5.1.2. states that:-
‘a person must notify the issuer of the percentage of its voting rights he holds as shareholder, or holds or is deemed to hold through his direct or indirect holding of financial instruments falling within DTR 5.3 1R(1) (or a combination of such holdings) if the percentage of those voting rights:
(1) reaches, exceeds or falls below 3%, 4%, 5%, 6%, 7%, 8%, 9%, 10% and each 1% threshold thereafter up to 100%’

However, under 5.1.3 R:-
‘Voting rights attached to the following shares are to be disregarded for the purposes of determining whether a person has a notification obligation in accordance with the thresholds in DTR5.1.2.

(2)
(a) shares held:or
(b) shares underlying financial instruments within 5.3.1.R (1) to the extent that such financial instruments are held:
by a custodian (or nominee) in its custodian (or nominee) capacity….’

And when you add all that lot up, I think it provides an exemption to the acquirer such that he need not declare his voting rights IF the shares are held as custodian OR in a nominee account.
I think!

C0ckeye,

I forecast that Xmas sp at the same time as I convinced myself that Mrs SC wasn't the alley cat my mates said she was.....I got that one horribly wrong too!!!

Mikey,

Thanks for that link.
DTR 5 FCA rules would appear to apply BUT apparently not if the shares are:-

' held by a custodian (or nominee) in its custodian (or nominee) capacity (whether operating from an establishment in the UK or elsewhere)'.

So if I've understood it correctly, the acquirer evades the Bermudan bye law if they've behaved as above and don't have to declare.

Calm down C0ckeye, thought you might see the dark humour.

Too soon?

Thefuturetruth,

Have you met C0ckeye?

You have a lot to talk about!!