Member Info for Straycat

tom,
If they sold by Private Treaty and because it's under 5%, we'll not find out who bought them, nor what was paid.
But Capital had held those shares ever since the Restructuring in 2016.
And the buyer wouldn't be able to get his hands on a quantity like that quickly without whipping up a storm around the market price, cos there's no volume stock to trade at current prices.
So I bet they weren't cheap.

C0ckeye,
Anyone who buys into this share without some recognition of the geopolitical dynamics is a fool.
It’s a high risk share and it takes real balls to put your money in it even if you think you know what you’re doing.

It seems to me there are two distinct types holding GKP; pre and post restructure investors.

Those LTH who were damaged by the recapitalisation have suffered real financial pain and feel they are left with no choice but to stick with their paper losses until either:-
1) The planned production uplifts develop the sp past their break even over time; or
2) GKP is sold at a price reflecting its real value.

Those who have invested since the recapitalisation recognise the risks but also the potential rewards of a successful GKP campaign, whether that comes from organic growth or sale.

But carrying a self declared break even sp @£6 you are obviously a damaged LTH still suffering from the effects of that well documented slomo GKP car crash a few years ago.

I feel for you. I really do. And you’re not on your own.

But I can’t help feeling that some of you simply can’t let go of the past. It’s almost as if you enjoy spilling your bile onto the boards, stifling any opposing view of the Company’s prospects.
Any challenge to your bitter understanding of a company consumed by broken promises, lies, deceit and corruption.

And that’s a pity for us all.

It may be time for you to face your own future by taking back control of your destiny, as you have so rightly suggested others do.

This from GKP on 12/12/2019:-

‘Gulf Keystone has been informed by the Kurdistan Regional Government’s Ministry of Mineral Resources that payments relating to invoices for August and September oil production, due in November and December, will be received in January 2020.’

On that day the sp dipped 4.5% to £1.97, but 4 trading days later it had fully recovered.

So, even given GKP’s problematic payment history, the news that every LTH dreaded reading was dismissed by the main body of GKP investors in a heartbeat.

Such was the Board’s concern that even though it must have known about this turn of events on 10/12/2019, nevertheless it launched a “Further Buyback Programme” utilising $25m of cash resources and has bought back every trading day since, amounting to some 2.1m shares bought back at a cost of £4.3m since inception.
At the current run rate GKP will have satisfied its goal of making sure it has enough shares in treasury in preparation for all vesting purposes by Wednesday 8/12/2020.
Even though:-
(a) Most of these shares aren’t yet required;
(b) Only a fraction of those shares that have vested have been exercised so far, despite the consequent loss of future shareholder dividends to Treasury;
(c) A cash squeeze has been identified.

Simple question:-
Assuming there’s no suicide pact in play, what the hell are they thinking of? Why are they doing this?

Surely, armed with the MNR warning about late payment without any firm date as to when in January we are going to be paid, the prudent thing to do would be to delay the buyback launch or at least pause the buyback schedule pending normal resumption of payments?
No explanations have been given. No action plan has been devised.
It’s almost as if nothing must get in the way of buyback…..why?

I bought into Tlw today.
I'm not a trader and I'm definitely not an oil man either.
But imo you're really missing the point if you can't see that with net assets of c.a. £2.9bn producing an ongoing 70k-80k bopd and a market capitalisation of £0.8bn this company is now seriously undervalued.
Cheer up Mrd5432, tomorrow's another day.

If GKP had any concerns about payment they could/would cease the buy back immediately.

Particularly since those treasury shares don't vest 'til 2021 and beyond.

Bigger question is why they're buying them back now at all.

They can't even get the awarded and vested shares out of treasury as it is!!! (see previous post Tues..)

According to 2016 Full Year Results announcement, under the terms of the 2016 Staff Retention Plan (SRP) the Board awarded 1,401,500 option shares to employees on 12/12/2016.
Those SRP terms were laid out in a Circular issued on 16/11/2016 and approved at the 8/12/2016 AGM. As a consequence these initial options were awarded ‘at a zero exercise price’. The exercise of the awarded options was ‘not subject to any performance conditions’ and could ‘be exercised at any time after the three year vesting period but within ten years after the date of the grant.’
But only 82,000 of the original 2016 SRP options had been claimed by exercise notices as at 31/12/2019.
Why hasn’t there been a deluge of exercise notices flooding in at the earliest possible moment following the end of that three year vesting period?
Because by leaving them in Treasury those staff to whom awards had been made on 12/12/2016 are denying themselves:-
(a) Any future dividend which attaches to those shares;
(b) The opportunity cost of not cashing the shares in.
Assuming they’re not stupid, those staff members who choose to leave their shares in GKP Treasury have done so for a reason.
What is it?
What could possibly persuade rational minded managers to leave their hard earned zero priced shares in the hands of GKP so that GKP might benefit from any future dividend payments at their expense?
Who are these people and how many options have they been awarded?
Those specified in the December 13th 2016 SRP RNS are:-

Nazeya Kemoha (Financial Controller) 175k
Gabriel Papineau-Legris (Commercial Director) 175k
Marie Ross (Legal Director and Company Secretary) 100k
John Stafford (VP Operations) 175k.

Of these four named senior managers we know that John Stafford has left. And Gabriel Papineau-Legris was still with GKP in May 2019 because he was caught on camera presenting GKP’s investment case in Hong Kong (thanks to tom_the_bomb). As for the other two, I have no information. Nor do I know the names of any other awardees.

What I DO know is that there would have to be a pretty powerful reason for me to choose to leave my vested options in GKP Treasury if I were in their position.

They obviously know something we don’t know and/or just don’t care.

Happy and PROSPEROUS New Year everyone!!

2019 was my first full year on lse and it’s been quite a revelation.
I’ve learned a great deal from many other regular contributors that I wouldn’t have otherwise known, and for that I thank you all.
As a consequence I’ve been thinking, and maybe I’ll start my own family BB with its own bunch of anonymous avatars. I’d probably learn a lot there too.
I’d be ‘****forbrains’…..
No, that wouldn’t work. Mrs Straycat (or pussy as I like to call her behind her back) already uses that name for me all the time.
Hmm…the things I’d say to my wife if she didn’t know who I was……
Oh well, have a great break, and I’ve no doubt we’ll all be back ‘on it’ again next year.
Merry Christmas and a Happy New Year.

No corrective posts to show me the error of my ways?
Okay then, so on that basis, I’ll press on.
The argument goes that the more shares GKP buy back and hold in treasury as opposed to cancelling them, the less any potential acquirer pays for GKP.
No one has explained why GKP are so intent on buying back so many shares and then letting them rot in treasury, without serving any useful purpose. Including me.
What if GKP are buying back their own shares into treasury so as to make GKP a more attractive sale proposition as part of a planned sale process?
It wouldn’t matter to us. We’d still get full value.

Have we been misdirected?

As we know, when Jaap Huijskes asked for authority to begin buying back GKP shares in May this year, his pivotal rationale was to ‘satisfy the vesting of staff share option plans’.
However, that rationale never made it to the final cut in the explanations provided by the Board per the relevant RNSs.
AS A MATTER OF FACT, according to the relevant RNS releases, the reason for buyback has nothing to do with satisfying staff option share plans at all.

The identical wording used in each of the two $25m buyback announcements is that-
‘The Buyback Programme is aligned with the Company’s 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 current investment programme.’
As far as explanations go, that’s it. Nothing to do with satisfying staff share option plans anywhere.
So the use of the word ‘accretive’ becomes critical because it is fundamental to the DECLARED buyback rationale.
And it turns out that the purchase of GKP shares is specifically to encourage an increase in the share price ACCORDING TO THOSE RNSs.
This means that the buyback purpose transitioned from satisfying ‘the vesting of staff share option plans’ (as it was originally described by Jaap Huijskes in his letter of 23/5/2019) to acquiring GKP shares at a discount to their perceived market value (as it appears in the final RNS announcements).
If not, GKP would have reinforced the Chairman’s rationale when the RNSs went live, rather than giving a different reason.
So if the Board thinks the Company is undervalued, why is it buying its shares back and then holding them in treasury?
Because that isn’t working is it? Look at the sp movement since the buybacks began.
Surely it should be cancelling them to truly test the market valuation of the Company? It has the general authority granted under Special Resolution 13(b).
Why the buying activity now, and why so many? And why not for cancellation but for treasury?

STUPID QUESTION.

If I pay £220m for GKP and there are no treasury shares then I pay £1 per share to every Common shareholder and it ends up costing me £220m.
If I pay £220m for GKP and there are 110m treasury shares I pay every Common shareholder £1 and it ends up costing me £110m.
Because even if I pay GKP for their treasury shares, I own the £110m I paid post acquisition.

IS THE ABOVE CORRECT?

At the end of play last night there were 9.3m shares in treasury.
Under the new buyback initiative GKP are authorised to buyback a further 10m-11m shares (depending on sp movements).
So at the end of this buying spree we’ll have c.a.20m shares out of market circulation and specified (under RNS) to remain in treasury.
Yet I as I recall, the last time the total number of shares required to ‘satisfy the vesting of share option plans’ was calculated, the finite number of shares needed to close out the various schemes was about 11.6m.
This leaves a surplus c.a. 8m shares unaccounted for, out of circulation and remaining in limbo by the end of this buyback phase.
If the buyback ambition was ‘accretive’ as RNS stated then these shares should be cancelled. In fact by using the word ‘accretive in the two buyback announcement RNSs GKP are admitting that the sp is undervalued.
And yet they are specified to remain in treasury. Awaiting what?
I reckon they are earmarked for a different purpose. So where are they going? There’s obviously a plan for them.
What is it?
.

IMO. DYOR.

d0dger,
You make reference to Sami losing 50% of his options if he leaves before his options vest, and I’ve seen this view expressed elsewhere, but I’m not so sure.
The departure RNS declared that-
‘With respect to Mr Zouari’s current outstanding options held under the 2016 Value Creation Plan (VCP), these will be retained by Mr Zouari and will vest according to the rules and normal operation of the VCP, subject to performance conditions being attained.’

One interpretation of this statement is that Sami ‘retains’ of all his 3.2m options and they will vest as if he were still employed, irrespective of the general VCP rules regarding this.
In that case he loses nothing…..

Nickel,

JF was recognised under the VCP, a legally constructed corporate maze.
Look it up (Value Creation Plan) on the GKP website, but it can be summarised as follows.
The VCP was established in 2016 as a reward scheme for performance and loyalty, which is ironic because Jon’s never performed and Sami abandoned ship just as the Capex spend began!
Under its terms Executive Directors and other ‘key drivers’ could be awarded nil cost option shares if certain badly defined perameters were ‘hurdled’.
Performance was centred around the market capitalisation of the Company over time (5 years).
There were only ever two recipients, and from memory JF and SZ were awarded 3.8m options and 3.2m options respectively. The strike price for the options, (which were issued in two tranches) were £1.19 and £2.63.
The VCP is now defunct and at some point both Jon and Sami will be handsomely rewarded.
Whether it’s now or later, they’re both going to become VERY wealthy for doing VERY little operationally.

Bugsy,

Peel Hunt are forecasting revenues jumping from $340min 2020 to $507m in 2021.
Similarly profits are forecast to move from $109m to $218m over the same period.

If any of that's possible at all (which I doubt) it depends on GKP functioning at 75k bopd from January 1st 2021 imo.
That stretches GKP's own production perameters which suggest the move to 75k bopd will take at least two years or even longer.
And that was before the recently announced production set backs in the field.

So it looks highly unlikely that GKP will be ready to go at 75k bopd by 1/1/2021 imo.

As a consequence, how much credence you place in Peel Hunt's assessments of GKP performance must be questioned.
Including their sp valuation.

Surrey,
I have done (ad nauseum) and I can't see any reference to that $500m anywhere in the main body of the accounts.
You'll have to be absolutely specific about what it is you're referring to before I can comment. Show me where.
However, the point is entirely academic.
If they're in GKP's numbers, then by definition they're in mine.
If they're not in GKP's numbers they're not in mine, again by definition.
Because the analysis itself is defined exclusively by what GKP choose to include or exclude in their figures.

ss,

Yes I know surrey, and I feel sure there's value there.

But my reference point for analysis are the audited company accounts.

So unless and until GKP recognise them as assets for reporting purposes I mustn't include them either.

Largo,

I may be wrong, but I don't believe that $500m is recognised by GKP anywhere in their audited accounts.
I certainly couldn't find it in the notes to the accounts or anywhere else.

We now have an Operational Update that enables more detailed analysis of what the next twelve months might look like.
On the basis of the November end cash balance, and the updated production levels I’ve taken a look at the projections for 2020 based on 42k bopd and 50k bopd respectively.

And, in summary, it looks like this.

If all we achieve is MAINTAIN current production levels:-

2020 @ average 42k bopd:-
Revenues $260m - $280m;
Profits $70m - $80m;
(before dividend payments)
Receipts - $240m - $260m.
Capex - $180m - 220m.

If we INCREASE production levels as per revised operational update:-

2020 @ average 50k bopd:-

Revenues $310m - $330m;
Profits $90m - $100m;
(before dividend payments)
Receipts - $290m - $310m.
Capex - $180m - $220m.

Key Assumptions:-
Terms of Crude Oil Sales Agreement to December 2020;
POO @ 2019 average levels.

I could finesse these figures to infinity, but there’s no need and there’s no point.
On any set of sensible assumptions we are going to be collecting significantly more cash than we need to finance our ambitious capital spend for the year.

Look at our worst case cash flows using the above P&L perameters:-

1) At 42k bopd;
January 2020 Opening cash $250m - £206m( Nov 30th declaration) + $44m (late Nov and due Dec receipts on time);
2020 Receipts $240m - $260m;
Capex spend $180m - $220m;
General & Admin spend $20m
Worst case closing cash $250m - $270m.
(before any dividend payments).
2) At 50k bopd;
2020 Opening cash $250m - £206m( Nov 30th declaration) + $44m (late Nov and due Dec receipts on time);
2020 Receipts $290m - $310m;
Capex spend $180m - $220m;
General & Admin spend $20m
Worst case closing cash $300m - $320m.
(before any dividend payments).

Summary.

Even at average 42k bopd for the year, we close 2020 with $250m - $270m in the bank i.e. same cash balances as we start the year with AND we’ve spent $220m on Field development towards 75k bopd. This is before any dividend distribution.
At average 50k bopd for the year, we close 2020 with $300m -$320m in the bank, $50m - $70m MORE than we start the year with AND we’ve spent $220m on Field development towards 75k bopd. This is before any dividend distribution.

Of course the Board have seen this so they needed a plan to manage the excess cash.
And they’ve chosen buyback.
(Interestingly, they have decided to place those repurchased shares in Treasury, not for cancellation – why?).

That decision is up for debate. For example, the Board might have looked at trying to pay off our $100m loan facility which carries a hefty 10% coupon.
Or they might have looked at accelerating the Field expansion.
Maybe these options are still/have been under consideration.
But certainly if the Field development programme proceeds on plan there will need to be a more strategic approach to cash management over the next few years, such are the anticipated net inflows.


ALL IMO. DYOR.

FH1,

No because there's $180m - $220m spend on 2020 capex to factor in.....I'll show you tomorrow (tonight if I get time).

FH1,

@ 42k bopd 2020 year end cash @ $240m - $260m.

Moves to $290m - $310m @ average 50k bopd.

Just checking the rest before publishing tomorrow.

IMO.