Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
For me, the current share price is an irrelevance.
As a long term investor I care less about the current share price, and more about the long term trajectory.
And that is the plan for self-funding growth to 85k bopd and more...
IF GKP can secure its payment future then that plan is something it can manage without outside finance or management as far as I can tell.
But it MUST secure that reliable cashflow if it is to achieve its strategic goals.
It's nothing to do with local sales to shore up the P&L, although all credit to the Board for doing that.
It's everything to do with a five year horizon and how that will work out for GKP if they can withstand the current headwinds.
My bet is they can. So much so that I am currently considering another significant investment.
Because GKP is so undervalued right now imo.
Nobody's celebrating Israeli's past difficulties, not at all. Nor the Palestinian problem as a consequence of historic 'solutions' to that problem.
Nothing to do with that.
But common humanity should prevail.
All okay to celebrate the murder of young Israeli woman by driving her dead naked body through the streets of Gaza then, shouting and screaming victory?
All good? I think not.
No idea I was fanning the flames of fanaticism by pointing out the blindingly obvious...don't kill innocent peace loving Jews in a massacre.
And then put their dead nude young bodies on display as if they were less than human.
Stupid politics.
Will end in tears, Palestinian tears even though most of them only want to get on with their lives.
Pathetic.
Roger,
I've been in the chaos that is this share history for five years. Previously it was carnage been engaged!! Ask the real LTHs.
In the end it depends on whether you believe in the strategy I guess... and I do.
But I could be wrong.
Rog,
Stick to the fundamentals and believe in the essential truth of the basic commercial proposition, or quit on it.
Either way, the oil will flow. Geopolitics or not...
Nightmare share with such massive potential; that's the dilemma.
Good luck.
SC
GKP Fundamentals for the uninitiated:-
1) Under current PSC terms capable of generating massive FCF if paid on a reliable basis using the export oil pipeline;
2) Free-flowing dividends as a consequence, even @ $200m+ CAPEX a year;
3) No debt (crucially);
4) Self-funding growth plan to 85k bopd and beyond;
5) Committed Board to the point that they have deferred their earnings by 20 % as a gesture of that commitment (critical to GKP future from a shareholder perspective imo);
6) Board ability to find a way through and maintain the Company's financial integrity by redeveloping their routes to market and maintain their cash-flow model, albeit in a different form;
7) 55.3k bopd recorded prior to pipe closure with further massive planned investments to follow.
All GKP needs is to secure its payment future.
It will do the rest, with or without the $151m delinquent repayment ( which it must retrieve as a matter of urgency).
This is not complicated. It either can it or it can it not pursue its goals which are clear and unambiguous.
Invest/divest accordingly. Trade or commit to the GKP proposition.
Everyone knows where I sit on that spectrum.
ST,
Have you modelled financial potential to 85k at a range of oil prices and the profits/cash generated?
If so then you will see how little $151m matters in the grand scheme of things.
Don't misunderstand me; we are owed that money and we must be paid.
But in the context of a macro settlement approach CRITICALLY concerning a reliable and credible payment structure, GKP may have to sacrifice immediate repayment of delinquent debt. It might be phased, it might even have to be written off in part or in whole.
But don't forget, its full or partial repayment is reliant on re-starting production.
And that can't happen unless the IOCs can be sure that they are going to be re-imbursed according to the PSCs.
In isolation GKP's position is clear and unambiguous. It's debt free, it's shored up its finances and can stand its ground until the Board and us shareholders are confident about the payment landscape going forward.
My concern is that despite the hardball APIKUR rhetoric, what you've got are five Members in toto, each with their own commercial models. And none of the other Members have the cushion of a debt free Balance Sheet.
So when push comes to shove, are they going to stand shoulder to shoulder when they know that exporting the oil through the pipeline is their only inevitable future anyway?
The danger is that cracks will appear in APIKUR's negotiating position as the heat intensifies (and it will) for the IOC's to re-commence pumping for export.
For me, GKP should hold strong, because at any sensible oil price (of whatever denomination) and if they can get a new arrangement which regularises cashflow, then GKP can pursue its self-funding plan for growth to 85k bopd and beyond.
But without that, GKP is just another tradeable share that has no real development potential without massive external finance.
And who would invest if payments were not reliable?
While I care deeply about the delinquent $151m, it is nowhere near as important as re-setting future payments in a dependable form. Any future performance analysis suggests that $151m is very small beer in the context of 85k bopd supported by reliable payments.
That's not to say GKP shouldn't pursue that debt with vigour...they should. And must.
APIKUR should hold strong, but inevitably there will be compromises...I just hope JH is able to protect GKP's interests in the coming negotiations.
And I'm not sure that's possible. Compromise will be required. Between APIKUR and the other negotiating parties and then between the APIKUR Members.
But in the end, the oil will flow.
Matthew Zais (V.P. of GKN) in his half hour interview with Rudaw:-
The World is watching Iraq right now. Is Iraq an investable destination?'
He goes on to push his hardline agenda that PSCs need to be honoured whether it's via the KRG or the ICG. Otherwise the pipeline will remain dry...no oil will be pumped into it.
The Members of APIKUR are GKP, Genel, DNO, HKN and ShaMaran.
GKP are debt free.
However, their partners are all dragging debt to a greater or lesser extent. There is nothing wrong with debt funding for development. But right now that puts pressure on their finances because their cashflow is being choked. And therefore that will inevitably prove a factor in their ability to resist the pressure to start pumping export oil again.
If you take a look at the H/Y results for all APIKUR Members, cashflow has suffered massively. Like GKP they are all trying to mitigate that issue, with varying degrees of success.
But unlike GKP, the other Members' Balance Sheets are, to one extent or another, debt dependent.
So my questions are:-
1) Can APIKUR remain unified in their insistence that agreements need to be honoured in all respects; back payments, and regularised ongoing payments; and
2) At what point they can all agree that those terms of re-engagement are satisfied?
Inevitably the pressure on all other sides in this negotiation will be for AKIPUR to yield...and maybe their shareholders too!!
So like a league system then; Premiership; Championship et al.
With different terms according to commercial relevance/importance/potential performance.
Because in your example, A B C and D would be Premiership IOCs, E and F would be second tier and the rest would hope to aspire to better terms depending on what they achieved on/in the field of play (to stretch an analogy).
Divide and rule then.
Well I suspect that once the chips are down, the IOCs with most potential will cut loose and look after themselves first, last and only...not what APIKUR formed for, but it's a cruel world and it'll end up being a self preservation society imo.
In the end every APIKUR member has a responsibility to their individual shareholders.
So each Board will have to evaluate what that means in the context of that perspective.
And those considerations will be different for each Company.
In my experience, self-interest usually prevails.
There'll be a form of words. A joint statement of renewed commitment to the cause.
But 'Gun Boat Diplomacy' demands that this will be settled on ICG terms...because we have no power apart from our ability to perform in our best interests, i.e. the best interests of our shareholders.
And as a significant shareholder I don't mind saying, I want the export oil to flow...
For me, APIKUR are now centre-stage.
On at least three counts:-
1) Will that dissociated Group of IOC's with different P&L/Balance Sheet dynamics have the balls to present a common face and stand firm for new arrangements securing reliable on-going payments? Maybe;
2) Will they re-start production on the back of those new arrangements, given that their receipts are dependent on that production? Maybe;
3) Or will they capitulate/collapse under the weight of that short term pressure to re-start production and just ignore the past commercial abuse?
Who'd want to be JH right now? Sure as sh*t not me.
As an aside, when those shares matured in April this year the sp was 136p.
But our esteemed CFO waited until 27/9 and then sold his nil-cost options @ 101p.
And you wonder why the major shareholders are questioning his judgment...
So IW joined the Board on13/1/2020.
On 28/4/2020 he was awarded 733871 NIL -COST OPTIONS valued @ 74p. These matured and were available to trade three years later on 28/4/2023.
Irritating...particularly as there are serious shareholder concerns as to his competence.