Member Info for Straycat

Theoryman,

‘Shares held in Treasury are not dividend attractive whilst they are held there – which in lieu of an RNS to the contrary must be the case as of now.’

The case as of now is that those treasury shares have IN FACT attracted a dividend because they were included in the calculation, as we know.
The RNS to which you refer would amount to a restatement of the calculation (and payment) excluding the treasury shares, and an apology for wrongly including them in the first place.
No such RNS has been forthcoming for the last two months since the announcement.
Nor will it in my contention.

Under Bermudan Company law there is a general principle that no dividend is payable on shares held in treasury.
This is stipulated under Section 42B(11) of the Bermuda Companies Act 1981 (as amended).
Therefore GKP, in principle, are acting unlawfully by assigning a dividend to their treasury shares.

HOWEVER, there is ONE EXCEPTION to this general principle and it is set out in Section 42B(12):-
‘(12) Nothing in this section shall prevent a company from:-
(a) Making an allotment of treasury shares as fully paid up bonus shares in respect of shares held by the company as treasury shares;’

Under this exception, GKP can create new fully paid up bonus shares using those shares held in treasury to do it.

In doing so those newly created shares are then quite properly included in the dividend calculation. Indeed GKP would have no choice but to include them in the dividend calculation to avoid acting unlawfully.

Hence no corrective RNS required.

Right now this is the only plausible explanation for GKP’s otherwise extraordinary behaviour as far as I can tell.

GKP advisors must have known about the law relating to dividends not being attributable to treasury shares.
And yet that dividend was attributed in the belief that it was entirely lawful.
Ergo there’s something about those treasury shares which makes them different to ordinary shares held in treasury.

IMO. DYOR.

Hi BD , and welcome back.

So when does a treasury share devoted to 'the vesting of staff option plans' which are dividend neutral, suddenly become so dividend attractive?

When it's allotted as a fully paid up bonus share?

Where's that corrective RNS?
That'd sort the job out.

tom,

That chronology is powerfully persuasive.
The timing also corroborates the 'allotment of treasury shares as fully paid up bonus shares' argument.

But that's all it is...an argument.
No counter yet, but that doesn't mean there isn't one.

Theoryman,
First of all let me thank you for the response which is a real attempt at answering the conundrum that is the dividend calculation.
I’m not sure you posted your original response on this bb, but if you did and I missed it then my apologies.

And so to your argument.
1) It seems clear to me that under HMRC rules, GKP’s dividend calculation would be problematic, as your advisor suggests;
2) But it’s now fully two months since the announcement and no sign of a corrective RNS;
3) Furthermore GKP were insistent (under intense PI pressure) that:-
‘the calculation was made by its registrars and is satisfied that the calculation is correct.’
No outside regulatory body has seen fit to influence this position;
4) So that takes us to any other explanation which makes sense of the Company position on their dividend calculation. Note that GKP have steadfastly refused to explain their rationale despite repeated requests;
5) And the only one I can come up with is the one where they allot those treasury shares as being fully paid up bonus shares held in trust for the relevant staff beneficiaries. With all the attendant consequences.

For me, this issue has never been a matter of tax avoidance or evasion.
Put simply, it is a question as to GKP’s motives for paying a dividend on treasury shares, when they must have known that they were acting in pure contravention of both UK and Bermudan Company law.

tom,

For quite some time now I've been banging on about those bought back shares being allotted as fully paid up bonus shares, therefore vesting early.

This the only explanation I have for the dividend calculation including treasury shares.

Assuming you're familiar with my argument, have you got a view?

Hi C0ckeye,

Funny.

I don’t know what made me smile most;

(a) Your youthful enthusiasm for your task, or
(b) Your abject failure to achieve your purpose.

Anyway, can I take it that you have now satiated your blood lust?
I do hope so because I quite enjoy your bb company.

By the way, the jury’s still out on whether those treasury shares that attracted a dividend are now sitting in treasury allotted as fully paid up bonus shares…..because if they’re not, where’s the corrective RNS for wrongly attributing a dividend to treasury shares?
And if they are then they must have vested early by dint of being fully paid up.
And that can only happen, according to VCP stipulation, on a ’change of………’

Have a good weekend and if you want to take pleasure in my misery have a look at my guess at the Xmas sp…...it does not augur well for my forecasting skills!!

ss,

That’s really left field.

And if you wanted me to know why I should do it, you would have told me.
Okay. I’m on Twitter but I haven’t really used it because=
(a) I don’t like the 140 character format and I don’t know how to compress; and
(b) I have no friends!
So maybe you’re setting me up, but that’s a judgment call and I don’t think that’s your m.o.

You’ll need to tell me why I should start messaging Paul on Twitter.

If it’s because I engaged with chinese_takeaway on ADVFN last week thinking he/she might be Paul then that’s not enough.
I value my independence too much.
Why can’t he/she come on here and we can properly scrutinise his/her proposition in detail without being restricted by the 140 character format?
And scrutinise doesn’t mean crucify.
I’d just like to properly examine his/her ‘sold’ rationale to see if it really is fit for purpose.

C0ckeye,

‘CHANGE OF CONTROL
In the event of a change of control or a voluntary winding up of the Company (other than an internal reorganisation) there will be a Measurement Date on the change of control and the value of additional options will be calculated as at any other Measurement Date. The share price used to calculate the Measurement Total Shareholder Return will be the offer price for the Company.’

This from the document in 2016 launching the VCP.

The ‘acceptable premise’ I have referred to is embodied in the above extract.
That only on a change of control will the awarded options convert before time, using the offer price as the tool to enable this early vesting.
You keep referring to Bermudan Company law as if it and the VCP were somehow entwined.
They’re not.
The establishment of the VCP was a GKP construction to reward Directors and ‘key drivers’.
By signing up to it the participants are engaging in a reward for performance agreement.
It is a contract between employer and employee. And a part of it defines what happens to staff options if the business is sold before they vest naturally.

‘misleading less battle hardened investors’….

You really do yourself and our fellow bb investors a disservice if you think I’m attempting to mislead anyone.
Unless seeking out the truth using FACTS is misleading.
You should really back that statement up with ANY example.
But you won’t because you would be cruelly exposed by me and others for being one eyed, myopic and plain wrong.
Or are you simply seeking to discredit me because you don’t like what I’m posting?
You must have thought long and hard before you chose your avatar.
How apt.

tom,
Last Friday I ventured onto the ADVFN board to quiz chinese_takeaway (possibly Paul in drag) about his continued assertions that GKP was sold.
I posited a number of scenarios that could equally well explain Company behaviour without the sole conclusion being that there must be a sale outcome.
I was just testing the strength of his position.
He had nothing in response, just the same old mantra.
So I started testing his assertions for myself, and however uncomfortable it may be, the simple truth is that we may not be even near to a sale conclusion here.

And yet you are right to question the IIs motives for their investments, in the same way as so much else is debatable about GKP’s behaviour.
After all, there was heavy duty II involvement way before the announcement of the dividend policy.....why?

The BIG issue for me right now is the rationale for buying back Common Shares into treasury for vesting of staff plan options so far ahead of the need.
And then attaching a dividend payment to them, thereby contravening Company law.
As far as I can tell, the only way that can legally happen is if they have allotted those shares as fully paid up bonus shares (which do attract a dividend) and hold them in Treasury in trust for the beneficiaries.
And the problem with that is that those shares would have had to have vested.
And the only acceptable premise for vesting under VCP rules is a ‘change of control’.

So you’re not on your own here tom.
It’s just that, on the balance of probabilities, I think that the appointment of a CFO is a signal of a commitment to the organic growth of the business that cannot be easily ignored.

And for you C0ckeye,
We have every right to explore these possibilities and their alternative outcomes without looking over our shoulders for the ritual abuse so easily thrown our way without any attempt at counter argument.

I'm so gonna regret this, but what's a PU?

Hey C0ckeye, missed you.

I don’t do melancholy or conspiracy.
I leave that to you LTH….you lot have forgotten more than I’ll ever learn on that score.
Has it ever crossed your mind that a lot of us might be pretty tired of your constant blubbing, drooling in your soup as you relive bad memories, shouting and screaming your pain into the darkness with no one to hear or care. Pitiful.

And for the record, the sale litmus test for me was always the appointment of a new CFO.
Weatherdon’s arrival satisfied me that GKP is NOT FOR SALE.

Now I’m intrigued as to why a second rate no name with no negotiating skills whatsoever would attract Jaap’s attention in such a way.

The Headhunters had a global field to comb…..and they came up with Ian?

Critiquing Board decisions and postures is every shareholders right. And this bb is for sharing those analyses for discussion.
I like calling people to account for their actions.
Okay?

Ask yourself this:-
If you were negotiating your entry package to GKP and you knew that your predecessor had made millions by being gifted 1.5m 55p options just for sticking around for two years, wouldn’t you demand the same?
Either he made this argument and they refused, or he didn’t and they didn’t offer them.
So whatever his inducements for joining, they patently weren’t influenced by long term considerations.
Otherwise they would have been reflected in the appointment RNS as they were for Sami.
I wonder what his employment brief is?

The 2017 accounts stipulate that Ian Weatherdon wasn’t on the BoD at SGEH. He was simply classified as a Senior Executive.
And a Senior Executive with expat’ status, attendant benefits including:-
‘housing and utilities, medical insurance, schooling, mandarin lessons, relocation expenses and annual flights to home base.’
His 2017 earnings package totalled $944k, 33% of which was performance related.
Within that, $405k was salary and a further $116k was a short term bonus.
He had also been awarded 5.8m option shares at strike prices ranging from $.024 to $.078 per share. None of these had vested as at 31/12/2017.
Not bad for a man whose more recent management experience had been associated with a small loss making business in China.
Lone Star acquired SGEH in September 2018 and paid A$.25 (approx. US$.17) per share at which point we lose sight of Mr Weatherdon. Presumably he stayed on with the new team to help develop their new dream, as his share options moved ever closer to redemption if they had not already vested on acquisition.
But such was the lure of GKP that Ian has joined without negotiating any option share incentives in his package. Even though his predecessor, Sami, had walked through the door and into 1.5m option shares priced at 55p, 500k of which vested immediately!!
As a trained accountant he will have done his dd and been only too well aware of this.

So if he doesn’t warrant long term option share incentives, why was he recruited, and why did he leave Sino?

ALL IMO. DYOR.

A few short months ago a middle aged man with wild ambition was hiding in a Beijing backwater waiting for The Call.

He looked around him and sighed. These offices weren’t even his. They were part of a tower block of managed meeting rooms and PO Boxes, all with lounge facilities of course.

He looked down at the papers in front of him. Sino Gas and Energy Holdings Ltd.

What a car crash. He put his head in his hands.

If that call didn’t come he was surely finished.

2017 Revenues @ $31.8m (prior year $12.1m).
2017 Losses @ $4.5m (prior year losses $7.8m).
New owners. New US private equity owners. Lone Star…that said it all.

He looked around him at the beige walls and the leatherette sofa across from his lonely desk. He considered his future.
They hadn’t spent $360m to buy this.
And they certainly weren’t going to keep paying him nearly $1m a year so he could keep on losing them money.

The heavy silence was broken by the sound of his mobile belting out Abba’s ‘Dancing Queen’.
He really needed to change that ring tone.

“ Ian. Hi, it’s Jaap. Congratulations, and welcome to Gulf Keystone!”

Question : What does Ian Leatherdon bring to GKP?

All in my vivid imagination.

Except for the offices.
And the numbers.
And the ‘phone call.
And the Question.

IMO. DYOR.

It seems to me that if you run the argument-

No New CFO = Sale much more likely.

Then the corollary must also follow-

New CFO = Sale much less likely.

Top Headhunters rarely do their searches in the public domain.
They pride themselves on their in-house portfolio of ‘premier executives’ from which to draw. This from personal experience.
And at this level of remuneration they would definitely be spoilt for choice.
The candidate list would be long, talented and ambitious.
The money alone, combined with the certainty of millions to come (whatever the outcome) would do it.
In a response to a query back in September, Mark Antelmes advised me that-
‘We have a leading sector international search firm on the case and we are seeing some very strong candidates.’
BS. Where are they?
Though I’m treading on dangerous territory, I’m rapidly coming to the conclusion that there is no replacement anywhere on the horizon.
And if GKP is to quickly to develop into an oil producing behemoth, investing billions in its endeavour, then it is patently ridiculous that they might even attempt that without proper financial scrutiny at all points.
The other option is that there will be no need for a replacement, and this recruitment fiasco is just that, a fiasco.

Dear Mr Counter,

What a pleasure it was to meet you last evening. And what better place to conduct the ceremonial final interview than in the convivial but discrete surroundings of the Greenhouse restaurant.
Jon and Kimberley also very much enjoyed the experience.
In fact after your departure Jon was still laughing at your Donald Duck impression conducted in full view of the other diners singing that Country classic, ‘Big Bad John’.
Well, as you said at the time, he is a bit of a cowboy!
So it was with real surprise and genuine disappointment this morning when I opened my post to find your correspondence declining our offer to join the Board of Gulf Keystone Petroleum when only twelve hours ago you seemed fully committed to the cause.
We went so far as to outline your remuneration package including the $750k salary, the reception package of 500k nil cost options, 250k of which would vest immediately with no consideration required, and the further three million performance related nil cost options vesting at one million a year for the next three years. We even agreed your guaranteed annual loyalty bonus of $500k.
However, your note references concerns relating to the size of the Field, the delays in the FDP approvals, the chequered history of our relationship with the KRG/MNR, the lack of any Oil and Gas Law, and the geopolitical fault lines running throughout the Region.
You go on to describe the ‘revolving door’ approach to senior management recruitment. You seem particularly concerned about Sami Zouari’s reasons for departure which, as I have explained, we are not allowed to discuss for legal reasons.
And I don’t accept your contention that you’ll end up being an overpaid Project Manager. Certainly your success will inevitably be measured by the increase in production to 110k bopd in timely fashion and within budget. But that’s not all.
You’ll also become fabulously wealthy in a few short years, and that matters to us all.
As to the possibility of acquisition and its impact on your position, as I said last night, this should not concern you. Your primary task is to oversee the application of the appropriate capital spend at the appropriate time and in an appropriate manner.
Any acquisition activity should remain distinct from operational requirements, and will be managed away from the Operational cauldron with specialist advice.
So I would ask you again to consider your position (as I said to Sami!! lol ).
If it’s simply a matter of remuneration, I feel sure we can come to an acceptable resolution.

In any event, I will call you tomorrow to discuss these matters further. Tempus fugit and all that.

Please don’t be difficult….we really need you for Investor Relations purposes. Bravedog and tom_the_bomb are getting ugly....

Yours Sincerely

Jaap Huijskes.

Chairman.

surreyscot,

Good get on those Peel Hunt forecasts surrey.

They forecast 2020 with revenues at $340m developing profits of $109m. To get there they’ve assumed 55k bopd from Q2 next year.
My forecast is $310m showing $110m. The sales discrepancy is because I’ve assumed 55k bopd from Q3 as per the latest update, not Q2.
More worrying, their 2021 P&L performance is showing revenues up to $507m and profits at $218m.
And I reckon the only way that makes any sense is if we go straight to full year production at 75k bopd from the start of 2021.
But that part of phase 1 development is not yet sanctioned and I believe it to be FPD approvals dependent.
In any case the projected time frame for the move to 75k bopd is 18-24 months.
Thing is, if they are making those assumptions and recommending accordingly , if we don’t meet their unrealistic forecasts then it’s likely to adversely impact the sp.
Far from £3.81 we might be looking at something very different.

slings,

Operational updates are simply progress reports and as such should present no problem, but they do.

Corporate updates might be a little more sensitive, but in principle are simply further and better particulars of initiatives already announced so should present no difficulties, but they do.

Updates on relationships with the KRG and the MNR are clearly more sensitive. But what's to prevent announcements on negotiations with the KRG and/or the MNR if they are censored by those parties in advance?
As you point out, their absence only fuels the speculation about progress.

All in all this aspect of GKP performance is a major weakness UNLESS they have no choice but to bunker down.

slings,

It's a good point, though I think guys like C0ckeye, ANGINA, Invstrat, Bravedog and others might disagree.

You've obviously got strong feelings on the matter, what are they?