Member Info for Straycat

Here’s what’s happened and when:-

28/3//2019 - Announcement of record results and announcement of new dividend policy with special year 1 bonus dividend;
1/5/2019 – VCP collapsed but only after SZ and JF are awarded a further 2,087,756 and 1,565,817 nil cost option shares respectively;
23/5/2019 – Chairman’s letter where Jaap Huijskes seeks buy back approval in special resolutions 12 & 13 and more particularly 13(b) –
‘to acquire or purchase all or any part of its own shares in accordance with the Companies Acts.’
May – resubmission of FDP to MNR;
4/6/2019 – RNS informing Sami’s departure and the start of the search for his replacement;
21/6/2019 – AGM. Resolutions 12 & 13 adopted;
7/7/2019 – First tranche dividend announced;
8/7/2019 – Buy back begins;
2/9/2019 – First stage buy back ends;
10/9/2019 – Buy back recommences;
20/9/2019 – Controversial second tranche dividend announced INCLUDING treasury shares in dividend calculation;
9/10/2019 – Completion of $25m buyback.

To Summarise:

So far this year GKP have settled the financial futures of their two key executives.
They have settled the financial futures of all other key personnel.
They have paid off their shareholders concerns regarding the cash mountain.
They have enabled future share buy backs without having to seek further permissions and this authority applies to any number of shares they may wish to buy back in accordance with Companies Acts.
They have reduced the number of tradeable shares in circulation.
They have initiated a four year strategic, self funded production plan which will move daily volumes from 32k bopd to 110k bopd…more than tripling their size. (Unfortunately this plan has already met with ‘operational’ delays which they are excusing on a regular basis).
And they have done all this on top of securing $100m in long term Loan Notes last year, none of which are needed for trading purposes, presumably for buy backs and share concentration then.

For a Board that struggles to demonstrate strategic competence, this looks awfully like a very deliberate strategic plan with a very deliberate end game.
Are they prepping the business for early sale, or are they building for the future?
That’s the question.
They look in very good shape to deliver either way.

And I think the timing of Sami’s departure, the production uplift delays, and all the staff protection initiatives might well provide the answer.

IMO. DYOR.

Sami’s departure was either known in advance or came as a surprise.

I don’t think it was a surprise to anyone (apart from us hapless PIs); the surprise loss of a CFO from any public company always triggers a response from shareholders, and the response is invariably negative.
In GKP’s case Sami’s departure announcement barely registered with the Markets.

It’s now twenty weeks since that announcement, six short weeks to Sami’s official departure, and a wall of silence from Celicourt as to who’s up next.

By now we should have received an update on progress but in a reply to a recent enquiry Celicourt’s Mark Antelmes stated that they:-
‘have nothing to report on re Sami’s appointment but we will update everyone when we have something to say.’

Five months after the announcement they should at least have a short list by now. But if they did then surely they’d tell us via a one liner at least.

I’m starting to doubt whether he’s going to be replaced at all.

Maybe they’re happy with the performance of his temporary replacement.
Maybe they can’t find anyone who wants the job.
Or maybe there’ll be no job on offer at all shortly.

BB doesn't help himself does he?

But now he's gone, back to my original point which was simply that 55k bopd suggests annualised GKP turnover in a range between $400m-$450m. I think tom the bomb is looking at the same ballpark numbers.

This has massive ramifications for accelerated profits and cash flow. Net profits increase to well over $100m with monthly receipts ranging between $28m-$35m and a rock solid $300m + sat in the bank. All this after continuation of fully self funded capex, roll out of the dividend policy, and even some additional buy back activity if required.

Clearly it's all oil price critical, hence the spread.

But on the basis that we achieve our self imposed production targets in our self imposed time frames using our self imposed cash resources, then GKP is a remarkable business with a remarkable story to tell.

And if/when the FDP is approved and the second phase self funded capex is initiated we're starting to look like a Company whose future in Shaikan is limited only by reference to the oil reserves there.

With the cash flow projections following on from planned production uplifts, what's to stop us looking elsewhere for growth as well? Either organic, acquisition based, or both. There's no need for us to be shackled to Shaikan.

I'm just waiting for the sp to catch up with our potential.

All IMO. DYOR.

BB,

Sorry I missed the fun but I'm back now, so:-

'Furthermore the 2018 sales revenues, as advised by the monthly payment RNS' totalled $216m although the company stated annual revenues of $251m.'

In that one statement you have demonstrated your complete ignorance of even the most rudimentary of accounting principles.

The monthly RNSs relating to Shaikan payments simply tell us how much we've been paid in any given month.

THEY DO NOT TELL US HOW MUCH WE HAVE INVOICED!!!

For all I know, we might have sold (invoiced) $35m by the end of October for the month, but we've only received $16.8m in October, for sales (invoices) dated July.

In that example, the correct figure forOctober revenues (sales) would be $35m, not $16.8m.

All the $16.8m denotes is WHAT HAS BEEN PAID IN THE MONTH. It has nothing AT ALL to do with what we end up invoicing in that month.

It would really help you to understand GKP's accounts if you could only grasp the fundamental difference between a Profit and Loss account and a Balance Sheet.

BB,

Oh dear.

You seem to have equated revenue (a P&L item) and cash receipts (a balance sheet item).

For the uninitiated, the net value on an invoice is the revenue sum to be incorporated in the P&L.

The date on that same invoice stipulates when that invoice will be paid and is exclusively a balance sheet issue (classified as 'trade receivables' in GKP's case).

As a consequence it is perfectly possible, nay likely, that revenues and receipts will NOT MATCH in any audited or unaudited figures. But the two must not be confused. The 2018 revenues (not cash receipts) were $251m.

The fact that we only collected $216m is totally irrelevant to the Company's profit performance.

I hope that clears the matter up for you.

Hey Tom,

Then run the P&L on those revenue projections and stand back in amazement.

The market cap is ludicrous right now, look at how preposterous it will soon become.

BroadfordBay,

'The annual REVENUE generated by 55kbopd will be approx. $300M.'

2018 full year results showed revenue @ $251m on average 31.6k bopd.

So on your analysis, another 24k bopd = another $50m in incremental sales.

Sorry BB but that analysis is BS.

I've got the forecast P&L at 55k bopd and more but I daren't publish it....no one would believe me. I don't believe me.

Which is why the rest of this charade is so depressing, because it's hiding a massive story if the production uplifts are achieved.

Half year 2019 interims saw net assets at $527.8m.

This included non current liabilities of $121.6m comprising a $102.3m unutilised five year bank loan, and $23.6m in unspecified provisions.
Commenting on the $100m in New Loan Notes on 26/7/2018 JF declared that –

‘this refinancing resets the Company’s capital structure that was put in place in conjuncture with the restructuring in 2016.’

SZ reiterated and embellished this view when he stated –

‘The refinancing confirms the substantial progress achieved by the Company. The New Notes considerably strengthen the Company’s financial capabilities as we embark on our next investment phases in the Shaikan field.’

But why were those New Loan Notes so necessary at that time? And why did they cost so much?

Clearly those long term loans have proved completely unnecessary for trading or planned production growth purposes. It’s almost as if the Board had absolutely no collective belief in their own ability to manage cash flow at even the most rudimentary level. This despite the fact that they are doing a pretty good job of it as far as I can tell.

Capex, dividend and buy back plans have all been easily managed within normal monthly funds flow. And by year end we’re on track to have spent c.a. $175m or more, making minimal inroads into our bank balances, if at all. .

So what are those New Loan Notes there for? They carry an exorbitant 10% coupon and are with us for the next four years.

If it was the result of a belt and braces approach to funding requirements then there was no need in 2018. A more nuanced approach to lending would inevitably have been much cheaper and in all probability would not have been needed for trading purposes at all.

Remember, the lenders were so relaxed they made the loans unsecured. And the invitation to lend was oversubscribed. Borrowing for trading purposes usually goes hand in hand with security requirements. Why was this so different?

What are those Loan Notes there for? And why on those terms?

It could be that those loans are not for trading purposes at all.

Tucked away in the Chairman’s letter of 23/5/2019 was the proposed Special Resolution 13(b) whereby the directors sought permission to delete Bylaw 4 and replace it with –

‘4 The Board may, at its discretion and without the sanction of a Resolution (i) authorise the purchase by the Company of its own shares for cancellation or acquire them as Treasury Shares in accordance with the Companies Acts on such terms as the Board shall think fit and (ii) exercise all the powers of the Company to purchase or acquire all or part of its own shares in accordance with the Companies Acts.’

This resolution was adopted at the subsequent AGM on 21/6/2019.

Are those loans in fact there to buy back a lot more shares as authorised under Resolution 13(b)?

And if so, why?

He made a lot of noise about ALM when it was @ 60p. Few months later, ALM @ 49p and absolute silence.

Very quiet on RPT since the AGM though.

£3.00

‘Secondly, if the shares have been vested early, they should no longer be held in treasury, it’s an either or situation.’

It’s my understanding that fully paid up bonus shares can still be determined as treasury shares viz-

‘Holding Treasury Shares

When shares are held in treasury, the name of the company must appear in the register of members as the holder. The company must not exercise any of the rights attached to the shares, including any right to attend and vote at general meetings. The shares will carry no right to receive a dividend or other distribution while they are in treasury ALTHOUGH IF THERE IS A FULLY PAID UP ALLOTMENT OF BONUS SHARES THAT APPLIES TO THE TREASURY SHARES, THE COMPANY IS ENTITLED TO KEEP THEM.’

In other words the Company can still keep them as treasury shares even though they are fully paid up bonus (treasury) shares.

In GKP’s case it’s just that no distribution has taken place yet.

IMO. DYOR.

I’m no lawyer, but if the Board was in breach of contract then a whole raft of civil remedies would apply under English law (and probably similarly for Bermudan Civil law). The intention would be to put the employee back in the situation he would have been in had no breach occurred.
IMO.

But that would never happen…there’s too much money at stake, and it would get very messy, very publicly, very quickly.

Why do you ask?

****eye,

The reference to change of ownership and its impact on option shares relates to the various GKP share incentive plans initiated at different times, and not to any statute law, whether Bermudan or English.

So, for example, in its set up the VCP protects the Directors and ‘other key drivers’ by specifically referring to what happens at a-

‘Change of Control.

In the event of a change of control or a voluntary winding up of the Company (other than an internal re organisation) 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.’

Put another way, the shares have an immediate, calculated and real value on change of control.

Equally, the Staff Retention Plan Rules stipulate that-

‘Change of Control.

In the event of a change of control or a voluntary winding up of the Company (other than an internal reorganisation) outstanding options become exercisable provided that if the Company enters into a binding sale agreement prior to 13th July 2017 an option may only be exercised up to a maximum of 50 per cent of the Common Shares over which it was granted.’

The rules vary by scheme type, but the outcome is always the same; that on change of control the options vest.

And if you think about it, this makes perfect sense. Otherwise option share awards would be forfeit on sale of the business, because they weren’t yet due for vesting (and in GKP’s case weren’t even in treasury).

To prevent this, the Board have specifically engineered the buyback scheme to protect those staff option shareholders by making their shares real, and secure, in treasury. At a cost of $25m.

I should point out that while positing a possible sale, I’m trying very hard to defeat my own argument.

However, right now I’m struggling.

DYOR. IMO.

Indrid,

We're going off topic I know, but theories are neither proved nor disproved by time.

They are validated by new facts or new interpretations of existing facts.

There was a theory that the world was flat. Time didn't make it round, rather new facts did.

If it is sold it is very unlikely that there will be any AGM of the Company in its current form in 2020.

Distressed,

I've only just finished providing an argument with supporting evidence as to why it may be sold IMO.

Instead of just telling me I'm wrong without any supporting argument why don't you try explaining why I'm wrong, preferably with supporting facts?

If I'm right, then the 'main players' do know.

The current sp has absolutely nothing to do with this.

Indrid,

It’s precisely because it is GKP that I’ve crawled all over this issue trying to develop flaws in my analysis and challenging my conclusions at every turn.

And you’re right, even during my limited exposure to this share I have become keenly aware of the sale connotations swirling around GKP at all times.

I just want someone to prove me wrong using reasoned arguments, not just empty flat denials.

If it is sold, then the announcement can’t be far away IMO.

Hi Indrid,

I don’t mind being wrong, but please help me by explaining why.

I’m not sure you’ve followed the logic. That might be my communications skills, so let’s try this;

‘I don’t see why just because those treasury shares attract divi means it sold,’

The whole point is that TREASURY SHARES CANNOT ATTRACT DIVIDENDS BY LAW. Treasury shares have no dividend rights. To give treasury shares those rights is in direct contravention of the Companies Act.
THE ONLY WAY those treasury shares can attract a dividend at all, is if they has been an allotment of those shares as FULLY PAID UP BONUS SHARES, which do attract a dividend under company law.
And if they’ve been so allotted then those treasury shares MUST HAVE VESTED AND VESTED EARLY, i.e. before they would have naturally done.

And early vesting = change of control.

GKP have done nothing wrong. Hence no corrective RNS nearly three weeks since the announcement. Because of the allotment.


But in allotting those treasury shares as fully paid up bonus shares THEY HAVE VESTED THEM EARLY.

And that can only occur on change of ownership.

The Insties aren’t up in arms because GKP have done nothing wrong, and they will have been forewarned anyway.

All IMO.

The buyback scheme was initiated specifically to ‘satisfy the vesting of staff share option plans’.

This has been achieved and the shares now sit in treasury, attracting dividends.

In my understanding of Bermudan company law this is only possible if those treasury shares have been allotted as fully paid up bonus shares per 42B(12)(a) Bermuda Companies Act 1981 (as amended).

Otherwise treasury shares have no dividend rights and GKP would have been wrong to have included them in the dividend calculation as they did.

Fully paid up bonus shares, on the other hand, qualify for dividends pari passu with all other shares.

So GKP would be correct to include them in their dividend calculations having allotted them as fully paid up bonus shares.

But in the very act of allotting those treasury shares as fully paid up bonus shares they have vested.
And they have vested early.

And that can only happen on a change of control.

So I ask again; Are we sold?

All IMO. DYOR.