Member Info for Straycat

surrey,

How reliable is that update info'?

2019 interims revealed an aggregate 4192 boepd for the first half.

MEX119 is now producing an aggregate1070 boepd at a stabilised flow rate.

That’s a 26% uplift, with gas up 26% and condensate up 31% respectively.

Pretty impressive stuff.

gotabesirius,

$900k of second $10m tranche to go. 8,392,819 shares in treasury.

Nearly spent up.

But will they need more buy back money to satisfy the staff share option need? I'm not sure they will.

In the RNS 3rd June 2019 declaring Sami’s departure, it was specified that he would be –
‘stepping down as CFO and a Director of the Company during the second half of the year, and will leave the business no later than 3 December 2019.’

Following a recent enquiry, Celicourt advised they had no news.

Seventeen weeks since the announcement.

Nine weeks ‘til Sami walks out the door (if he’s still there even).

No news on his replacement. No mention of a short list. Nothing. Strange that, given his post is/should be pivotal at this time in the Company’s organic development.
And it’s not unreasonable for shareholders to want to be kept abreast of developments. But nothing.

Makes you wonder how hard GKP are trying, or if they’re trying at all…..

Anyway, IF they’re going to install his successor by w/c/ 2 Dec., they’d better get a move on, because the good guys nearly always come with extended notice periods and other financial baggage that needs settling.


Still, no news is good news, right?

Change of control under the VCP.

With regard VCP participants, on a change of control –
‘the value of additional OPTIONS will be calculated as at any other Measurement date…’

I think this means that the grant of nil cost options is in and of itself enough. There is no requirement for them to be in treasury on a change of control.

This would make sense, because otherwise the VCP participants would lose out due to unfortunate takeover timing if it happened between option grant and option vesting.

And this is important because at the moment we have 7,414,738 shares in treasury and only another $4.2m left to buy back shares into treasury with.

If we have to buy back SZ and JF’s granted nil cost options (c.a.7.1m options from memory) then we’ll need more money. If not then the mission to protect the staff option awards is nearly/already complete.

And if that’s right, then we’ll soon be buying back for cancellation. Not sure whether they’d have to RNS that change of buyback policy or not.

BD by name, BD by nature.

Your queries sequentially:

1) If they’re still around I think they’ll change the way they compute the dividend going forward to something more akin to the norm, i.e. X pence per share;

2) I’ve thought about it overnight, and Section 42B (12)(a) is actually quite explicit in its meaning –
‘(12) Nothing in this section shall prevent a company from –
(a) making an allotment of shares as fully paid up bonus shares in respect of shares held by the company as treasury shares;’

I reckon this means that shares can remain as treasury shares while being allotted as being fully paid up bonus shares. If that’s correct (and it certainly reads like that) then it must be that those shares attract dividends as fully paid up bonus shares (that is the law) and yet still sit inside the wraparound description of being treasury shares, until they are released.

It seems to me that the above is the only logical and legal way of explaining the application of a dividend to treasury shares.

Unless GKP have simply miscalculated, (which was until recently, my preferred view).

Anyway, I too am reviewing my investment position, but lest we forget, I am an idiot!

All the above IMO, DYOR.

Incidentally, have you noticed the excitement this whole issue is generating across the boards?
Not so much here on LSE though eh?

Okay. So why do the treasury shares attract a dividend?

Cont'd....

Are we sold?

DYOR

Since the second tranche dividend announcement of 20/9/2019 I’ve berated the Board, accusing them of taking a shambolic and chaotic approach to the calculation for that dividend payment, accusing them of short changing the shareholders, and even raising the matter of their competence to deliver the planned production uplifts in Shaikan. I simply refused to countenance any other possibility than that they had miscalculated.
However, this appeared on Paul’s twitter account last night at 7.12 p.m.;
Dear xxxx,
As stated in the Dividend Payment RNS announced on 20 September 2019, the Company confirms that the calculation was made by its registrars and is satisfied that the calculation is correct. The calculation of dividend per share includes the entire issued share capital, including treasury shares.
Kind Regards
Investor Relations
Gulf Keystone Petroleum Ltd.
Main: +44 (0) 20 7514 1400
Website: www.gulfkeystone.com

I cannot verify its authenticity.
But it purports to be recent correspondence from Investor Relations at GKP stating that the calculation of the second tranche dividend per share is correct.
This, in turn, supports Mark Antelme’s statement that the treasury shares are correctly included in the calculation.

So I’ve had another look at the Bermuda Companies Act 1981 (amended) Section42B (11) of which states:
‘No dividend shall be paid to the company in respect to shares held by the company as treasury shares’;
Then under Sections 42B (12) and (13) of the same Act:
‘(12) Nothing in this section shall prevent a company from –
(a) making an allotment of shares as fully paid bonus shares in respect of shares held by the company as treasury shares; or
(b) paying any amount payable on the redemption of shares held by the company as treasury (if they are redeemable shares)
(13) Any shares allotted by a company as fully paid bonus shares in respect of shares held by the company as treasury shares shall be treated for the purposes of the Act as if they had been acquired by the company at the time they had been allotted.’
What does all this mean?
GKP could have granted options and then accumulated them in Treasury to satisfy their need, hence the buyback resolution and subsequent purchases.
Then GKP could have allotted those shares as fully paid up bonus shares.
In that event, while technically remaining in Treasury, these shares would be reclassified under Company law as fully paid up bonus shares and would attract a dividend IMO.
So when it came to calculating the second tranche dividend payment those ‘treasury shares’ would properly be included in any dividend payment, otherwise 42B (11) applies.
But critically to get to this point, these shares have vested, and they’ve vested early. The Board has developed them into fully paid up (and ready to go) bonus shares before their time which can only happen on a change of control IMO.

The above provides an explanation for otherwise confusing recent events.

Ar

Hey Tom,

The 'recommend' button isn't working, or you'd have definitely got one for that post.

This Assessment by Mark Watson-Mitchell is remarkable because it gives us new updated information regarding cashflow and capex.

Full year capex is now forecast @$100m as opposed to the previous estimates of $130m-$150m.
Since half year spend was declared @$32.4m, this gives us capex spend of $62.6m to go in the second half.
The cash balance is now declared @ $263.6m as at 9 September.
The first tranche dividend @$17.3m must also be included in that declared cash balance since it was distributed on 5/7/2019.
Similarly in the RNS of 2/9/2019 declaring the completion of the first phase of the share buy-back programme we had bought 5,225,933 shares at a VWAP of £2.34, or $15m.

So in cash terms;
If we assume that there is still the second tranche of the dividend spend to come @ $33.3m;
If we include completion of the $10m second phase buy-back spend in the second half;
And if we assume that none of that second half capex of $62.6m has been utilised since 9/9/2019 so is still to be spent;
Then total ‘exceptional’ spend for the second half to come is $106m.

With four months payments to come, at between $70m-$90m at the very least , then by year end our cash position will be repaired nearly back to its half year position of $302.4m
.
All this despite the extraordinary buffeting cash balances have taken, with capex, dividend, and buy-back spend combined exceeding $175m for the full year.

This is a truly outstanding performance, with the outlook even more exciting as we progress to 55k bopd and beyond.

Yet look at the share price and you’re brought crashing back to earth.

A significant re-rate must be coming.

GKP’s method for calculating the dividend will deprive the top eight shareholders of a combined total of $568k in dividend payments when the dividend is distributed on 4/10/2019.

The likes of Lansdowne Partners (-$129k) and Sothic Capital (-$123k) will already know this.

They will also know that their ‘loss’ is GKP’s gain.

Good luck with that JF.

It seems to me that the Board’s approach to the buyback and its potential consequences on dividend payments has been nothing less than shambolic.

Somehow they’ve contrived to get themselves into a position where they’ve issued a notice of a dividend payment on 4/10/2019 which is 3% less than it should be imo.
Talk about chaotic.
And while the Bermuda Companies Act 1981 as amended is less than clear on the matter, their actions may even contravene corporate law on the issue of the relationship between treasury shares and dividends.

How the f8ck is that possible?

It’s happened because they rushed into the buy-back programme without considering the consequences if they ran it alongside the new dividend policy.
The start of the buy-back activity didn’t have to coincide with the new dividend payment schedules. There was a strong argument for waiting until after the second tranche ex-dividend date of 20/9/2019 precisely to avoid the potential problems of trying to do both things in tandem.

But no. We had to do it sooner.

Jaap Huijskes stated in his Chairman’s letter of 23/5/2019 that he had no immediate intention to use the buyback authority requested in Special Resolutions 12 and 13.

And yet only ten trading days after its approval at the AGM the buy-back began, just after the announcement of the first tranche dividend payment on 5/7/2019.

So why the urgency?

And if they were in such a rush to start reducing the Common shares available to the Market why was no thought apparently given to the ramifications the share buy-back activity might have on the distribution of dividend payments?

This is the Board entrusted with a plan and funding to nearly triple the size of the Company in the next three years.

Should treasury shares be included in the most recent dividend payment calculation or not?

Have a look at this.

beernut at 18.50 p.m. on ADVFN last evening;

“From Mark Antelme.
“Thanks for the call just now. The figures in the RNS of 20 September are correct and take into account the recent buyback activity. The treasury shares are included for the calculation but the treasury shares are not paid. As ever the calculation was done in conjunction with Computershare and we are satisfied that it is correct.”

Now I have no means of independently verifying the veracity of the above post.

However, if it is accurate, and Mr Antelme has offered his opinion on the matter as stated above, then the effect is dramatic imo.
By including the treasury shares in the dividend calculation, the effect of the buyback of 6,690,807 shares is to dilute and discount the value of the second tranche dividend to shareholders.
I reckon it at 14.965214 cents per share on 222,738,759 shares (excluding the treasury shares), but it moves down to 14.528787 cents per share on the figure of 229,429,566 shares (including the treasury shares) actually used.

This all occurs because GKP have included treasury shares in the calculation. This immediately dilutes the dividend per share thereby costing GKP less than it otherwise would have.
The total dividend payment saving to GKP is $972093.10. This is because the treasury shares would have attracted 14.528787 cents per share on 6690807 shares and this element of the second tranche dividend payment of $33,333,333 ‘is not paid’ per Antelme’s statement.

I think that $972,093.10 should more properly have been allocated to those shares still active in the market i.e. 222,738,759 shares or an additional .436427 cents per share.
Because my understanding is that treasury shares attract no dividend rights.
Instead, if I’m right, that money has been lost to treasury.
And it represents a circa three percent discount on what would/should otherwise have been the second tranche dividend payment to shareholders.

Quite apart from this, if the above quote is an accurate reflection of Mr Antelme’s views on the calculation then I reckon he’s wrong in law.

My understanding of the status of treasury shares is that they convey NO DIVIDEND RIGHTS AT ALL.
If this is correct, then those bought back treasury shares should more properly have been excluded from the dividend calculation because the dividend doesn’t apply to them.

And even if I’m wrong on that point, and what’s going on is entirely compliant with company law, then it would appear that the effect of including those 6,690,807 treasury shares in the dividend calculation is to short change the shareholders by three percent imo.

If Mark Anthelme did make those remarks, and if he is representing GKP’s position on their most recent share dividend payment, then the Board may have some awkward questions to answer.

Unless you're hung up on red, try a glass of Corton Charlemagne and any concerns over the possessive apostrophe will melt away.

Meanwhile, where's that corrective RNS?

There were two RNSs released on 20/9/2019.

The first (1229N) announced;

‘a dividend of 11.612860p per Common share will be paid on 4 October to those shareholders on the register of members of the Company as at 20 September 2019.’

Later, the second RNS (1909N) stipulated that as at 17.23 p.m.;
‘6,698,070 Ordinary shares are held in Treasury…’

So at close of play on the day of the dividend announcement those bought back shares were still in Treasury, i.e. NOT vested.

Ergo they should have been excluded from any calculations as to dividend payments, and they weren’t.

So I reckon GKP have used the wrong number of Common shares for calculating the dividend.

Theoryman,

You’re aware there’s another argument being posited?

That all the bought back treasury shares have already vested early.
This would mean that they attracted the dividend and would be included in any dividend calculations.

It would also indicate that the GKP is sold because on my understanding, nil cost options included in GKP’s staff incentive plans can only vest early on ‘a change of control.’

I do not subscribe to this view, preferring the argument that it’s an administrative error.

But it is appealing….

Hi Theoryman,

My understanding is the same as yours, that treasury shares do not attract any dividend rights.
I don’t think you’re wrong at all.

And I read 42B in precisely the same way and have come to precisely the same conclusion.

But if we’re right then where’s the corrective RNS?

It’s five trading days now since the original announcement.

BD,

This reminds me of our VCP discussions earlier this year reference the possible sale of GKP.

And once again my conclusion is different to yours.

I’m going to stick with the view that GKP have made an error in calculating the second tranche dividend. This implies a corrective RNS before 4/10/2019 restating and increasing the dividend per share using the reduced number of Common shares in issue.

But once again I find myself really hoping you’re right and I’m wrong.

An RNS expressing your view in terms would indeed make everyone on this bb happy.

Good effort Lazzeroni.