Member Info for Straycat

So that’s two of us who think that second dividend calculation is wrong. It should be ;
$33,333,333 / 222,738,759 shares = 14.965214 cents per share imo.
This is after 6,690,807 shares were bought back by 20/9/2019.

On the cash flow front, first half monthly receipts were $94m and cash was at $302.4m.
To swallow up all anticipated second half capex, the $50m dividend payment and the share buyback up to $25m we need second half receipts of between $130m-$150m I reckon.

And as long as the production uplifts are attained and maintained this is easily doable. Even more so if the pipeline tie in is completed.

The current market cap is a joke.

All the above are reasons why I got invested. All the Board have to do is what the plan says they should do, and in timely fashion. After all, it’s their plan. They should own it.

Well Angina, not surreyscot so much then! (Oops!)

Don't know much about him Angina. He posts daily on Twitter and has been around for about a year.

Think C0ckeye or surreyscot might know more.

BD,

The trouble with Paul.

Paul is pretty keen on the idea that GKP is sold. It underpins his tweets and he occasionally supports his assertions with ‘legal extracts’ from The Bermuda Companies Act 1981 as amended.
He habitually tailors his analysis from the Act, and elsewhere, to suit his relentless argument that GKP is effectively sold and that the sale announcement is imminent.

On this occasion we are discussing whether GKP should be including treasury shares in its dividend calculation. Paul’s argument would appear to be that if the shares are no longer in treasury and have been vested early, then those shares should be included in the calculation.

In this case the relevant section is The Bermuda Companies Act 1981(amended) PART 1V Section 42B (12,) the full text of which is as follows;
‘(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; or
(b) paying any amount payable on the redemption of shares held by the company as treasury shares (if they are redeemable shares).’

Nowhere in the Act is there any reference to Paul’s example that this section applies in the case of employee share option plans or share dividends. He’s just extrapolated that to suit his sale proposition.
In my opinion 42B (12) refers only to an allotment of ‘fully paid up bonus shares’. In GKP’s case this would only relate to nil cost staff options that had vested, not those that had merely been granted. And since they don’t naturally vest until 2021/2022 they should be excluded from dividend calculations while they remain in treasury.

WHY IS THIS IMPORTANT?
Because, if my interpretation is correct then it follows that GKP have understated the second tranche dividend which should more properly be stated as 14.965214 cents per share. This on the basis that they used the wrong number of Common shares in issue at the time the second tranche dividend was declared.
And if Paul’s right then my understanding is that, under the staff option plan rules, those options can only vest early if the Company is subject to ‘a change of control’. That is its sale.

Or maybe I’m simply confused?

Anyone else got any ideas on this?

BD,

So you agree that no dividends are attributable to GKP shares bought back into treasury up to and including 20/9/2019.

And yet that is exactly what they’ve done.

The declared second tranche dividend payable on 4/10/2019 is 14.528787 cents per share. That is;

$33,333,333 / 229,429,566 shares (all the Common shares in issue prior to commencement of buyback).

But if we’re right, then the second tranche dividend payment should more properly have been 14.965214 cents per share. That is;

$33,333,333 / 222738759 shares (6690807 shares having been bought back into treasury by 20/9/2019).

Either we’ve been short changed or those treasury shares have vested early.

Or we’re both wrong!!

N’est pas?

I’m confused.

To the best of my knowledge shares bought back and held in treasury carry neither voting nor dividend rights.
So the options are;
1) I’m wrong;
2) It’s an error in which case we should see a corrective RNS in short order;
3) They’re no longer held in treasury, in which case they’ve either vested before time or they’ve been cancelled.
If they’ve been cancelled then the reasons for buyback in the first place have changed.
If they’ve vested early then on my understanding this can only happen on a ‘ change of control’.

Someone please correct me.

And does 24 to 30 months from sanction to producing 75k bopd sound plausible?

Shandypants2,

As far as I’m aware, the most recent advice as to future capex spend was in the summary of the 2018 full year results where GKP made reference to;
‘gross Capex associated with 55,000bopd phase of between $130m and $150m, in addition to the $25 million to $45 million associated with the subsequent development phase.’
This broadly tallies with the previous statements made in the presentation during the Capital Markets Day of 28/3/2019.
In that presentation GKP was described as fully funded up to and including drilling completion to 55kbopd by Q1 2020. The accompanying gross capex was indicated at $200m-$230m including a sum of $130m-$150m in 2019.
In relation to the matter of funding to 75k bopd, the gross capex was estimated at $400m-$450m including the estimate of $25m-$45m referred to above,, but both JF and SZ were at pains to point out that this and subsequent phases had not yet been sanctioned whereas the move up to 55k bopd was.
As to the timings for the development to 75k bopd, they were described as being a period of up to 30 months from sanction.
and while future funding for these developments was not covered in detail, it did not appear to be in question given the resumption of regular payments, the ‘strong revenue generation’ and continued tight cost control.

CCC.,

The declared capex requirements for 2019 are $130m-$150m. This includes a twenty five percent contingency for unanticipated problems during phase 1 development.
According to the half year interims we have already spent $32.4m of this leaving a further $98m-$118m to go in the second half.
The dividend and buy-back costs are currently specified at $85m for the year.

So the total of 'exceptional' spend this year is c.a. $183m-$203m.

We had $303m in the bank as at 30/6/2019, with And six monthly payments to come during the second half.

So by the year end we will have all but completely replenished the half year bank balances leaving them at or around half year levels.

What's the problem?

There’s a loan of $100m sat in our balance sheet carrying a ten percent half yearly coupon.
We accrued $4.4m to cover interest costs on it in the first half 2019.
If you run any cash flow projections on GKP over the next two years that loan will never be called upon for operational purposes imo.
Even this year, facing dividend and share buy-back costs totalling $85m and a full year gross capex spend of $150m, we’ll close with well over $150m in the bank imo. And that includes a bleak outlook on cash receipts for the second half. If you question this analysis do your own projections and you’ll see what I mean.
If that loan was taken out as an insurance policy against unforeseen circumstances, then remember, there’s already a twenty five percent contingency built into the capex costs.
If you’re still persuaded that this ’insurance’ is required, and remembering it’s unsecured, then it still comes at a massive premium. Ten percent. On an unrequired five year facility.
Unbelievable. Particularly when the existing Guarantee Notes (issued at the same rate)weren’t due ‘til 2021 by which time we’ll be pumping 55kbopd min. and collecting $30m+ a month in receipts .
It’s almost as if we need that loan in place at any cost. Which makes me wonder if it’s there for any other reason for it being there. There’s a lot of noise around share buy-back policy right now.
If there are other reasons then Sami knows, but he’s not telling. It’s a three line whip for him. His financial future’s on the line.
The recruitment of his successor is in train but more than fifteen weeks since the announcement of SZ’s departure and less than ten weeks until he leaves the business for good, there’s absolute silence on any progress in this regard. Not even the announcement of a short list. This is a pivotal position at a critical time in GKP’s development, and having announced the change at the top the Board are surely under a duty to keep us informed as to developments? What harm could it do?
There’s too many questions and not enough answers at the moment.
And uncertainty fuels speculation at every turn. Those who think GKP is sold can be forgiven for taking that view given the Board’s reluctance to share information in an open and transparent way.

Ten weeks 'til Sami's replacement turns up. Maybe.

No news is good news. Isn't it?.

djm1,

If you want to take some solace just remember that monkey's bun fight that erupted a couple of months ago on the back of PH's Proactive Investor interview! All those idiot's fighting for BB space, spouting complete (and inarticulate) b*llocks and screaming Bloe's merits without any knowledge, understanding or care.
Champagne corks popping, demob happy spirits cheering and all the rest.
I remember trying to raise a point about Ferguson's shareholding but by the time I'd written it another twenty five or thirty posts had been created by the primates and I'd lost the will.
I wouldn't mind but mine was only a one sentence missive!!!
Anyone who's really interested in Block will know the risks involved and the potential rewards for those who hold firm.
Things have settled quite nicely now....just the traders left to wait out which'll take a little time I'm afraid.
But never forget those monkeys because they'll be back!!!

Cheers ****eye.

That Chairman’s letter of 23/5/2019 has Huijskes writing re the buy-back authorisation proposal;

‘the Company has no immediate intention to use this authority….’

And yet only ten trading days after the Resolutions 12 and 13 were passed at the AGM the buy-back had commenced.

Again, why the sudden rush?

I reckon the 10th might prove a very interesting day.

In his Chairman’s letter of 23/6/2019 Jaap Huijskes asked for authority to engage in a Common Share buy-back arrangement.
One of his stated reasons was that the Company;

‘believes it is prudent to ask shareholders at this juncture in order that we can act quickly if necessary.’

What can that phrase possibly mean if not that there are concerns about possible outside interest which require pre-emptive measures to be in place.

And yet not eight weeks earlier, when his CFO had been asked about the possibility of share buy-back activity as a means of utilising surplus cash, SZ had stated that it was discussed at Board level but was deemed unnecessary.

I reckon the 10th may prove a very interesting day.

The chronology looks like this.

28/3/2019
SZ announces dividend policy at Capital Markets Day. When asked about utilisation of surplus cash for share buy-back he dismisses it as unnecessary following discussions at Board level.

23/5/2019
Chairman’s letter where Jaap Huijskes seeks approval of buyback proposals by Special Resolution at upcoming AGM to be held on 21/6/2019;
‘to make market purchases of our own Common Shares within certain limits as to quantum (up to 10% per annum) and price.’
He goes on to say;
‘the Company has no immediate intention to use this authority but it believes it is prudent to ask shareholders at this juncture in order that we can act quickly if necessary.’
And then;
‘…the Company will only hold such Common Shares in treasury to satisfy the vesting of staff share option plans and if they are not required for this they will be cancelled.’

2/6/2019
SZ steps down. No explanation. No market reaction.

8/7/2019
Share buy back commences.

2/9/2019
First phase buy back ends with all staff share option shares required now in treasury.

Question.
If none of the various outstanding share options vest until 2021 earliest (and some in 2022), why are they now accumulated and ready to vest, in treasury, two/three years early?
What's the rush?
One thing’s for sure. If there were a bid in the offing, and the staff shares were not secured in treasury, there would be no staff shares to vest. Poor staff.
But not now because their interests have been protected BY SPECIAL RESOLUTION.

I reckon the 10th could be a very interesting day.

Proffit,
I'd love to be able to correct you but you're absolutely right. In the normal course of events Sami now exits with a King's ransom if the residual management perform to Plan over the coming years and the sp eventually recognises it.
But he will have done nothing to advance the cause now the plan is underway.
And that's the point.
The basic structure of the VCP is badly thought through.
And that inevitably leads to questions as to the quality of decision making at Board level.
I accept the hindsight argument, but let me ask you this.
Would you have voted through a bonus scheme that potentially rewarded early departure before the job was done? All Sami's got to do now is nothing.
So in the end we do have to live with it, but we don't have to like it, particularly when in this case it could have so easily have been avoided with just a little thought as to possible outcomes.

On a more general note, I might have this wrong but I thought this bb provided an opportunity for us to share our thoughts on Company activity and performance with a view to a better understanding of our investment and its outlook.

I'm genuinely not so sure nowadays.
You certainly have to wade through a whole load of dross to get to the informative bits.

****eye,
Don't really like the sound of that at all!
But thanks anyway.
Not that it matters (unless Bobobob is a serial killer) but I'm not him.
Just plain old Straycat.
Great call on the 'asylum' by the way....funny.

FlyingHorse1

Yesterday I posted that according to my understanding of the VCP, SZ was in line for a ‘posthumous’ special pay award of £14m+ if the sp reaches £6.00 in the next four years.
All down to his nil cost option shares vesting.
And whatever Sami’s merits or otherwise, whether he was fired or he resigned, is that the best use of shareholder money?
How is that not of shareholder interest? Why shouldn’t we be able to discuss that?
What are your thoughts? Have you even read the post?

CCC's original post from yesterday has been removed.