Member Info for theoryman

@ValueS, there is an opportunity to dampen the effect of cutting their over production level.

Iraq had already signed up to future voluntary cuts from its quota - despite ignoring that current quota.

Therefore there is some leeway where the voluntary cuts are partially reduced by agreement and offset against the compensatory cuts in the plan.

@straycat, Iraq has been breaching its OPEC production quota, they had to submit a plan to reduce it, they didn’t, the lads from OPEC have been around, had a chat and they have now produced one.

Remember, this is without Kurdish oil production which is deemed to be currently outside their sphere of control.

They must immediately reduce production back to their quota level and then reduce it further over 15 months to compensate for the previous over production.

They were already running a deficit budget with the over production being exported!

The incentive for them to bring Kurdish oil under their control through SOMO, by settling the contract disputes, is IMO nonexistent.

Unless they can negotiate an increased quota, any Kurdish production would have to matched by yet another reduction in their own.

I had three stages built into my trading and position building.

#1 Current FCF with boost from historical costs recovery.

#2 Reduced FCF as boost is removed if pipeline still closed.

#3 Self funded expansion after pipeline reopens.

Looks to me like #2 will be running for much longer than I had allowed for, with the chance of #3 never happening increasing.

Iraq’s breaches of the quota have been over too long a period and by non-trivial amounts for OPEC to ignore. I will be focussing on trying to get a handle on how serious they are this time to “encourage” compliance.

@starsalign, the recovered costs under the PSCs should be audited against well known international standards.

The key difference is that Iraqi oil exploration is state funded. So they have a limited amount set aside in the budget to cover running the costs of the successful fields PLUS the costs of the failed ones.

They view profit from oil as being generated by 100% of the production (enters budget under one heading) minus those total costs including a profit element per barrel for the IOCs(leaves budget under different heading).

The KRG let the IOCs fund all exploration and give up production to cover costs and profit from the successful ones and the failed ones are paid for by the IOCs. In return they give up circa 50% of production from the successful ones and just collect income from the rest.

So there are two reasons they object to the PSC costs.

#1 They are comparing their mature field costs in easily accessible areas with developing field costs in the KRI - totally ignoring the costs of failed fields, terrain related difficulties and different development stages. They are not comparing like with like and need to reset their way of thinking🙄

#2 If the Kurdish oil goes through SOMO then it becomes part of their OPEC+ production quota which is already being exceeded without it. Without an increased quota they would have to remove production from their own fields which ARE much lower cost and hence more profitable.

@Straycat, according to Investopedia we are talking about the same thing, “Also referred to as key success indicators (KSIs), KPIs …”

With the pipeline closed, what would be your specific KPIs against which exceptional performance could be measured?

@Straycat, what Key Success Indicators would you prioritise in any reward scheme?

How would you ensure that they gave current share holders value for money in terms of not just rewarding employees for doing what they are already paid to do?

There is a cost to shareholders whether they buyback shares in advance (cash leaves company) or issue shares from thin air (dilutes % of company owned by holders).

They must be fair to the employees, so if they perform exceptionally BUT due to exceptional external circumstances the targets for the KSIs are missed they still get bonuses, otherwise the talented ones will exit stage left IMO - there has to be an element of discretion.

Welcome to my world !🙄

Suppose the employees think that triggering the performance related shares is a slam dunk given even the slightest boost from their performance.

Shouldn’t they be buying shares now at this “low” price and storing them in Treasury, preempting the need to buy them at a higher one caused by their performance?

If they don’t then what are the implications?

They don’t think they are capable of triggering the process?

They think they are capable but circumstances outside their control will stop the share price rising whatever they do?

Add your own on this glorious July day in the UK.

If you look at previous ex div openings you will see it will either go up, down or sideways 🙄

@belgrano, you wrote “Future dividends in effect don't get issued to treasury stock, increasing amount paid to shareholders.”

I’m afraid that just isn’t correct.

The total amount to be distributed is divided by the total number of shares, INCLUDING those in Treasury.

The calculated amount per share is then distributed but NOT to those in Treasury - that is withheld.

The nett effect in a previous dividend distribution was that only $49.1 million of the headline $50 million figure ended up in the hands of investors.

@rtg, the original holder gets the dividend and not the one doing the shorting - this avoids a double bonus for the shorter.

Assuming the price of the share drops by the amount of the dividend.

The shorter automatically benefits from the drop in price because it allows them to buy and close at the reduced level.

If they got the dividend as well then they would get a double benefit.

The other way of looking at it is the original holder needs the dividend to compensate them for the drop in price.

GKP didn’t spend anywhere near the $10 million set aside for the Buyback, IMO the market “liked” the idea and as a result the price per share went up and they ended up buying fewer shares than hoped for.

So they take the unspent bit of the $10 million and top it up with around circa $11 million to set a dividend of $15 million.

The market liked that even more so increased the price per share even more.

Can’t help thinking the double use of the unspent buyback was a stroke of genius, its threat of use produces a rise and its re usage in the dividend produces another 🙄

Yesterday the market seemed to take advantage of the timing of the buyback, average paid was above 141.3p but the Close was below 138p.

How do you calculate the efficiency of a buyback for cancellation when there are two opposite preferred outcomes depending on personal choice?

#1 Those who have no intention of selling into the process want to retain their original number of shares and end up with a higher % holding of the shares left after cancellation.

They want as many shares bought back as possible in order to lower the number left after cancellation.

They want the average price paid to be as LOW as possible.

#2 Those who do want to sell into the buyback want as much money per share as possible for each share that they sell.

They want the price paid for their shares to be as HIGH as possible.

For the sake of clarity the official mentioned in the first paragraph works for one of the IOCs in Kurdistan.

“All is not well in the APIKU camp; who to believe?”

Given the gap between the two versions, I am going for neither at the moment.

Is this an agreed strategy or has someone gone rogue?

If the unnamed guy had put himself and his company in the firing line by putting his name to it then my personal bias would be in favour of him telling it as it was.

IMO we might be getting too focussed on the contracts and meeting when in reality we need to zoom right out and look at Iraq as a whole.

Is the FGI’s vision of their Best Alternative To No Agreement perfectly acceptable to them and for some hardliners, preferable?

Which fields in Kurdistan have the highest production costs per barrel?

What are the root causes, assuming incompetence is ruled out?

Do they also happen to have the highest production levels and produce the higher quality oils?

Given Shaikan’s relatively small production level and VERY low lifting costs, its contribution to the weighted average being asked for by APIKUR will be minimal.

The FGI either need the whole of the Kurdistan production or they don’t.

If they don’t then it becomes about eliminating the bits that they don’t need in the most efficient way they can.

Wrt APIKUR and each BOD, united we stand or will we get dragged into things that are nothing to do with our company?

The FGI have suggested paying back debts, that they previously have failed to recognise the existence of, over 10 years.

Compare and contrast with getting nothing back off the KRG.

Hopefully the IOCs are educating the FGI about the differences between the privately funded oil business in Kurdistan versus the state funded one in the rest of Iraq.

The cost to the KRG in Dinars since the PSCs were awarded is ZERO.

What is the TOTAL cost in trillions of Dinars, adjusted to today’s prices, that the FGI have spent on every aspect of their oil industry over the same time?

That has to be included in any like for like comparison of PSCs versus TSCs.

The PSCs are designed to reward successful exploration through payments over the full course of the contract - reflects fact that IOCs take on the risk of failure.

Interrupting them before completion and amending them has to take that on board.

Given that the IOCs are looking for an average $21 a barrel cost of production before transportation but the latest Budget includes only $14 to $15, is there a time related solution to this mismatch?

Could commercial equivalence be achieved by extending the lengths of the amended contracts compared to what’s left on the current PSCs?

Shifting back to a GKP related group and song.

How about, Gladys Knight (& the) Pips?

Song which might not apply to all shareholders, “Your’e the best thing that ever happened to me.”?

I find it amazing that two very similar groups of words can have very different meanings 🙄

“Production Costs” relate solely to those encountered by the IOC, aka according to the EIA as lifting costs.

The “Cost of production” repeatedly referred to by the FGI relates to how much they have to cough up under any contract in TOTAL. That’s the sum of the approved recoverable costs and the element from which the IOC can generate profit.

The “Cost of production” under a PSC versus TSC is very different conceptually.

It costs the KRG $0 but they give up roughly 50% of the production to the IOCs.

It costs the FGI 0 barrels but they have to pay an amount per barrel of (recoverable costs plus a fixed remuneration fee).

Should be a very interesting first tripartite meeting.

Can someone check my maths?

Using official 1320 IQD to $1.

Total allowed for year is 3.9 trillion IQD or $3000 million.

400kbpd for 365 days is 146 million barrels.

$3000 divided by 146 barrels gives circa $20 a barrel average all in costs.

Way above what has previously been mentioned but still below the APIKUR figure.

No mention of mechanism for getting debts repaid.

@Dumbly, we have been provided, for each day there has been a buyback, with data for the number bought and the av price paid.

On which specific date(s) do your calculations show the constraints were breached?

@belgrano, did you see that Iraq was one of the three named for signing up to extra voluntary production reduction who failed to do so?

Yet another compensation plan has to be submitted, this time by end June.

No chance of them doing anything until Summer is over which will only compound the problem.

Any benefit they were going to get from the easing of the voluntary reductions will not be felt until 2025, maybe even later.

One hope was another country was given a boost to their quota, Iraq will need it when Kurdish production comes official Iraqi production going through SOMO.