Member Info for theoryman

Have you got a link to where they stated the deal will be better?

@opulentia, why on Earth would SOMO offer even better terms than the present PSCs?

In terms of the profit component that the Contractors get per gross barrels lifted at present PoO, even KBT, it is much higher than the equivalent fixed sum SOMO pay through their average TSC in the rest of Iraq.

The incentive to do what you want the IOCs to do is already built into the present PSCs, it’s the payment delays that have stopped it happening.

“The sources said the court decided that KRG is an organ of the Iraqi government, therefore a legitimate entity under the ITP deal.”

Yet another ruling by an international court that seem to confirm that when the KRG enter a contract they do so under the overarching umbrella of the Iraqi Government themselves.

So when the FSC ruled the PSCs were illegal under the Iraqi Constitution at the time, they were illegal from creation. Basic rule of contract law, no-one can be allowed to benefit from a contract that was illegal when it was signed.

So the FSC ruling combined with International Law seems to imply that the CGI itself effectively entered into illegal contracts with the IOCs.

All the oil that has been lifted under those illegal contracts cannot benefit anyone involved and yet it can no longer benefit all the people of Iraq because it has been removed from the ground!?

If it goes to arbitration how long will that mess take to unravel and get a judgement issued and who would get compensated by whom?

@AHojj, there are two conflicting reports of who owes what to whom.

The FT carries one version that comes from a source who wasn’t allowed to be an official source - this version appears in many reports.

The other version comes from a Twitter account which looks like the official one for the Turkish Energy Ministry - quoted by Kurdish sources.

Throw in references on chat boards that the KRG indemnified Turkey from the consequences of carrying the oil and you have a perfect mix for producing uncertainty.

Now given the three participants are the CGI, the KRG and the Turkish Government should anyone expect anything else?

Those involved have had every chance to put together a quick short term temporary solution to the situation that has arisen. Either that is now proving more difficult to achieve than any of us can understand or they feel it’s worthwhile spending a bit more time having a go at a permanent one.

“Today/tomorrow/by the end of the week” coming from junior members of various committees is not worth the aether it twittered through as far as the market is concerned.

As previously suggested, this needs a statement from the top, preferably a joint one, stating that the underlying issues have been resolved to the satisfaction of all parties and exporting through the pipeline will recommence at hh:mm on dd/mm/yy local time. [ If this was in Lebanon they would have to specify which local time :) ]

Every decision has to be released at some time. Could be a.very simple reason, decision released to those at the top, standard embargo in place, which ran out on Friday evening.

The potential good news is, whether deliberate or not, it allowed two full days for the CGI and the KRG to come up with something that doesn’t spook the market.

The potential bad news is, someone knows they won’t be able to and this is designed to expose just how fragile the recent progress has been.

If you are into conspiracy theories everything you don’t understand opens up the well trodden path to creating another one. Why not create two for the price of one?

Only two things matter, firstly will there be any joint press releases before the market opens and secondly how will the market react to the lack of any or their content if there are.

If Baghdad now declares that it is legal oil under a new TEMPORARY agreement with Erbil then it looks like it can flow again, unless of course the FSC then rules that the temporary agreement is itself illegal under the Constitution, then it would have to stop again.

Does the proposed budget agreement include the extreme scenario where the KRG export zero oil and yet they get 12.67% of the headline budget figure which is now considerably lower because their contribution to the total no longer exists?

That ruling was about the past, the key question is what role will it play in determining what is happening today and the future…

Storm in a tea cup, easily resolved under new cooperative conditions OR a major spanner in works that causes everything recently achieved to unravel, a complete disaster?

If anyone is having a go at the correct maths and building in an assessment of the R-factor then the following numbers come a stage before what follows from PUTUP.

“ Profit Oil less CBC is currently closer to 7% of gross field sales.”

GKP is getting circa 36% of the gross field production, anywhere between 35 and 37 is OK.

This 36% will be split roughly 4:1 CO to PO after 20% CBC.

So the PO after CBC is roughly 7% of the gross production.

Einstein was in favour of simplifying a problem but only to the stage where the simplified one still represented the original complex one - you have gone way beyond that.

You are using too many wrong numbers to end up with anything realistic unless you accidentally include self cancelling errors, which you are not.

The correct maths is also simple, why not use that?

If you think the profit will run at 20% of your “turnover” figure you will be very disappointed.

When I see “110,000 barrels of oil per se at 100 dollars turns over 4 billion a year.”, is it no wonder he posts his analysis :)

Looks to me like someone is using a calculator to multiply three numbers together and only the 365 is the correct one.

No attempt being made to assess the profit derived through the PSC which is rather important since the company operates under one.

@Armas, PUTUP posted his analysis of the FCF going forward under a given scenario and your response is to attack him personally and question his motives.

Do you think he is correct, if so why attack him?

Do you think he is incorrect, if so why not attack his analysis?

“ "A joint account will be opened, but it will be managed by the KRG. The Iraqi government “won’t have access to do anything except observing,”

Is this a special Kurdish joint account then, a joint account where one holder has unilateral control?

Financial oxymoron or poor translation? In either case …

“ There's still a decent amount of money to come in from the historical CRP. The increase in capex coupled with the lower receipts has pushed normalization out to around September/October this year.”

As late as that? Originally had in done by Dec 22 at the latest, then shifted it to Mar 23. I am very very close to giving up on modelling this, too much opaqueness and uncertainty that seem to lower my expectations when things clarify and they aren’t that high to start with :)

Try this, prepared it for another group of investors. It reflects my understanding, if anyone disagrees with it get them to explain why, I can’t :)

Have a read of the first bit, covers up until now. When you have had a think, get back to me and I’ll answer any questions and add the future bit.

Imagine that GKPA was the company before restructuring in 2016.

GKPB has operated since then under the DFE effect on the CRP with Brent minus 21 then 22 and finally 23. The boost to cash flow came from the $500 million that should have left GKPA to pay back the people they borrowed it from but GKPB didn’t have to do that, it was theirs to keep under the DFE swap. (That is THE key bit if you want to understand why GKP suddenly became more profitable.)

That 500 plus a bit from Profit Oil allowed the $100 million Bond to be repaid and over $400 million distributed in buybacks and dividends since 2019. The unused bits from previous PO are now sat as cash in the bank.

A superb piece of work. I am still trying to work out how I underestimated the discount of Shaikan wrt KBT by so much.

Best explanation is a triple whammy. I underestimated the current API of KBT, overestimated the current API of Shaikan and underestimated the hit due to its Sulphur content.

I am assuming the new system will stay but hoping there will be some boost from a tweak to the internal working of the PSC .

I genuinely think production is on the up, no evidence other than I like where these latest drills have been placed.

The quality discount to KBT is fixed but it looks like the KBT discount to Brent is reducing. Previous drivers with the last bit were Feb FSC ruling and Russia dumping Urals.

How much will production have to rise YoY to compensate for natural field decline AND then compensate for the KBT switch just to stand still in terms of receipt received.

Auto correct at work again, I did type busy but maybe it knows better?

If Opu does show up, probably bust at the moment topping up again, could someone refer him back to his $60 million by year end comment?

Did he actually mean the total receipts for Oct plus Nov and December?

If so he has probably underestimated it a bit and I will apologise for doubting his knowledge, skills and understanding.

@itsaponzi, they don’t pay a reduced price on the whole production, they pay the full realised price but on only GKP’s entitlement share of production - at the moment roughly 36% give or take of the total lifted.

There are the Supremes, the Iraqi Supreme Judicial Council and the Federal Supreme Court.- three different groups .

The last attempt at the draft Law for the FSC in 2019 went really well didn’t it. Apart from who should be on it, how many should be on it, who had a right of veto and what the quorum was it was smooth sailing.

Seriously it actually makes the O&G Law drafting seem relatively very simple.