Member Info for theoryman

“My question is simply this; will we get that transparency later this month?”

There has been increased transparency in some areas e.g. latest values for the CRP and R factor.

On the other hand compare what used to be standard in terms of numbers wrt to production from individual wells with what we know about SH-13, 14 & 15.

I expect them to continue to be as transparent/opaque as suits their needs.

What does cause me concern is when there is an area where they were transparent but are no longer so.

No surprise then that I will be paying particular attention to the level of detail that accompanies the outcome so far wrt SH-16.

DYOR but IMO there appears to be a shift in language in these press reports.

Initially it was stated that the O&G Law would be produced in 6 months, no ifs, no buts and thankfully one key word was missing.

Now they contain words like “hopefully” plus references to meetings that will continue until agreement is reached and the dreaded C word, Constitution.

There are so many issues outside the control of GKP but a positive update from the company is desperately needed to try and help break the share price out of this long running sideways channel.

“ Note the % ownership is distorted some by the company buybacks” and also by the company issuing shares under the two reward schemes.

Just done a quick check and all those increases in holdings after 2020 big step up from just over 10% to 15%, seem designed to keep them above the 15% threshold by an amount sometimes in the 4th sig figure :)

So in order to retain the power that goes with that threshold, they have been forced to buy more.

@ValueS, thanks for correcting me, again!

As far as my memory was concerned, it seemed like they have been at the top of the shareholders list at 15% for a very long time.

Turns out you are correct and they crossed the 15% threshold on 27/04/20, RNSd soon after - how could I possibly have missed that?

Only thing I can think of was my mind was elsewhere dealing with everything that Lockdown 1 was throwing at me at the time.

So in order to reflect the correct position, I’ll rephrase the two questions.

Why haven’t they sold any in the last 30 months?

Why haven’t they bought more in the last 30 months?

@Victor384, I try to keep an open mind by looking at any issue from both extremes.

Compared to their original outlay, how much income have they derived from the dividends and how much capital growth from the share price?

All they have done is held their original holding, so IMHO there are TWO questions that should be asked.

Why haven’t they sold any?

Why haven’t they bought more?

Saw there was an RNS and brain kicked into “What if….” mode.

If they can make this late payment so early, then maybe they can shift the next one even earlier, then get a double payment in before the year end, then actually make 12 payments in the year, then that will lift sentiment.

Then I saw the title, so back to tracking one of the key income drivers I.e. (PoO-21), apart from the days it doesn’t :)

If you have power and wealth without the O&G Law, why would you sign up for one?

A For the good of the people
B Without one your power and wealth will decrease
C With one your power and wealth will increase
D Some other reason

@Sdoglyons, when you wrote, “No idea on cost pool …”, I thought about pointing you in the direction of some posts that could bring you up to speed - glad I didn’t.

Have now read the post about your working figures for the mid-term FCF.

You don’t need to factor in the effect on the CRP from the DFE because your mid-term only starts when it finishes.

Surprised you didn’t get flamed for pointing out the value of the Working Interest you used and the range of FCF you derive from your assumptions.

Now for some good news, there are X months of production from the end of Oct ‘22 before your mid-term assumptions kick in. In those months the FCF will still be boosted by the workings of the CRP not being normalised.

What is the value of X? Well until the PoO dropped along with production I had it at zero. Then it became at least 3, then the delayed payment occurred and now it’s hmmmmm, higher :)

In terms of 12 months from now it makes no difference when it happens, as long as it happens within the 12 months. In terms of financial years, less of a bonus this year, compensated by an unexpected one next year.

Mediator - OK, we are going to sort this out using impartial analysis, agreed?

Baghdad - Agreed
Erbil - Agreed

1 PSCs are illegal as a direct consequence of Article 111 of the current Constitution.

Baghdad - Yes
Erbil - No

2 A combination of other Articles limits the powers of the Federal Gov and therefore excludes the CGI from interfering in oil contracts in any region.

Baghdad - No, the FSC has ruled otherwise.
Erbil - Yes, the FSC doesn’t exist, International Law etc. applies.

3 Does the FSC exist?

Baghdad - Yes, it was created under Article 44 of the interim Constitution, there were no specified mechanisms for terminating its existence. You can change its membership but it can never cease to exist.

Erbil - No, the Articles in the current Constitution automatically replaced any similar ones in the previous versionS. Article 92 means there is no FSC until the vote takes place.

Mediator, as an outsider it does seem there is fair amount of ambiguity in some Articles and contradictory links between others.

Baghdad and Erbil simultaneously agree - No, it’s all very clear what is meant.

@Jenslehman, I think there has been an element of miscommunication here :)

When PUTUP wrote, “ September's receipt will be closer to $34 million assuming a BIG rebound in production.”, he was referring to the receipt for September’s production and not the receipt that should have arrived in September for June’s production.

If you go back through his posts, he has been pushing circa $50 million for the one that has just landed for a considerable time - it is a very simple calculation if you understand how the PSC is working. (Any uncertainty is due to the change in the R factor and % pipeline payment,)

Just put the known PoO for Sept in to the spreadsheet, along with a range of estimates of production, gives a range of $34 to $35 million net to GKP for the receipt that SHOULD arrive before the end of December, if the 90 day agreement is stuck to for the rest of the year.

@Onepoundfish, a double payment should be a sign of things improving but having looked at the when payments arrive, the data paints a different picture - should have done this much sooner.

A double payment arrives after two non-consecutive missed ones. Looks good but one is the regular payment and the other is for only one of the two missed ones - nett result, still missing a payment.

A double payment arrives after a single missed payment, that is good news but very soon after there is another missed payment - nett result, still missing a payment albeit a different one.

Just double checked the 2021 financial year, 12 invoices submitted but only NINE were paid - I didn’t realise it was that bad. Feel like I have been misdirected by a financial conjuror and I only watched the stuff I was supposed to watch.

The 2022 financial year had been good until this missed payment. Management confidence in the much improved payment schedule allowed them to pay off the debt, give out dividends and instigate some more drilling - let’s hope the KRG are not reverting back to previous behaviour.

@BB, when was the seismic data collected in the area that SH-12 to 15 are in?

Was it 2D or 3D?

Given that all four were Commercial successes, even if the data was 3D, how would it be used to set the the degree of expected commerciality before drilling - does it work at that level?

Agree about the strategic long term thinking but IMO any new IOC would factor in the KRG’s long-standing approach to not sticking to agreements when valuing Shaikan.

@AKP1, the window of opportunity is open but their strategy appears to be let’s not pay the current IOCs on time?

Wrt to your other point, how about flipping that around, the IOCs will not touch Kurdistan until the political shenanigans are sorted?

As a result of the unresolved political issues, the KRG are so indebted that even after a bumper cash generation month like June, they cannot pay the IOCs that are already there within 90 days, by the time September arrives.

Just in case anyone is unaware and thinks is a one off short term blip, the historical agreements to pay GKP within 10, then 15, then 30, then 60 days have all been unilaterally broken by the KRG.

If you want me to put a positive spin on the data, here goes. All the previous agreements got breached within 2 months, this last one kept going for 5 months.

Even if they cough up today or by the end of the week they will have broken an agreement for a FIFTH time…

So will they get a grip and revert back to a sustained run of within 90 days or will it become within 120 days and how long will that last?

End of June R-factor 1.13 leads to GKP’s nett take being just over 36% of production assuming it applied to the whole of June based on my model of the PSC.

So for June it’s 0.362 of 30 times 46000 = 500000 barrels

The pipeline deduction is in the form of a linear equation.

Deduction = (fixed but unknown %)*PoO plus fixed 21.1

Given the exceptionally convenient 500,000, should take less than 5 seconds to deduce what the unknown % is when payment arrives :)

Luckily the R factor only changes after a periodic review, so each month from now on should allow for any changes to it to be detected.

Why do these changes in pipeline fees and R factor matter? Their combined effect will only initially nibble away at the company’s profitability after the CRP normalises.

It’s what then happens under the various proposed scenarios that does matter:-

Steady state with lowest possible costs - protective mode
Steady state with costs matching max CO allowance - marking time mode
Steady state with higher costs - preparing for take off
FDP agreed and off we go

@Straycat, you wrote “Otherwise GKP runs the risk of looking like a Company having a problem in developing the field in a timely fashion and on capex guidance. With or without FDP approval.”

How about this for an example of how to communicate with investors?

From RNS DEC 2019 UPDATE - “The first well of the drilling campaign, SH-12 came onstream on 13 November. During commissioning, the well produced at rates up to 4,600 bopd, in line with expectations and is currently producing at c.4,000 bopd.”

Given that the above establishes the level of detail the company is willing to give and therefore to be expected with subsequent wells, what do we know about SH-13, 14 & 15?

We don’t know what the expectations were. We do know they they all turned out to be below those unknown expected values, but not by how much - from clarity to opaqueness in one step.

If I wanted to plant seeds of doubt to support the view that all was not going well, that is exactly the strategy I would have chosen.

In addition water becomes an issue with SH-10, it gets temporarily shutdown and then released at a lower but now unknown production level whilst awaiting system upgrade.

After years of references to dry oil, we now know there is definitely a water issue with one well but what about the rest? Are they dealing with a localised effect or an increasing probability it’s a field wide one?

On the other hand we are dealing with unknown data from FOUR wells, not 40 or 400, so in the greater scheme it could turn out to be nothing more than a cluster of atypical wells.

I cannot place it in time at all but I can be clear about the context.

They were produced alongside pressure against time charts for each well. From those it was possible to see how a single “traumatic” event caused similar changes in pressure in different wells - key idea wrt inter connectivity.

The graphs also showed the the decline in pressure within each well - perfectly normal.

I remember someone trying to suggest the decline was linear and hence worrying but the rate of decline clearly reduced over time - again perfectly normal.

Hopefully the above will help someone put a time stamp on it, maybe they have copies.

A whole load of stuff was wiped off the archive on the company website - take your pick as to why, conspiracy or incompetence have both been suggested on bulletin boards :)

@Straycat, historically the answer used to be yes but that is no longer so. The company used to produce a month by month stacked bar chart showing the production from each well - non mathematicians should picture a wobbly multi coloured layered cake.

The summit reflected the total production and the timings of workovers and their effectiveness was clear to see in the width of individual layers as time progressed.

I believe there was a change in regime within the company, accompanied by an incoming declaration of more transparency, and those charts stopped.

Six months ago posted a list of detailed information I wanted to see in the full year update and to the surprise of some, the company obliged by publishing the vast majority, including all the really important bits.

So this time what about?

Update on cash in bank.

Update on what the intended shareholder distributions will be before the year end. Pure dividend or pure buyback or hybrid?

Apart from the PoO, the following four numbers are needed to calculate the payments, that should follow the invoiced production, well ahead of their receipt.

Updated production rates to as close to end August as possible.
Updated on how the previous fixed $21.1 reduction per barrel now includes a variable bit based on PoO (Brent)
Updated R factor.
Updated CRP figure

Based on plans in last year’s HYR update, they should now be producing over 55kbopd - three issues previously identified by the company then arose.

Update on progress re water treatment equipment to deal with trace water from SH-12 or elsewhere for that matter.

Are attempts to increase flow from SH-13 &14 still ongoing or have they given up?

Is the flow rate from SH15 still at the low end of expectations?
Again, if so, are there any plans to try to increase it?

They have contracted the equipment, so when and where do they plan to start the next set of drills?

Finally, any progress with FDP and changes to intended Capex?

“ Has anyone got any examples of sales and the premium to share price paid in a politically challenging area of the world such as Kurdistan? ”

The only ones I could find were based on getting large data sets, USA , Europe etc.