Member Info for theoryman

When it comes to getting a bonus what have they done above and beyond what would be expected anyway?

When the pipeline closed they handled the safe shut down of the field - trained to do it.

When the pipeline closed they found a local market for the oil - so did every other IOC.

Shaikan has the very low lifting costs - nothing to do with them, it’s a side effect of the field.

Now how about they have set up conditions for negotiations?

The discount they have accepted for Shaikan compared to other higher quality Kurdish fields appears to be above what the quality difference justifies.

This seems to be a deliberate policy to boost production and demonstrate profitability at low realised PoO levels.

Given their debt free status and profitable running in protective mode, they have then set about distributing up to $10 million and suggested there could be more to follow.

IMO these latter points are a strategy aimed at making clear what their stance will be when as a COMPANY they are in negotiations with the FGI.

We have a zero “distressed negotiator” rating, so don’t even bother thinking it’s anything other than that.

Until you settle we can continue lifting your resource from the ground, because it isn’t ours when it’s down there, and sell it at well below market value - we are under no financial stress.

Given our low lifting costs we know they will be covered by the average “costs of production” needed by the Budget. How do you want to amend the PSC, profit or revenue sharing, without changing its commercial outcomes?

Finally, we know and fully understand why you have said there is no way you will repay the debts run up by the KRG.

How about you immediately repay 20% and claw that back from them through withholding a portion of the Budget? Worth a try but…

As for the other 80%, add it to the unrecovered Costs on contract transfer and we will get it back over time, as a result of our work, through the new contract?

For those who think that OPEC is a side issue, here’s a quote from our favourite spokesperson,speaking to his favourite outlet, Kurdistan24:-

“OPEC meetings will happen on Jun 2nd, the oil from Kurdistan Region must be included in Iraq’s OPEC’s quotas,” Caggins continued.

If belgrano is correct and allowances will be made then there’s no problem. On the other hand…

OPEC+ banging heads together?

MNR not sending production figures to Baghdad, which suits both parties, 🏴‍☠️driven economy and inability to include it in monthly Iraqi production quota.

Meanwhile that production does exist and it is hitting the market at a discount to what OPEC+ production would get.

@alexeliasson, time for you to visit Specsavers and apologise to PUTUP 🙄

The average discount for the years you quoted was not $22, the last one was $27.2 which you obviously read as $22.2.

Otherwise it would have raised alarm bells, why the sudden increase?

Then you would have searched the RNSs for the one where they gave the added discount to Brent caused by the swap to KBT.

The one where there were four months, 2 @$11 extra, 1@$12 extra and one at @$13 extra, giving a convenient average of $12 extra a month.

So if there were 8 months at $23 and 4 at $35, what would the average be?

What a surprise, it’s $27!

The $32 that PUTUP is using is an improvement on that $35.

@belgrano, thanks for the detailed reply.

@belgrano, whenever the implications of OPEC+ and Iraq producing above its quota has been raised, you have referred to the history that implies it’s no big deal.

Given the need for Iraq to reduce its future budget deficit from juggling oil production, export and imports, how certain are you the quota will not be a problem going forward?

At the moment the MNR are not sending the Kurdish production figures to Baghdad, so Iraq is claiming it is unfair to include something over which they have no control.

Previously they claimed that Kurdish production was from contracts they had not approved, hardly fair to hold them responsible in that case.

When the contracts transfer to Iraq, both those mitigating factors are removed, they are in total control and have to manage production from the whole of Iraq.

They are already on the naughty step for their recent production boost, the plan to reduce it again had to be submitted by the end of April and implemented in full by end H2 2024.

Taking Kurdish production off the International market raised the PoO by circa $5 overnight.

What effect are people building in when it returns?

Are OPEC+ going to let that happen without demanding a compensating reduction from the rest of Iraq’s behaviour to redress that effect?

@kheldar, one translation refers to it being contained in a seasonal report, I.e. a summary of events over a given time period.

It contains a reference to something happening recently I.e. the salary flow and something from the past I.e. the signing of the agreement.

IMO, they are two separate events and linking them in any way, shape or form is stretching things.

The quality of the journalism on their Sirani site is generally very poor.

On the 4th of April 2023, twenty twentyTHREE I.e. last year.

Same player, same match.

https://youtu.be/g4wDyCi3DdM?feature=shared

What were people who bought at circa 140p this morning hoping for?

142p gets breached, resistance level cracked, indicators scream Buy, the herd join in, leaving behind two unclosed gaps - a runaway wooosh trend continuation. Anyone Short hiding above 142p would get caught in a Short Squeeze adding more fuel to the fire as they buy back.

What were people who went Short at circa 140p hoping for?

142p turns out to be rock solid. The two unclosed gaps tempt people into thinking they are bog standard gaps that will get closed relatively quickly. People who are Long from much lower Sell, taking profits, and drive the Price down, more selling etc…

The joy of this game is no-one knows who has missed a sitter and who has hit a screamer into the top corner.

💡The more people who do not understand the consequences of the PSC normalising, the better it is for those who do 💡

Ergo whilst it is morally correct to help the former group get a grasp on what is basically a simple concept, it is IMO financially prudent to leave them in their current state, where they seem happy anyway.🇬🇧

@alexelaisson, you are misrepresenting the order of events.

You posted about FCF and a PSC wrt to DNO and used it to cast doubt on someone else’s analysis wrt GKP’s going forward.

For some reason you did not name the person who you thought was wrong- why not?

Did they provide you with data, methodology and reasons for drawing their conclusions in a readily accessible form?

If you name them we can check and then it would be up to you to do the same.

There are a number of posters who always post up the necessary detail and encourage others to take apart their reasoning and conclusions - basic scientific method at work.

Some of the conclusions are not positive enough for some but if the thinking is sound…

@alexelaisson, I was hoping for evidence that the FCF you were referring to was generated solely by their Kurdish projects.

Then I wanted to see how you had taken the raw data which feeds into their current PSC and how it generated the receipts and then the CO and PO and finally the FCF.

If everything matches for a PSC like this one which is functioning normally and it doesn’t fit with what another posters implies will happen to the Shaikan one when it normalises, we could look for the anomaly.

Since that was the basis of part of your post I.e. throwing doubt on their analysis/motivation, I assumed you would have all the necessary numbers ready if you were questioned about it.

@alexelaisson, where are those profits and free cash flow coming from, they have a much more diverse portfolio than GKP?

Have you extracted out the contribution from the Kurdish projects and linked it to their current PSCs, that were enhanced as part of the previous debt recovery?

If so, can you post up the figures so we can compare the outputs with the Shaikan PSC?

“In a significant announcement, Prime Minister Al-Sudani extended the application deadline for the fifth and sixth licensing rounds by two weeks,”

Round 6 is probably best ignored as it’s Gas based. Round 5 plus is very important because it will reveal what they meant by “sweetened” contracts wrt Oil I.e. how far have they shifted their mindset towards partnership contracts.

Remember this is their attempt to put right the debacle which was Round 5.

Doesn’t look like they have been inundated with IOCs vying for position under this new contract regime.

What have they got wrong this time? Insufficient data, not enough time or % takes in the sharing part which are much too low?

Hopefully it’s the latter and it focuses their minds on what commerciality means in terms of risk, reward and CoS when it comes to IOCs funding exploration as they did in Kurdistan.

@belgrano, the article about the 30% rise in pump prices read as if this was down to the state subsidy being removed. As usual there were no figures that allowed us to check if this was the sole reason, or one of many including having to pay more for local oil.

No doubt the comment an IOC made about increased demand for heavier oil was true from their point of view.

Obvious question though, heavier than what API? Were they talking about 28, 26,………,18 being equally in demand?

GKP used to produce production figures on a monthly basis in presentations and payments from the KRG that went with the relevant invoices in an RNS.

They could remove any hopes/fears about what is happening now to the price of Shaikan by doing a monthly RNS combining production and cash up front.

The counter argument is that if nothing is changing then why issue an RNS?

@straycat, wrt #5.

On signing, the contract is either legal or illegal at creation and hence non-existent.

So I don’t believe adding clauses within the same contract, to protect yourself from it being illegal, would offer any protection. No-one can gain anything from a contract which was illegal at creation, which includes protection from the consequences of it being so.

There is some legal precedence that offers support to the KRG having the right to write the contract. That was at an International level in a London court. The FGI though can always choose to ignore such rulings and as the song goes, carry on regardless.

@BB, 43.3 reads to me as protecting the IOC’s commercial benefits from any amendments to the contract imposed by any entity, from anywhere, instigated by changes to any laws - rather all encompassing.

So IF it’s legal at signing it is protected - any amended one must be commercially equivalent.

In order to force through an uncommercial equivalent or withdraw it completely, the FGI would have to show it was illegal at signing.

There are those in Iraq who believe that to be true, based on their interpretation of the Constitution - basically the KRG could not sign an oil related contract without FGI involvement and approval, which was not forthcoming.

Not surprisingly there are others in Iraq who believe the Constitution does give the KRG the right to act independently of the FGI in such matters.

Under a TSC the FGI take on the risk of finding no commercial oil, they take in 100% of the benefit and pay out X% to the IOC.

Under the Shaikan PSC the KRG get circa 53% at the moment for doing NOTHING, no upfront risk, nothing…

The FGI see this as giving away 47% to the IOCs, which is a lot more than the X% it would be under a TSC.

There argument will be that the KRG were stony broke when they signed the PSC, they could not have funded the exploration phase needed under the TSC. That situation was of their own making, it’s not what the FGI would have done.

So why should the FGI now have to pay out the excess for the rest of the lifetime of the amended contract?

It will need a complete reset of how the FGI think about oil contracts - unless of course Clause 43.3 nails down the asked for “commercial equivalence”.

@SeplatWinner, it’s good to see someone new prepared to put their work up for others to look at.

How have you arrived at the $430 million Sales figure for 2025e?

There a number of variables that need multiplying together, so what values have you used for the individual components and why?

This is Iraq, so if the locals get angry enough the FGI will keep the subsidy low but drive the pump prices back down by paying the IOCs less 😁

On a more serious note, that is one hell of a deficit budget they ran last year and doesn’t match Sudani’s comments when he RAISED the spending for this year based on roughly the same income.

Heard the one about the honest Iraqi politician? Asif…