Member Info for theoryman

Sorry, the arrival of our 3 year great niece needed my attention.

Agree about the TSC being potentially better in a low cost PoO environment - there are no zero invoices if it drops below $21 like happened one month.

When it comes to the recognised government again I agree but the question was at the time, did they have the right to issue the PSCs.

International legal opinion, in the absence of an Iraqi one, thought they did.

The FSC has now issued the Iraqi one and ruled that they never did have that right - seems to me they were therefore illegal at creation, as opposed to being initially legal and then becoming illegal through activity.

As c*ckeye pointed out the market at the moment doesn’t seem spooked by these developments.

Off to the park now, full on day with a toddler about to start…

@ValueS, I raised the partial similarity to an RSC on here at the end of May, “ A “KRG PSC” is effectively a mechanism to create a TSC (allowable under the Constitution) where the profit element allowed per barrel produced for the service provided, is not fixed as it is in the rest of Iraq but varies with the PoO.

The key defence is money generated at market through the action of the government is shared at some later stage. ”

As written it is a PSC and therefore IMO needs rewriting but what form would the rewrite take?

A fixed profit per barrel allowance as in a TSC or a variable one?

What rates will be used, the present high PSC level resulting from the current PoO or the the much lower ones used in Iraq?

How will the market react wrt the present IOCs operating in Iraq if it’s the lower one or how will the IOCs in Iraq react if it is the higher one that they don’t get at the moment?

@c*ockeye, from Kurdustan24, “ Those IOCs - which include Addax, DNO, Genel, Gulf Keystone, HKN, Shamaran, and WesternZagros - operate in the Kurdistan Region …”

Agree about the market’s view at the moment and that’s what matters. As BB points out, they don’t even seem able to form a government this time, never mind agree and carry out any legislation.

The ministries though are still functioning, and as far as I can tell, it’s them that are driving the implementation of the FSC ruling.

The IOCs will either go to court and answer the summons or not, and then it will get interesting…

@c*ckeye, what you described was what it used to be, “ It's one side pointing at certain articles within the constitution and the other pointing elsewhere. ”

There was no legal ruling before, just opinions. Now the FSC has stated which Articles in the Constitution the KRG were in breach of and what the consequences are for the contracts that were drawn up.

As a LTH you will remember that previously the FSC would not be drawn into giving a ruling, this time they have.

Contract law is established by legal rulings and the fact that the KRG don’t agree with the ruling has no standing because they are only semi-autonomous, this federal ruling applies to them.

Anyone who thinks what is happening now is just a continuation of what has been happening for years has not understood the key difference.

Previously it was political ping-pong between two governments based on two different interpretations of the same Articles in the Constitution.

This time there is a legal ruling from the Federal Supreme Court that both governments have to accept and implement. When it comes to counter noises coming from any court in Kurdistan then they need to “count the stripes”!

90% of the problems might be solved but the oil contracts are in the remaining 10%.

If anyone thinks a PSC can function under the FSC ruling wrt to Article 111 then I would like to see their logic.

If every PSC has to be renegotiated then what will replace them? If it’s pure TSCs like in the rest of Iraq then at what FIXED profit allowance per barrel?

@Straycat, I can assure you that being a self employed professional gambler is a serious business.

As a mere grunt I feel that any level of bucks come with the commensurate level of responsibility. The sort of serious business you are referring to is in my mind just a matter of scale.

How about taking my other point, the introduction of SH-9 just before he started and how that has made his bopd figures seem better than his predecessor’s?

He was handed 43k on a plate and where are we now 17 months later?

Remember it was on his watch that the 55k target was moved forward, before being moved back and then missed, and then being further adjusted downwards by the end of 2022.

Correction - auto adjust struck.

In 2020 JF had to contend with four missed payments and the collapse in the PoO, hardly a scenario for a full scale attack on increasing production.

In 2020 JH had to contend with four missed payments and the collapse in the PoO, hardly a scenario for a full scale attack on increasing production.

By the end of 2020 the introduction of SH-9 boosted production to 43k bopd, which looking at the subsequent months was a key reason for the 2021 average of 43.4k.

Both SH-13 & 14 should have come on line in 2021 to give the boost to probably just below the 55k target, neither did.

I don’t think either of them have performed above and beyond what should be expected as a minimum.

@Straycat, how about the following metric which removes everything that is completely outside his control ( PSC, DFE effect on CRP and PoO etc..)

He can decided how many extra wells to drill, where to drill, how to make the best use of wells that are already producing and how to get the best out of PF-1 and PF-2.

Key success criteria = Bopd divided by total number of wells drilled

Haven’t done the calculation for each year the company has been producing but gut feeling is that the failure to hit 55k as a result of SH-12, 13 and 14 would not reflect well on him for 2021.

On my chart the highest. gap opened at 270p, so still unclosed.

All that’s happened is today’s price action took it a smidgin below the level it gapped up to.

So at the moment it is still yet another unclosed runaway gap up in the upward trend BUT if it does get closed by a move below 270p, then what type of gap will it turn out to be?

A standard gap that opened and closed , nothing to see here, move on OR an exhaustion one?

@PUTUP, your wish for “ Shame they can't have sales escrowed before distribution to operators and KRG/Iraq respectively.” would IMO be the KRG shooting themselves in the foot wrt interpretation on the Iraqi Constitution.

A “KRG PSC” is effectively a mechanism to create a TSC (allowable under the Constitution) where the profit element allowed per barrel produced for the service provided, is not fixed as it is in the rest of Iraq but varies with the PoO.

The key defence is money generated at market through the action of the government is shared at some later stage. The increase in the delay time, maybe the odd four missed payments all add background to the story that production is NOT being shared at the surface and the IOC can then act as an independent seller.

888 trades on Friday, it’s the Chinese signalling again I tell ye!

When the legal experts employed by the companies reached their opinions, there were no legal rulings on the interpretation of the relevant Articles within the Constitution; now there is the one from the FSC.

Q1 Would those same experts give the same advice now?

Production SHARING Contracts are never used by the CGI, they believe that you cannot share the PHYSICAL oil production from one area within the country with an IOC, because they fundamentally believe it belongs to all of the people throughout the country.

They have no problem with selling the oil and then sharing the proceeds with the IOC through a SERVICE contract.

With the GKP PSC, the MNR has never let the company take its share of production and sell it independently, it does on its behalf and then shares the proceeds via the monthly receipts.

Q2 Is that a deliberate tactic to introduce a bit of fuzziness, “…honest guv the oil itself never really gets shared.”?

PSCs often include as standard, clauses referring to the use of International Arbitration to resolve disputes arising from the contract between the company and the Government which issued the PSC.

Q3 The CGI didn’t issue the contract in the first place, so why would any company be able to take the CGI to International Arbitration?

Q4 Is there any mechanism by which the IOCs can appeal the FSC ruling, either within Iraq or externally?

@Straycat, whichever future scenario anyone considers it must be based on the monthly $9 million Profit Oil base.

If no expansion takes place, low cost steady state ensues, the unused CO gets redirected down the PO route. This is heavily weighted towards the MNR but GKP would benefit.

The 9 would increase until it reaches a maximum and then start to decrease as the R-factor increases.

If at some stage the expansion started then the CO route would rise again at the cost of the PO route. Both GKP and the MNR would lose PO but the MNR much more so.

The self funding mechanism you have outlined works best for smoothed costs over an extended period as opposed to a one off large chunk that needs to be paid upfront.

It would also be interesting to know if at the end of any stage the production increased from the starting level and then have a mini compounding effect.

If the loan mechanism is used then IMO it makes sense when modelling to use the CO to build up a sum to repay the loan on maturity and pay the coupon out of the PO.

Up until the problems with SH-12, 13 & 14, my major concern has always been those 4 missed payments and the steady increasing drift in time between invoice and payment. (10, 15,30, 60 and now 90 days).

After SH-15 is analysed, it will be interesting to see where SH-16 and upwards are drilled and what the outcomes are, plus whether PF-3 keeps its intended location or not, wherever that was when Malcy visited.

At the moment the market loves GKP. One of the potential outcomes of the present pattern on the adjusted chart has a reward:risk versus chance of success that offered superb value. Doesn’t mean this particular one will deliver but if the portfolio contained 39 similar ones I would be a very contented investor.

@straycat, from a post earlier this month from PUTUP.

“We now have updated pricing data from the EIA.?Average Brent for the month $104.5753 (versus $117.2452 for March).?For now I am assuming average daily production of 45,500, a slight uptick on March. My current expectation is (+- $0.25m):?Cost oil recovery of prior capex/opex $32.8 (versus circa $11.3m of costs added to pool in month)?Profit oil $11.4 ?CBC withheld $2.3?Net to company $41.9 million “

Working to 2 sig figs, there is $33 million of prior capex/opex versus circa $11 million of smoothed current.

That is a bonus of $22 million a month which is derived from the one off effect of the DFE, which had a fixed value.

It is not a question of if that bonus pot will be emptied, it is a question of when.

So the Profit oil of $11 million less $2 million of CBC, means there should be just $9 million from which profit would normally be generated.

But at the moment it is the 9 plus the bonus 22 to give $31 million.

I haven’t seen any figures suggesting the present situation will extend past production for Dec 2022. Have you got a different view?

So next year IMHO could well be very different, without the effects of all the other unknowns, in terms of profit generation - still good but nowhere near the present boosted level.

In the process of supervising work costing €1700 without the use of an anaesthetic, so hoping the above is either wrong or if correct, already built in by the big players in the market.

@not2night, I use tradingview. On their charts in the bottom right hand corner there is an Adj button.

GKP is the only share I use it with, the repeated dividends have a MAJOR effect on any pattern.

@PUTUP, it’s not just the rise after adjusting for the dividend, it’s what that rise achieved on the adjusted charts.

1 Removed the possibility of a failed 5th that was flagged by a falling M.

2 Changed a potential rising W into a confirmed one.

3 Smashed through a strong resistance level with volume and remained well above it.

4 Kept all three previous existing runaway gaps up alive and well.

CCC, IMO. ‘well’ is an understatement, I think ‘very well’ is sill one, I’d plump for ‘exceptionally well’.

Most of the day the PoO was not the driving force for once, it was about a pure a reaction as to how the market sees GKP alone, as we have had for a considerable time.

Above comment to be taken in the context of my previous post and I have just taken three goes to subtract one number from another.

On the Zoe app there is a box for unusual symptoms - tempted to put Acute Dyscalculia when they contact me tomorrow.

@VS, my own personal experience at the moment is dealing with COVID.

Very mild cold like symptoms so far, apart from very sore eyes and a split brain effect. The creative part is on overdrive, the routine part keeps making stupid mistakes.

I think I have come up with a very different way of solving a problem that has been plaguing one of my projects, problem is I can’t read the numbers I want to use and if I can do I will probably mess up how I use them.

Thanks for pointing out my mistake.

Time for my afternoon nap :)

opulentia, over my investing career I must have received thousands of dividend payments. Since things moved from phone calls to online I have never had one problem with executing a plan based on T+1. If I did, that broker would no longer be my broker :)

Very surprised that no-one has mentioned the dividend adjusted charts, new yearly High achieved after powering up towards and then through what looked like a potential problematic solid resistance level.

Think I am right in saying that if anyone bought into the Open Offer at 0.8314p or 83.14p after consolidation, if they have them in a tax free wrapper, they will have got all their investment back after the next 9p div.

So their original money at risk will be zero and their profit at risk will be the ex-div price after the next 9p.

No idea what the big hitters involved in the DFE paid for their shares, probably less than anyone else at the time but depending on their tax set up they must be in a similar position IMO.

A simpler way of looking at it is what does the ex-div signify?

It means if you buy today the share come without the dividend.

Guess who does get it? Correct, the person who sold it to you does.