Member Info for theoryman

Opulentia, how do you intend the repay the bond holders, by buying back the bonds in the market early or setting up an “account” where profit from revenue is stored until the whole $100 million is repaid in 2023?

Keeping the debt running has the advantage of allowing an extra previously agreed drawdown of $200 million if it is needed - could be because things have gone pear shaped or things are going so well a very rapid increase in production is worth funding ASAP.

You have outlined why GKP should be viewed as a very stable cash cow, so what would be the incentive for the bond holders to give up their 10% over the rest of the lifetime of the bond? IMO they might expect a bit of a premium :)

If you leave the debt running and syphon off some of the revenue into that virtual account, then you have reduced the cash available to be used in other ways.

Over two years you would need to set aside (100+10+10) million dollars or $5 million a month for 24 months.

FH1, maybe a scheme based on a positive delta wrt $50?

So many possibilities, so many companies, so much debt - time for some committees to be convened.

Call me a cynic but my money is on DANA getting their money first :)

FH1, how about the MNR suggest reversing the order of events?

GKP get production up to 55k from 42k, then the repayment of the debt starts whatever the PoO is!

Each month GKP get to keep the MNR’s share of the extra revenue generated by the extra 13k until the debt is paid off.

Hi, if the company spends £20 of the original £100 then the company is now worth only £80, I’m a Physicist so I am using Conservation of Money - probably not an accepted accounting technique.

So the 20 shares are still only worth 80/20 or £4 each rather than the £5 you arrived at.

Could the money doesn’t have been spent more efficiently on buying the shares back or more effectively on increasing the value of the company? Cue discussion descending into unwavering disagreement.

From a chartist’s technical point of view, the higher probability outcome is looking very good indeed and the next one down ain’t so bad either.

The last paragraph doesn’t mean it won’t go pear shaped yet again but with very limited apologies to SM, this is about as positive as I get - it’s a result of experience in a probability driven working environment.

attyg, you wrote, “Overall, I do not view the company decision to buy back 19m shares at an average of, let's say £2 each, a poor decision.”

Suppose you had done the same and after you stopped the price went below 50p, how would you rate the value you had given yourself as a shareholder?

IMO another way of looking at the process, is the company really gave value to those shareholders who sold into their declared buyback programme. My reasoning is if the company hadn’t been buying, the price the sellers took would have been even lower.

Hi, the last paragraph got missed off in the copy and paste of the RNS.

“ In line with this communication, the KRG has now also submitted a reconciliation model for repayment of the receivable relating to amounts owed for invoices for oil sales from November 2019 to February 2020 and the suspended override from March to December 2020. We will work through this submission and update the market when appropriate, as further discussions with the KRG take place.”

So the override which has been suspended is what is being reinstated but the missed ones not being repaid at this stage repaid.

The KRG does have a model for repaying Genel the missing payments and missing overrides.

Hopefully there is a similar model for repaying GKP their missing payments, with discussions about modifying it to the satisfaction of both parties and then implementing it are ongoing at this very moment...

Thanks for the reply. As you correctly point out at the time of the HKN comment, Brent was nowhere near $50, circa $43 seems about right.

The next bit of the HKN comment does cause me some concern, not a lot, just some.

“We continue to stress the importance of a concrete plan for recovery of these arrears with the KRG. The outstanding arrears impact our measure of free cash flow as well as our cash and net debt balances.”

I read that as meaning they could not ascertain what the KRG’s plans were for paying the money back if the conditions were favourable.

Your counter argument that the review will only start once it gets to $50 possibly explains why.

Last sentence parent should be present.

It is only my opinion that they will try to quell the local unrest first but if you think they will give the IOCs priority the same questions still apply.

Hi, hope you don’t confuse looking at the situation in a different way with negativity.

The last reference I can find from an IOC about these missed payment was on 12/11/20 from HKN. They reported they had made no progress in their dealings with the MNR re the missed payments.

So what has changed since then?

PoO rising, signs that at long last the disputes between the regional and central government might be moving towards a mutually beneficial solution but increasing civil unrest in Kurdistan concerning the financial hardships.

If everything goes well then I still think that sorting the missed payments with the IOCs will only come after the KRG have resolved the issues with the local population.

Once they have done what sort of repayment time span are people expecting?

Lump sum?
n equal monthly payments where n is equal to ?
Building in gradual repayment into the new Oil Agreement which needs to replace the parent (Brent-21) which runs out at the end of this month?
Any other?

Simon. you are correct that the historical discount as a result of heaviness has recently become zero in some situations and negative in others - depending on regional supply and demand which are both responding to the present complex situation.

The difficulty in making a comparison of value might arise because I believe that both the two very different products are not sold as such to the market, they end up in a blend.

As far as I know, no-one has publicly announced how the MNR distribute any premiums to the providers of the individual components - that will probably be dealt with behind the scenes as interested parties do their DD.

That should all come out in the wash, again just a matter of waiting for the offers to appear.

Secure link to Basnews English - not a translation through some second-rate app.

https://www.basnews.com/en/babat/653047

Two paragraphs stand out IMO.

Redrafting the budget assuming $48 a barrel, raised from previous level of $41, is pushing the boundary a bit, more IMO likely to lead to future problems.

It’s the last one that really stands out and what if...

“ A statement by the KRG said later that Erbil and Baghdad had progressed to a “mutual understanding” on KRG’s financial entitlement.”

If true, that IMO would be a massive step towards GKP getting rerated - time to sit back and wait.

Hi, it will be interesting to see what price it achieves,potentially first real figure as opposed to theoretical valuations - not identical but still reasonably comparable IMO.

Two points to keep in mind:-

1 HKN reported on 20/10/20 that they have made no progress in their dealings with the MNR re the missed payments. That is directly comparable to GKP as far as we are aware, so the market will build that into the valuation.

2 The oil reserves being discussed here are of a much lighter quality than that which is currently being produced from Shaikan - typically API 36-39 as opposed to circa 18.

Might stand for Making November’s Repayment?

If they transfer the money towards the end of today, the confirming RNS might not even be issued until 07:00 on the 2nd Dec - today transfer, tomorrow clearing & produce RNS, day after publish RNS.

Mind you November last year was when they suddenly stopped making the previous set of irregular payments.

Expect a reduced payment if it does arrive of circa 10% - pipeline attack on the 28th Oct will have impacted on what got to market.

Hi Ken10, you are calculating the revenue generated by the field, if it were being sold at the price of Brent.

You need to put the production through the PSC, workout the % that goes to the Contractors and then the reduced % which ends up with GKP, after deductions made for them being the Main Contractor.

Then you need to use (PoO-21) for their revenue per barrel as agreed.

The $9.9 million gross reverse calculates to 36.3kbopd give or take a bit.

surreyscot, I’d encourage investors to block no-one, read everything and ask questions.

Bravedog and I see things from a different perspective, which is why I welcome his considered input.

I have no difficulty agreeing with my own interpretation of information, which is why I welcome the opportunity to reflect on that of other people.

The last thing I need to do is wrap myself in a comfort blanket and only read the views of people who agree with me.

Bravedog, thanks for pointing that out - never occurred to me that something like that could still be operating in this day and age of instantaneous movement and tracking!

Since every share has a unique identifier attached and each Institution has a unique identifier as a holder, why can’t this be updated and in the public domain on a more frequent basis, as one of the moves towards transparency? (I’m not referring to Nominee Accounts, just the Institutions that run Funds.)

What still stands though is whatever the timeframe, the total sells far exceeded the total buys. I’ve done a quick search about GKP and any current MCSI, nothing concrete either way so far.

Your point raises another one though. If the time delays are as you state, and I think you are correct, how does anyone know whether Institutions and Hedge Funds are currently buying or selling?

surreyscot, have a look at the latest from Morningstar wrt GKP.

https://www.morningstar.com/stocks/xlon/gkp/ownership

If you compare the totals for buying/selling by the Funds/Institutions, it seems heavily skewed towards selling rather than buying.

I realise there are problems of comparison with the usual monthly changes in top 10 holders, Morningstar do it for the top 20 in each category and over a 3 month period.

What anyone sees depends on what they look at and how much they suffer from confirmation bias.

What the data seems to show IMO, is that a number of Funds sold 100% of their holding in the last 3 months to end of Sep 20. The total number of shares involved did come as a surprise.

The trade went through at 75p but the Low for the day was 75.4p because it carried a TNCP code attachment, see the London Stock Exchange site. So it’s a Transaction Not to Contribute to any Price forming system.

So what’s the chances that someone kindly let Voleon buy shares at the price below what others were having to sell at?

The latest data showed they still had 0.48% running, which equates to just over 1 million shares, so 125,000 is nowhere near enough to close from that level. If you think they have got it down to that level since the last update then how have they done it given the volume yesterday?

Since the drop from around the start of August there have been 45 candles on Daily, 16 green, 27 red and 2 dojis. On the days during that period when Voleon bought back some shares, 5 were green and only 1 was red.

So of the 16 green, 5 were days on which they were buying, On each of those days was their action enough to turn red into green or was it a reaction to what was already happening that day and they just helped it stay green?

everhopeful, the Bonds mature in 2023 and that is when the debt becomes repayable.

“The cash balance at 30 June 2020 stood at $143.6 million (H1 2019: $302.1 million; FY 2019: $190.8 million). The $100.0 million of New Notes mature in July 2023 and the Company remains well above financial covenants' minimum thresholds of $15.0 million cash balance and equity ratio of 40%.”

In addition to the $100 million already borrowed, there is an facility to draw down another $200 million if needed and provided certain conditions are met.

Nobull, the cost of the “at least $35 per barrel” insurance is quoted somewhere in the full RNS, from memory it’s under $3 million.

Like all insurance it is wasted money if you don’t need it but great to have if you do.

The breakeven price for the company is circa $35, so they have protected 70% of that income until Dec 2020.

Given even the short term uncertainty attached to the global economic effect of Covid-19, it was something that they had to consider doing.

Even if they don’t end up gaining from it, it doesn’t mean it was the wrong action to take.