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Latest presentation (Half -Year) slide 7 has the July production at 31.0 kbopd, reason given is repair maintenance at PF-1. So the spreadsheet model of the PSC and Agreement is still holding up.

Note the reference to payment of an invoice now only expected by end of the next month, previous reference to 15th of the month now seems to have faded away...

Just bunged the numbers into the spreadsheet and the gross is under what would have been paid if the same model was operating for the PSC and production remained at 36kbopd.

Back to the usual issues with GKP about reasons but at the moment the market seems relieved the payment has arrived.

Two simple possibilities come to mind why the payment is lower than expected:-

1 There has been some money withheld for some reason, hopefully legitimate.

2 The production has dropped from 36kbopd to around 32kbopd for some reason, hopefully non-problematic.

The nett take for GKP is on average 78.3% of the gross. GKP does not get the whole working interest of 80% because as main operator it is treated differently to MOL wrt to certain deductions.

Come Half-Year time from 2015 to 2019, the MNR failed to make the payment for the invoice which was due to be cleared prior to the result’s announcement.

This time with Genel having been paid, it might mean GKP will get theirs “early” this year.

If they do then it could be seen as a positive, but the negatives are it would still be arriving well after the 15th of the previous month, and the the discussions about the missing payments to all the IOCs are still ongoing.

Hi, I don’t know if looking at it in this way was your idea or someone else’s but this is how I would present it if it was mine - which it isn’t!

Working from the latest figures in the public domain and making reasonable assumptions and adjustments to make it easier to follow.

Latest total production 36.0kbopd.
GKP’s share is 80% of the Contractors’ share which is roughly 50% of the total production.
GKP’s shares is therefore circa 80% of 50% of 36.0k = 14.4kbopd

There are a maximum 365 production days in a year but there have to be shutdowns for work overs and pipeline maintenance.
Assume there are 15 days lost, leaving 350 days.

So for the year we have 14.4kx350=5.04 million barrels per year.

So for ease of use call it 5 million barrels per year.

Hence every dollar per barrel above/below the break even, changes the profit/loss under the stated conditions by $5 million per year.

Taking break even at $35 with a PoO of $43 would generate 8x$5 million profit for the year. That’s $40 million for the year or about $3.3 million on average per month.

I prefer to use the $21 reduction after putting the production through the PSC. That way I can distinguish which part of the revenue is Cost Oil (getting agreed costs back) and which is Profit Oil ( fresh cash flowing into the company).

The RNS on the 14th at 07:00 announced that the new guy was confirmed as a Director, so from that time onwards he is definitely a Director.

The RNS on the 15th informed us that during trading on the 14th, which didn’t start until 08:00, he bought shares in the company.

From this I deduced the company in not in a close period because he bought shares whilst he was a Director, where is the flaw in the logic?

The focus should not just be on the price of Brent, important as it is!

In my model the key number is (Brent-21) to allow for the discount that is applied.

In your way of looking at the effect of exceeding the break even value it is (Brent-35).

The closer you are to $35 the % change in Brent leads to a much greater % change in (Brent-35).

Suppose the actual price was $42.5 when you pictured it rising to $50, you have suddenly doubled the profit.

Working out the numbers for each scenario is the easy bit, the really difficult part is assessing the relative probabilities of the different cases happening.

Hi, where in these calcs has the production sharing been applied?

It looks like you have used the total production and not GKP’s share of it to work out GKP’s profitability.

As a rough guide, the Contractor’s share is only 50% - actual figure is 48% give or take a bit.. As a further rough guide GKP gets 80% of the Contractor’s share - actual figure is just over 78% over the year.

So the combined effect is if you work on GKP’s share being 80% of the 50%, the very rough figure of 40% is too high but not that far off.

So unless I have completely missed the point you are making, you have significantly overestimated the yearly profit - try working on it being only 40% of those figures.

As an aside, the last payment was back to being more like what the model I use had predicted - in fact it was $0.1 million higher due to the share of the gross being 79% rather than the more usual just over 78%.

Suppose you wanted to keep secret the potential of a resource.

The key elements would be to keep every piece of positive information out of the public domain in the first place and limit the number of people who know the truth to the absolute minimum.

Would you do the following?

Publish initial positive reports and then follow up with less positive ones - the initial ones are still readily accessible.

Open the data room and let 18 sets of outsiders look at the data...

Publish a slide and then change it - too late.

Publish a slide and then remove it - too late.

Allow employees to speak freely at outside events about the tremendous potential of the resource...

Allow academic institutions access to core samples where the subsequent analysis contains some positive conclusions.

What’s the chance of finding something as poorly constructed as that? Must be a contender for the worst attempt at conspiring to keep information out of the public domain.

andypa, at that time the net payment was always the same $12 million whatever the number of days, PoO etc

Under the conditions that were in place for most of 2019, the net payment would be less than $8 million for June’s production.

The problem is that since then there have been more than one payment that hasn’t fitted the model, so IMO it’s better to wait and see rather than anticipate in a situation that is riddled with so much uncertainty.

The actual revenue was circa 70% of that expected as derived from a model I use, it is normally good to within 1%. For example it predicts the revenue owed from the four months is (72.4 plus or minus 0.4) million.

IF the working interest of 80:20 had reverted to the previous fully diluted working interest of 58:12:30 then the reduced gross 70% to GKP+MOL is magically explained.

I did make it clear I did not like the explanation and that it could be a simple case of two numbers matching by coincidence. If I really want to put a nail in its coffin then I’d point out that the gross was split was 2.1:0.6 which nowhere near matches the 58:12 required.

Throughout the year GKP has to pay the MNR fees etc, usually lumped together in an annual RNS. Under normal circumstances they appear as minor ripples in the space time continuum but these are not normal times.

Suppose some were due to be paid from the last two payments. When you remove them from 0 + circa 4 million it could well account for the reduction to 2.7

Why don’t I ask the company? I have a DNR notice in place, along with a lot of other people, as in Do Not Reply.

h1970, after total produced barrels go through the PSC, just under 50% ends up as Contractors’ Oil, then only 78% of that ends up as GKP net rather than 80% (tax difference).

Put those correcting factors in and I think you will find your circa 50% shortfall is accounted for.

Hi, found this in the RNS from GKP re Full Year Results.

“The KRG has committed to paying for monthly production by the 15th day of each following month starting with March 2020, for which payment was recently received. Dialogue with the KRG is continuing relating to payment of outstanding invoices for November 2019 to February 2020 aggregating $93.7 million gross ($73.3 million net to GKP).“

So I read that as coveting two separate issues.

1 The “by the 15th” component for all future payments is already agreed and in place and started with the April payment for March oil production. ( The RNS re payment was on the 17th but that just about meets “by the 15th“ in my experience. If the payment arrived late on the 15th it gets bunged in with the next day’s arrivals, funds show as being cleared after a short delay and get RNSd the day after.)

2 The ongoing discussions re the missing payments are still ongoing. One part of my brain wants to be involved (uncertainty, unknown unknowns.... ) and another books me in to go and play golf.

Had a rethink about the concept of a “Loss Oil” payment from GKP to the MNR because the average price of Brent was below $21 per barrel, thus generating a negative revenue when the formula was used to convert the barrels generated by the PSC into cash.

As far as I can tell that won’t happen because all the references I can find are to how any profit is distributed, so if there is no profit there is simply no distribution.

Given that the average PoO for April 2020 was less than $21, that generates a negative revenue for GKP from the MNR.

Of the two components I can’t see why the Cost Oil should ever be negative but when it comes to the Profit Oil bit, could that become a Loss Oil payment from the company to the MNR?

Anyone claiming to have written software that allowed for the above to happen? If so, what were the consequences?

CCC isn’t this just a Monday before the third Tuesday in the month effect?

The May 2020 Futures expire tomorrow, so if you hold some and you haven’t got a buyer for the Oil lined up and you haven’t got any storage; you have to sell at whatever Price you can get...

If nothing else does, it brings home the difference between paper trading and dealing in the real stuff!

FH1, that is not a reference to the KRG’s $1 billion, it is an entirely different holding from IMMS which just happens to be for the same amount.

This lawsuit was announced on Reuters late November. Do we know if the KRG has instigated proceedings to get their money back? Always best to get your money out early in situations like this.

Hi, those with good memories will recollect that the Sept payment was lower than expected, compared to the pattern established by the previous 8 months; this one is higher. Will need to wait for the Nov one to see if there was just a temporary unknown need for the readjustments.

If $35 is the break even price for Brent in terms of Opex, then that equates to $6.3 million per month revenue needed from 38kbopd; so this latest payment covers 2 months.

FH1, try searching:

Lebanese Dollar liquidity government indebtedness

Have a read and draw your own conclusions.

Found the article I was looking for.

Written roughly two weeks before the KRG announced the delay in payments and well before any financial problems generated by the virus.

https://www.washingtonpost.com/world/middle_east/with-dollars-running-low-in-lebanon-atms-are-spitting-back-bank-cards-and-locals-are-panicking/2019/11/22/eb74eca4-0a22-11ea-8054-289aef6e38a3_story.html

Read somewhere that this problem with Lebanese based USD accounts re liquidity was already a problem by the end of 2019.

If so, then that would now tie in with the MNR statement delaying the payments which came out of the blue in December.

Will go looking for the evidence later tonight.