Member Info for theoryman

Drilling is a separate issue, different staff pool.

Construction as part of the move to 55 k is a separate issue, different staff pool.

So access to the PFs is restricted to those needed to keep production running.

That was then, whether it still applies now is a different matter and if it still does appl; how long can they continue?

Straycat, Yes and until I get an RNS stating that it has shut down or gone into minimal protective production, then I will continue to believe it is still producing.

Straycat, I read the piece you quoted,

‘Production rates at the field are at c.38000bopd and production currently continues unaffected by the impact of Coronavirus (COVID-19). However, as a precaution, the Company has restricted the access to its production facilities.’

as being two different references to the same physical space.

The part that is already up and running is continuing to do so.

Work on the part that is in the process of being upgraded has been stopped and it is those workers who are no longer allowed access.

So access is still allowed for some workers but not others, hence the use of the word “restricted”.

These are the types of numbers used in the US to justify the right to bear arms.

How about focussing on the causes of deaths on the roads? How many are defined as accidental and how many were avoidable?

When it comes to cancers there are some that just happen to people, no apparent underlying cause. With others there is a definite causal link and they could have been avoided.

Patients suffering from some types of cancers, plus anyone on chemo; are already at increased risk from any infection, never mind this virus. Some clinical trials have already been cancelled, the associated risks have been deemed too high.

The moves introduced yesterday are about increasing the probability of the right care being available to as many people as possible I.e. avoiding deaths.

The system was not ready for this, so they have to buy time. A simple example is the machines designed to aid breathing, the staff trained to use them and oxygen supplies.

At the end of it you will know how many people have died from it, and the financial consequences, but you’ll not know how many deaths were avoided by these strategies.

surreyscot, there are many out there who disagree with your analysis, hope you are correct but certainly not banking on it.

So allowing enough time for your view to develop, Summer Solstice on June 20th 2020 is as good a date as any - just over 3 months away.

According to official records produced by independent medics, how many deaths will there have been in the UK attributed to the Covid-19 virus and its side effects?

There were problems with payments before the Covid-19 outbreak.

There are now two further problems, fall in demand and the Saudi driven rise in production.

It’s not just the KRG who rely on revenue from Oil to fund their budgets, how about Iraq, Iran...

There is only one of those problems that can be addressed immediately, the rise in production. If that was stopped the PoO might rise to some degree - something is better than nothing.

There are two ways of persuading the Saudis to cut back production, either through persuasion or force.

When it comes to this virus and all its side-effects there is only one lyric that comes to mind, apart from the positive thinking “I will survive”.

“She looked at me with those big brown eyes and said,...”

Invstrat, my first hope would be that everyone else would be too busy protecting their own jobs, as opposed to having a go at someone else.

If not, then if the attack was split into a before/after analysis, with respect to the Black Swan and the Price action; then I think I would be pushed to mount a reasoned defence.

They would have to benefit of hindsight and could cherry pick the questions they asked.

Wow! They actually managed to get the VWAP down to 176p for the shares bought back since Dec 10th.

Slight problem though, all those shares are presently worth just 84p each.

The market knew that there was $25 million coming its way for anyone wanting to sell, previous support levels turned into resistance on Feb 6th, lower support levels gave way on Feb 24th and still they kept buying.

Anyone who has ever been involved in performance review, will know the difficulties of differentiating between what should have happened in hindsight, what did happen in real time and the roles of competency versus luck.

So I ask a very straightforward question.

If a member of your team, who you rated very highly, was in charge of this; how would you defend them from an attack from outside your team?

Yeah a really wonderful opportunity to buy yet more low cost shares. Whether they prove to be cheap is another matter.

You never know, they might get the chance to get the VWAP since Dec down to as low as 176p.

As buy backs go, this has to be amongst the most inefficient, if not THE most inefficient in corporate history.

Angina, you asked BroadfordBay a very simple question on the other place and got a lees than simple answer.

Try him again with what is his estimate is of the profit per barrel is if the PoO is $51?

Mine in less than 1 second is $2.7!

(51-21) gives 30, divide by 10 to give an overestimate of 3 and knock another 10% of that to give the much more accurate 2.7

Even neater if the PoO rises and the overestimate starts to get a bit too big to be ignored, is as follows.

PoO=61 leads to 40 and hence 4 but the more accurate answer is just 3.6.

Well just take the 4 divide that by 10 to get 0.4 and take that off the original 4 to get 3.6

For those who deal with numbers a lot, will have spotted that while the 10% is an overestimate, 9% is bang on the money.

Just spotted a very quick and slightly dirty way of getting the upper boundary for the profit per barrel for any PoO using mental arithmetic.

Example of how quick it is to work through in real time.

If PoO=36, then knock of the fixed 21 to get 15 and divide by 10 to get the answer of $1.5 profit per barrel under present financial agreements.

The more accurate answer using the spreadsheet is $1.4, so the quick way will give you an answer that is a bit too big but is certainly in the right ball park.

Here are the steps used and the underlying compounding approximations that lead to the overestimate.

Approx 50% of the revenue from the Oil ends up with the contractors, in reality it is around 47 or 48%

The final split between them turns out to be roughly 78:22 because of different tax demands but 4:1 is easier to use.

The revenue is split CO:PO at just over 3:1, so let’s use 3:1

So of the 50%, the 4:1 split pushes 40% of the revenue GKP’s way and of that, the 3:1 split pushes just 10% as Profit Oil per barrel.

Invstrat, there are three different thing that have been covered:-

The first two are about now.
1 The point at which revenue becomes zero but there are still running costs.
2 The revenue per month which just covers the running costs.

The original one was about the future, that is the profit per barrel once 55kbopd had been reached and all the historical pre-restructuring costs had been recovered etc.

The equation I gave yesterday was for these latter set of conditions and most certainly do not apply now.

The answer to 1 is obviously $21, that’s when (PoO -21) =0

If anyone one wants a very quick and dirty way of getting a rough answer to situation 2 then here it is.

At the moment about 47 or 48% of what enters the PSC ends you as revenue for the joint contractors; call it 50%.

So to cover running cost of 4 you need there to be a spare 8 going in to the system, which means
there has to be 29 at the start.

Revenue is approx 50% of (29-21)=50% of 8 =4

Hope this helps and puts into context what I have been posting.

Back to doing battle in the markets.

Just had a deeper look at the issue. Revenue is based on 90% of the production because of Royalty deduction but the contractors have to pay for 100% of the lifting costs - if my memory serves me well.

The PO takes are different for GKP and MOL because of the Capacity Building tax.

So from the contractors’ point of view, circa $29 per barrel looks to be the ball park figure if the lifting costs are circa $4, to keep running but standing still.

The unpaid part of the lifting costs, as a result of the 90 versus 100, should get paid at a later date but they are no good if you aren’t breaking even on a month to month basis; hence it’s higher than my first estimate of $25 plus a tad extra.

FH1, both components of the revenue stream depend on the (PoO -21), so the payment would become zero when PoO=$21.

But the break even figure is higher than that because during that month the Contractors would have to find the cash for the lifting costs.

If the revenue stayed at zero but each month they had that accumulating running cost, they would eventually go broke.

At the moment the lifting costs are circa $4/barrel, so for GKP to break even under the present tax regime; it needs $25 plus a tad more.

That way the revenue though small, is just enough to cancel out the lifting costs from GKP’s point of view.

What we don’t know is the discount to Brent that the MNR are actually getting when they put Shaikan Oil into the Kurdish Blend. So they might well be making money from Shaikan at that level...

We can have a very good guess at what discount the Blend is sold BUT we do not know how they distribute that based on API, sourness etc.

I know, I know, I KNOW!

I am trying to show the absolute maximum profit that GKP could possibly make from each barrel of oil.

To do this I have used the values for the variables that produce this result.

At one stage the lifting cost were close to $3 before they undertook all the work, so I have assumed it will return there eventually.

If it doesn’t then the profitability is even worse.

If the R factor goes above 1 then it gets even worse.

If the Capacity Building tax is 40% rather than 30% then it gets even worse.

For the last time MIkey, this is about finding the highest value it could be, the real one has to be lower, it’s to establish an UPPER boundary!

Mikey, I am talking about the unused CO and that quite clearly is rerouted down the PO route - see your own posted chart.

To maximise the amount going down the PO route, the amount going down the CO route that is NOT rerouted has to be the MINIMUM.

The lifting costs are unavoidable and they represent the absolute minimum costs that are reclaimable, even if all others are zero.

My initial findings are the profit per barrel at lifting cost of $3 / bbl is given by:

PperBbl= 0.151*PoO-3.68

I’ll leave you to double check that and work out the figure at $33.

Invstrat, I believe that the lifting costs are originally charged to the Contractor(s) and are then reclaimable through the CO route.

What I’ll do when I get time is assume the PoO is x, offset is 21, the production is 55kbopd and the only cost of running the show is the lifting. That way I can assign the known allowable costs to be based on the previous months production and the revenue to be based on the following one.

This is obviously a simplified version of what would obviously be happening but hopefully the simplification doesn’t render the result totally meaningless.

The unused CO will go down the PO route, I’ll also assume that R factor is still <1 and the Capacity Building Tax is only 30% and that it gets deducted from the GKP share of the PO.

I should end up with some function of x and then I can look at how the effective PO/barrel varies as the PoO varies.

FH1, the amount of cash that Shaikan will generate under the conditions you outlined is not the key issue.

It’s not even the total net revenue that GKP would receive.

What really matters is the total profit that ends up with GKP from those billions of cash that the oil from the field generates.

At the moment the revenue is working its way through the company and appearing as a very healthy profit per barrel. This is IMHO an illusion which results as a side effect of the restructuring. The DfE wiped out the vast majority of the debt that the Cost Oil should be being used to pay back. So at the moment most of the CO is surplus to requirements and hence appears as profit.

Once pre-restructuring costs are paid back, the CO will only be paying back real costs that have been incurred since, so reverts to getting own money back, so no profit from the CO.

The only source of profit will then be from the PO and that is where i have focussed my attention.

FH1, I assume you meant the (PoO-21) was circa $40 but there are some points I think need looking at.
Firstly the revenue seems to be the gross revenue rather that GKP’s net.

Secondly that’s the revenue rather than the profitability of the enterprise. Even now the Cost Oil content of the revenue outweighs the Profit Oil by a ratio of ROUGHLY 3:1

Since Cost Oil is just a way of getting back your own money - why not focus on trust the PO?

Under the scenario you outline, what element have you built in for the notional CO generated by the PSC not all being needed at some stage? The good news is that the surplus does gets rerouted down the PO side rather than getting lost but there are two bits of bad news.

That route is heavily weighted towards the MNR share even at the present R factor (70%) plus once the R>1 level is reached it gets even worse until as much as 85% goes their way.