Member Info for theoryman

Hi, assuming 40kbopd plus or minus a bit, average monthly Brent applies to each day in whole month, days in month, discount to Brent...

For the 4 months, best guess based on previous months in millions $ is net to GKP of 75 plus or minus 2

75 plus or minus 5 covers every good/bad outlier I can think of - just a matter now of waiting for these payments to arrive and then we can compare the model with reality.

Just got an email from someone who has asked IR to clarify the very same point.

If they get back to him, and he OKs it, I will post their response on here - hopefully it will finally put this issue to bed.

The company has said that the shares held in Treasury did not receive a dividend payment - which is what should happen.

So by definition it was only the shares outstanding that did - which is what should happen.

Given the number of shares outstanding and the dividend per share, it follows that only circa $49.1 million was distributed.

Now in the RNS it says, “ Ø The Company returned value to shareholders by paying dividends of $50 million in 2019 ...”

So two statements from the company where the outcomes seem to be mutually exclusive, either you paid out dividends of $50 million or you don’t!

Straycat, there are two separate issues here that seem to be mingled.

The shares held in Treasury did not receive a dividend payment. There is absolutely no way they ever should have and according to the company they didn’t - matter closed!

Which number of shares should be used to calculate the dividend per share? The company did it one way and have not changed it. Everyone else I have checked with believes, but does not know for certain, that they are wrong.

A “worldwide” quest for clarification has just been instigated, it could well turn out to be a slow burner or even a damp squib but I haven’t given up.

Does anyone have a DIRECT email address for the new CFO?

Bravedog, re the following point:-

“-the problem of the dividend paid to treasury shares isn’t solved.“

According to a reply from IR published on here 31st October, there is no problem because whilst the shares in treasury were included in the calculation of the dividend per share, they did not receive any payment.

The net result was that instead of distributing the previously declared $50 million through the two payouts, they only paid out circa $49.1 million to shareholders of the shares outstanding. It will be interesting to see how that is represented in the full year accounts.

I have found lots of people who genuinely believe the company have made a mistake doing it like that BUT none, as yet, are prepared to say they are certain - big difference!

BB, agreed there is no way the pressure drops are minimal or any synonym.

I still think you extrapolation is not supported by the evidence.

As for the reference to the aquifer, I hope someone will be able to postulate a negative consequence of the graph shape.

Something along the lines of, IF there is an aquifer involved THEN you would NOT get that shape. So IF there is NO aquifer involved, why would anyone be worried about the ESPs extracting water from it?

BB, you have assumed that they are linear in your extrapolation of a further two years to now but state that they are only “more or less linear” - that could make a significant difference IMHO.

Take SH-1B for instance, use the first year drop and extrapolate that on the graph as a straight line, it drops well below the actual value that is shown.

The slope of the graph looks to me like it is becoming less -ve over time. If you actually measure the first year % drop and the last year % drop there seems to be a difference even to 1 sig fig. (Probably all that can be reasonably deduced from the information,)

So I agree that the pressure is dropping but I disagree with how you have extrapolated it and reached your conclusion.

The question probably ought to be, “Is this typical behaviour for the reservoir drive mechanism they have modelled?”

An extra question aimed at reservoir engineers would be, “What would the graphs look like if an aquifer were a major component of the drive mechanism.” As a physicist I could have an educated guess but I’ll leave it to the experts.

Ss, must admit I had not come across the meaning of ruminate as used by psychologists until you used it.

My experience of the word goes back to ‘O Level’ Latin and the verb ruminare which had two distinct meanings. One applied to animals who were chewing over the cud (hence the word ruminant ) and the other to humans I.e. to turn over in one’s mind.

Given some of the complex problems I have had to solve, I often used to ruminate on their content. It’s a common technique where you repeatedly turn over the issues in your mind trying to find its weak spot but it can be a dangerous one - two extreme outcomes being a Eureka moment or ending up muttering, in a catatonic rock while in a straitjacket.

I have even come across both original meanings being blended, as in a group of farm workers sat in the bar drinking their dark mild, talking about issues of the day - “We are chewing over the cud.”

This last example of the concept of rumination could well be expressed as pondering over or musing about something - something that happens a lot on bulletin boards.

Try the following line of thought -just floating an idea, I have zero knowledge of accounting practices; just years of experience of laws of conservation.

The shares held in treasury already appear somewhere in the accounts as having value, either assumed to be bought at par value or the actual price paid.

In order to buy them the purchaser would have to pay the same amount per share as for those which are outstanding.

So if you buy the shares, the company loses the value they previously had in treasury because the company no longer owns them but you are now the owner of the company which holds the cash you paid for them.

So on one hand you lose value but on the other you gain, circumstances would decide the net result.

Now for the bit I have come across before. Shares held in treasury have strategic value if there is an unwanted takeover attempt. Provided they were obtained lawfully in the first place AND it can be shown that such a move is not unlawful*, they can be bought by someone who opposes the takeover- once they leave the treasury their voting rights are reactivated.

* such a move can be challenged, if the move to stop the takeover can be shown to be not in the best interests of shareholders in general.

All the above is nothing more than my honest opinion, even if it seems logical DYOR.

A clause went missing in the original post, should have read :-

The KRG seems happy to transfer 250 kbopd BUT wants to increase the amount they sell for themselves above and beyond that BUT the ICG want them to limit the amount at below what the KRG are already producing , never mind targeting.

(They are hoping to shift 300k, compared to the present circa 250k left after the SOMO deal but the ICG want it reducing to 200 k.)

I can’t fault your logic about the resource, it should be very appealing for a large, well diversified organisation - one that can afford to take a long term view about both local and global conditions improving.

The issue then becomes on what metric is the company sold at?

The worst case scenario would be a <100% premium of a distressed share price, as a result of things going really pear shaped. The best would be two or more organisations fighting to gain control because Shaikan is a perfect fit for their portfolio.

There are a lot of conflicting requirements hiding behind the new budgetary agreement IMO.

The KRG seems happy to transfer 250 kbopd BUT wants to increase the amount above and beyond that BUT the ICG want them to limit the amount at below what the KRG are already producing , never mind targeting.

The ICG are happy to get the 250 and want to increase their own production BUT OPEC want them to reduce their production and NOT increase it.

The present system seems to have ended up with the KRG being unable to pay the IOCs. So the new system seems to be the way out of this mess but with all the issues listed above how long will it last?

GKP has a single product, it operates in a single region and has a single customer...

Hi, posted this last week:-

“ I’m sure there will be someone who will see this present set of irregular payments as a sign of good things happening behind the scenes - I am not one of them. Whilst regularity of payments is no guarantee they will continue, in my experience irregular ones was never a good sign.”

The market reacted today to the RNS about the double delay in payments. The initial reaction can often be a knee jerk one but after careful consideration throughout the day, it still feels the same.

There is a standard way of comparing different explanations of a single event - the one with the fewest assumptions is the most likely to be correct.

Non-payment of something as routine of this is best explained IMHO, as being evidence that the defaulter has limited funds and the IOCs are not high enough on their list to warrant receiving any of it.

CCC, have been having a think about the point you raised about quotas.

The deal appears to be for only a portion of the KRG’s production, in return for a smaller % of the national budget than they asked for - both sides seem happy.

Any oil passing through SOMO is by definition Iraqi Oil, it’s a state organisation and its role is to market and export surplus Oil from Iraq.

IF all the KRG Oil went through SOMO it would play havoc with the Iraqi quota and they are already getting their knuckles rapped at present levels.

So how about the following compromise?

We can only give you a budget share if you give us Oil. Much as we would like all of it, we can’t take it, OPEC would go ape.

So you give us what we ask for and you sell the rest off under an exemption...

Won’t someone ask how come some Oil from the KRG is Iraqi Oil and some isn’t?

Nah, it will slip under the radar and if they do, just point them to those two sections of the Constitution that were constructed to generate maximum ambiguity.

Ha!
Was rather hoping someone would put a positive spin on it and say that PF-1 and PF-2, in their present states, are maxed out at 42kbopd.

If they are not then could it imply that the 40kbopd at the start of September had dropped to 38kbopd and had been then topped up by the output from SH-12.

So the net increase was only 2kbopd, the rest having used to offset “natural decline” from the other wells...?

If that is true then it really emphasises the need for those ESPs to be fitted and how important their trouble free introduction is to reaching the 55kbopd target.

Working in kbopd to 2 sig figs, the latest figures are interesting.

11 months at 32 plus 1 at 42 give annual mean of 33, so within target - good to see.

Start of Sept it was 40, add in the 4 from SH-12 and we should now be at 44 but they are quoting circa 42.

Any suggestions as to the “missing 2”?

CCC, blindingly obvious that as a result of the latest agreement there is no such thing as KRG Oil anymore, therefore it must still exist!

How about the following explanation aimed at two separate audiences.

Within IRAQ all oil now belongs to the Iraqi people as a whole but for international purposes, in order to benefit from exemptions, it is still separate.

If the press release from OPEC is correct,

“ OPEC’s de facto leader, Saudi Arabia has been adamant those that have previously been overproducing — such as Iraq and Nigeria — must comply with the group’s quota.”

then that implies that not only will IRAQ not be able to increase production, it will have to reduce it.

Will be interesting to see if in reality they will be given any leeway as a result of the internal problems they are facing.

GKP, KRG, the rest of IRAQ, plus others close by, seem to want to raise revenue through increased production.

Either the market, as it stands in terms of supply and demand, will allow that or it won’t. If it was GKP alone then it wouldn’t be an issue.

On the other hand, if a different player or group object to quotas being breached and also raise production....

So in terms of GKP we could reasonably be facing the following. They finally hit the 55k target just as the increased production leads to a revenue neutral or worse outcome.

It is also reasonable to think that outcome will be revenue positive or if it’s not it is only for a short time.

Some see the present share price as being due to dark forces manipulating it so that “the big boys can scoop up the shares at mates’ rates.” I think it merely reflects the new outbreak of instability/unrest and the uncertainty of what the future holds.

Straycat, here’s something I posted on iii September 2017, please note I used calendar days because of the different working week between GB and KRG.

“ For payments to be considered regular there has to be a fixed number of days between them, give or take a bit for weekends and local holidays.

In yesterday’s Interim’s there was yet another reference to “regular payments” but IMHO it is highly questionable as whether that is in any way justifiable.

The gaps between the seven payments, in calendar days, were:

17,28,35,56,27and 40

What’s the mean? What’s the range? Assess the degree of regularity…

Was today’s payment predictable with any reasonable degree of confidence?

I have kept a record of the payment dates starting from early 2016 when the started to settle down a bit.

Including all the data up to the August payment the mean gap was between 37 and 38 days. So basically monthly plus a week.

The smallest gap was 17 days and the biggest was 56 days, so 37 plus or minus 20 covers the lot and seems to point to a high degree of irregularity!”

I’m sure there will be someone who will see this present set of irregular payments as a sign of good things happening behind the scenes - I am not one of them. Whilst regularity of payments is no guarantee they will continue, in my experience irregular ones was never a good sign.

It might be interesting to find out what Experian, or similar organisations, would give the KRG as a credit score.

Mikey, have a read of the types of harm that the FCA get involved with.

This example might scrape in under one part of subsection 1 but I very much doubt it.

Even if it did qualify as something they could look at, would it then meet the criteria for them actually doing so?

IMHO, not a payer! Everyone got double the first divi payment in cents, what is the problem?

Errr, the second one should have been roughly 2.7% higher than double...

The costs for them, and me, do not justify involving expert opinion. Theirs have much bigger fish to fry and I can’t find one on Bermuda Tax Law that does pro bono work!

Next time you meet up with your motorcycling friends maybe you could ask around?

With house, it’s location, location, location.
With horse racing, it’s the going, the going, the going.
With GKP, communication, communication, communication?