Member Info for theoryman

Straycat, there is nothing in that quote that implies the company were unable to publish their internal review.

What was interesting/disappointing depending on the reader’s standpoint , was the company has moved away from previous much higher numbers linked to previous regimes/previous other reports and come back towards the last CPR 2P number.

Waiting for the revised FDP before releasing the next CPR seems to be sensible IMO.

In the 2016 CPR there are three references to “gas injection”. The objection to the FDP was based on gas flaring, hence the drilling of SH-9. As a side effect, if that works out as intended, it would hopefully have a knock effect on the recovery rates from different sections; which would be a very important part of any revised CPR.

Looking at 2019 since the latest agreement started.

Feb payment was cleared so late in the month the RNS was 1st March.

The May payment did not arrive until well into June.

The July payment did not arrive until well into August.

All payments due have eventually got paid but not on a regular or even “monthly” basis.

Worry not, someone, somewhere will refer to regular monthly payments. It used to be SZ, maybe it’s in the job description and the new guy will...

Added as an edit - wrong word used leading to potential flaw in logic or maybe not...

For GKP the number of non-voting shares and the number held in treasury are an exact match, because there are none of the former special ones.

Bravedog, the answer to your question is both yes and no because the non-voting and non-dividend issues are not necessarily linked.

Ordinary shares in GKP have both voting and dividend rights, there are no A, B,C... sub groups.

It is possible to create non-voting shares which have dividend rights - there is no evidence of that having happened with GKP.

Shares held in treasury immediately lose both their right to vote and receive a dividend.

For GKP the number of non-voting shares and the number held in treasury are an exact match, hence there are none of the former special ones.

Can you change those rights?

As soon as the shares in treasury, which previously were ordinary ones, are vested they become ordinary shares again with both voting and dividend rights.

As for those specifically created not to have voting rights, I believe it can be done but it ain’t simple.

Rhens, as far as I am concerned this is nothing to do with whether the company is sold or not, it’s whether they have acted within the relevant company tax law or not.

The problem would be solved if the company responded to requests for further clarification.

Those who have questioned them initially got an answer that said they were satisfied with what they had done.

As far as I am aware, everyone who then asked for an explanation of why the alternative was wrong has not received an answer.

If they are so convinced they are correct it would have been very simple to generate an email response putting us right. Something along the lines of, “Your use of shares outstanding in the dividend calculation is wrong because under Clause etc..”

They might even come back with both ways are allowable but we chose the one we did because...

It’s the failure to communicate that is still giving me concerns. My last job involved dealing with often very difficult questions raised by external entities, ignoring them or failing to provide justification for our actions was not an option!

Light bulb moment!

Bonus shares have to created and paid for out of cash reserves - they are not like scrip ones.

Dividends have to be paid out of cash reserves.

Bonus shares can be used as a means of value distribution in lieu of cash dividend.

Now for the relevant clauses.

Shares held in treasury cannot be awarded a dividend - hence no DIRECT transfer of cash allowed back to company accounts.

Shares held in treasury can be awarded bonus shares, along with all others - hence value can be transferred in this way, as a result of the company owning the shares, from cash reserves. At a later stage some or all of those shares could be sold in the market to raise cash.

The difference is a prohibited immediate transfer of cash versus a possible indirect way of achieving it - probably something to do with tax law?

Added as an edit - probably well understood but just in case...

Whilst the bonus shares are free as far as the receiver is concerned, they have cost implications for the company because their creation has to paid for out of cash reserves. So when the company gets its allocation of fully paid up bonus shares free as a receiver, based on shares held in treasury, they have actually paid for them when they were created.

So if shares held in treasury did not qualify for the bonus ones, the company would be hit by a double effect. Not only would they have paid for the bonus shares they would not get the ones they really ought to get if the pro rata rate was applied.

And that’s why IMHO the clause is there.

That is one of the differences between a scrip issue and a bonus issue - the cost implication for the company.

Straycat, I’ll copy the original clause, then add (word) to clarify the 1 2 3 approach implied instead of the 3 2 1 I used earlier.

an allotment of treasury shares as fully paid up bonus shares in respect of shares held by the company as treasury shares;’

an (further) allotment of treasury shares as fully paid up bonus shares (pro rata) in respect of shares (already) held by the company as treasury shares;’

Since the original shares in treasury are already fully paid up and the additional bonus ones are by definition, there would now be more fully paid up ones in treasury - these could then be vested to employees or sold in the open market or cancelled...

This is the process to be followed when there is a bog standard bonus issue to all holders.

Are you reading “bonus” in a different way e.g. a special sort of creation created with of a sole goal of being targeted at employees as some sort of performance related program?

Wish I knew how to do an edit!

Think of it as a flow process, the bonus shares flow out from the company to all shareholders, which if the shares are in treasury and already owned by the company; means some of those shares flow back to the company thereby increasing the number in treasury. There is no need to buy them back because they are free, it happens automatically.

A company can award itself free shares, no wonder it needs a clause of its own!

Straycat, I’m arguing that the clause is there to cover a situation when a general bonus offer is distributed - that was the only type of distribution I came across.

There is no need to generate extra shares in treasury to seed the process. The number of shares in treasury increases as a consequence of the process, it is a by-product.

Start with 90 million outstanding, 10 million in treasury, hence 100 million in issue.

Execute a 1 for 1 bonus of 100 million shares.

Finish with 180 million outstanding, 20 million in treasury, 200 million in issue.

The 20 million in treasury are now there as a result of the company awarding itself 10 million shares for the 10 million it already owned.

The clause is there to distinguish between the company being able to award bonus shares to the ones it already owns but it cannot award itself dividends on them as covered in other clauses.

Every example I could find when looking at the concept of bonus shares treated it as a general process - all shares benefitted provided they were fully paid up at the time. The bonus shares themselves were also fully paid up. There were no examples of a subset being awarded a bonus to the exclusion of others.

Slight edit needed, couple of words went missing.

1 in respect of shares ALREADY held by the company as treasury shares
2 IF the company awards general bonus shares to ALL holders
3 THEN the company should make an allotment of EXTRA treasury shares to those held in 1 above based on the rules used in 2 above

Straycat, i’ll take the sentence below and work through it logically but backwards - I am deconstructing it and reaching a different conclusion. Apologies for the CAPS but I cannot seem to use any other sort of text enhancement on this site.

“ (a) Making an allotment of treasury shares as fully paid up bonus shares in respect of shares held by the company as treasury shares;’”

1 in respect of shares ALREADY held by the company as treasury shares
2 IF the company awards general bonus shares to ALL holders
3 THEN the company should make an allotment of EXTRA treasury shares held in 1 above based on the rules used in 2 above

The reason this needs clarifying as being a right of shares held in treasury, in that the company is actually awarding shares to itself; since they are the nominated holders of such shares. This is to distinguish this right from not having a right to vote or right to be awarded a dividend.

I believe that you are using the word “attract” differently to how I would. To me, shares that attract a dividend have a right to receive it and actually do receive it - it cannot be withheld.

Straycat, the counter argument goes as follows.

Fully paid up shares are those than the owner does not owe any money on as part of a staged buying process.

Bonus shares are those issued by a company to all holders of fully paid up shares, on a pro rate basis.

Fully paid up bonus shares do not require the receiver to contribute any money, they are free.

If a company issues bonus shares then even those shares held in Treasury are allocated them. So if a company has 100 million shares in issue and has 10 million of those in Treasury, then if they issue 100 million fully paid up bonus shares, there will then be 20 million in Treasury.

Shares held in Treasury are not dividend attractive whilst they are held there - which in lieu of an RNS to the contrary must be the case as of now. If they are vested in the future then they do become dividend attractive for the new owners when the share register is updated.

Straycat, I have already posted on why I believe your interpretation could be wrong.

I am making very slow progress on getting an unequivocal ruling on whether the dividend calculation is flawed or not.

The language used in what follows is carefully designed to represent the opinions of those involved, there is NO 100% certainty implied or any implication of a deliberate attempt to break the law.

If GKP was a GB registered company paying tax under HMRC rules then they are almost certainly in the wrong. My sources strongly believe that under HMRC rules, once a dividend is declared it cannot be altered in this way - this is a measure to control tax evasion. ( Basically stopping the transfer of profit out of a company from one way to another, when different tax rates would apply to those methods.)

The company declared a total dividend of $50 million but only paid out circa $49.1 million because it withheld the money allocated to those held in Treasury - that appears to be a breach of HMRC rules, even though it would be a smallish (<2%) and accidental side effect of the method used.

What about Bermuda Tax Law? This bit is my personal interpretation because I am still trying to an opinion from an expert. The key rates are all 0% anyway, so there is no way what they have done is tax evasion because there would be no tax to pay anyway.

There has to be some strategic thinking underlying the continuation of the buy-back just before the dividend ex date and the withholding of the money from the dividend distribution. Why would you buy back shares whose price would drop on the ex-div date, if you knew you were NOT going to get the divi equivalent through the back door?

So I am now tending towards seeing this as the driving force for how they did the divi calc and they knew there was no problem under Bermuda Tax Law.

“ Dear XXXX,
The calculation of dividend per share includes treasury shares as we need to base it on the entire issued share capital, however they will not receive a dividend payment.”

Suppose 50% of the shares were in Treasury for an unknown company.

If they declare a dividend of say $30 million then only half would get paid out!?

So if they really wanted to distribute $30 million they would have to declare a dividend of $60 million.

I know there is a difference between logic and accountancy but is the gap that wide?

Just activated a Plan E sub strategy 1...

Point1, that is my understanding based on the following.

A company is not allowed to pay itself money, so it must not be shown as 33.3 leaving and 0.9 coming back in millions of dollars. It should be shown simply as 32.4 leaving.

Investopedia disagree about the type of shares that should be used.

“ Dividend per share (DPS) is the sum of declared dividends issued by a company for every ordinary share outstanding.”

The shares outstanding are the number GKP used minus those in Treasury.

The net effect of doing it their way is to only distribute circa $32.4 million as opposed to the circa $33.3 million that was available, RNSd as part of the $50 million 1:2 split but covered by the coverall statement at the end of any RNS.

Still working on getting a ruling one way or another but until then some thoughts.

1 in section 42 (15) of Bermudan Company Law it lists 9 situations where shares held in Treasury must not be included in calculations - the dividend per share is NOT one of them. It could well be both methods are allowable and they chose the one they did for a reason.
2 Those shares do not qualify for a dividend but the company were still buying them prior to the ex-div date. What they lost in not getting a dividend they saved by not distributing the whole of the $33.3 million using their method.
3 By mixing the two $25 million dividends, standard and special, they have created a nightmare situation for those organisations that report dividend histories, they often like to keep them separate!

I think there might be some confusion here about the use of the word “bonus”.

If a company awards bonus shares to all shareholders then under Bermudan Company Law the shares held in Treasury qualify - that is one of their very limited rights.

The shares held in Treasury at the moment are not bonus shares in that sense, they are simply shares that are there to be paid in lieu of cash as a bonus for performance. Once you picture them as performance related shares the paradox disappears IMO.

Still trying to get a ruling on this dividend issue. I cannot get a definitive ruling for free!

This drill according to an MNR report from 2013 arrived in their area on 01/06/2006 and that got me thinking.

Is there any sort of linkage between this company drilling and subsequent takeover of the field by its parent company?

For example, in the last 10 years, how many completed drills and how many takeovers?

Consider three areas: Worldwide, Middle East and Kurdistan.

Anyone got easy access to the sort of data required?