Member Info for ValueS

@theoryman, despite the gloomy circumstances when you made that post, you did judge it correctly! And answered your own question: Yes, there is value in the GKP share price.

Best Regards ValueS

"with gross average sales this month to 26 February of c.38,400 bopd, "

The prospect of selling 60 kbopd+ by April or may be sooner, which seemed impossible just yesterday, now look highly likely. If the realised price goes up above $33 by then I won't care whether the pipeline is open or shut. It is better to have advance payment from a local buyer than a payment (that looks more like a ahandout) from the MNR some 6 or 7 months later. The real effect of increased refining capacity in Iraq by at least 310 kbopd should start to show as the Summer approaches.

Best Regards ValueS

It happens when the total payments is equal to or larger than twice the costs, R factor = 2 or more. Could happen fast when payments are made fair (brent -21; for ex.) and on time while production level and poo are high ($80+; 60 kbopd +) and costs kept low. In the past for ex. Opex was @ $2.4/bbl for quite a while and capex wasn't too high.

Best Regards ValueS

"The R Factor is still likely around 1.19 now. So that's a 27.2% share in Profit Oil of which the contractor has 80% i.e. 21.8% now and falling."

Yes, and I shall not forget that the $/bbl falls to $10.51 either when the share in Profit Oil falls to 15%. Thanks for the help and responses.

Best Regards ValueS

It is actually $15.287 in my model, however it comes down if opex is reduced from $3.2/bbl to say $2.4/bbl and/or the capex is cut or the realised price decreased.

In any case It is now easy to find the right parameters where the two methods become equivalent to each other.

Best Regards ValueS

Best Regards ValueS

"the required payment to the Contractor is $14 a barrel - even with ONLY maintenance levels of capex for the field."

Here is the re-adjusted model of monthly payments after CPR normalcy for a 50 kbopd and realised price = (Brent -KBT) = ($80 - $32) = $48/bbl of Shaikan crude.

|Month__Cost Recovery_Profit Oil_Payment_$/bbl__|

|Sept24___$9.072 m___$8.91 m__$17.982m_11.982_|

|Oct 24____$9.374 m__$9.207 m_$18.581m_11.982_|

|Nov 24___$9.072 m___$8.91 m__$17.982m_11.982_|

|Dec 24____$9.374 m__$9.207 m_$18.581 m_11.982_|

|Jan 25____$9.374 m__$9.207 m_$18.581 m_11.982_|

The final $/bbl is still under $12 but only just. Should become more than $12 if the realised price is higher.

Best Regards ValueS

Thanks @TM, found it in the footnote of that slide. I'll re-adjust my model accordingly. But I remember from the CPR something about 56%! The footnote clearly state: "tentatively agreed"! whatever that means:

"4) During PSC negotiations with the Ministry of Natural Resources, it was tentatively agreed that the Shaikan Contractor would provide the KRG a 20% carried working interest in the Production Sharing Contract (“PSC”). This would result in a reduction of GKP’s working interest from 80% to 61.5% and, to compensate for such decrease, a reduction in the Capacity Building Payments expense from 40% to 20%. While the PSC has not been formally amended, it was agreed that GKP would invoice the KRG for oil sales based on the proposed revised terms from October 2017"

Another round of kleptocracy by the MNR I guess.

Best Regards ValueS

" I think he was using 80% at the contractor level I.e. gross and not nett to GKP."

Yes, thanks for correcting me. But isn't that incorrect as well. From memory, the MNR's 25%, which justifies the fall of GKP share from 80% to 56% after CBC was changed from 40% to 20%.

"was is topped up by volume from storage?"

The storage is still there and it could provide a welcome help.

"On the booster side weren’t there two new wells which were drilled tested and ready for hooking up just before the pipeline shut?"

Yes, specifically SH-17 and SH-18. They costed Gkp over $30m to drill, test and connect according to the FY22 results and contributed to the reduction of the cash balance from $118 m to $80 m by 08/08 and nothing else! IMO production can be raised to over 60 kbopd!

Best Regards ValueS

"So slower ramp than I think you've assumed"

I am proplexed that you think it takes a whole 8 months to ramp up production from 30 kbopd to 50 kbopd while we have a previous model of how quickly production can be ramped up. In July 2023 the average was under 5 kbopd, but by 25th of September the 33 kbopd production rate was reached! There are 56 days between the end of July and 25 Sept, and the production was ramped up by c. 28 kbopd clearly showing that production rate can be increased by 500 bopd per day. According to this model, only 40 days are required to increase production rate from 30 kbopd to 50 kbopd.

Regarding GKP share of profit oil, I think it is 56% and not 80%.

Unfortunately such assumptions made your model invalid as far as I can tell.

Best Regards ValueS

Accidental hit of the post button!

I used 25% as the contractor share of PO and did not deduct any CBC. I.e the first table demonstrates the

monthly payment after CRP normalisation.

For the second table I used a flat rate of $12 offer by SOMO. Monthly payment is then simply determined by multiplying volume of oil production by $12. Again, no CBC deducted.

For comparison purposes with the first table, 20% maximum recovery rate assumed and whence this (assumed) cost recovery is deducted from the monthly payment and the result is regarded as profit oil without CBC deduction.

For both cases the net capex is assumed to be $48 m (or $4m pm), which is much higher than the $20 m mentioned in the latest RNS, so that production level can be maintained.

The first table shows that after CRP normalisation the $/bbl is even less than $12/bbl under the current terms.

"Under what terms? If the current contract terms held, the recovery of the CRP would be faster than you've projected in your first table. "

For the first table, under current contract terms. Just as if the MNR was making the monthly payments in the past. I used 25

If capex is restricted to $4m pm (GKP contribution), and for $3.2/bbl opex plus a small amount for recoverable G&A, then c. 17.5% of gross sales after 10% royalty should be sufficient to recover the monthly costs. Assuming the pipeline opens in early April and the production rate quickly ramped up to an average of 50 kbopd by mid June 24, such that the normalisation occurs by the end of August 24. Here is a table of GKP monthly payments for September 24 to January 25 might be:

|Month__Cost Recovery_Profit Oil_Payment_$/bbl__|

|Sept24___$9.072 m___$7.484 m_$16.556m_11.038_|

|Oct 24____$9.374 m__$7.734 m_$17.108 m_11.038_|

|Nov 24___$9.072 m___$7.484 m_$16.556m_11.038_|

|Dec 24____$9.374 m__$7.734 m_$17.108 m_11.038_|

|Jan 25____$9.374 m__$7.734 m_$17.108 m_11.038_|

Under the SOMO proposal (assuming it is correct as you said), GKP gets a flat $12 but reduced recovery. Given that only c. $50 m left in the CRP for GKP; the rest is locked up in unpaid invoices. I am not bothered anymore about the maximum amount of cost recovery, so I'll assume a maximum of 20% of gross sales after royalty is allowed by SOMO. The Profit Oil stream can then simply be calculated as monthly payment minus cost recovery. Here is what the monthly payments for Sept 24 to Jan 25 under SOMO might be with similar realised price and production rate:

|Month__Cost Recovery_Profit Oil_Payment_$/bbl__|

|Sept24__$10.368 m___$7.632 m__$18 m____12___|

|Oct 24__$10.7136m___$7.8864 m_$18.6 m___12___|

|Nov 24__$10.368 m___$7.632 m__$18 m____12___|

|Dec 24__$10.7136m___$7.8864 m_$18.6 m___12___|

|Dan 25__$10.7136m___$7.8864 m_$18.6 m___12___|

Best Regards ValueS

"It gets 36% only because we are still recovering historical costs"

So, let us see what the KRG monthly payments look like after CRP normalisation! Production rate = 50 kbopd; realised price = $48/bbl

"Now how do you invest for growth?"

Firstly, $12 is better than the current $9.72.

Secondly, see condition 2, no further investment unless SOMO increases the offer. Only c. $4m pm to maintain functionality and (hopefully) production level.

Thirdly, don't forget that the KRG failed to pay 6 months invoices worth $151m out of 11 (from JUN 22 to MRCH 23) after fully paying a previous arrears. I'd rather have a safe $12 than a risky $17 particularly if that is coupled with reimbursement of the $151 within say 15 months! See condition 1.

Best Regards ValueS

"but if they are offering $12 to gkp is that really such a bad deal? "

According to the latest RNS, the realised price for Shaikan crude was $27/bbl. GKP gets 36% of gross sales according to the 'current' PSC setup, that is just $9.72/bbl for both cost recovery + profit oil streams. Therefore, GKP ( and I) should be happy (chuffed) with a $12 offer from anyone. If that is coming officially from SOMO, then I'd get up and do the 'moon walk' in celebration! But on two conditions:

1- SOMO recognizes the past invoices and puts a firm plan of payment ASAP or obliges the KRG to do so.

2- SOMO buys ALL the oil that can be extracted from Shaikan at full production capacity without pressuring the contractors (GKP/MOL) for further investment, unless they are prepared to up the offer.

Best Regards ValueS

This means that Iraq's refining capacity has increased by at least 310 kbopd since this time last year!

"Our Colonel (but seemingly 3wks old)"

How about getting the KRG to pay the past invoices Colonel! It is obvious who is strangling the IOCs working in Kurdistan. Payment for past invoices is now more important than anything else. $151 m is due to GKP.

"Classic example was shell pulling out from huge Iraqi contract"

With Winter approaching its end, and the extremely hot Iraqi Summer starting in less than 3 months time. Iraq will have to buy Iranian gas again as the demand for electricity used for air conditioning hugely increases. As the US$ can't be used to pay for it, the oil for gas deal between Iran and Iraq will have to be reactivated, about 100 kbopd? And another 200 kbopd (at least?) will have to be fed to the local refineries more than last year (140 kbopd for the newly opened Kerbala refinery alone! And another 20 kbopd for the expanded Haditha refinery!). Where will all that oil be coming from? Certainly not by cutting exports. If the pipeline still closed by then I think the volume of 'local sales' of Kurdish oil will hugely increase. Whatever the case, I'm optimistic that Gkp revenues will increase in the coming months. Whether the pipeline opened or closed!

Best Regards ValueS

Come on Mr Gabriel Papineau-Legris, your next move should be a buyback programme of some 20% of outstanding GKP shares.

You can do it! I know you can!

Return the excess cash to its owners rather than keeping it sitting at the bank doing nothing.