Member Info for ValueS

Last year, GKP issued an operational, corporate and AGM update on the 18th of December. My impression was that GKP had to give an AGM update after 6 months of the publishing of the AGM results that were published in 18/06/2021.
This year the AGM results were published in 24/06/2022, both Mr Jaap Huijskes (the chairman) and Mr Ian Weatherdon (CFO) did not pass the 80% threshold of approval. So, my guess is (if the rules haven't changed) that GKP will have to issue at least an AGM update by the 24th of December this year.

Best Regards ValueS

The way I see it is that "e&" simply decided to re-invest the dividend cash they already got 2months ago + the cash they'll receive in 2 months time + an possible additional small amount to bolster their holdings.

Best Regards ValueS

"Why haven’t they bought more?"

They have! Lots more!

Lansdowne partners first came on as a major GKP shareholder was in 2016 after the restructuring was complete. According to the 08/11/2016 RNS they held 22,563,303 (after 100:1 consolidation) then (9.83% of GKP shares).
According to the latest shareholder analysis page (as of 29/07/2022) they hold 32,545,253 shares (15.05% of GKP shares).

Best Regards ValueS

So where will Europe source crude this winter if spare capacity worldwide is limited? Head of European Oil for Morgan Stanley Martijn Rats wrote in a recent note:

"The oil market is where it is because this question is so hard to answer. If we knew, we could all breathe a little easier."

https://oilprice.com/Energy/Crude-Oil/EU-Ban-On-Russian-Oil-Could-Spark-Worst-Energy-Crisis-In-Decades.html

Best Regards ValueS

My assessment is that the market might be pricing a possible collapse in gas prices and hence oil prices which could happen if the war in Ukraine ends and Russia withdraws; given their recent failings. They have already withdrew from large areas that were under their control.

Best Regards ValueS

ii paid.

According to Reuters, OPEC+ missed its production target by 3.58m bopd.

https://www.reuters.com/business/energy/oil-climbs-ahead-opec-talks-supply-cut-2022-10-05/

Let's wait for the actual payment, should be few days away (max). I am not going to bother. It won't change anything.

PUTUP, the 1H results are un-audited and gives the discount to Brent as $23.3! That is a much larger discount than should be. In any case, according to 1H results it is $47.7 m, but isn't that too low? Compare it to MAR 22 payment ($48.5 m). Average production was 44.8k bopd and average Brent was $117.25. So, GKP should get a bigger payment for June oil sales than they did for Mar 22. What is your interpretation for this?

Best Regards ValueS

And yet they are still dragging their feet when it comes to paying the invoices of IOCs operating in Kurdistan! It is the 27th of September and still waiting for June 22's invoice payment. The best month in the year so far. Production was at 46k bopd (second only to Jan 22) and an average Brent of $122.71 (Best monthly average in 2022) according to Statista:
https://www.statista.com/statistics/262861/uk-brent-crude-oil-monthly-price-development/

Could be the largest payment in 2022, over $50 m. (Assuming discount to Brent = $22 and 28% share of PO).

Best Regards ValueS

https://oilprice.com/Energy/Crude-Oil/How-Big-A-Problem-Is-Americas-Shrinking-Oil-Reserve.html

"GKP still incurs a cost of capex via the lost profit oil share"

Yes PUTUP, but isn't that obvious in my 2 posts (opex is the same in both) :
Capex : Max cash flow : Min cash flow
--------- : ------------------- : ------------------
$180 m : $317.8 m ------ : $153.9 m
$0 ------: $344.38 m ----- : -$167.19 m
--------------------------------------------------

Best Regards ValueS

BSmonitor, There will always be costs to recover (opex) as it costs money to get the oil out of the ground and process it to "export standards" before pumping it down the export pipeline. Capex is also necessary to at least maintain the level of production and reduce gas flaring. For Ex. if capex = $0 and the natural erosion is @ 6% in year X where production is 90k bopd, then this production rate start to decline as follows:

Year : Production rate
-------:----------------------
X : 90,000 bopd
X+1 : 84,600 bopd
X+2 : 79,524 bopd
X+3 : 74,752 bopd
.
.
------------------------------

Addressing gas flaring is also of critical importance to the life of the production sharing contract (PSC) as gas flaring negatively impacts the environment and violates international and local law(s). The MNR has the power to terminate the PSC with immediate effect and they have a history of doing so. For example Genel's contract regarding one of the gas fields in Kurdistan. Genel responded with a law suit against the MNR in the international arbitration court, but that take years to resolve. Also, GKP (was made to?) relinquish the contract to develop Sheik Adi oil field (80% WI for GKP the operator) on the basis that GKP has no resources to develop the field after investing vast sums exploring and appraising the field over many years. See the 17/03/2016 RNS. Two other contracts were also relinquished, namely: Akri-Bijil oil field and Ber Bahr oil field. Only the Shaikan oil field remain.

In any case, reducing capex to $0 does NOT impact the net cash inflow by much. This is because it is the MNR that pays the capex eventually (as well as opex) via the cost oil stream (maximum 40% of sales split between GKP (80%) and Mol (20%)) without taxation. Whereas the profit oil stream where the rest of oil sales revenue run has a maximum of 30% share (R factor = 1 or less) and 70% goes to MNR the owner of the Shaikan oil field and a minimum of 15% share (R factor = 2 or more) and 85% goes to the MNR. Also, the MNR has a 20% stake in this share, GKP 61.5% and Mol 18.5%. On top of that there is the 20% capacity building charge (CBC) taxation on GKP's share of profit oil - being the operator. Here is some examples of the GKP cash flow generation when capex = $0 for different contractor share values with everything else as in the previous post:

Contractor share : GKP cash flow generation
-------------------------:-------------------------------------
30% (R = 1 or less) : $344.38 m ;Maximum in-cash flow
27% (R = 1.2) : $308.94 m
24% (R = 1.4) : $273.50 m
21% (R = 1.6) : $238.07 m
18% (R = 1.8) : $202.63 m
15%(R = 2 or more) : $167.19 m ; Minimum in-cash flow

Best Regards ValueS

Thanks PUTUP. Yes I know, but as you said: immaterial to outcome. Regarding pace of R factor growth I did give the 2 figures for R factor = 1 (30% WI gives $317.8 m) and how it declines with R factor growth until it becomes 2 or more (WI = 15% gives $153.9 m).

Best Regards ValueS

Sorry, Contractor share of profit = 15% for an R factor =2 or more, 30% if R factor = 1. Linear relationship.

Assuming $15 discount to Brent (as apposed to the current ~ $22?). I have no idea what price would SOMO realise for Shaikhan oil, but have read some articles claiming that SOMO sells the oil @ $5-$10 better than the MNR can manage.

Brent 100
Sale Price $85
Less 10% royalty $8.5
Net Sale Price 76.5
Average daily production 90,000
Gross Oil Sales $2,513 m
(a) Contractor Direct Operating/Lifting Costs $101.835 m ($3.10 per barrel of which 80% is GKP ($81.47 m))
(b) Contractor Direct Shaikan G&A $10.25 m (Assumed higher costs for larger operation)
(c) Contractor Capex $180 m (yet another assumption)
Cost recovery $292.1 m (Cost recovery limited to the year's capex and direct costs if historical CRP depleted)
GKP Share Cost Recovery $233.68 m
Total Profit Oil $2,220.9 m (Gross oil sales - Cost recovery)
Working Interest share profit oil $333.135 m (R factor = 15%)
GKP share profit oil (61.5%) $204.88
less GKP CBC (20%) ($40.98 m)
Net to GKP per annum $397.58 m
(d) Corporate G&A $10 m (GKP booked $9.5m for 2021)
(e) Interest 0
GKP Cashflow Generation $153.9 = Net - 80% of (a, b and c) - d -e

As can be seen from the above calculation, GKP's net income is only $153.9 m per year when the R factor = 15% @ $100 Brent and 90k bopd. It would be $317.8 m if the R Factor = 30%. Somewhere in between for an R factor larger than 15% but less than 30%.
============================================================================================
Acknowledgement: made the same way as PUTUP 2023 example given earlier, with necessary editions/recalculations to match this case.

Best Regards ValueS

With recession looming, inflation and the interest rate increases, its a blood bath today across nearly all market sectors. All major indices are down, Gold is down, oil is down and the £ is down.

"Im having to cover a £5k loss this month"

Sorry to hear that! The payment for June 22 should land any day now. It is going to be another bumper payment; greater than the $25m dividend payment + all immediate costs (capex+ opex) for Sept. Hopefully, that should lift the SP back up again. Also, Brent may start rising as Mr. Market gets over the rate increase of 0.75% in the US - the 3rd in a raw :( and China winds down its Covid lockdowns. Fingers firmly crossed.

Best Regards ValueS

According to my knowledge, the production rate declines at a rate of 6% per year. I can't remember where I got this figure from, probably from an old document on GKP website that is no longer there. Before the implementation of the ongoing current FDP which aims at 55 kbopd (originally, now it is 50 kbopd from what I gather). the highest average production rate GKP achieved was 35,298 bopd in 2017. If (hypothetically) GKP sat idle since then to end of 2022, then the production rate would have been:

2018 33,180 bopd
2019 31,189 bopd
2020 29318 bopd
2021 27,559 bopd
2022 25,905 bopd

The current production rate as given by the HYR is 45,000 bopd. This is an increase of 19,095 bopd when compared with the (natural) production rate for 2022 as calculated by the above table. When this is added to the 2017 production rate (35,298 bopd) the total is 54,393 bopd! Also,the natural decline in the newly drilled and producing wells as per the current FDP; namely: SH-9, SH-12, SH-13, SH-14 and SH-15 need to be estimated and added.

So, in reality, GKP would have reached the 55 kbopd if it has stuck to the original schedule of doing it all by mid 2020. It is just all this delay since starting the implementation of the current FDP in 2018 up to now that has led the natural decline to wipe out this achievement!! All IMO.

Best Regards ValueS

"I fail to see the logic here"
GKP does the unexpected (in both directions). LTHs know this for a fact and have learned to live with it. I for one, became almost numb to GKP SP! Just picking up the pennies in front of the roller coaster and waiting for .... the unexpected.

As I type, Brent futures up 1.8%, BP up 1.95%, Shell up 0.97% GKP down 3.62%.

Best Regards ValueS