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Whilst I try not to dwell on the past I personally think it’s important to remember history to try and avoid the same mistakes going forward. However one of my points in a previous post is that we haven’t learnt from previous mistakes I.e. we still rely on the same customer (MNR/KRG) who contributed to us getting into financial difficulties a few years back due to non payments. Yet whilst we are in a much stronger position now than previously with low level debts which are not secured against the licence/asset the opportunity to diversify to has not been taken.
But again banging the same drum I think that has been to poor management and with a change of CEO I am hopeful this can be reversed.
Putup - maybe I will by myself a bigger calculator just like yours :)
Remember there are many ways to value companies and Enterprise Value is only one, which funnily enough normally provides a higher valuation dependent on the level of debt carried. Reality is if I sold a share today I would get around 76p if I had the equivalent share without the dilution etc it would have been in the multiple pounds. Either way we are grossly undervalued in my opinion.
Everhopeful - I think most people recognise the current CPR is both outdated and also hugely underestimates the recoverable oil as well as being very limited in the scope of the study of the field.
I have mentioned in the past the fact that GKP board members at the time were not happy with the findings of the CPR they instructed the same company to perform a second (ERC) now call me stupid but if you your not happy with the findings the first time then surely as a duty in your role you would a) get a second and opinion and b) surely not use the same company to repeat the study.
Either way even with the current reserves published using the current CPR we are hugely undervalued in my opinion. Hopefully at some point we will get a more sensible CPR which covers the entire field that will enable a decent CEO to promote us.
GL
Putup. - you are completely missing the point and you know full well enterprise value is different than what I was highlighting. My point is that GKP has previously had a market cap in excess of 4bn without any route to market or proven production, this valuation was based on potential and now my rant :)
GKP has delivered a snippet of its potential but potential needs to be realised and delivered which it hasn’t been to date. Even within our own peer group we are massively undervalued in my opinion,
I am a long term holder here and continue to believe in the asset hence why I haven’t sold out, believe me there have been times when I wish I did.
I like a lot on here have seen people come and go Nickiminaj who only ever seen the blue skies and others who have only ever pushed doom and gloom.
Each of us have to make our own minds up about GKP and take responsibility for our own decisions. However even adding all the risks in please feel free to stick a dollar estimate for valuation purposes against our current CPR numbers which might highlight how ridiculous the current valuation is.
- 194m 1P
- 578m 2P
- 239m 2C
GL
Slingsandarrows - I think any sort of alliance between the Kurdistan oil E&Ps would be positive however I would very much doubt this could be achieved as let’s face it a consortium of companies would be much more difficult for the MNR/KRG to bully and control. Obviously this would be completely different if majors were operating there or maybe that explains why most of the majors have not gone big in Kurdistan.
Regarding a commercial tie up whether that be a farm in/out or otherwise there would be a financial transaction of some sort based on what the two parties would bring and I feel with such a low valuation at the moment we wouldn’t get anywhere near a fair deal in my opinion. Let’s face it if we were producing 55k Bopd and market cap 2-3bn then we would have much bigger resources to expand/acquire etc through greater access to cash.
For me we have got to get the right calibre of CEO in and start to rebuild confidence.
GL
slingsandarrows, please seem my personal thoughts below:
1. For what it is worth I have always felt JF was completely out of his depth, for all his faults and he had many TK could sell and promote the company which in my opinion is a key skill for any CEO. The CEO sets the tone and direction of the company and at no point as JF really sold the 'potential' of GKP, he has failed to deliver on so many levels (PSC, FDP, Growth Plans, Improved Communication etc etc) Albeit there has been some significant things going on including political unrest, pandemic etc etc however all his failings cannot be excused. I think any decent CEO would have promoted the company more and also used the huge cash holdings last year more wisely to diversify. However given JF couldn't deliver on the development expansion of Shaikan and clearly had eyes on a cushy retirement there was no chance of him ever trying to build another revenue stream to try and offset the risk of the one resource one client situation we are in.
2. Whilst I am hopeful we will receive the outstanding debt I wouldn't expect this will be received in one lump sum and I also believe interest should be charged on any repayment plan agreed going forward. Please bear in mind we have been here before like an old saying making an error once is forgivable however to repeat the same mistake again is careless at best. But again I come back to the reliance of one customer (MNR/KRG). With another revenue stream we could take more control of our own destiny which should have been the case.
3. I do think there is merit in M&A when there is genuine value of bringing two companies together however the conditions have to be right and the current valuation of GKP would mean a bad deal for us shareholders I fear. Consider we currently have the largest reserves in Kurdistan and that is based on a very conservative CPR and a previous market cap in excess of £4bn yet currently have a net valuation of approx £17m!!! GKP has access to the better asset when comparing to Genel however Genel has performed so much better but even they have underachieved. DNO were trying to take GKP on the cheap a few years back and for me that is my biggest fear.
GL
****eye - the hope and it is hope is that as the debts are applicable to all Oiler’s in the region an agreement will be done where payments are made I suspect over and above monthly payment. Similar to the top ups we used to receive previously.
The issue for me is the fact we are totally reliant on the MNR/KRG. I have banged on about this for some time for me diversification is key but the current BoD can’t manage one asset let alone another business venture.
GL
First of all well done JF on destroying GKP the current market valuation approx £157m less £100m debt values and cash on hand of £40m our total reserves and assets at £17m which is absolutely ridiculous. Consider this:
- we currently are owed £73m
- we have a cost pool of over £500m recoverable
- we have almost 1bn barrel reserves conservative estimates including:
- of which 194m 1P
- 578m 2P
- 239m 2C
This is what happens when you have an invisible BoD allowing them share price to be driven into the ground and primed for a hostile low ball takeover. Let’s hope we can attract a decent CEO who can actually positively promote the company and actually deliver.
Anyway below is a new presentation posted on the company website:
https://wp-gulfkeystone-2020.s3.eu-west-2.amazonaws.com/media/2020/09/08164502/GKP-Fearnley-Webinar-Presentation-vFinal.pdf
GLALTH
https://oilprice.com/Alternative-Energy/Renewable-Energy/Fossil-Fuels-Are-Here-To-Stay.html
Doesn’t really tell us anything new but interesting to see it published. Oil is here to stay for a long time yet, GKP have a lot of it which is massively undervalued.
GLA
So we are officially owed $73m net to us for non payment of oil supplied between November and February. I would be surprised if we receive any of this during this year, we should however receive another monthly payment of approx $8m net this week.
Don’t forget we also have over $500m cost pool which is recoverable.
GLA
Pressed post too soon :)
- Positive update half year results on 3d Sept
- Cancellation of treasury shares
- Release of updated CPR/FDP (ok I know I am being optimistic)
- Oil law agreement between Kurdistan and Iraq (being very optimistic)
In summary we are currently standing at such a low valuation any of the points highlighted should get us moving again. When compared to other E&P's even in the Kurdistan region we are valued extremely low, as I have said before I believe a lot of that is to do with the lack of trust in the current management for failing to deliver. Hopefully with the appointment of a replacement CEO this will change for the good.
GLA
So as it stands we seem to be in a holding pattern before things start to move, obviously one of the triggers will be the appointment of a replacement CEO which I would expect to happen over the next couple of months. In addition to the CEO replacement there are no number of positive events which can give us a kickstart including:
- Return to regular payments
- Payment of arrears
- Resumption of dividend and/or buyback
- Resumption in development/uplift to 55k bopd (according to latest updates we should not be far away)
- Uplift in oil price (depending on your views it looks increasing likely we are range bound for a bit yet)
- Positive update ha
I suspect your right which vindicates some of my previous posts about the mismanagement of GKP.
Ultimately the primary purpose of a GKP CEO is to deliver value JF failed miserably apart from lining his own pocket. Let’s hope his successor fairs better.
GL
Interesting reading some of the debates currently taking place about the possible reserves. I like many believe the current CPR is very conservative (supported by the views of numerous amount of people who have passed through GKP over the years). However just looking at what has been officially communicated rightly or wrongly I wouldn't expect a significant upgrade any CPR released whilst the current management are in place (this pains me to say).
The reason for this is if you take a look at the presentations released by GKP they even state the following:
"On that basis, GKP’s internal review of reserves indicates: An upgrade in Proven (1P) reserves, No material changes to Probable reserves (2P) compared to previous work" see page 52 of the presentation below:
https://www.gulfkeystone.com/wp-content/uploads/2019/12/gkp-cme-presentation-vfinal.-28.03.2019-1.pdf
The wording is also interesting as it suggests the CPR is already available but has simply not been released (which again is frustrating and typical of GKP with its mixed messages, another bug bearer of mine is the fact they use the same company ERCE to complete the CPR when historically they have disagreed the findings).
Like all these things there are wide implications and political motives behind the actions that have taken place over the years with GKP from the scope of the CRP to the porosity figures used to determine the reserves (another interesting presentation is the Scottish club one below)
https://www.gulfkeystone.com/wp-content/uploads/2019/12/gkp-scottish-oil-club-presentation-7-feb-19-vfinal.pdf
Either way unfortunately I suspect we will never truly find out the sheer size and scale of Shaikan I just hope we land a proven CEO who can restore confidence in us and get the valuation to a much more realistic level (even if that is based on a very low reserve figure). There are a lot of things which will trigger an upward trajectory for our share price and if a few of them land I would expect quite a quick shift upwards.
GLALTH
https://oilprice.com/Energy/Energy-General/Chinese-Majors-Sign-Contract-For-Huge-Iraqi-Oil-Field.html
Could this be the start of further M&A in both Iraq and Kurdistan?
I just hope we don’t get taken out on the cheap, hence why as a long term holder I would be much more comfortable seeing a current valuation much closer to reality.
GLA
So as of today Genel has a market cap of approx £420m with GKP just over £200m both massively lower than their peaks. However given recent events have applied to both companies what is so drastically different given the massive difference in current valuations (bearing in mind GKP has the better asset and more reserves albeit a slightly lower grade of oil currently).
For me there are a few distinguishing factors:
- the leadership team at Genel portray a clear plan and have the trust of the market (even after huge downgrades in reserves a while back)
- dividends continue to be paid
- potential gas (if route to market can be established)
So looking at GKP what is dragging us down, as I have said in previous posts for me there is still a hangover from the restructure and lack of trust in the current management additionally:
- lack of dividends
- lack of trust and confidence in BoD
- outgoing CEO
- not meeting development targets
So in summary for me just based on what is known in general public GKP should have a far higher market cap than Genel but and it’s a big but JF replacement needs to deliver on his/her promises and get the development to 55k bopd done and start to build trust and confidence in the company again.
We have a lot of potential positives which would warrant a rerate just a couple of them would really get us shifting in the right direction in my opinion.
GLA
Distressed - I agree with you that something changed from his early days of joining to the man he has become. When he joined he was full of beans saying the right things and I too was hopeful he would deliver clearly that’s hasn’t been the case. Who knows what has gone one behind closed doors but clearly something changed and whilst I firmly believe he was not upto the task his lack of skills/experience doesn’t completely explain such poor communications and failures during his tenure.
SS - Leaving of JF opens up a vacuum in my opinion we could be vulnerable until a replacement is found and appointed as anyone knows once a person has decided or been asked to leave motivation to take on new endeavours wouldn’t be high on the agenda. The sooner we can find a high calbre replacement the better. As a long term holder I certainly don’t want us to be taken out on the cheap or a merger which doesn’t reflect the true value of what we have.
In my opinion JF was always out of his depth whether you believe he was ‘told’ to fall in line or not I am not sure however he had a decision to make it that was the case comply, whistleblow or leave. Clearly he has been happy to pick up his money and bonuses despite failing to deliver his own set targets and that for me makes him just as guilty if he was falling in line.
Regarding GKP/Genel merger rumours personally have always felt it could be a good move however the devil would be in the detail around any merger proposals. Personally GKP has the far superior asset but Genel has a superior management team and better investor relations.
Let’s see if we have better times ahead all the fundamentals point that way.
GLA
Interesting article particularly find this part pertinent to our current situation:
‘ Typically, in order to generate the capital growth required Peel Hunt says they need:
First-rate management with a proven track-record (the most important factor for us). Good quality assets with a production bias. A healthy balance sheet.
“Having all three is clearly the ideal scenario and will maximise the chance of success, but companies with a combination of any two may also provide interesting opportunities if they can attract the third’
If you look at GKP I am a firm believer it’s the poor management that has held us back significantly, hopefully this is corrected and bing we have all three factors: excellent asset, strong balance sheet and .......
https://www.google.co.uk/amp/s/www.proactiveinvestors.co.uk/companies/amp/news/923314
GLA