Gulf Keystone Petroleum Share Discussion Threads

[nestoframpers] 02/12/2016 18:45

Oh yea Lard , rules is rules , I dunno why do all the GKP BODs need adult supervision ? Bob should have been given a place on the BOD ages ago.Why do you reckon that is SG's?

[nestoframpers] 02/12/2016 18:38

Corp Jones's spirit is what GKP needs now , Lol

[nestoframpers] 02/12/2016 18:37

Hurray Bob's back , "They don't like it up 'em!

[oil_investor] 02/12/2016 18:23

Something from the vaults lol

....................................................................................


I have now taken a closer look at the latest Investor Presentation, since nobody much else appears to have done so.

1. Valuations

The Enterprise Value is given as $341 million, with the median analysts' asset value at $896.1 million. The latter would equate to a diluted share price of 3.2 pence (or £3.20 after the forthcoming consolidation).

The current CPR gives an NPV of $4.615 billion for GKP's interest in Shaikan, based upon the 3P Reserves (GKP Working Interest of 551 million barrels) at a discount rate of zero. This would equate to a diluted share price of 16.5 pence, which is more than an order of magnitude above the current diluted share price. Whilst this figure would reduce with the application of a discount rate, a counterbalancing factor is that GKP have not included the Shaikan Contingent or Prospective Resources in the NPV valuations quoted in the Presentation. These latter figures are very substantial: for example, the GKP Working Interest in the Shaikan Contingent Oil is 500 million barrels. These numbers are based upon ERC volumetric assessments which were disputed in 2014 by both John Gerstenlauer and John Stafford, but that is of course another matter.

The Presentation and the CPR suggest that the current share price does not reflect the underlying value of the assets in the Shaikan Cretaceous, Jurassic, Triassic (and potentially Permian) reservoirs. GKP must presumably share this view, otherwise they could not justifiably refer to the upside potential in the share price. Indeed, by way of an example the Enterprise Value was over one billion dollars when Jon Ferrier was appointed CEO and had previously been very much higher.

2. GKP in the context of Kurdistan as a whole

Perhaps rather oddly, the Presentation says that the "USGS reports...estimated undiscovered hydrocarbons of c. 40 billion barrels of oil in Kurdistan". This might perhaps lead to the incorrect interpretation that Shaikan is relatively minor compared to the overall potential of Kurdistan; that USGS figure was actually compiled many years ago and it predates the exploration drilling which has been done over the past decade etc. It has already been established that it was in fact an Oil In Place figure and it did not represent a USGS estimate of economically Recoverable Resources.

GKP do not include the Shaikan Oil In Place figure in the Presentation and therefore the positioning of Shaikan within the overall context of Kurdistan is not apparent. The MNR have previously recognised the very substantial contribution of the GKP Oil In Place discoveries to that USGS "marker" figure, and it has become increasingly apparent that Shaikan is far more significant in the overall context of Kurdistan than was ever anticipated when the PSCs were awarded to the International Oil Companies around a decade or so ago. A number of high-profile PSC targets proved unsuccessful for a number of other IOCs when drilled, whereas the exploration success at Shaikan greatly exceeded the pre-drill estimate as was explained to Lord Justice Christopher Clarke at the Excalibur trial in the Commercial Court. So Shaikan - which was dominated by GKP with its small army of PIs - very unexpectedly rose to the top of the pile.

The latest Presentation does show GKP already at Number Two in the Kurdistan IOC 2P Reserves table, marginally behind DNO, but any comparison of the USGS Oil In Place estimates with the Recoverable Reserves figures potentially understates what has been found in total during some ten years of exploration drilling in Kurdistan and, in particular, what GKP had discovered under the stewardship of Todd Kozel.

3. Current Production

In terms of production, Shaikan is currently producing (when external factors are not hampering operations) about 39,000 bopd. This is a very good performance within the physical constraints: the current surface facilities probably have a "nameplate" capacity (including the benefits of some debottlenecking investment) of somewhere around 45,000 bopd (the figure has not been given by GKP, though individual daily production has been some way in excess of 40,000 bopd demonstrating that 40,000 bopd is not the upper limit) but an oilfield cannot run at full output because of the downtime associated with maintenance etc. work. The current output is not in decline, though the "headline" 40,000 bopd is hardly what Kurdistan needs: well-known declines and failures elsewhere (Tawke, Taq Taq, Akri-Bijeel etc) have required additional output from the Kirkuk area in order to maintain total Kurdistan output. Increasing the Shaikan production substantially, and bringing the adjacent Atrush oilfield onto commercial production, are clearly key objectives. This is why the MNR is currently installing the 10-mile 36-inch 750,000+ bopd Feeder Pipeline from Shaikan to the KPS2 injection point on the main export pipeline. Perhaps the MNR will make a public statement regarding the Feeder Pipeline at the forthcoming Kurdistan Conference, because otherwise the situation regarding Atrush (and Swara Tika) is somewhat unclear.

4. Increasing Production and the associated Capital Expenditure

In the near-term, achieving 55,000 bopd at Shaikan represents an "evolution not revolution" appriach. This level is considered relatively straightforward to achieve via the installation of up to 5 Electric Submersible Pumps and one new Jurassic production well, together with the addition of a surface production module. The total cost of this work, excluding contingency, is $58.5 million to $65.4 million though GKP is apparently only liable to fund 64% of that, with MOL carrying 16% and the MNR the remaining 20%. The net cost to GKP is therefore between $37.4 million and $41.9 million excluding contingency: say, about $40 million. This is a very modest sum and represents a much lower cost per flowing barrel (actually less than $3000) than for the baseline 40,000 bopd. Indeed, the current cash-at-bank figure given in the Presentation is $108.9 million and the Shaikan operations are now reported to be cashflow positive. Including a 30% contingency, as GKP have been doing in their presentations, seems somewhat unusual not least because a capex range has already been given.

The company says that the capex (of c. $40 million net to GKP) can be "funded from forecast cash flow". This is presumably intended by GKP to indicate to investors that the increase to the 55,000 bopd level can be achieved from revenue going forward, without the need to use any of the existing cash at bank. This appears reasonable, though the company's forecasting of its revenue levels has historically been over-optimistic.

A level of 55,000 bopd represents annual production of 20 million barrels. Whilst such numbers are not small they bear little relationship to the future levels which have previously been forecast by GKP for Shaikan. It appears likely that another operator, with broader and deeper financial, technical and human resources would be required to realise the fuller potential within an acceptable timescale.

5. Monies outstanding

The Presentation restates the 30 June 2016 figure for the net arrears of $89 million which are due to GKP from the MNR for unpaid oil sales and Government Participation Option back costs. These, together with the current cash at bank and some recent production for which payment is currently awaited, would give GKP a total cash position of some $200 million. With debt of just $100 million at the relatively modest interest rate of 10%, which can be deferred if required, the net cash position would be some $100 million.

Additional to that are the recoverable Shaikan sunk costs, which are very substantial. These are probably around $500 million to $600 million net to GKP, the capex required to achieve the incremental 15,000 bopd (to reach 55,000 bopd) being itself recoverable. These monies are recoverable via the PSC Cost Recovery mechanism, going forward. The reduced oil price, which coincided with the commencement of volume production at Shaikan, prevented the recovery of these costs to the anticipated timescale.

6. In summary

Broadly, a prospective purchaser would - putting aside the issue of how much recoverable oil there really is in Shaikan - be looking at an established onshore operation with positive cash flow producing 55,000 bopd with substantial upside much of which is relatively easy to address, a Feeder Pipeline in place, around half a billion dollars of recoverable capex and a total production cost in H1 2016 of just $4 a barrel, which is currently among the very lowest in the world.

[lardner23] 02/12/2016 18:08

nest, lse 11:25

Maybe better to leave bob's stuff confined to the annals of history?

[nestoframpers] 02/12/2016 18:02

What thread was that Lard ?

since we are missing Bob so much I will start re posting some still unanswered ? of his.


oil_investor11 Oct '16 - 13:39 - 521606 of 528486
4 2
As if Joseki could ever be a broker analyst.

What a preposterous notion!

The question remains unanswered: how did he attend the 27 May 2012 broker analyst meeting?
---------------------------
My guess is Stafford was there and spilt the beans .Why is JS still at GKP?

[lardner23] 02/12/2016 17:49

Lol, they couldn't stay away; gibbs was having a whinge about Stafford on the other board earlier :))

Good youtube vid, btw.

[wildrider7] 02/12/2016 17:38

thanks Nest,

well yes, it's a big club ....

[nestoframpers] 02/12/2016 17:31

No sound on that one WR7

[nicebut] 02/12/2016 17:14

wildrider,

What happened to your boyfriend?

[bigdog5] 02/12/2016 17:08

KRG/MNR/Propaganda Press are good with encouraging announcements but they suck at delivery. Check out their history of achievements over the past seven years.

There was a famous quote from Hawrami that stated "there will be consolidation". He got that right.

The same can be said about GKP, wiped out investors whilst paying themselves £millions. There is nothing to suggest anything will change. Imho.

[wildrider7] 02/12/2016 17:08

Since it's friday

[nestoframpers] 02/12/2016 15:25

23,000,000,000 shares consolidation 100 to 1 gives 230,000,000 mill shares , thanks OWLD got it wrong there .Here's a ramp for ya OWLD

Since CPR is wrong and GKP's 58% WI of Shaikan is 3 bill blls reserves (2.5% FP)
£15 bill would be very cheap @ £5 a bll .And that is leaving the Permian for free.Shale will be short lived POO will be way up in 5 years.

[1712notout] 02/12/2016 15:09

At the moment of peak danger retail were piling in at £4 in huge volume and the city was dumping

Encouraged by avatars here

Now at peak opportunity retail are largely out and not buying and the city is massively in and holding for the inevitable

Huge buy and hold
All the best
Much love
Poodle time

🐩🐩🐩🐩8041;🐩Ԁ41;🐩🐩;🐩🐩🐩🐩
28041;🐩€041;🐩㈄1;🐩🐩🐩

[pocopicu] 02/12/2016 14:59

This is clearly a massive buy 1712. I do admire your spirit in trying to educate the stupid. Though it must be a bit like trying to teach algebra to your pet hamster.

[1712notout] 02/12/2016 14:42

🐩🐩🐩🐩8041;

99.97%hold

Could be the lowest traded for literally years

How strange 😜😜😜

Huge buy and of course hold
Much love
All the best
😛😛😛😇8519;😇