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For those who like number puzzles

lse:gkp

#1

Three answers that follow from the PSC effectively becoming a Revenue SC, what do they represent?

No units because that would be too big a clue.

Plus or minus 0.1 would cover the expected range but I have used 0.2 to allow for a bit of slippage.

A1 20.4 plus or minus 0.2

A2 11.2 plus or minus 0.2 Corrected as an edit to 11.5 plus or minus 0.2 (see next post for reason)

A3 A percentage which is 38.2 plus or minus 0.2

If you want some clues, just scroll down a bit.

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A1 Expected any time now.

A2 Add an extra step, plus maybe protect yourself from the market reaction.

A3 Everyone is arguing about 80% or 58%, strange really when this number is what matters at the moment IMO.


#2

A1 is the Gross payment due this month for November production:
AV Daily production = 32.4 mbpd, days = 30, Brent = $64.75 using 48.9% as PSC factor.

A2 is GKP’s net payment due next month for December production:
AV Daily production = 27.5 mbpd, days = 31, Brent = $57.36 using 4?.??% as PSC factor.
PS: I calculate this as $11.8m not 11.2!

A3? Well my best guess is that it is the percentage of what GKP gets paid (Net) from the total monthly revenue. i.e. 0.8*PSC factor (47.75% ?)


#3

VS8, for some reason the data supplier I used very early in January, gave an average price for Brent in December as $56.55. Maybe the Christmas period caused a recalculation because it is now the $57.36 you have used.

So your querying of A2 is correct.

A1, spot on.

A3, almost there but very well spotted, slight correction still needed.

A2, even with the new figure you are still only almost there, same issue as for A3.

Clue, did you get brainwashed by $15 million gross always becoming $12 million nett?


#4

Brainwashed? correct me if I am wrong. I am under the impression (not really confirmed by clear official statement, not arsed to check!) that GKP gets 80% and MOL gets 20% of the monthly contractors pay.


#5

VS8, GKP are only getting 78% of the gross, give or take a bit which slightly changes on a monthly basis.

Most like explanation, a reflection of the workings of the present operational agreement.

A couple of points I would like to make.

When the last bumper payment was made the market reacted very positively before falling back. Anyone who followed my post with the spreadsheet would have expected that amount, the market is supposed to forward thinking! What will be the effect of GKP’s nett payment for Dec 18 oil production being so low in comparison? Questions about sustainability at those levels for x months etc…

GKP have a PSC. They do not own the oil in the ground, the government does via the MNR. GKP only benefit from production and the revenue derived from it. Why is everyone focussing on 80% rather than the much lower 38% which is the % of the revenue raised that ends up coming GKP’s way?


#6

I think there is confusion there between the total monthly revenue and the total contractor revenue (share). Out of the total revenue, contractors get their share as drawn by the PSC (52.2% 48.2% 48.9% I don’t know, you tell me) and then that gets divided between GKP and MOL. May be you are correct that it is 78% for GKP but I always thought that it is 80% for GKP and 20% for MOL.
PS: GKP always gives rounded figures not exact ones.


#7

VS8, having read some of the posts on the other boards about the significance of the 80%, I have to agree with you.

I believe, but am quite willing to accept that I am wrong, that the working interest when applied to the revenue stream only applies to the Contractor’s Share.

The Contractor’s Share being the sum of the Cost Oil route plus the (Profit Oil minus Gov reductions route) , which APPEARS to be 48.9% give or take a bit of the total revenue raised.

At the moment GKP’ s share APPEARS to be 78% give or take a bit of that last number.


#8

Now that we have a fresh payment agreement, according to which piped oil is priced at Brent - $21 and trucked oil is priced at Brent - $22. And that 3000 bpd is still being trucked. Using the formulae:

Total Monthly Revenue =(Days in Month)X( (Daily Production Rate)X(Brent - $21) - $3000)
Net payment = 0.78X0.4976X(Total Monthly Revenue)

Given: Jan 2019 Production Rate = 26400 bpd and Feb 2019 Production rate = 24600 bpd according to GKP’s 28/03/2019 webcast:

And the average monthly crude oil price as:

image

Total monthly revenue for Jan 19 = 31X(26400X$38.41 -$3000) = $31.34 m
Total monthly revenue for Feb 19 = 28X(24600X$42.96 - $3000) = $29.51 m
And consequently, we should expect that:
Jan 2019 net payment = 0.78X0.4976X$31.34 m = $12.16 m
Feb 2019 net payment = 0.78X0.4976X£29.51 m = $11.45 m

Best Regards @ValueSeeker8


#9

The 10/09 interim report revealed that the average production during July and August standing at 34,641 bopd and 39,269 bopd respectively, largely reflecting the positive results from the work-over campaign and the successful debottlenecking works at PF-1.
Furthermore, it revealed that The oil sales price was calculated using the monthly Brent price less an average discount of $21.69 (H1 2018: $22.8; FY 2018: $22.3) per barrel for quality, pipeline tariff and transportation costs (see 5. Revenue, Notes to the Condensed Consolidated Financial Statement).

Brent average price for July 2019 = $63.92 and for Aug 2019 = $59.04 according to statista.

In my previous calculation I used an optimistic 0.4976 PSC factor, now I’ll use a more realistic 0.49 as such factor. Therefore, I expect that:

Jul 2019 net payment = 0.49 X 0.78 X 31 X 34,641 X ($63.92 - $21.69) = $17.33 m
Aug 2109 net payment = 0.49 X 0.78 X 31 X 39,269 X ($59.04 - $21.69) = $17.38 m

Best Regards @ValueSeeker8


#10

VS8.

There is a chance that for August’s Production you may need to add in a fully piped factor for part of the month ? ?


#11

Hi, just wondering if you spotted the following.

The expected payment figure for most of the months this year, except Jan, have been lower than calculated - definite systematic error.

The magic number for the Contractors’ share now turns out to be 47.3% to 3 sig figs, now why did that ring a bell?

It’s from the PSC calculations from ages ago.

Start with 100 barrels and remove 10 for Royalty to leave 90.

40% of the 90 becomes Cost Oil, which gives 36

The remaining 54 gets reduced twice, by 30% and 70% to give 11.34 or 11.3 to 3 sig figs as Profit Oil.

So Contractors’ OIl is 47.3% of the production.

The MNR are no longer behaving as a Contractor at the moment, so the split is 80:20 to the two that are.

We have already covered why in reality GKP only get circa 78% as revenue.


#12

Theoryman.

The current “R-Factor” being used is not the original R-Factor.
It is a new R-Factor which was introduced to pay off the unpaid Debt the KRG owed GKP and it presently allows a repay percentage each month to repay the Debt

But, unfortunately or on purpose GKP removed the Presentations that held the original R-Factor chart leaving us with nothing pre 16th June 2016, and I cannot find any information about the original R-Factor on the GKP website nor the KRG website


#13

Mikey, VS8 and I both came to the conclusion that since the first $22 agreement and at the start of its replacement; the effective Contractors’ share was just below 50%.

My guess is, and it is only a guess, that this was 47.3 plus a bit on the side to pay off a particular back cost.

Once that specific cost had been repaid we are now back to what should be happening.

I don’t know if I have a copy of that specific R factor chart, there are other examples available on the internet. Plus I don’t know how close we are to moving across a boundary in terms of production.

When we do, the effect should be easy to spot. What no longer comes down the Cost Oil route will be heavily reduced as it comes down the Profit Oil route.


#14

Theoryman.

I’ve been trying to follow the money the KRG have been paying back GKP to reduce the Back Costs since the present R-Factor came into being.

In the 2016 & 2017 Results that was fairly easy and the Debt had been reduced to c.$48m, then in this years 2018 Results GKP changed where they placed the Debt so the amount wasn’t easy to find, but I think I found it and it looked to be down to $32m.

Now the present R-Factor & Oil Payment Deal was extended for a further 2 years when it run out late last year, so by the end present deal the Debt may well be paid off.

However, since the 1st Oil Deal & R-Factor was announced, the KRG still hadn’t been contributing to their shares of the Shaikan ongoing running Costs, so their Costs have been adding to the Debt, so that while (from memory) the KRG originally owed GKP c. $72m it was being added to, which has resulted in the Debt only being slowly paid off.

That is the reason why GKP presently get 80% (78% actual)MOL 20%.

When the Debt is paid off the R-Factor should change again back to its original R-Factor, which should result in GKP getting 58% (net) of Shaikan Profit Oil, which should be circa $7.5-8.25 per barrel as per the original R-Factor.

But, it’s all been going on so long and there’s so much information lost in the mists of time, partly as ii has changed and GKP no longer shows any pre 2016 Presentations, it’s all getting difficult to understand let alone Research with any thoroughness.


#15

@theoryman, @MikeyAdmin, there could be another explanation to the reduced payment: higher transportation cost (trucking cost)! It was the first thing sprung to my mind when I knew the July payment received is $0.53 m less than the figure I calculated. This is because of much higher production rate from SH-1 and SH-3 which are attached to PF-1 that is processing more oil (after debottlenecking) ; moreover the interim report revealed that the connection of PF-1 to the export pipe was still not completed when the report was released - another broken promise?.

Best Regards @ValueSeeker8


#16

VS8, thanks for pointing that out. I have revisited the spreadsheet and I had shifted the (Brent minus x) back more towards x=22 than 21

Looks like I guessed what it might be because the magic 47.3% delivers and I’m well inside the plus or minus 0.1 range for the actual payment.

Another explanation could be that I have included a lot of errors that just happen to be self cancelling when taken as a whole :roll_eyes:


#17

Recent published presentations revealed the daily production rates for all 2019 on monthly basis. The last 4 months payments still outstanding, I expect the respective payments for these to be :

image

Best Regards @ValueSeeker8