GKP anyone?

[catherinedenerve]

Any TK fans out there?
And what the heck is going on with MOL?

Wolfgirl I am very impressed with your post (nov 09) and wondering if you are a happy bunny at the mo?

[catherinedenerve]

bump

[Wolfgirl]

HI there catherinedemerve. So sorry I did not respond. As you can see, I have not been on here for a VERY long time.

Well, GKP eh! what a story is unfolding there!

I do hope you have some stashed away, as this little baby is going to rocket. For me, us as family - this is our opportunity to make some decent money. We invested about £15k and are about £11k in profit now.

However, if you read about some of the wealth from the posters on the financial boards, you will quickly learn that our gains are pocket money amounts, absolute nada to them.

I am holding for £10 per share min. We are nearly at £2 per share. Just wait till the politics are sorted, and next week looks set to do just that. It seriously will not be long, then whoooosh... off we jolly well go.

Please do let me know if you are invested!

Oh, and MOL.... I have no idea, but when MOL move... everyone sits up. They are the one's to keep an eye on. But TK has founds, not just millions of barrels, but BILLIONS of the stuff. All good quality, with excellent API's of 30+

Good days ahead, m'dear, good days ahead!!!

[Wolfgirl]

Catherindenerve.... thought I'd cut n paste a posting from the III.co.uk bulleting board for GKP, form a guy called Scaramouche. He is an incredible knowledgeable oil man, and should you sign up to the iii site and go to the GKP board, you will find him 'ticked' up constantly. Here is what he posted Friday 5th Nov.

*
Thank you all for your comments to my earlier ?Americans? post.

Plenty of good points ? and it could be a case of bread today or jam tomorrow.

It is certainly good to have a constructive debate at this early stage, because you might need to make a decision earlier than you expect. It is not ?make you mind up time? now, but please think about this:

? 12 months ago. GKP £1 per share, 500 million shares. Total market cap of £500 million. If a T/O bid at £3 per share had been received then.... Game over.

? 6 months ago. GKP 80p per share, 625 million shares. Total market cap still £500 million. Expectations heightened, but market over-estimating risk. If a T/O bid for £4 per share been received then... Game over.

? Now. GKP nearly £2 per share, 750 million shares. Total market cap £1.5 billion. If a T/O bid of £10 per share was received today, IMHO it could be game over too. It would be hard to sell the potential for GKP beyond say 20 billion barrels potential OIP for Shaikan and 30% recovery rate, and that would amount to £9 per share by my calculations. So, with nothing guaranteed, a £10 per share offer would probably go through.

? In 6 months time. Now things would be getting interesting. We would be a bit further on, but probably still at an SP of £3 ? £4 (unless the bidding process had already begun) and a market cap of £3 billion. This to my mind, is when the bidding war would be most likely to start.

Compare the likely options then;

1. £12 per share, straight T/O by an IOC with deep pockets ? no risk, plenty of GKP millionaires, and even those who got in a month or so, sitting on a 10-bagger! Highly appealing.
   

1. GKP looking to be the next Supermajor, operating alone, but with full exploration and production. Still very high risk IMHO although if it worked we could be worth £30 per share after future dilutions! One for the speculators amongst us.
   

1. £6 per share, plus one share in Marathon (currently about £20 per share) for say 4 shares in GKP. Much reduced risk with still substantial gains likely over the following 2 years.
   

This option would give you the equivalent of only £11 per share then. However, with the opportunity for the GKP part to reach the full potential of £40 - £50 per share (equivalent to £30 - £40 billion market cap) as evidenced by Spidymonkey?s calculator with BBBS potential, the total benefit could be much higher.

MARATHON currently has a market cap of about £15 billion, and about 700 million shares. So the combined company in 2 years time would probably be about one billion shares (including possible dilution), and have a total market cap of anything up to £50 billion... or £50 per share.

In this scenario, each of your current GKP shares (then 0.25 shares in Marathon Keystone) would themselves be worth £12.50, and you would have banked £6 already, plus some healthy dividends en route. A grand total of about £20 per share.

Okay, not as good as the POSSIBLE £30 under option 1, but better than option 2?s £12 in 6 months time.

I am certainly NOT saying that Option 3 is best ? in a way I would prefer bread today (or at least in 6-12 months time), but the prospect of Jam tomorrow is surely an option well worth careful consideration.

Good luck all,
scaramouche

[Wolfgirl]

Catherinedenerve... just in case you do pop back in at some point, thought I'd post a recent update taken from a poster on www.iii. co uk - to keep you up-to-date on GKP. Still a VERY good share to get into. If I had more spare money, I would certainly invest here...

*

One of the problems with boards like this, as has recently been said, is that new investors come in and ask questions or make statements that those of us who have been here a while thrashed out a year ago and so we tend to, perhaps, not take the trouble to restate what we think we know, the known knowns, but concentrate on the known unknowns (copyright D Rumsfeld).

So for new arrivals this is a summary of how I calculate the value of GKP?s oil in Shaikan. It may differ a bit from Spidy?s wonderful creation but what I am trying to do is show something of the calculations which go to make the old timers so confident. Not every assumption will be spot on but it will serve as a rough guide.

Every barrel of oil that GKP extracts belongs to Iraq. The oil is sold and GKP receives a fee per barrel depending on a multitude of factors. We have never seen the GKP production sharing contracts (PSCs) so we cannot be certain of all their terms but we have seen sample PSCs of the type used by the KRG and we have seen actual details for companies like VAST and from time to time GKP has revealed some of the terms in an RNS, for instance, when the terms change. So what follows is an educated guess but not a certainty.

1. Oil in Place in Shaikan
   
   To start somewhere lets assume that there are 4.2 billion barrels of oil in place. This was the figure of the independent experts DGA?s early this year. It has been our lodestar for almost a year and yet I suspect its days are numbered, maybe even this week?.
   
   
2. Recovery factor
   
   Not all the oil in place can be got out so the experts allocate a percentage that can be recovered. At the Zurich AGM figures in the low 30 percents were mentioned. Gramacho is more cautious but for this purpose let?s say 30%. So 4.2bbls oip becomes 1.26bbls actually extracted over the lifetime of the field which could be long.
   
   
3. Working interest
   
   GKP shares the Shaikan license with other companies including MOL and a company connected with Todd called Texas Keystone. Some of the rights to Shaikan have not yet been allocated by the KRG. When all the rights are allocated (fully diluted) GKP will have at least 51% but because Texas Keystone has forfeited its rights, Todd said in Zurich that its share can be assumed to belong to GKP also so the final figure is 54.4%. So of the 1.26bbls extracted, 54.4% will be GKP?s share, ie 685.44mbls.
   
   
4. Tax number 1 ? the top slice royalty
   
   The KRG takes 10% of this share before all other calculations so 685.44mbls becomes 616.9mbls.
   
   
5. Tax number 2 ? the Risk factor ?R?
   
   When the PSCs were agreed each license was assigned a different risk factor and the tax now taken off is a function of that level of perceived risk. We do not know the actual figure for Shaikan but we are led to believe that 30% is a reasonable guess. The R factor is not flat but varies over the lifetime of the license as costs are recovered so using a single flat rate oversimplifies matters but should be close. So the 616.9mbls are now reduced to 30% of that figure or 185.1mbls. (The experts reading this will know that I have left out the cost oil calculation but I will come to that at the end).
   
   
6. Tax number 3 ? the ETAMIC tax
   
   As a quid pro quo for GKP getting ETAMIC?s share of Shaikan, GKP agreed to pay a further 40% final tax on its output so 185.1mbls becomes 111.1mbls. That is the net share that GKP gets and this figure can now be converted into cash.
   
   
7. Revenue to GKP
   
   How much revenue per barrel GKP will receive is clearly highly uncertain. At present it will only get half the international rate as exports are stopped. But very soon exports will recommence and then it will get a price based on Brent crude but discounted to allow for the nature of the oil and for transportation costs. Gramacho estimated that we should apply roughly an 8.5% discount to Brent to get the net revenue.
   
   So if Brent is $85 then GKP would get about $76.8 per barrel or $8.5bn for the 111.1mbls. At £1:$1.60 that is £5.3bn or £7 per share.
   
   
8. The discount factor
   
   But sadly the final answer is not £7 per share because the revenue will come in over 30 years or more so we have to discount the stream of future revenue to a net present value. The extent of that discount is a matter of hot debate. The Minotaur has suggested that NOCs could be so keen to get the oil that they might apply a small or even negative discount factor. Personally I use NPV10 which I think is conservative particularly with Peak Oil theories gathering credence. So using NPV10 takes £7 per share to £2.24 per share over 30 years.
   
   
9. Conclusion
   
   So my version of Spidy?s machine gives £2.24 per share for Shaikan at 4.2bbls oip. But remember now to apply the BBBS factor. We believe that Shaikan will actually be shown to hold perhaps 20bbls oip and there are three other fields which, if the regional reservoir/fill to spill theories are correct could hold perhaps 100bbls oip.
   
   Personally, to be conservative, I use a "BBBS lite" figure of 70bbls distributed over the 4 license areas in the proportions Todd has indicated and that gives me a prospective share price of?..well, work it out for yourself, let's just say it is well over £20 per share.
   
   
10. Footnote
    
    The experts will have noticed that I did not separate profit oil and cost oil. I did not do so partly to avoid over complicating the calculation but also because the actual net effect is simply to bring forward the cash flow so that my NPV10 figures are actually slightly pessimistic, but with so many other assumptions, I can live with that simplification.