Saudi Arabia’s Dream Of $85 Oil Is Closer Than Ever OilPrice.com Saudi Arabia’s Dream Of $85 Oil Is Closer Than Ever | OilPrice.com Since the oil price collapse a few years ago, Saudi Arabia has struggled to get its finances in order, but things appear to be getting better for the Kingdom Saudi Arabia’s Dream Of $85 Oil Is Closer Than Ever By Tim Daiss - Apr 24, 2019, 40 PM CDT Things are starting to look good financially for Saudi Arabia again - very good. The de facto OPEC leader and world’s largest oil exporter said today it posted a budget surplus of 27.8 billion riyals (U.S. $7.4 billion) in the first quarter of the year. The Kingdom actually posted a budget deficit of 34.3 billion riyals in the first quarter of last year as the Saudi economy emerged from a recession in 2017, the first time the economy had shrunk since the global financial crisis nearly a decade earlier. According to its 2019 budget, Saudi Arabia plans to increase state spending by 7 percent this year in an effort to spur economic growth that was hurt by low oil prices late last year. Saudi finance minister Mohammed al-Jadaan told a conference in Riyadh on Wednesday that expenditure in the first quarter amounted to 217.6 billion, slightly higher when compared to last year. Not only has Saudi Arabia pivoted from a budget deficit, but the goal of some of the Kingdom’s energy players of having oil prices near $80 or even more per barrel is also now in sight. Global oil prices so far this year have already hit multi-month highs amid the OPEC+ oil production cut put in place at the start of the year to remove 1.2 million barrels per day (bpd) of oil from global markets, as well as output losses coming from Iran and Venezuela from U.S. sanctions, and also loss of output in Libya which is embroiled in fighting around Tripoli. Moreover, now that President Trump has decided to not renew waivers for Iranian oil imports, prices have plenty of upside potential left. Fiscal break-even point Several industry sources recently indicated that Saudi Arabia needs oil north of $70 per barrel to help shore up its coffers. Officially, of course, Riyadh doesn’t comment on what oil price they would like to see. The Kingdom maintains the same well-worn line that price levels are determined by the market and that it’s merely targeting a balance of global supply and demand. However, the International Monetary Fund (IMF) said in February that even $70 oil is not enough to balance Saudi Arabia’s books over the long haul and that Riyadh needs oil between $80 to $85 per barrel - the so-called fiscal break-even point. Saudi Arabia’s budget surplus for the quarter, nonetheless, is a major turn around from just a few years ago when it appeared that the Kingdom was coming apart financially. In its now obviously ill-planned decision in late 2014 to abandon its role as global oil markets swing producer and actually ramp up production as oil supplies were increasing and prices were tanking, Saudi Arabia hurt itself as much or more than U.S. shale oil producers it wanted to drive out of the market - though Riyadh vehemently denied it was trying to drive U.S. producers out of the market. The officials’ line was that it was protecting market share, particularly in Asia where competition from other OPEC producers and Russia is fierce. However, that late 2014 decision almost bankrupt the world’s wealthiest oil-producing nation. Oil prices plunged from above $100 per barrel in mid-2014 to dipping below the $30 price point in January 2016. Due to low oil prices, attributed to the supply glut, the Kingdom – which derives as much as 90 percent of its revenue from oil sales – ran a historic budget deficit in 2015 of $98 billion, with around $87 billion in 2016. As a result, Riyadh Kingdom was forced to raise cash, some $16. 5 billion, in its first international bond sale. Going forward With oil prices still trending upward and with the OPEC+ group of producers, including non-OPEC oil kingpin Russia, still in agreement, any repeat of the 2014-2016 crash in global oil markets seems unlikely in the foreseeable future. The question now, at least in the short term, is: Will Saudi Arabia ramp up production to offset the loss of Iranian barrels due to Trump’s refusal to renew Iranian oil sanction waivers? And, if it does ramp up production, when and by how much? It’s likely that the Kingdom will let prices continue their northward trajectory - even if Trump calls for more production via Twitter - before they actually take decisive action. For the Saudis, oil at $85 a barrel or more would be a delightful development - especially for its budgetary needs. By Tim Daiss for Oilprice.com
Closing Prices Close . . . . 267.00 Open . . . . 268.00 Low . . . . . 269.27 . . . 14.25.00 . . OT High . . . . .261.00 . . . 08.08.58 . . AT MD Auc . . 447 @ 266p LSE Vols . . . . 814,007 . . . 597 trades AT trades . . . 480 . . 80.40% OT trades . . . 117 CP . . 70,641 @ 269.5p FTSE 100 . . . 7,473.73 . (-49.34) . (-0.66%) Brent Crude . . . $73.80 (-0.09) . (-0.12%)
Opening Prices FTSE 100 . . . 7,519.25 . (+59.37) . (+0.80) Brent Crude . . . $74.22 . (+0.18) . (+0.24%) GKP. . . 162,687 @ 267p . . . . . . . . . . . . . . . . . . . . . . . . . . . FTSE 100 . . . 7,517.45 . (-5.62) . (-0.07%) Brent Crude . . . $73.53 . (-0.36) . (-0.49%) GKP 378 @ 268p 2 x 25,000 @ 251 & 250 on the Bid 28,216 & 30,000 @ 270p and 40,000 @ 275p on the Ask.
RNS Major Holding Notification [link]
Closing Prices Close . . . . 251.50 Open . . . . 255.00 Low . . . . . 252.50 . . . 08.00.59 . . AT High . . . . .268.00 . . . 12.02.04 . . AT MD Auc . . 1,952 @ 266p LSE Vols . . . . . . . 860 trades AT trades . . . 695 . . 80.81% OT trades . . . 165 CP. . . 162,687 @ 267p
Gulf Keystone Petroleum: Potential To Double Revenue By 2021 MikeyAdmin: But even if the KRG had been paid “all” the money under the R-Factor the KRG owed GKP from the “outset” of Shaikan Oil Production “on time and correct”, GKP could never have received enough money to Pay Off it’s Debt to the Bond Holders. I promptly disagree! Please leave it at that. Best Regards @ValueSeeker8
Gulf Keystone Petroleum: Potential To Double Revenue By 2021 “Do you know what was the cost of that to GKP and its shareholders? It was the loss of 85% of GKP’s equity to its creditors in return for writing off $525 m + outstanding interest of debt! And that is after the open offer made to existing shareholders. If it wasn’t for the open offer, it would had been 95.5%! According to the 2016 prospectus for balance sheet restructuring.” VS8. I get where you’re coming from regarding the Refinancing. But even if the KRG had been paid “all” the money under the R-Factor the KRG owed GKP from the “outset” of Shaikan Oil Production “on time and correct”, GKP could never have received enough money to Pay Off it’s Debt to the Bond Holders. The Hedge Funds that ended up owning 85% of GKP could see that GKP could not Pay it’s running Costs and the $600,000,000 Bond Debts off, which is the reason for their Short attacks down GKP original listing price of $0.01. The Hedge Funds did what they do best, which was in GKP they found an over financed Company who’s revenues would never have covered it Debt’s and went for the jugular. If as been thought by the original management GKP had been Taken Over and its Bond Debts repaid then all would have been fine, but the TO never came to pass. Instead, as the Price was shorted down, most of the original Bond Holders sold their Bonds to the only Buyers in Town, the Hedge Funds, who after the Refinancing was agreed ended up holding 85% of GKP
Gulf Keystone Petroleum: Potential To Double Revenue By 2021 @MikeyAdmin, thanks for the reply! But my point is just regarding the effect of Brent crude oil price on the annual revenue whatever the R-factor might be! Of course if the the R-Factor changes, the revenue will change correspondingly, but the effect of Brent price will still in percentage terms continue to have exactly the same effect on the revenue stream whatever the R-Factor might be! I do not really like to have an R-Factor based argument when it comes to GKP and the KRG! Because it will be a very angry argument - and rather pointless in the unfair world of capitalism combined with corrupt politics. But please let me have a little one, you said: MikeyAdmin: but the KRG fell behind in their Payments they owed GKP a Debt. Do you know what was the cost of that to GKP and its shareholders? It was the loss of 85% of GKP’s equity to its creditors in return for writing off $525 m + outstanding interest of debt! And that is after the open offer made to existing shareholders. If it wasn’t for the open offer, it would had been 95.5%! According to the 2016 prospectus for balance sheet restructuring. In a fairer world, shouldn’t that all be compensated for by the KRG? Best Regards @ValueSeeker8
Gulf Keystone Petroleum: Potential To Double Revenue By 2021 VS8 Note. Your own Shaikan Key Information says “Gross Figures” In my opinion GKP is “presently” being paid based on the “Working Interest” to pay the KRG Debt to GKP off IMO if the “Net Figures” are not changed by the 2nd Amendment at some point the R-Factor will revert to a “Net Figure” R-Factor based on new Net Figures obtained through the 2nd Amendment.
Gulf Keystone Petroleum: Potential To Double Revenue By 2021 VS8 The point I’m trying to make is that there is a difference in KRG unpaid Recoverable Costs and yet to be paid Recoverable Costs Yes GKP’s Past Recoverable Costs is over $500,000,000 plus the present Capex spending, but the past Recoverable of $500m is not recoverable in a lump sum, but through a period of the Licence through the R-Factor. The original Shaikan Licence contains a method of recovering Capex Costs called the R-Factor. and the KRG did not repay what they should have done. From memory the R-Factor was designed to repay Recoverable Capex over a period of c. 20years on a reducing scale until full payment had been made, but the KRG never made any Payments so they owe GKP a Debt It was sort of like a finance agreement style, so that the KRG did not pay back in a lump sum, but allowed the KRG revenue while still paying off the Recoverable Capex. Recoverable Capex spending was recoverable through the R-Factor over the course the Licence, but the KRG fell behind in their Payments they owed GKP a Debt. That Debt the KRG owes GKP is IMO currently being recovered based on the 80–20% Working Interest, and once the Debt is paid off, IMO the R-Factor will revert to the original R-Factor To see the original R-Factor you would need to get the relevant 2008 Presentation that shows its workings. So to pay off the Debt the original R-Factor was changed for a faster repayment method as the KRG played catch up on its Debt to GKP. Like I said, when the payments have paid off the KRG Debt to GKP unless the 2nd Amendment changes matters, the original R-Factor may well come back into force.
Gulf Keystone Petroleum: Potential To Double Revenue By 2021 @MikeyAdmin, the back costs owed by the KRG are huge! According to GKP’s final results they stand @ $500 m without accounting for much of the cap-ex required to lift production to 55kbpd! See below: IMO, even after reaching the 55 kbpd in Q1 2020 and right to the current payment agreement (Brent -£21 for piped oil) expiry date by end of December 2020, the petroleum cost pool will still be large! To show you the combined effect of an increase in Brent price to say $101 per barrel as opposed the the average Brent price of $71 in 2018 on the annual revenue, I have drawn a graph (using my spreadsheet) that does that: image.png696x490 6.57 KB You can see from the graph that an increase of just 42.25% in Brent ((101-71)/71) and the decrease in discount from $22 to $21 has resulted in 63.26% in annual revenue! This is because @$71 Brent and $22 discount, Shaikhan crude oil price = $49. But @$101 Brent and $21 discount Shaikhan crude oil price = $80, i.e. 63.26% higher. The graph also shows that production rate directly and linearly affects the annual revenue, i.e. doubling the production rate results in doubling of revenue! And hence the straight line (theoretically and assuming everything else is constant). The above graph and calculation proves that the combined effect of Brent price and discount is even greater than the effect of production rate on annual revenue! Best Regards @ValueSeeker8
Gulf Keystone Petroleum: Potential To Double Revenue By 2021 VS8 I think you’ll find that GKP earnings are based more on Production Output than Oil Price based. From a base line of c. 33,000 bpd output before the current Capex spending began, to 55,000 bpd than on to 75,000 bpd in c. 2 years time, it ain’t rocket science to make a call for GKP to double its earnings. The Oil Price increase will effect GKP’s earning a little but will effect the KRG’s earnings far more than GKP. But under the present payment system I think there is a potential sting in the tail for GKP. IMO the present payment system is designed to enable the KRG to pay GKP the back costs the KRG failed to pay in the early days of the PSC, so that when the playing field has been levelled we may find that the original PSC R-Factor based on the percentage ownership of the PSC comes back into force, rather than the Working Interest based payments GKP is currently receiving.
Opening Prices FTSE 100 . . . 7,462.89 . (-8.43) . (-0.11%) Brent Crude . . . $71.71 . (+0.09) . (+0.13%) GKP . . . 199,440 @ 251p . . . . . . . . . . . . . . . . . . . . . . . . . . FTSE 100 . . . 7,477.07 . (+17.19) . (+0.23%) Brent Crude . . . $74.57 . (+0.53) . (+0.72%) . . . big rise over Easter GKP . . . 23,701 @ 255p 12,038 @ 255, 15,000 & 10,000 @ 246 on the Bid 19,124 @ 263 . . 25,000 @ 265 & 28,216 @ 270 on the Ask Screencast.com 2019-04-23_0800 Shared from Screencast.com
Level 2 I dunno Mikey it might do my head in , don’t think I have time anyway . If it is a one off then something is in the pipe line IMO ( not just the oil )
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