Working from revenue back to production Theoryman. I have never posted any production figures for pre June 2018 months. I have only posted figures for August 32,110 and September 29,612. Your figures for the same months are August 27.4 and September 30.4 So we arrive at different figures from different methods. This is a forum of different minds. You work by your methods and I will work by mine.
Working from revenue back to production Which RNS please
Working from revenue back to production Theoryman. On the 16th January GKP issued the following RNS [link] Shaikan Crude Oil Sales Agreement Signed The agreement is effective from 1 October 2017 until 31 December 2018. GKPI will now invoice the KRG for oil sales for the months from October 2017 onwards on the basis of the realised netback price and net entitlement volumes in accordance with the Shaikan Production Sharing Contract, as amended by the 1st PSC Amendment in 2010 (“Shaikan PSC”). The Oil Sales agreement states that Payments from October 2017 will be made on a “realised netback price and net entitlement volumes” according to the 1st PSC Amendment 2010" On the 29th June 2018 GKP by pdf issued a Report on Payments to Governments for the year 2016 gulfkeystone.com report-on-payments-to-governments-for-the-year-2016.pdf 106.55 KB In the Report GKP reported on the Payments the KRG had deducted at source before Payment is made to GKP Also on the 29th June 2018 GKP issued RNS 9571S [link] The Report on Payments to Governments for 2017, and IMO details what payment such as the Capacity Building Bonus has been deducted during 2017 GKP first issued the Payments formula the Payments are made under in the 2018 March Presentation , which, IMO includes every deduction otherwise if the formula did not include all deductable fee’s, the figures in the formula would be different. The Payment Formula was issued in the first Presentation made after the Shaikan Crude Oil Sales Agreement was signed and before the 2016 and 2017 GKP Reports on Payments to Governments. For those worried about the Shaikan Crude Oil Sales Agreement having ended on the 31st December 2018, please NOTE, the Oil Sales Agreement became effective from 1 October 2017 until 31 December 2018 . . . which is 3 months in Arrears from the signing date prior to the 16th January 2018 RNS
Working from revenue back to production Mikey, one last attempt, after this I will wave the white flag and formally give up. The production figures I am comparing the output from the spreadsheet to, are two figures from GKP, both contained in the same RNS. These are specifically for the average over the first 6 months and then the average for July plus August of this year. You are repeatedly using your opinion of what ought to be happening, compared to my use of facts in the public domain, to show what is actually happening.
Working from revenue back to production Theoryman. Are you basing your thoughts and calculations on the MOL Third Quarter Earnings Report, because if you are your assumptions may be entirely wrong, and you may need to revise your thoughts. IMO you may need to visit the Capacity Building Bonus in the original Shaikan Contract and the 1st Amendment GKP & MOL are signatures in the Shaikan PSC made in 2008, but, the big difference is that GKP is the KRG Nominated Operator. As the Operator of the Shaikan Licence under the terms of the PSC GKP is, in my opinion, solely responsible for the monthly Capacity Building account auditing by the 10th of each month, and Payments into the KRG Shaikan Capacity Building Bank Account set up by the KRG, and in my opinion MOL are not responsible for such KRG Payments. Therefore in my opinion the Monthly Payments GKP receives cannot be correlated to MOLs Monthly Payments as they differ by the Payments the KRG take at source from GKP. IMO the KRG have a need to be “in control” of every aspect of payments and don’t trust anyone, and with the Payments being made 3 months in arrears, they can check and recheck everything.
Post on FP from LSE Via ADVFN Habshan13 Jan '19 - 16:40 - 1656 of 1656 0 5 0 LSE seem to have a problem with this kind of post recently, with somebody taking exception and having them removed. So I think it’s worth bringing it over here as it’s an interesting and thought provoking post. Courtesy of gypsum. Competent Persons or Spin Doctors? Fracture porosity - a comparison of Competent Person Reports (CPRs) at Gulf Keystone (GKP) and Hurricane Energy (HUR): GKP: ERC Equipoise CPRs dated March 2014, September 2015 and August 2016 applied a ‘mid case’ fracture porosity of just 0.4% for the Shaikan Jurassic reservoir. Only the most recent CPR remains accessible on the GKP website: gulfkeystone.com erce_gkp_cpr_2016-08-26.pdf 5.15 MB HUR: RPS Energy CPRs dated May 2017 (Lancaster) and December 2017 (Halifax, Lincoln, Warwick, Whirlwind and Strathmore) incorporated a fracture porosity of around 4%. Specifically, the ‘Best Case’ values applied were: 3.952% (Lancaster), 4.2% (Halifax), 3.65% (Lincoln & Warwick) and 3.8% (Whirlwind): hxxps://www.hurricaneenergy.com/investors/competent-persons-report Both Shaikan and the WOS Basement fields are classified as ‘naturally fractured reservoirs’. Naturally fractured reservoirs are formed from large-scale blocks of intrinsically brittle rock material, (carbonates in the case of Shaikan, basement in the WOS fields), that were originally deposited / existed in a relatively ‘flat’ orientation but have been subsequently uplifted / folded / bent-over and otherwise mechanically deformed during the course of their burial history - with the resultant generation of faults and fractures throughout the brittle material. As stated in the RPS CPR Appendices (on the last two pages of each CPR report), “Fractured Basement reservoirs (base Basement reservoirs) are a subset of naturally fractured reservoirs”. With regard to Shaikan, the current CPR interpretation of recoverable reserves is predominantly controlled by fracture porosity alone - because the CPR assumes that there is minimal contribution from matrix porosity. Both Shaikan and the WOS Basement fields exhibit outstanding (‘world class’) Productivity Indices (PI) in excess of 100 stb/d/psi (refer CPRs from both companies). Both Shaikan and the WOS Basement fields are interpreted to have faults and fractures that are mostly inter-connected and in communication with each other throughout the reservoir structures (refer multiple reports and presentations from both companies). —> So why is there a FACTOR OF 10 difference between the assumed fracture porosity at Shaikan (0.4%) and the WOS Basement fields (4%)? GKP: At a presentation to Institutional investors on 28/05/2012, GKP is reported to have said: “In terms of the Jurassic matrix, the overall fracture or amount of oil retained is higher than expected, where originally it was thought 0.8%, but is now proven to be some 3%". This revelation was made on ii by a poster named ‘Joseki’. During the webcast presentation of the 1st CPR on 13/03/2014 John Gerstenlauer stated his belief that ERC had used a very conservative fracture porosity at 0.4% on the basis that “they had never seen one bigger than that”, and that “it was the highest level that they had come across anywhere”. Gerstenlauer then went on to serve a sop to shocked shareholders stating that “an increase of 0.2% in fracture porosity yields approximately 800 million barrels recoverable”. It follows from this that IF the fracture porosity is 4% (and not 0.4%) the incremental increase in recoverable resources would be (18 x 800 million) or 14.4 BILLION barrels. Question for GKP: Dr Ashti Hawrami, the KRG Minister for Natural Resources from 2006 to present, previously served as Chairman and CEO at ECL from 1999 to 2006. Dr Hawrami’s experience at ECL would have made him intimately familiar with all of the other key people and players involved in the Reserves Auditing business - RPS (who acquired ECL in 2005), ERC / Equipoise, Gaffney Cline & Associates, McDaniel & Associates, etc. Did Dr Hawrami, for whatever reason, use his influence to downplay the audited reserves at Shaikan? Note that this is only a question. HUR: Dr Robert Trice presented at the ‘Understanding Fractured Reservoirs & Rocks’ event at The Geological Society on 23/01/2018. In the Q&A there is an interchange with David Peel from Lukoil, David Peel: “You said that the porosity was 4%, is that 4% of total GRV or just fracture porosity?”. Dr Trice: “Correct, fracture porosity, and that’s of GRV”. David Peel: “That’s quite high”. Dr Trice: “Well, we’ve just done a recent study of global analogues with C&C Reservoirs and I would say it’s the average”. Question for HUR: Dr Trice, if fracture porosity really is of the order 4%, is ‘granite paste’ a plausible explanation for why an 800+ metre section failed to flow from the DST in well 205/23-3A? • A suggestion for one way to address these questions - GKP and HUR should swap Reserves Auditors: —> HUR: Would you be concerned that current 2C Resources may be decimated - BY A FACTOR OF 10 - if you used ERCE for your next CPR? —> GKP: What would you say if current (2P + 2C) Resources of 0.861 billion barrels increased - BY A FACTOR OF NEARLY 18 - to 15.261 billion barrels (0.861 + 14.4) if you used RPS and C&C Reservoirs for your next CPR? Silly question of course, as GKP would most likely just continue saying nothing at all. Ca(sh)t(i)'s still got your tongue?
Working from revenue back to production Mikey, I am not saying GKP are wrong, I am saying that you do not understand how PSCs work. The slide you keep posting has (1) after Contractor, which refers to a FURTHER reduction from PO for Capacity Building. That is in very small print at the bottom of the slide. The Payments RNS refers to Licence Fees, one of which is Capacity Building. They are NOT hiding it, it is plain sight but for some reason you are not seeing it. Even if you refuse to accept both of those as being correct, your own calculations show that there must be a reduction and yet you refuse to accept there is one.
Working from revenue back to production Hi Theoryman. No matter which way you work it out, the figures in the screenshot the 52.2% are written in stone, otherwise why would GKP have shown the 52.2% in the calculations they displayed to the world in many Presentations & RNS’s Screencast.com 2018-11-29_1347 Shared from Screencast.com What you are saying is that GKP are wrong but you are correct. When there are millions at stake IMO there cannot be any hidden 4%'s . . legally it has to be shown. The way I see it is, Mathematics should display exactly how figures are arrived at without the need for added adjustments figures to suit the end result. The RNS to which you relate to remove 4% from the above calculation is headed “Report on Payments to Governments for 2017” which is a totally different year, and for all you know could be a totally different set of figures from 2018. The GKP calculations clearly show the 100% Gross Revenue minus 10% Royalty fee’s Plus, in my opinion, if there are any additional payments to be made to KRG in addition to the 10% Royalty figure I would not expect such payments to be shown in the Monthly Payments, but instead to be shown in the Yearly Accounts Also in the “present calculation” shown in the screenshot it shows the Contractor as receiving 40% of 90% as a “Cost Recovery payment” . . . then the R-factor splits the 60% of 90% between 30–15% to the Contractors 70–85% to the KRG The reason for the 40% of 90% “Cost Recovery payment” is because of the KRG’s failure since the 1st Amendment to pay their percentage shares of Shaikan’s Capex, so through that 40% of 90% the KRG is playing catch up on past non payments. Plus as the Oil sales go through the KRG, if there are any dues owed to the KRG, they should be shown and removed before the Monthly Payment figure is issued. “All of the crude oil produced by Gulf Keystone was sold by the KRG. All proceeds of sale were received by or on behalf of the KRG, out of which the KRG then made payment for cost oil and profit oil in accordance with the Shaikan PSC to Gulf Keystone, in exchange for the crude oil delivered to the KRG. Under these arrangements, payments were made by or on behalf of the KRG to Gulf Keystone, rather than by Gulf Keystone to the KRG” The original requirement of the R-Factor was two fold. a) over the Licence Period, to repay the Capex spent on Shaikan to the Contractors based on their Working Interest percentages b) over the Licence Period, based on the Contractors Net Interest percentages to pay the Contractor their Profits. (the contractors profits were shown years back by GKP as being in the region of $8.25pb +/-) If the R-Factor was working as intended originally, the Production could be calculated by dividing the payment by profit per barrel costs.
Working from revenue back to production Mikey, I went through the following steps. I saw your 52.2% based calculations and was surprised there was no reduction for fees etc. because in my experience there always have been in previous PSCs I have studied. Maybe this one was different though? I then calculated the average monthly production figures for Jan to June 2018 based on your 52.2% and compared them to GKP data. They were too low by about 8% which meant about 4 needed to come off your 52 - quick bit of mental arithmetic. I also looked at the Payments RNS [link] That specifically, as I expected based on previous experience, refers to payment - in kind for License Fees. They are listed and there is an explanatory addition under (5). Using the Royalty figure as a known 10%, it is then a simple ratio calc to see that the License Fees are around 4% for that period. So there are two distinct ways of showing that the 4% reduction gives a far better match to reality than your not including fees at all. For the sake of keeping one issue separate from another, do not go on to the next stage until you understand all of the above. If you want to use that flowchart, even though it refers to revenue , then look at the (1) content in very small print. That refers to just one of the listed fees previously mentioned in the RNS. If the 40% still applies, then that would mean 40% of the PO 16.2% would be being taken; which is about 6.5%: for just that one fee! So what does that tell us?
Working from revenue back to production I have taken Mikey’s 52.2% interpretation of the PSC, my adjustment by 4% to 48.2% to reflect fees etc. and an extra column. Theoryman. Can you please explain You have taken my 52.2% and removed 4% to reflect Fee’s. As the Fee’s you have introduced reduce the percentage figures which in turn increases the production figures . . what do “Fee’s” represent . . and why have you deducted anything from what GKP has stated as the “Summary of terms Shaikan Production Sharing Contract” Screencast.com 2018-11-29_1347 Shared from Screencast.com
Point of Note It’s almost a year now since we emigrated from the UK, to remain within the EU and keep our business viable and, without question, it has been an success. So glad to have called that strategic move right as, if we’d have stayed in the UK, I’m sure we would now have been sunk. As I watch the calamitous chaos of Brexit unfolding from this distance, dominating every news headline and sub-headline on a daily basis, the contrast here is that anything Brexit barely evens features on any news TV show. It’s a non-event here. Nest, I think that demonstrates exactly how bothered Europe is about this self-inflicted British crisis. They’ve practically forgotten Britain even exists. Brexit isn’t even newsworthy here. Europe has had 2.5 years now to get to grips with its future without the UK, and it’s already well priced-in by now. The UK, on the other hand, still doesn’t know what on earth the future will be like, other than worse, obviously If you think that the EU is even remotely worried about losing UK contributions, after already having 2.5 years of re-adjusting it’s future budgets and strategies accordingly, then you really are seriously deluded Please, do let me know what life is like when the anchor gets raised and the UK drifts of into the middle of the Atlantic. From this perspective here in the EU, I can assure you that Europe really won’t be desperately trying to haul you back in… but that’s what you wanted, right?
Working from revenue back to production Hi VS8, thanks for getting back to me with your thoughts. My initial thoughts were that, for the reason you outlined, I should not go anywhere near the path of working from payments to production. How about the rexpected references to improved commercial clarity though? Maybe what was true not longer reflects the current practices? There is a phrase in the (Brent-22) agreement that was the start of the increased clarity. " Under the agreement, the KRG will purchase Shaikan crude oil at the monthly average Dated Brent oil price minus a total of c.$22 per barrel for quality discount, as well as domestic and international transportation costs." I took the reference to Dated as meaning production in a month gets paid at a rate derived from that month’s average figures for market price - no messing about, no slippage, no hard luck stories! As always, before anyone else uses these figures, they had better make sure they understand the uncertainty in them; resulting from the underlying assumptions used in the calculations.
Working from revenue back to production Nice work TM. With regard to varying figures (and hence revenue) from one month to the other IMHO is due to ‘creative accounting’ most probably done by the KRG! I Suspect in months where the pay is low, the KRG does not pay for the full production, but pays extra the following month! Notice the alternation in pay from one month to the other which could made more visible in a bar chart. Although this is partly due to varying POO , but I suspect it is also due to this ‘creative accounting’ rather than variation in production level! So, I am sorry to say, there isn’t much point trying to calculate the monthly production from the given payment as we can’t trust whether it covers for exactly the full production in that particular month. Best Regards @ValueSeeker8
Working from revenue back to production Mixing and matching revenue with production can be fraught with difficulties - E.g. production from one month is booked as a sale in the next… So in reality you should either stick to revenue sharing or production sharing and stay way clear of working from one to the other. So the next question comes, is it worth doing with GKP in terms of filling in a gap of knowledge? Using the simplest spreadsheet at my disposal, I have taken Mikey’s 52.2% interpretation of the PSC, my adjustment by 4% to 48.2% to reflect fees etc. and an extra column. The idea is to work from known revenue back and check against known production figures, sourced from GKP and MOL data. Mikey’s figures are way off as expected. My 48.2% ties in well for the first 6 months, GKP and MOL. The next column is an adjustment to match the average production for July and August according to GKP. Given the minimal difference introduced, I feel that the figures produced for production are of use in filling in the gaps. My original concern was that the figures produced would only appear to be useful when they were in fact completely misleading. Firstly, why does the average daily production on a monthly basis vary so much? Is it the production/revenue problem really that large, or is due to work in progress, or is a mixture of both, or… Secondly, if the av daily production is the same in the next payment, then I would be expecting gross payment of $29 million plus or minus $1 million to cover reasonable expectations - more days, higher (Brent-22). image.jpeg1010x644 108 KB
Closing Price Just for a change !