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Https://www.rudaw.net/sorani/business/210620242
Rudaw - Washington
Epicure agrees to sell oil through SOMO and makes three proposals to resolve the payment of the companies' financial entitlements.
The proposals are as follows: first, by paying the money at the beginning of oil exports; The second is by depositing money in an independent bank account as a guarantee. The third option is that the Iraqi government can give the companies their shares in the form of barrels of oil in the port of Jayhan instead of money.
On Friday 21-06-2024, the US Chamber of Commerce organized a meeting for a number of US oil companies, including those operating in the Kurdistan Region, with Geoffrey Payet, US Assistant Secretary of State for Energy Resources.
The meeting was attended by Miles Caggins, spokesman for the Kurdistan Petroleum Industry Association (Epicur) and Matthew Zeiss, vice president of HKN; Part of the meeting was devoted to the issue of oil in the Kurdistan Region and the problem between Erbil and Baghdad and companies.
"Ambassador Pite explained to the executives of US oil and gas companies that the United States is committed to working with Iraq and the Kurdistan Regional Government to help Iraq have a strong energy sector," Caggins told Rudaw after the meeting.
"Ambassador Payte emphasized the resumption of oil exports through the Turkish-Iraqi oil pipeline," Cagins said.
"Epicure agrees with the Kurdistan Regional Government that selling oil directly through SOMO and exporting it through the Ceyhan port is the best option to resolve the Iraqi-Turkish pipeline problem," he told Rudaw.
Rudaw reporter Diyar Kurda's questions and answers with Epicurus spokesman Miles Caggins:
Rudaw: They met with Ambassador Payet today and the Chamber of Commerce. What was discussed between you and Baghdad about your problems and the oil problem between Erbil and Baghdad? Were there any positive signs from that meeting?
Miles Caggins: Today in Washington, the U.S. Chamber of Commerce hosted a meeting hosted by Ambassador Geoffrey Payette, U.S. Assistant Secretary of State for Energy Resources. At today's meeting, Ambassador Payet explained to the executives of US oil and gas companies that the United States is committed to working with Iraq, with the Kurdistan Regional Government to help Iraq have a strong energy sector; This is a priority for the Sudanese prime minister and the Biden administration to make Iraq energy independent. The goal is for Iraq to become energy independent by 2030; Ambassador Payet stressed the resumption of oil exports through the Turkish-Iraqi oil pipeline. There is also a view in Epicure that international oil companies were happy to be invited to participate in the trilateral meeting in Baghdad. We believe that these discussions should continue to resolve the issues.
Rudaw: What were Ambassador Payt's views on the recent meeting between Erbil and the oil companies with the Iraqi Oil Ministry?
Rudaw: What were Ambassador Payt's views on the recent meeting between Erbil and the oil companies with the Iraqi Oil Ministry?
Miles Cagins: Ambassador Payette said he was pleased to see the tripartite meeting to resume oil through the Turkey-Iraq pipeline, but he was aware that other discussions had to be held. The Ambassador is well aware of the Iraqi energy sector, including the Kurdistan Region; He also mentioned his recent visit to the Kurdistan Region where he saw the important level of oil investment and oil companies, and saw government officials and businessmen working on the development of the gas and oil sector in the Kurdistan Region. Regarding the Iraq-Turkey oil pipeline, Ambassador Payet said that this pipeline is important for Iraq's energy independence as well as for the global energy market; Therefore, the United States will continue to encourage Baghdad to quickly resolve the issue of oil exports through the pipeline, he said it is important to have another trilateral meeting between the Iraqi Oil Ministry, the Kurdistan Regional Government and international oil companies.
Rudaw: If I ask you my last question. What is Epicurus' position on oil exports through SOMO?
Miles Cagens: Epicor agrees with the Kurdistan Regional Government, as recently announced after the Council of Ministers meeting that selling oil directly through SOMO and exporting through the port of Ceyhan is the best option to resolve the Iraqi-Turkish pipeline problem Advance or deposit in a third party account as a guarantor and independent banking party or similar financing by payment of oil barrel shares from Jayhan Port. This arrangement can be made between SOMO and international companies; This is the best option to quickly resolve the issue of oil exports through Iraq-Turkey
Kheldar. Don't know why that's a shooting the messenger issue, SOMO have been an option since the start, and legitimised contracts will do wonders for the SP, or even attract outside interests in GKP. Appreciate there's a big gap on terms yet and as I'm only a latecomer here happy to be contradicted!
I'm unsure why buybacks are causing concern, whether cancelled or not? Won't the buying of shares contribute to buying volume and potentially an increase in share price?
Many funds and private investors alike buy shares, but not for the purpose of cancellation. What is it I don't understand?
S2
I suspect it's some concern around shares being bought back into Treasury when they should be cancelled. The idea that this Treasury stock will be used to enrich (in various ways) senior management and board members at the expense of smaller shareholders, further dilution.
"I'm unsure why buybacks are causing concern, whether cancelled or not? Won't the buying of shares contribute to buying volume and potentially an increase in share price?"
The buybacks may effectively be just cash expended on extra cost on staff: the company probably awards more shares than it buys back, so the removal of shares from the share count (by putting them into Treasury) is maybe only temporary if the vesting conditions are eventually met, as the shares then get re-issued. I just see the buybacks as advance payment of staff cost, so I am not terribly excited by them, but I am pleased by the dividend, even if it just goes straight out again on the next installment of IHT. I voted in favour of all the resolutions yesterday even though I dislike the generosity of the LTIP and DBP. I blame the Iraqis for increasing the salary-bargaining power of our CEO (the retention payment). I remain disgusted by the way free shares are issued to people who do not work at the coal face: the share count has risen by about 12m shares since I bought in April/May 2021 for the relative that has caused the IHT problem. I do not like being diluted out.
It doesn't matter a tot if they are brought into treasury or, for example, the EBT (rather than cancellation). The "enrichment" people stupidly fear comes from approval of compensation schemes (eg the LTIP) and not from buying back shares and holding them in treasury. When options vest and are exercised by the recipients, shares have to be delivered. They can be supplied from new issuance, shares in treasury or shares held in an EBT. Only when they are delivered do they come into circulation and are counted as in-issue. If you want to b*tch about compensation protest those schemes not the buyback.
In the RNS of 13 May when the company announced the launch of the $10m buyback scheme, the RNS stated...
"The sole purpose of the Buyback Programme is to reduce the capital of the Company. As such, all Shares purchased under the Buyback Programme will be cancelled."
So we can put to bed whether they are held in treasurer or elsewhere. Every share that is cancelled will mean existing shareholders will own a higher percentage of the company (albeit small) than they did before the cancellation. This, all thing being equal, should result in the share price rising.
'I don't like being diluted out'.
Another good post Nobull.
IF the next buyback is in partly/wholly to Treasury (which I strongly suspect it is) then the biggest dilution is in my belief in JH...like that matters!!
He should be paying rewards out of tangible profit performance, which is measurable.
And not laying it off against the shareholders to carry the burden.
Supposing FCF in the next twelve months is ca. $70m-$100m. On top of the current $99m banked with no debt offset.
ALL employees should be incentivised to achieve this goal as their bonus targets.
The idea that they should be rewarded for 'staying the course' is absolute anathema to me.
Given that GKP lost £11m in the last financial year, the Market won't give a toss if they make £50m or £60m in that context.
JH should have trusted his judgment and asked his employees to do likewise.
Performance is the only way forward in my experience.
That means that the Team have to believe and perform accordingly.
THEN they get paid for their efforts.
In fairness most oil companies do operate a share bonus scheme which is intended for share retention so employees feel more part of the company which they own. This is normally not individual performance based or even annual company performance but constitutes part of remuneration package.
This is normally like 2%-5% of your salary and if held for X years becomes tax free.
I was part of one for over 30 years.
What I believe most investors are rightly concerned about is when its not a set percentage and fear is that pure greed will take over and they will in fact trouser the lot with excessive share handouts. Pigs in the trough comes to mind.
They is partly due I believe to a bit of a history with this company by grossly over rewarding themselves at the expense of shareholders.
Its well worth following up with the company.
If the Ceyhan export route opens up again then this debate will become to a degree immaterial assuming of course all of the IOC's current contractual arrangements and other issues are settled accordingly
" This, all thing being equal, should result in the share price rising."
How so?
All things being equal the size of the pie hasn't changed. There are less forks and those forks lift a slightly bigger slice but the pie hasn't gotten bigger.
The below is of course wrong...
That would support the view that each fork is worth more. But it omits the fact that the pie DID get smaller - money left the company (sellers of shares received it). The fewer forks remaining lift a smaller pie.
"So we can put to bed whether they are held in treasurer or elsewhere. Every share that is cancelled will mean existing shareholders will own a higher percentage of the company (albeit small) than they did before the cancellation. This, all thing being equal, should result in the share price rising."
Yes, except in the context of staff costs that constantly require remuneration in payment of shares (why cannot they be paid in cash?), the share count is likely to rise given the amount of shares bought back is less than the rise in the amount of awards of nil cost options. In this situation the bought back shares help cap the staff cost, but not entirely as the more dividends are paid between award and vesting date, the more shares have to eventually be issued to pay for the dividends not collected between award and vesting date, if I have understood it right. The buy backs do not seem to be sufficient to get the share count to drop over the long term, which is what I care about as a long term shareholder who does not trade his stock. It is outside my competence to understand what the correct rate of remuneration is for risk-taking, for performance that meets targets and for work done, so I voted in favour of all the resolutions, but I do not like seeing the share count rise over the long term to my detriment. The dividend is nice to receive but no good if it results in a loss to me through dilution from having to issue more shares to pay for the dividends missed out on by those having awards vest three years later.
Some people here still do not understand buybacks need to be done below intrinsic value otherwise they are at best value-neutral or value-destructive (never pay £1.20 for £1 of present value of an expected profit stream). Pleasingly, our current CEO seems to understand this - he used the correct form of wording last time. The problem arises with some posters failing to understand what a share is: yes, they know how to subtract shares (in the ways accounting rules dictate) but have forgotten what a share actually is, an entitlement to an expected profit stream, so one should take care not to overpay when doing buybacks.
So now we are to receive an interim dividend, while the share buybacks continue if needed to support the share price and decrease the quantity of shares in circulation.
However this has been achieved in only a couple of months, so apart from the planned maint (wish we had a lot more tankage, my poorly answered Q2 in the AGM), for three weeks we will run at reduced capacity, (hopefully they can stockpile a decent amount to reduce losses). However we are starting to see some pretty decent amount of cash being generated.
No reason why we might not see 3 or 4 such dividends per annum.
Also on the subject or our absent but owed 151M from the KRG. They know they owe us it, they got paid for the crude that was produced before the export pipeline closed. They had to prioritise payments when faced with sudden large income shortfall, and the IOC's were not top of the list.
However current large sales are controlled by the KRG via proxies, and for arguments sake lets call them what they are....exports.
Now we know as all the IOC's are exporting via truck currently the KRG must be really pulling in a small fortune in sales.
Its been going steadily for a while now and I expect the most urgent bills have been paid.
Is it not inconceivable that GKP might receive a nice part back payment for monies owed from the KRG, with which the company will reward shareholders with a real decent dividend. Some money might be used for field development.
So a few modest dividends which add up to a decent amount annually
Chance of a whopper divi.
Buyback supporting price and reducing stock.
Outside chance of export pipeline agreement (I'd say 3%)
No debt and decent contingency cash held.
Oil field giving 6-10 % decline which is good.
Very strong demand for our valuable sludge, and good relationship with the KRG.
For me a very positive outlook with much better than evens chance of decent capital growth from here and high annual dividends as well. Very hard to beat that.