GKP Dalesman New Year post ' valuations '

New Years Message

Lets have a look at what GKP could have in store fo us!
The following is all my own speculation and in no way is a recommendation to buy, hold or sell.

Firstly lets get the downside out of the way – the contract could be declared illegal and be worth nowt. This would p … off the UK. USA, China, Canada, Turkey, Korea, India, Russia and all the other countries who have KRG interests

The calculations below use $3.6/barrel, a 33% recovery rate, £1=$1.63 and are the unrisked figures.

Akri Bejeel

The Weatherford rig is currently drilling at Akri Bejeel. Todd Kozel has said that the data gained from Shaikan has de-risked AB and Mol through its broker has hinted that the reserves at Acki Bejeel could outstrip Shaikan.

TK has hinted that Shaikan could contain between 11-15 Billion OIP. If this figure is bettered by Akri Bejeel that would be worth up to £1.44 to GKP using 6.4% diluted interest.

If Mol was referring to the 2.8 billion DGA figure and by ‘exceeds’ they mean for example 3billionOIP, the upside to GKP would still equal an additional 29p unrisked.

Further upside from Akri Bejeel could include GKP being awarded part of the 20% Kurdistan Backin rights.

If the backing rights are awarded to a third party, GKP would receive a payment from the party to cover the drilling costs commensurate to the rights awarded.

Shaikan

We have the DGA reports to look forward to. There could be an interim report followed by a final report after the workover rig has done its stuff.

Only 30% of the pay has been evaluated so far, the data from the work over rig will increase the OIP figures.

TK has put his reputation on the line by using 11-15 billion barrels. These figures may also be conservative.

We know that the Triassic is high energy – high gas to oil ratio with an API near 50. This will aid the recovery of the higher Jurrasic oils and increase the likely recovery rates. If we take the 15billion barrel figure OIP each 1% increase in recovery represents 17p to the NAV. Re injecting the gas to provide a gas lift to the low energy Jurassic should improve the recovery figure. I look forward to hearing what recovery factor DGA may put on the discovery.

With Shaikan 2 being drilled at a distance of 9km from Shaikan 1 the data relating to the reservoirs will be fine tuned and I expect that the OIP numbers may continue to rise. Additional Seismic will increase the data and probably the OIP figures adding weight to any figures presented in a data room when the for sale sign really goes up.



Production will reduce the cash burn – starting in May and the improved data will attract buyers for GKPI.

Production will under right the share price

In addition we could be allotted part or all of the 15% Kurdistan backing rights. If these rights go to a third party they will be expected to pay their commensurate drilling costs – cash back to GKP.

The KRG may give up part of their 20% for an equity stake in GKP/GKPI – again increasing GKP’s involvement in the block. (Vast petroleum sets this president)

A few numbers for Shaikan (All unrisked)

2.8 billion OIP = £1.07
5 Billion= £1.91
11 Billion = £4.19
15 Billion= £5.72

As Shaikan is proved up Sheik Adi is de-risked along with Ber Bahr.

Sheik Adi.

TK has hinted that the Shaikan seal to the west may be in Sheik Adi and could be in Ber Bahr. At the moment the official OIP figs for SA are in the 0.5 -1 billion OIP range. If however the Shaikan reservoirs do extend into SAI would expect these figures to be revised upwards. Lets say to 5billion OIP at 40% to GKP this would give £2.99 increase in NAV. As with all these figures these are guesstimates but are not beyond the bounds of possibility. You can add your own pro rata!

As there are no backing rights we will receive the full 40%

Ber Bahr

As this is the furthest away from the Shaikan block lets use Gennel figs of 1.9billion OIP. An additional 57p on the NAV. Drilling on Sheik Adi will derisk BB.

Algeria

Additional upside will come on the sale of Algeria. Using $1.20 / barrel this would add 26p.

Additional News
GKPI could be awarded other blocks on trend with Shaikan.
The Contract problem is sorted out.
News of a TO is revealed to the market.

The above adds up to £10.98 and is a best case scenario.

Lets look at a worst case scenario regarding OIP

Akri Bejeel = 1 billion OIP
Shaikan = 2.8 billion
Sheik Adi = 1 Billion
Ber Bahr = 1.9 Billion.
Algeria = 173m

Risked at 50% for the above with the exception of 70% for Shaikan and 100% for Algeria.

The risked total is £1.64 risked and £2.59 unrisked.
!

Have a great 2010

Cheers Dalesman.

I just know I’ve missed something!