Gulf Keystone Sued by Ex-Soldier Over Iraq Oil Field Rights

By Kit Chellel and Brian Swint - Oct 15, 2012 9:18 PM GMT+1030 Rex Wempen says he introduced Gulf Keystone Petroleum Ltd. (GKP) Chairman Todd Kozel to opportunities in Iraq’s Kurdistan region in 2005, and used his contacts to help win oil exploration rights from the government. Now the company owes him for his effort, he claims in a trial today. The claim in the London lawsuit by Wempen, a former U.S. Special Forces army captain, may be worth about $1.6 billion, according to a person familiar with the matter who wasn’t authorized to speak about it publicly. The company’s shares have soared from 13 pence to about 200 pence since its August 2009 discovery of as much as 15 billion barrels of oil, enough to supply the U.S. for two years, in the Shaikan region. The trial casts a shadow over Gulf Keystone’s plans to exploit what Peel Hunt LLP analyst Werner Riding described as a “world class” oil find. “There’s been a lot of speculation about the company being bid for, but that’s unlikely while the court case is here,” Riding said in a telephone interview. “Until the uncertainty is removed entirely, it’s a deterrent to an acquisition.” Mark Antelme, a spokesman for Gulf Keystone, declined to comment in an e-mail. Shares of the company fell 0.7 percent to 202.5 pence in London trading today at 11:22 a.m.. A collaboration agreement signed by Kozel’s Texas Keystone Inc. company gives Wempen a 30 percent share of the Shaikan concession, Wempen said in court documents. Wempen says in the lawsuit that Gulf Keystone was an agent of Texas Keystone. ‘Dishonestly Assisted’ Gulf Keystone “dishonestly assisted Texas Keystone’s breach of fiduciary duty,” to prevent his company from getting its share, Wempen said in the documents. Wempen, who served in the U.S. Special Forces in Korea and Japan in the 1990s and is a founding member of the United States-Kurdistan Business Council, trekked across the Turkish border into Iraq during the second Gulf war, and stayed there for more than a year, eventually meeting the Kurdish prime minister at his palace, his lawyer, Simon Picken, said at the start of the trial today. Wempen’s work in dangerous conditions “resulted in the vast riches now enjoyed by Gulf and indeed, by Mr. Kozel personally,” Picken said. Excalibur “was then cut out of the deal completely.” Kurdistan Rush Some of the world’s biggest oil companies have entered Kurdistan, a semi-autonomous region in northern Iraq, which the government says may hold 45 billion barrels of crude, about a third of the country’s total. Exxon Mobil Corp. (XOM), Chevron Corp. and Total SA have committed to doing business there in the past year. Tony Hayward, the former chief executive officer of BP Plc, who left following the 2010 Gulf of Mexico oil spill, took the helm of the region’s biggest producer, Genel Energy Plc, last year. The $2.1 billion all-share purchase of the company valued its 356 million barrels of reserves at $5.90 a barrel. Hamilton, Bermuda-based Gulf Keystone said Wempen’s firm, Excalibur Ventures LLC, wasn’t authorized by the Kurdish government to participate in any deal and additionally broke its side of the bargain by failing to contribute to exploration costs. Gulf Keystone prompted takeover speculation in March when it announced share payouts totaling 26 million pounds for employees in the event it was sold. $31.4 Million Loss Gulf Keystone said last month that it lost $31.4 million in the first half of the year as it built production facilities for the Kurdistan oil discoveries. It plans to move from the Alternative Investment Market to the main list of London Stock Exchange Group Plc. The trial is scheduled for 12 weeks and Kozel, Wempen and Gulf Keystone Chief Executive Officer John Gerstenlauer are scheduled to testify. Wempen’s lawyers will question Kozel’s “opaquely structured and incompletely disclosed” holdings in the company he co-founded, according to court filings. The case is: Excalibur Ventures LLC v. Texas Keystone Inc. & Ors, High Court of Justice, Queen’s Bench Division, Commercial Court, 10-1517. To contact the reporters on this story: Kit Chellel in London at cchellel@bloomberg.net; Brian Swint in London at bswint@bloomberg.net To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net =============== mrniceguy1066 I was just thinking that with the amazing amount of media coverage not only acknowledging the vast riches of GKP but extolling the magnitude of its assets, this court case may turn out to be the best thing that GKP could ever have hoped for. During the last 2 years GKP have been well undervalued and the risk for any suitor would have been too great. Meanwhile the drills have been turning and in reality this has given time to prove up the numbers. If we get a satisfactory outcome as we all (ok not all) hope for we could expect the whole world to suddenly become aware of the true value of GKP. ========== Re: Hypocrisy in spades Fruit n Veg >>>>I suppose Excal will try to drag Etamic into this - if allowed to - for no other reason than to try to cast TK/TKI/GKP in as bad a light as possible corporately to try to get the Judge to take a dim view of TK's dealings in general...<<< Any judge treading the boards in the Commercial Court for long enough will have come face to face with some of the world's worst crooks and chancers, so Clarke J might be somewhat unfazed by the Etamic mystery, even if it were to be finally unravelled. He will decide on the facts of the case or, possibly, points of law. Only in the latter case is an appeal possible. If business tycoons spent their lives suing on murky deals, no business would ever get done. This Etamic stuff is murky but it is peripheral and should only be allowed in evidence if it sheds light on how Wempen claims to have been shut out of a PSC. The Etamic arrangements were not, IMO, done at arms' length whereas the business with Wempen should have been as he was not otherwise involved with TK. ==================== GKP NAV - Offline spidymonkey Hi All, I decided to take the GKP NAV Calc offline while there are court proceedings taking place. http://www.navcalculator.com/GKP_NAV.php Regards Spidy ======= Jackozy " but I am a bit ignorant (well, a lot ignorant!) about Etamic" No Quarter, don't worry....EVERYONE's a lot ignorant about Etamic....including our chief financial officer who signed off on the deal!! === Re: 136,650 @ 215.715098 MikeyAdmin Tuesday there was two more 136,650 trades There is a 136,650 @ 199.956328p actually, and mark as "b" whatever that means. Also earlier at 13.27.27pm a 136.650 @ 201.1749p mark as a b ===== 02-10-12 Re: Joseki on Oil ..Chicago jack GJ, I'm sorry, but I have to interject here. Many of your 'points' regarding CJ are irksome in the extreme to me, and as much as I would like to sit on my hands right now, I cannot. Firstly, you have paid Kandymans a poorly shrouded 'compliment' by stating your happiness at him not 'blindly jumping' to defend CJ, which apparently is the norm. I find that a little condescending for starters. Kandymans is a decent, honest and genuine man, and, as such will naturally wish to defend anyone that he values when they are attacked. Secondly, CJ's posts are fully understood by very few. Yes, they have been difficult to understand. Yes, they can be riddlesome. But you must remember that certain points regarding matters cannot be expressed explicitly on a (hugely) public bulletin board. The fact that CJ chooses to do so in any format beggars belief in the first place! I get very annoyed at The Times crossword because I simply cannot fathom it and the 'language' that you need to learn in order to understand it. My Dad has managed to learn that particular 'language' or 'code' over time. He's beaten me on that front. I've beaten him understanding CJ. Thirdly, please do not slate CJ for his use of the English language. He's not a journalist or a writer and has never purported to be one. This is a BB - a place where we can all share information and try to help each other through an investment experience that can be quite harrowing at times. Sadly, that's not the way it transpires much of the time. Which brings me to my final point… Fourth, and last… where have all the wise men gone? Look no further than your first post on here tonight for my own answer to that question IMO. Almost all said 'wise men' were at some point slated by people for essentially sharing what they knew in good faith. Imagine setting up a stall at a market and giving out tenners for free, and then being pelted with tomatoes as a result because people didn't trust your perceived motives. That's one reason - the other is that there's precious little to discuss at the moment, aside from Excal - and that's been discussed to death already. I get very frustrated when us PIs that should be standing together seem to find so many reasons to question each other and squabble. Take both posts and posters as you find them, and please remember that at the end of the day we're all aboard the same boat with the same goal, albeit with a rather dodgy captain that will covet your lady, steal your gold, and pinch your rum. Warm Regards, Axo ======== Author GRH1 View Profile Add to favourites Ignore Date posted Sunday 17:36 Subject OPTION VALUE DIMINISHED Votes for this Posting Voted 114 times. Message All of the following ... is ... IMO Caveat emptor DYOR... -------------------------------------------------------------------------------- Great posts by a couple... LES and SK at the top of the list and DANGEROUS witterings by a couple... good manners dictate that I am not going to cite their names but many of my investing friends have come up with the same culprits, quite independently Anyway... my view is that any VALUE of the claim by EXC as against the Parties... but specifically as against GKP of course would pretty much follow an 'Option pricing' model... bear with me 1) at the time IMMEDIATELY prior to the Mareva application AND the hoped-for dual track approach via UK Court and NY Court of Arbitration... the advisors to EXC... and EXC... will all have convinced themselves that their claim was mighty valuable... IE it will have been a very valuable 'option' in their view... as it will have been their view that it could cause GKP to halt in its tracks and FORCE GKP to a high priced settlement... hence the 'OPTION value' of that claim will have been viewed by EXC/Advisors as very high...at THAT time 2) However...any such option value will have been greatly diminished by the ruling of Justice Gloster... the more so ,as she ruled that, not only could EXC not gain a Mareva but she also cut off the route that they intended to use in NY Court of Arbitration a huge double whammy and 3) her obiter dicta really put the legal boot in... and THUS further diminished the option value I posted ages ago about that obiter... 4) of course the option value will still have been of SOME value even after such body blows... for THAT is what they were ...as ...although the legal remedies were being denied to EXC they still had the TIME value of the option... IE they had a long way to go pre trial and would have thought that the pressure that they could bring to bear would be great as it would damage the chances of GKP achieving monitisation... hmmm 5) but as the case drew nearer ,so the option value has IMO decreased very markedly... as it has become clearer that the time axis value is fast diminishing 6) right now ...my view is that the other side really KNOWS in their heart of hearts that their option is almost...but not quite yet. ...'out of the money'.... as they still have negotiating room perhaps vis a vis GKP... the emphasis is upon PERHAPS 7) but ...as soon as they appear in Court... I give them only a couple of weeks until their option is WITHOUT value... as their claim will be viewed in the same manner as set out by J Gloster -------------------------------------------------------------------------------------------------------- I know that and they KNOW that... so... 30%?? ...give me a break! ----------------------------------------------------------------------------------------- overall... I am relaxed as I can possibly be about this forthcoming charade... some here will take the contrary view (I have already written down on my desk jotter the names of the oh-so-predicatbel posters who will jump at this!!) but ...whilst I might now be old, I am not a total novice... Do I have ANY direct experience of the English commercial Court? yes...MANY times (I was then known to be highly litigious ...with some giving me the tag of GBH) and NEVER with a loss to my name (including ...successfully applying for a significant Mareva... I posted ages ago about the LEVELS of evidence needed for such successful application... as an ex parte application and draconian in impact... as per my option pricing notion above... PLEASE consider the maximal pressure point that EXC would have THEN gained... and carry the logic flow forward) do I have a lot of my wealth at stake here? yes, I do So ...for the avoidance of doubt... you must all make up your own minds... and everyone's circumstances are very different of course but personally... I am relaxed about this forthcoming charade... Regards GRH1 ================= Re: Court case now not listed. Updated article from CNBC with extra paragraph on court case delay and closing GKP share price. GLA, scaramouche http://www.cnbc.com/id/49346413 Gulf Keystone in court battle over Kurdistan fields Published: Tuesday, 9 Oct 2012 | 12:47 PM ET Text Size By Sarah Young LONDON, Oct 9 (Reuters) - Gulf Keystone , one of the biggest companies listed on London's junior AIM stock market, is due to start the defence of its ownership of a huge oil field in Iraqi Kurdistan in a London court this week. The company has long been touted as a potential acquisition target for an oil major looking for a foothold in Kurdistan, but the looming legal battle has been cited as a potential obstacle to any takeover deal. Kurdistan is emerging as an attractive oil province for big western oil companies. Exxon Mobil , Total and Gazprom have all taken acreage there over the last year, lured by the lucrative terms on offer in Iraq's semi-autonomous northern region. Gulf Keystone will contest claims made by Excalibur Ventures LLC at the English Commercial Court. The claimant, which commenced legal action in 2010, asserts it is entitled to an interest of up to 30 percent in all of Gulf Keystone's blocks in Kurdistan. Gulf Keystone's prize asset in Kurdistan is the Shaikan field, which could hold up to 15 billion barrels of oil - a volume which would make it one of the biggest discoveries made anywhere in recent years. Under legal orders, Excalibur has paid 6 million pounds ($9.6 million) to the court as security for Gulf Keystone's legal costs, and 3.5 million as security for the costs of Texas Keystone, a U.S.-based company against which it has also made the claims. Texas Keystone, a company founded by Gulf Keystone Chief Executive Todd Kozel and of which he is still a director, holds a small interest in the Shaikan field in trust for Gulf Keystone. Kozel, whose expensive divorce attracted media coverage nine months ago, is one of Britain's highest-paid executives, having earned around $20 million in 2011. *****The court case, which is expected to take between 10 and 12 weeks, was scheduled to start on Wednesday but was delayed by the judge.****** Shares in Gulf Keystone closed at 205.75 pence on Tuesday, down over 50 percent from an all-time high reached in February, and valuing the company at about 1.75 billion pounds. ($1 = 0.6240 British pounds) (Editing by David Holmes) ((sarah.young@thomsonreuters.com)(+44 20 7542 1109)(Reuters Messaging: sarah.young.thomsonreuters@reuters.net)) ========= Author scaramouche View Profile Add to favourites Ignore Date posted Sunday 22:43 Subject Wempens of self-destruction.... Votes for this Posting Voted 77 times. Message Thank you Pennyhappy for inviting me to pen a few thoughts on Excalibur. Although, to be fair, I am much more interested in reading the views of those with a high degree of legal expertise like Sicilian _Kan and Elikkos, or experience in commercial litigation like GRH1…. as I have neither! What I do believe I have though is the ability to form a fairly well-balanced opinion as to what makes sense and what does not. And, having just come back from a short break seeing many of the idyllic sights in Dorset, I feel that the short trip I had around Poole harbour only yesterday may have helped me in doing just that. Here's why.... I was interested to learn that the Wytch Farm oilfield on the Southern shore of Poole Harbour had been discovered in the early 1970’s and was the LARGEST ONSHORE oil discovery in WESTERN EUROPE, with an estimated 500 MILLION barrels of reserves. Oil production had apparently reached peak production of around 120,000 barrels per day about 10 years ago, but the field was now producing only about half of that. It was something that the boat operator was clearly quite impressed to be able to tell everyone, so I do rather wonder if he had even heard of Gulf Keystone and Kurdistan! Although strict comparisons are of course impossible, due to different remuneration terms, different development costs, and entirely different risks both political and geological, BP had apparently sold their two-thirds stake in Wytch Farm about 18 months ago for around $600 million, as a very small part of a huge programme to sell $30 Billion sale of assets around the world. On the one hand, this reminded me of the truly mind-boggling scale of the ‘Greater Shaikan’ oil discoveries, for which nearly 20 BILLION barrels of OIP have already been found in total, and which could ultimately add up to 60-100 billion barrels overall to the prospective buyer or buyers. With production costs likely to be in the region of $2-3 per barrel, and an overall 40% plus share in what is reputed to be the LARGEST ONSHORE oil discovery in the WORLD in the last 40 YEARS, you would have expected the British media to have made a little more of this point than of Excalibur’s rather dubious lawsuit, wouldn’t you! But this element of 'balance' does seem to be notoriously lacking in so many of their articles. And on the other hand it also highlighted the truly ludicrous nature of the idea that a 'former Green beret' should be trying to claim £1 billion (which seems to have somehow magically transformed from $1 billion in recent times according to various news reports) or 30% of GKP’s assets... for being somehow excluded by the KRG from a contract which had absolutely no initial guarantee of success. Ask KNOC how confident they are of finding oil after their shares in 6 different licences in Kurdistan have failed to bear any fruit, or Sterling Energy whose licence our acknowledged expert Adnan Samarrai apparently favoured originally… but which resulted in a duster. There was and is absolutely no certainty of anything in this high-risk area of the world. To me, apart from these key points, the main issue lies in the fact that Excalibur appear to have made no effort to get themselves included in the Shaikan PSC until more than a year after the Oil discovery had been made, when it was obvious that the oil find was of Giant/Super-Giant proportions. People seem to forget too that, long after the discovery had been made, GKP was being funded largely by a SEDA arrangement, a kind of loan that amounted to the princely sum of £30 million in total, which they were compelled to draw on until the first of the really major fundraisings in May 2010. The idea of £1 billion to someone essentially claiming 'introducer fees' does sound preposterous when viewed in this context, doesn't it! Where was Rex then, or even when the value of the company was about £400 million in July 2010? Presumably he did not see the risk/reward ratio as particularly appealing until GKP had become a £1 BILLION company, and regarded the uncertainties that were omnipresent throughout 2010 as rather too great for him to stake his 30% claim at the time. Meanwhile, there are many shareholders here, like myself, who have seen the share price rise significantly during the time they have been holding their GKP shares but also experienced sitting on very substantial losses when the political risks were deemed to be at their height and the SP was 65p in 2010, or 87p in 2011. I would begrudge Excalibur ANY form of 'compensation' for bearing none of these risks whatsoever, as I have said many times before. No, Rex and brother Eric did not share the burden of ANY of these risks but both are it seems all too ready to profit to the tune of up to £1 BILLION worth of assets out of the £1.8 billion company that GKP has become under TK’s stewardship. While I am just a layman, common sense surely tells us all that Excalibur’s declared aspiration is surely nothing but a pipe-dream, and that the Judge will not be keen for the British justice system to be opened up to abuse by cases so lacking in real merit. I don’t know what, if anything, Rex and Eric are due for their ‘contribution’ to GKP’s success in Kurdistan, but the mere fact that the claim is so noticeably late, exorbitant and tenuous, suggests to me that these aspects will not be viewed favourably by Justice Clarke in much the same way that Justice Gloster had found much to dismay her when first acquainted with these ‘chancers’ more than a year ago. Personally, I would like to think that these characters will soon become known as the "Wempens of self-destruction", and that their so-called case will soon disintegrate, blown to smithereens by GKP's highly skilled lawyers. Informal Fragments or splintered pieces; bits: The fragile dish broke into smithereens. Read more: http://www.answers.com/topic/smithereens#ixzz29QiNn4mj Certainly, it will be absolutely fascinating to see what does happen in the coming weeks, and my thanks in advance to all those who are able to provide us with up-to-date information as to exactly how the story develops. AIMHO and please DYOR. GLA, scaramouche ============= This is excellent news, and well worth repeating - thanks to our resident news hounds for posting it... "(Reuters) - President Vladimir Putin lobbied Iraq's prime minister on Wednesday to support Russian energy investment, as the oil arm of gas export monopoly Gazprom pushes for a foothold in the semi-autonomous region of Kurdistan." Mind you, I’m just waiting for Shahristani to say that Putin’s words have been misinterpreted…. and that he actually said... that he supported Russian energy investment IN IRAQ, but the oil arm of gas export monopoly Gazprom had PUT ON HOLD investment in the semi-autonomous region of Kurdistan. Anything is possible! But, it really is about time that the ICG changed the record. Every time, it seems to go: 1.Super-major X is said to be having talks about signing contracts with the KRG. 2. The Iraqi Oil Ministry says they will black-list super-major X if they sign on the dotted line. 3. Then the KRG confirms that Super-major X has signed for contracts in Kurdistan. 4. Then the Iraqi Oil Ministry says that they have written to super-major X warning them of penalties unless they ‘freeze’ their contracts in Kurdistan. 5. The Iraqi Oil Ministry then says that they have received letters from super-major X to confirm that they have indeed frozen their contracts. 6. Super-major X then declines to comment, or says that they are fully committed to all the contracts they have signed in the whole of Iraq. 7. And finally, Shahristani has a tantrum, threatens to cancel all that super-major’s contracts everywhere in Iraq and the rest of the world, and says that the Oil Executives are infidels intent on causing the break-up of Iraq by their actions. This is of course swiftly followed by another round of coffee and hobnobs, with another new committee being formed to draft the umpteenth version of the Oil and Gas Law! The whole process takes about 2-3 months and then super-major Y confirms that it is also looking in Kurdistan, and round and round we go again. It’s like listening to another rendition of the well-known 80's ‘Dead or Alive’ song “You spin me right round”.... and it almost drove me mad the first time around! But seriously, this pattern seems to have been the constant sequence of events with EXXON, CHEVRON, TOTAL and now GAZPROMNEFT. And the ICG propaganda machine just keeps on playing exactly the same record. However, I don’t think we should forget that SHELL too embarked on the start of this Iraqi merry go round only about 3 weeks ago, and the only thing we have heard since is this denial from Shahristani and the ICG. http://www.iraq-businessnews.com/2012/09/27/iraq-says-shell-denies-oil-talks-with-krg/ Personally, I’m not convinced that Shell are actually out of the running, nor ConocoPhillips, Statoil or the Chinese NOCs, as I think we have now reached the point of no return for the ICG... when Putin too starts puttin’ the boot in! Indeed, it is probably worth reminding ourselves that Hawrami himself has talked of ‘consolidation’ in Kurdistan for nearly a year now, since this article appeared in the Telegraph on 13 November 2011. http://www.telegraph.co.uk/finance/newsbysector/energy/8887311/Exxons-Kurdistan-move-set-to-trigger-raft-of-oil-mergers.html In it, Hawrami proclaimed that, with Exxon’s entrance, the "giant and magnificent" had arrived, following the "small and beautiful" companies that had been operating in the region for some time. And less than one month ago, Hawrami further emphasised the point in this article from Reuters http://af.reuters.com/article/worldNews/idAFBRE88H1E920120918 Extracts: "I'm expecting within this year to see more major companies coming in and negotiating for whatever we have - whether by mergers and acquisitions or farming in between companies". "Within a couple of years, Kurdistan will be home to 12 to 15 companies as opposed to 50. So there will be significant consolidation, which is normal." That whole article is, I think, well worth a re-read, if only because we do need to keep in mind that when Rex and co. have hopefully been consigned to the scrap-heap of GKP history, there will be any number of IOCs and NOCs looking very closely at GKP’s assets…. if they are not doing so already. The currently unexplained delay to the Court case until next Monday is undoubtedly capturing our imagination at present. But IMHO it is really little more than an early appetiser, hopefully soon to disappear. The sumptuous main course is yet to come, and it surely cannot be that far away. AIMHO and please DYOR, GLA, scaramouche CJ: "but i am sure even the most fans of a football team that does not play well, will voice there opinion." So, is that what this boils down to, then? Well, I'm sorry but there are MANY of us here who see this as an 'investment' .... not a football team, and are rather concerned when someone spends their entire time berating those who are doing their best to steer the ship towards sunnier climes! I guess that is the difference between having a very high proportion of your wealth tied up in the fortunes of the company.... or having absolutely no shares in it at all! Personally, I am rather more interested in what the company is doing (removing the uncertainty of the Excalibur case), and what it is likely to do next (Field development plan/possible sale of assets or company as a whole, future strategic objectives). But, for some unknown reason, I am constantly reminded of what "allegedly" happened well before I was even invested. It is like some heckler in the crowd always reminding the manager of when the team didn't play well a few years ago, and was perhaps struggling for survival at the bottom of the league.... instead of highlighting and rejoicing at how successful they are today in their challenge for the Premiership. Some people believe in trying to learn the lessons of the past and moving on - for others, it appears that 'history' lies at the centre of their universe. Perhaps, as the Iraqi and Kurdish people are gradually learning, I think, it is sometimes better to bury the hatchet and think about what should happen to improve things... instead of concentrating on all the issues that have gone before. IMHO, the same SHOULD be true for GKP.... IF that is, you really do want what is best for its shareholders and their families. GLA, scaramouche ======= sicilian_kan View Profile Add to favourites Ignore Date posted Monday 09:09 Subject Sunday Times Wording Highly unlikely to be a settlement RNS at 7am. Think of the practicalities. You would want the wet signatures of all parties on the same draft consent order settling the case and no RNS would be issued before parties had signed up in writing, absent any major leak. Getting wet signatures on the same document will not happen over the weekend. Far more likely to happen at court this morning. Hard fought cases can get settled on the day of trial. I settled one last month on the day of trial, which had been hard fought on both sides for over 5 years. I'm not saying it will happen. But don't let it surprise you if it does. On the other hand, an RNS at 7am stating that there had been settlement, would have been highly unexpected to me. I considered the wording of the Sunday Times article again today. Note the following (in these marks for my emphasis). "Kozel says that he met Hawrami, “in or around late July or early August 2007” at a London hotel, and the minister told him that, “he would need to submit a [contract] without Excalibur’s name on it ... for the concession to be granted”. Why is the date so vague? It suggests to me that there is no record of the meeting. Surely even a hotel receipt or a diary check would be enough to confirm the date. Anyway, it is just a thought, given that this evidence is so important. That said, if Hawrami gives evidence or if there is some other form of corroboration... - Would be interested in views on this post - it may be ill considered as it is just a thought that I have not dwelled on or checked... But might one of the reasons for timing the convertible bonds announcement before the court case be to reduce the number of shares available within the authorised share capital that might be available for a potential settlement with Excalibur? In other words, to portray to Excalibur reduced head room if negotiating a share settlement. No settlement above the authorised share capital could take place without shareholder approval and any settlement larger could therefore not be settled in a closed room. If there is settlement, it will not be put to shareholders, of that I am sure. Let's use a footballing analogy. When Liverpool received £50m for Torres, Newcastle knew that they could hold out for £35m for Andy Carroll, because even though everyone knew he wasn't worth £35m, Newcastle knew that Liverpool had that amount of cash available to them and that they wanted Carroll. Knowing your opponent's means (and how you portray yours) is key to negotiating - which is partly why Man City get done over on every transfer. My fag packet maths btw suggests the following: After the agm approval, there were 120,275,173 shares that could be issued. We also know from the Edison report that the convertible bonds could result in 7% dilution. (Presumably GKP must have the authorised share capital to issue convertible bonds - this is an assumption I make but I am not familiar with bonds). So this would leave no more than say 5% available for settlement, creating a nice tight negotiating field. And hopefully it would be significantly less. Or there could be cash settlement which might to some be more palatable. Would be interested in views whether I am missing something obvious... -- Slimbo, take a look at the following passage from the judgment of Mrs Justice Gloster: --- 'Why Oil Companies Don't Get Out of Bed for less than 50 to 1' We often hear, in general terms, about how the oil industry is driven by the risk-reward dynamic. It lies behind the vexed question of what is a fair government and oil company take: governments say oil companies are ripping them off because they make billions on big fields, companies reply that they need those margins for all the other times they drill dry wells or other stuff happens that prevents them bringing the black stuff to market. But reading through some modeling of petroleum contracts this week, I came across actual numbers. They boggled my mind and I thought they might yours too. It turns out a company might need a potential market value of hydrocarbons some 50 times greater than the sums they sink into exploration in order to make the whole thing worthwhile. Here's how that stacks up. = "16. The Collaboration Agreement recited that Excalibur and TKI wished to collaborate to pursue and prepare bids to acquire by way of "Consortium Bids" (as defined) and develop petroleum blocks in Iraqi Kurdistan ("the Blocks"), and, in the event of successful bids, to produce and sell petroleum from the Blocks. Excalibur and TKI are referred to in the Collaboration Agreement as the "Parties", and each as a "Party". TKI was to act as operator in relation to any Blocks acquired. 17. The Collaboration Agreement set out each Party's Consortium Interest, namely its participating interest share in the interests, rights, duties, obligations and liabilities which arose under the Collaboration Agreement; according to clause 3 of the Collaboration Agreement, the Consortium Interest of Excalibur was 30% and that of TKI was 70%. Each party's "Participating Interest" was defined as the party's participating interest share in the interests, rights, duties, obligations and liabilities which arose in respect of any particular Block which was acquired pursuant to the Collaboration Agreement as a result of a successful bid. Unless otherwise agreed, a Party's Participating Interest in any Block was the same percentage as its Consortium Interest." --- This was an agreement for two separate companies to collaborate together with one being the operator and one not being the operator. It was an agreement to collaborate. It was not an agreement requiring (in the circumstances of Excalibur being unable to participate) the shareholders of TKI to dilute themselves to such an extent that would cede large amounts of power within their own company (30%) to the very party unable to take part in the collaboration agreement. This would be a most surprising outcome and I'm sure that if Excalibur had such a contractual right they would have mentioned it at the hearing before Mrs Justice Gloster. In addition, I doubt that a High Court judge would seek to give Excalibur a right that was greater than the one they had contracted for. It would also be surprising if the KRG would have let Excalibur enter through back door, by allowing Excalibur to become by far and away the largest shareholders in TKI and therefore becoming the controlling interest in TKI. If the KRG was unhappy with Excalibur being participants, according to the Sunday Times quoting TK, because Wempen (Excalibur) "created an unfavourable impression among a number of individuals within the [Kurdistan government] as a result of his failure to deliver promises previously made", then the KRG would have been unhappy with Wempen having such a large (almost controlling) influence over TKI. So again, what is Excalibur's loss? As others have said before, I believe (on the limited information that we know) that Excalibur signed the wrong contract and I cannot see the Court wanting or being able to retrospectively change this just because Excalibur didn't get the outcome they wanted from the collaboration agreement. The key to me, as I stated in my earlier post, is whether or not GKP induced the breakdown of the collaboration agreement e.g. by corrupting the KRG or misleading them. This we will have to see, but I have already noted how there is no evidence that we are aware of that this is the case. Perhaps the best I can argue to get Excalibur some form of damages (in the absence of the KRG having been misled or corrupted) is the following (note I am not a lawyer specialising in contracts or confidentiality, my view is no better than any other lay persons). The argument might go as follows: TKI had confidential information provided to them for just one purpose (to collaborate with Excalibur) and that they had no right to use that information for another purpose without the further agreement of Excalibur, once the collaboration agreement terminated. I.e. was TKI required to pay for the further use of the confidential information in a separate contract once the relationship broke down? That the contract was void did not allow TKI to use the confidential information beyond the original scope it was received for. Now I do not know enough about the law on confidence and we do not have the contract before us (much may depend on its wording as to what would happen on the non-performance of one party if anything was said), but I am of the view that the following could (in some circumstances) have some relevance: 1. It would be most unpalatable as Excalibur who could not perform could then hold to ransom TKI by insisting upon the payment of an even higher price for the further use of the information or by refusing to contract at all, particularly if GKP was close to getting a PSC. I cannot see why the party unable to perform should be given this opportunity and why the party able to perform should be punished by a non-performing party. 2. Surely, Excalibur should have inserted a clause stating that in the event that they could not comply with the KRG's requirements or gain their approval they were entitled to a finder's fee or royalty of some other form of compensation for having provided the confidential information. As far as I'm aware, they did not do this and it would surely have been mentioned before if so. It would be most unpalatable for the court to rectify Excalibur's error after the event. That is not the role of the court. 3. Absent Excalibur holding TKI to ransom, surely the value of the information to Excalibur would be worth significantly less than 30% of the PSC if Excalibur could not participate join a PSC themselves, i.e. they were expecting the contracting parties to carry the work and obligations under the PSC. 4. Excalibur would (in part) be seeking to rely (in effect) on the terms of a contract that had been made void by their own actions. 5. After the Oil and Gas law was passed in August 2007, GKP would have been aware (irrespective of confidential information from TKI) that the KRG would be open to offers. Yes, TKI and GKP may have had a head start from Excalibur's information, but would the court really say that after information concerning the licensing of KRG territories became public knowledge and after the contract had become void, that TKI could contract with no one without Excalibur's consent, Excalibur having been unable to perform the agreement themselves? 6. Similarly, would not Excalibur need to establish that but for the confidential information provided, GKP would not have secured a PSC had it turned up for the first time without Wempen's early knowledge, only after the Oil and Gas law came in. 7. Is the party that can perform expected to artificially unlearn all that it knows thereafter pretending that it knows nothing despite having provided consideration for the collaboration agreement and having complied with its terms (assuming that it has) and despite the confidential information having been made public and the non-performance of the other party? --- In short, to me the key issue (on the face of the limited information we have) is whether Hawrami the KRG will back what the Sunday Times reports to be TK's position. If so, I believe that we have a strong case. As side issues: 1. Hub, an excellent post at 9.09am. 2. Elikkos, yes I did see your earlier post but did not have time to respond. We have some differences, but agree that the evidence (particularly from the KRG) is important. 3. manu19, yes, the killer point would be greatly assisted by having Hawrami as a witness, but this is not the only means of proof (though it is clearly the best). That Hawrami might not be keen willing to attend could be a key reason for settlement if it takes place. 4. Mandelsputin, if Excalibur lose, yes they might have a claim against lawyers if badly advised before. We don't know. They may also have had the opportunity to take the KRG to court too, assuming there is the equivalent of judicial review in Kurdistan, but I doubt that would have helped their cause! ========== bonobo77 If that correspondence related to the single most important deal I was cutting for my company then yes, I'd remember it. I'd also have a copy of it. I founded and ran a business for 9 years and you could have grilled me on any correspondence relating to the foundation of that business, or client wins, or financials ... and I would have remembered. I agree that there is a danger that posters on here become judge and jury, but this is just one of the regrettable consequences of the scenario that our CEO has thrust his shareholders into. As for the press ... they are only reporting what was said in court. And it's only Day Two now. There'll be more to come from both sides, and when Todd takes the stand he'll have a chance to address some Excalibur's opening claims. Hunker down because there will be a lot more to come unless this farce can be successfully nipped in the bud. However, I am of the belief that the only way Todd can emerge from this with his credibility intact is to take it the distance and win convincingly. Any payment over and above a million or two will not reflect well on his stewardship of the company. I don't think SP performance has got anything to do with any '30%' calculation. I think it's got a whole lot to do with sentiment + lack of buyers if court case drags on + bearish technicals. Not my forte. Will hold til Excal is removed and have a little powder dry to make me feel better if the 185p and 167p downside Fib targets get hit. Place the limit buys and walk away from keyboard to do something less boring instead. I wonder how all the other operators and potential investors in Kurdistan would react in that scenario. Sharistani has been decrying the PSCs as 'illegal' for long enough ... last thing the KRG would want to do in the face of this constant sticking point is to revoke their most high-profile and valuable contract ... the message to anyone signing any contract with KRG would not be good. The impression would be that Kurdish contracts are not worth the paper they are written on. And if the KRG were to revoke the PSC for Shaikan, the ensuing and monumental court case would make the current one look like an FA tribunal. Far from keeping their heads low, it would thrust the KRG and its most clandestine operations into the global spotlight, and compromise any hope of them hitting short-to-medium term production targets until the matter was settled. Remember, GKP are principal sponsor and keynote speakers at the December KRG/Iraq Oil & Gas Conference. 'The Conference is the gateway to the oil and gas business in Iraq and the Kurdistan Region.' Revoking the PSC on Shaikan might be akin to shooting oneself in both feet. =================== Taken from GKPFB pathai Court timelines and possible Early settlement Any court reporting by members of the GKPFB board I am transferring their post to this board...with their permission of course. Today Simon Pickens will be finishing his openings This afternoon & tomorrow Texas Keystone will open Friday court closed Monday & Tuesday Gulf Keystone openings Wednesday & Thursday the judge will be reading 2 folders of witness statements Friday court closed Monday the 5th starts with Excalibur witnesses and cross examination On Monday the Judge told Simon Pickens to go home and do some more homework, the collaboration agreement does not hold up and the PSCs are not legal, Excalibur was not part of the bid and could not fund any risk. Excalibur will try to discredit Todd in the witness stand, we had this nonsense regarding a lost letter and the desperate attempt to cast Todd as a unreliable witness, it's already possible to see where Simon Pickens is going with this, I have no doubt regarding Todd in the witness stand he is going to play a blinder. Yesterday the Judge worked out a timetable with the Barristers leaving it possible from next Wednesday IMO for a possible early settlement It would not surprise me to see shorts being closed from next Tuesday intra day RNS could come at any time I give permission if anyone wants to post any part of this on any board Good luck all! Yesterday the Judge worked out a timetable with the Barristers leaving it possible from next Wednesday IMO for a possible early settlement -------------------------------- I questioned ....?.....on the above. The answer: No problem Bob, At the end of the yesterday the Judge wanted to know how long each barrister was going to take, his question was directed to Simon Pickens as his opening was tabled to take only 1 day, we are now in day 3 of his opening, the telling detail is that the Judge is only on page 45 out of 2 large folders of witness statements, he is taking 2 days off to catch up with his reading , the tone of his voice was that of, do I need to do it? ============ Re: Hawrami/KRG are probably hoping they are given reason to revoke the licences from GKP. Then they can agree new terms with a super major and oust the likes of TK .... ------- Final session for SP this morning. So far we have only heard that he intends to discrete Todd and try and prove that the 70/30 Exc/TKI agreement to bid for a PSC actually entitles Exc to 30% of everything. Next update at lunchtime.The court IT system has crashed. The judge has, therefore, risen until it is restored. ============= Advice from an elder MARKETCHASER Last night I had dinner with an elderly self made (93 year old) billionaire and his family. After dinner we had a chat and I told him about an Investment I had in an oil company called Gulf Keystone Petroleum. He seemed vaguely interested so I gave him a brief overview and included the current litigation. He said and I quote, 'never trust a broker or a banker and never become emotionally attached to any stock - they will never love you back'. He also said, if he was 20 years younger he would buy stock in GKP now but since he didn't think he'd be around in another 5 years and didn't need to worry about his legacy, he suggested that I stay put. The market he says, is full of cheats, thieves and chancers, don't trust any of them but invest in the assets and fundamentals if you believe in them. Wise words. ======== PSC research enlightening! helicoiler I am sure some are well aware of this but I think its worth noting. We will have a lot more notification of short positions after November 1. www.ashurst.com/doc.aspx?id_Content=8271 Many of the games being played with AIM should no longer be possible without disclosure so we will have a much better idea of who is doing what. It would not surprise me if we see a lot of short closing on AIM this month to avoid the prying eyes of disclosure come November. Many of the huge oscillations we are currently seeing are only possible because hedge funds can create large amounts of fictional shares. If they have to disclose this then people will be much harder to scare out of positions. If you want a link that is not PDF then this should work https://docs.google.com/viewer?a=v&q=cache:efVVNDzJ5G4J:www.ashurst.com/doc.aspx%3Fid_Content%3D8271+&hl=en&gl=uk&pid=bl&srcid=ADGEESh0JIADxcAjIdRg_FdKudCd6LHmQEgKOgPmFVjDim_4o0Q52m1eboGWB6HpbxgEz3HSl_7I27MyebtQtMtka9m3D1Cm3_aHAnjPvGxkoEr-HGNucjwqjeIUILO21B5ka1VFrKAp&sig=AHIEtbSDdNenjXybhipNuKUMLm_QVlnXfQ ============ Exxon reuters renardargente JR; WQ is a huge field and is in a mess. Gazprom are primarily a gas E&P and their expertise is heavily skewed towards that area. Gazprom Nefte their oil arm is a small-ish part of their operations and they left WZR as operator on Garmian. The Russians are not daft and realised that they are not capable yet of entering a major new province even when everything is in tickety-boo Westernised order and there is perfect data. The Russians typically do not speak Arabic or anything bar Russian, have a bad press in Islam and are a target because of Chechnya, like a drink, can be unsubtle etc. Not a good mix with the locals. You never know but Shahristani will get a Lada to replace his Cadillac if he chooses a Russian replacement. But, BP/Rosneft as a wild card? ======== Lukoil and Gazprom look to be ruled out at the mo... What about Rexy boy and his brother? Perhaps they could sue Exxon for taking the West Q 1 licence block off the market and then doing nothing with it. That's completely unfair and had Exxon not taken the West Q 1 block - Rex and his bro could have had a go at it. If they were awarded it - they would seek funding/cash to pay the running costs - honestly Judge Clarke - we could have raised that dough! $4.5billion cap ex? No probs rex. "but it will be the KRG who decides who gets GKP assets." true to some extent, but if the KRG were smart, they would set a precedent by ensuring they achieve the best price for their assets. Cheap deals to favoured partners like the US would not encourage international investment with the likes of Total, Gazprom, KNOC, Sinopec and Maersk etc all being important parts of the equation. You don't want to place all your eggs in one country's hands. Thus far, there has not been a major asset sale in Kurdistan for many years and none that would come close to GKP's potential price tag. GKP and Shaikan would in theory define the future Kurd currency whether independent or part of iraq etc. The pricing / sale price is important - very important. Especially with other majors seeking inroads at present. It's all hotting up again Hub We have Exxon deserting the south and heading for the north - that's quite literally majors news and commitment from them. Chevron rumours bubbling around. Maliki and Sharistani with few options left but to agree Oil and gas law Maliki Elections early next year Gulf Keystone court case to be sorted in Dec or earlier Genel share price heading towards £9 Genel Director bought around £1.3mln in shares with his own money Afren / Hunt holding back news on Simrit-2 as looks to be another exploration well on Shaikan it is so close. We haven't even seen Statoil and co mentioned as yet. But judging by those in know (Genel in particular) something seems to be turning or derisking in the kurdy region. I wonder whether they are all expecting the floodgates to open around Dec? HUB HUB ==== Marketchaser appears now to be greater than I had at first envisaged based purely on the notes so kindly provided by those attending Court and without whom, we would be far less well informed. The British Justice system is a venerable institution and the presiding Judge is certainly no novice or fool. I would be surprised if he hasn't already deliberated the merits of this claim and concluded that the claim has no merit or foundation in law. Rex Wempen and his brother are having a laugh. What may or may not have been said in a car park is in the grand scheme of things irrelevant. What is relevant is that they patently could not meet the principal criteria of participation and were excluded by AH. I am hoping that the Judge calls both parties into his chambers next week and calls halt to these proceedings based on the fact that playing it out for the next 10 weeks at considerable expense to both will likely achieve the same outcome - case dismissed. Here's hoping. == tomthebomb No wonder he's saying chevron. Chevron have always been strongly linked with GKP. Sandunes said chevron too. Before anyone says that was ages ago, oil fields this size and of this global importance take massive amounts of preparation and time... Exxon moving out the south is of great significance too. Joint takeover between Exxon and Chevron IMO. Remember chevron are not in the south... Nor will Exxon soon. They are even presenting with chevron in December! Get this court case out the way - then boom. http://www.iii.co.uk/investment/detail?code=cotn%3AGKP.L&display=discussion&action=detail&id=10081195 On 3rd - 5th December 2012, Erbil is hosting the Kurdistan - Iraq Oil & Gas conference. http://www.cwckiog.com/ Gulf Keystone are Principal Independent sponsors. The co-hosting oil major is Chevron. I recently emailed someone at the conference with regards to who was speaking on behalf of GKP. He stated Todd - great I thought as much. Since then I've found a low res copy of the 3 day schedule. As stated on the website, GKP are confirmed as principal sponsors. The interesting part is on page 7, day 1. At 3.15pm there is a section titled "Latest Discoveries, Exploring Growth, Opportunities & PARTNERSHIPS for the Oil & Gas Industry". There are five bullet points: - Reviewing the development of current infrastructure plans. - Attracting investment across the oil and gas value chain. - ASSESSING the NEW OPPORTUNITIES for INVESTMENT in the JOINT DEVELOPMENT zones. - Outlining the role of the foreign oil and gas companies in supporting job creation. - EVALUATING PARTNERSHIPS OPTIONS Guess who are presenting this section...? Chevron + Gulf Keystone! Who was it that had been rumoured to have run the slide rule over GKP on a number occasions? Chevron! They are now CO-HOSTING the same section of the conference together. lol Sounds tasty to me. The court case 'would' still be going during the conference. Perhaps that out of court settlement will be coming sooner than we think? http://www.cwckiog.com/wp-content/uploads/2012/10/Kurdistan-16-page-Final-LOW-RES.pdf === Exxon seeks to quit flagship Iraq oil project Thu, Oct 18 12:18 PM EDT LONDON (Reuters) - Exxon Mobil wants to leave its flagship Iraqi oil project after upsetting Baghdad by signing a deal last year with the autonomous northern Kurdish region, which the central government deemed illegal. The U.S. major was the first company to flex its muscles and challenge Baghdad's authority by signing up for six blocks to explore for oil with the Kurdistan Regional Government (KRG) in October last year. Concerns over the likely profit margins on the estimated $50 billion West-Qurna-1 project could force Exxon to abandon its stake in this southern oilfield, diplomatic sources said on Thursday. "Exxon is telling Baghdad: 'We are letting you know we're looking to leave,'" one of the diplomats said. "They are shopping around and looking at all the options." Exxon stock barely budged on the news, indicating there may be more at stake for Iraq, Kurdistan and regional politics than for Exxon shareholders. The oil contracts row is part of a broader battle between the Baghdad government and Kurdistan over oil rights, territory and regional autonomy, which is straining Iraq's uneasy federal union. And Baghdad has been threatening to rip up the West Qurna-1 contract ever since. The oil row is just the latest complication in a long-running and deep-ranging dispute between Iraq's Shi'ite Prime Minister Nuri al-Maliki in Baghdad and Kurdistan's President Masoud Barzani based in its capital, Arbil. Maliki has gone as far as asking U.S. President Barack Obama to force Exxon to pull out of the deal, claiming the firm's actions are a threat to peace. Iraqi Deputy Prime Minister Hussain al-Shahristani met Exxon Mobil executives in Baghdad in the summer and threatened to kick the company out. He declined to say on Thursday whether Exxon was pulling out, but told Reuters in an email that Baghdad was sticking to its line that all contracts signed with the KRG without the approval of Baghdad were illegal. "All companies that entered in such contracts were asked to cancel them or pull out," Shahristani said. "Exxon Mobil can be contacted about their decision." Iraqi oil sources said Exxon has not informed Baghdad of its interest in exiting West Qurna. Exxon declined to comment, as did the U.S. State Department. Despite Baghdad's tough talk, Exxon chief Rex Tillerson said in March the company was committed to expanding output at West Qurna, where it's in charge, as well as exploring in Kurdistan. And it's been business-as-usual for Exxon at West Qurna-1, now pumping more than 400,000 barrels a day and earning a hefty chunk of Iraq's central government revenue. Exxon, with minority partner Royal Dutch Shell, signed up for the project - which targets output of 2.825 million barrels per day by 2017 - in early 2010. By the end of last year, the pair had spent just under $1 billion. But the pace of expansion has been slow. Exxon, like other foreign operators, has complained that infrastructure bottlenecks, payment delays and bureaucratic red tape are hampering progress. It was that frustration, say oil executives, that led Exxon to make its bold move into Kurdistan, which offers more lucrative production sharing contracts and a safer operating environment. A further setback came in February, when Exxon was stripped of its role as project leader for a multi-billion-dollar water injection scheme that is core to the development of Iraq's southern oilfields. "That really pushed back the time line on development," said an industry source. "In their minds, that played with the profitability of the contract." Exxon's departure from southern Iraq now hinges on its ability to find a company willing to buy out its stake in West Qurna-1, say industry sources. "If they can find the right buyer, they will pull out," said an industry executive. "It's an unusual move for Exxon. They usually don't give up." Exxon is meanwhile raising its profile in Kurdistan, with drilling set to begin in a few months. A senior Exxon delegation was last week in Arbil, where the company is setting up an office, they said. Other majors such as Chevron, Total and Gazprom have joined Exxon with their own deals in Kurdistan, provoking warnings from Baghdad. (Reporting by Peg Mackey and Timothy Gardner in Washington and Ahmed Rasheed in Baghdad; editing by William Hardy and Jason Neely) ============== helicoiler Boll*cks the Times have picked my earlier rumour that GKP would settle in 'oil'........ a Shaikan paperweight that is! These journo's really are impressively up tp speed with how this case is going - not!!! IMO GKP don't need to settle this - as it's very likely Excal has no claim - let's wait & see! Would love to see the Times do an in depth piece on Rex's chequered history. BILLFISH has already done the research for them! ========== EOR – Enhanced Oil Recovery Improved Oil Recovery (IOR) == To EITI board members Mr Stuart Brooks of Chevron, Mr Alan McLean of Royal Dutch Shell, Ms Elodie Grant Goodey of BP, and Mr Guillermo Garcia of ExxonMobil: Each of your companies is a member of the American Petroleum Institute (API), which on October 10 filed a lawsuit against the Securities and Exchange Commission (SEC) to block implementation of the resource extraction disclosure rules in Section 1504 of the Dodd-Frank Wall Street Reform bill. Your participation in the lawsuit through API begs two questions: how can any of you seriously claim to support the Extractive Industries Transparency Initiative (EITI), and stay on as members of the EITI board? And how can you stand by the shaky legal foundations of the lawsuit filed by API? You may view the latest post at http://openoil.net/2012/10/18/open-letter-to-the-eiti-companies-leading-the-fight-against-transparency/ Open Letter: to the EITI companies leading the fight against transparency Posted on October 18, 2012 by Amrit Naresh| Leave a comment To EITI board members Mr Stuart Brooks of Chevron, Mr Alan McLean of Royal Dutch Shell, Ms Elodie Grant Goodey of BP, and Mr Guillermo Garcia of ExxonMobil: Each of your companies is a member of the American Petroleum Institute (API), which last week filed a lawsuit against the Securities and Exchange Commission (SEC) to block implementation of the resource extraction disclosure rules in Section 1504 of the Dodd-Frank Wall Street Reform bill. Your participation in the lawsuit through API begs two questions: how can any of you seriously claim to support the Extractive Industries Transparency Initiative (EITI), and stay on as members of the EITI board? And how can you stand by the shaky legal foundations of the lawsuit filed by API? There’s a cognitive dissonance in your claim that you support and foster transparency in countries in which you operate while taking part in this lawsuit, this aggressive action to strike down Section 1504, the only legally binding transparency provision you or any other US-listed company face. Many of the countries in which you operate do not implement EITI. Section 1504 exists to provide transparency in precisely these types of cases – both for citizens of resource-rich countries and for your shareholders, the shareholders of every API member company. How can you justify this attempt to knock down a law that was designed specifically to complement and augment EITI? Section 1504 goes beyond EITI in some areas. For instance EITI recommends but doesn’t require reporting of payments at a project level, known as project-by-project or disaggregated reporting; Dodd-Frank enforces project-level reporting by law. Aren’t you embarrassed to walk into EITI board meetings, just as API attempts to strike down a provision which takes EITI’s best practices and sets them in legal action? The whole EITI process is founded on good faith between three stakeholder groups: corporations, governments, and civil society. Bringing these groups together in pursuit of a common goal of transparency has not been easy; and your participation in this lawsuit puts this hard-won trust at risk. Your EITI board membership is incompatible with your participation in the lawsuit filed by API, and merits suspension from the EITI board. As for the spurious reasoning of the lawsuit itself, the cornerstone of API’s complaint lies in an argument over semantics. API claims that the SEC “grossly misinterpreted its statutory mandate” by requiring in its final rules that US companies publicly file reports detailing payments to foreign governments on a project level. In any reasoned reading the SEC requirements do not, in fact, go beyond Congress’ mandate that the SEC “shall issue final rules that require each resource extraction issuer to include in an annual report . . . information relating to any payment made by the resource extraction issuer . . . to a foreign government . . . for each project . . . relating to the commercial development of oil, natural gas, or minerals.” API contends that Congress’ mandate for the SEC to make publicly available a “compilation of the information required to be submitted” means that the payment information should be aggregated, in the wording of the complaint – but, again, this is purely a matter of semantics. Nowhere in the law, as written by Congress, is “compilation” defined as “aggregated”. Another key argument in API’s complaint is that the SEC’s economic analysis was unsound, failing to adequately weigh the rule’s costs and benefits, with a net “disastrous effect” on member companies and the US economy as a whole. The SEC reckoned that the total initial cost of compliance for all issuers – the combined costs for all companies subject to the provision – would be about $1 billion, with ongoing costs somewhere between $200 million and $400 million. These costs would be spread across the thousands of US-listed companies, by my research, that are involved in resource extraction. Obviously, these costs will not be distributed evenly across all affected companies – but when ExxonMobil reports profits of $15.9 billion for the second quarter of 2012, the compliance costs look like relative chump change. (By the way, what are API’s lawyer fees for this lawsuit?) Still, some of the cards stack up in your favor. Economic analysis has proven a thorny issue for the SEC in the past – it was a main factor in previous SEC regulations that have been struck down, most recently the proxy access rule, which empowered shareholders to nominate directors to corporate boards. I see that the attorney Eugene Scalia, who headed up the proxy access case, is also leading this case on behalf of API. And he’s on a winning-streak against Dodd-Frank provisions: last month, Scalia won a court battle over another Dodd-Frank regulation regarding commodity speculation. The act of filing suit with the federal district court does not immediately stay the rules, meaning that section 1504 will, for now, remain in force during court proceedings. But API and the other plaintiffs could still petition the court to this end. Whatever happens in court, though, your bluff has been called. Your companies’ carefully worded statements about the importance of accountability and openness are a transparent sham. Your participation in this lawsuit demonstrates that your companies have much to hide; and that transparency has never meant as much in practice as it has as an image-marketing tool. This is not to say that EITI is failing; far from it. But as long as your companies are represented on the EITI board, the integrity of the initiative is cast in doubt. The citizens of the countries in which you operate – along with your own shareholders in the United States – deserve better than this. ==== The missing pieces in Iraq’s first EITI report Posted on February 22, 2012 by Zara Rahman| 3 Comments The next few months are an incredibly crucial time for Iraq as an implementing country of the Extractive Industries Transparency Initiative (EITI). It has until August 2012 to achieve EITI Validation, following the beginning of its candidacy in February 2010. As such, any issues with regards to the activities designed to display their increase in transparency which have taken place as part of their EITI workplan need to be addressed immediately, or risk being forgotten about among the celebrations which would otherwise take place in just 5 months time. As the principal global standard for transparency in the extractive industries, countries implementing the EITI should see a real difference in transparency in their respective industries following their validation and subsequent EITI Compliant status. But as things stand currently, will this be true for Iraq? On December 20th, 2011, Iraq published its first EITI Reconciliation report, a report which was heralded as “a historic step toward oil sector transparency” by the international community, as the report outlined in great detail the money received from export sales by the Baghdad government. However, as already noted by Johnny, there were many questions raised by the report itself, and over the past couple of days I’ve been seeing how much information already in the public domain can answer just some of those questions. The sole revenue stream covered in the EITI report is that of export sales. At the time that the terms of reference for the this EITI report were agreed, in 2009, the Iraqi oil industry was entirely state run and without foreign participation. However, with the re-entry of international oil companies in 2009, revenue streams into the Baghdad government are no longer limited to export sales. The first licensing round, which began proceedings in 2008 and was concluded in 2009, saw only one field- Rumaila- being awarded, although two further fields, Maysan and West Qurna Phase 1, were subsequently awarded in bilateral negotiations. Under the second licensing round which took place in December 2009, seven of the ten oil fields offered in the round were awarded to various consortia of companies. The technical service contracts (TSCs) signed under this licensing round included a number of clauses that have created multiple revenue streams. These TSCs included clauses for cost recovery mechanisms, signature bonuses, and remuneration fees, none of which were included in the EITI report. I began looking at the most clear cut of these revenue streams; the signature bonuses. These bonuses, which were widely reported upon in the media, ranged from $100 million, which Sonangol paid for the Qayara field, to $500 million, paid by a consortium led by BP for the Rumaila field. One point of uncertainty was the form in which these payments were made. Some, such as the $500 million Rumaila field signature bonus, was reportedly paid by the company as a ‘soft loan’, to be paid back in 20 quarterly payments, in either crude oil or cash as decided by the company. Others appeared to have been renegotiated, such as the $300 million paid by Eni and Oxy for the Zubair field, reportedly slashed to $100 million in April 2010. Bearing in mind these uncertainties, the total of the signature bonuses reported to have been paid by international oil companies to the Baghdad government during the period of November 2009 until January 2010 comes to $2.25 billion, as you can see in the spreadsheet I created. Even taking into account the discrepancy of reducing the Zubair field signature bonus, that still leaves a figure of around $2 billion dollars that is unaccounted for in the EITI first report. As stated in a model TSC published by the Ministry of Oil, the signature bonus should be “deposited in cash into a bank account designated by the Ministry of Oil” ; so finding and reporting these amounts should not require much more work on the part of the MoO. The second revenue stream I researched was that of remuneration, the fee that the government pays back to an operating company, in this case, after they’ve reached a pre-agreed production level. Evidence of these payments only begins in May 2011, which makes them inapplicable to the period of time covered in the first EITI report. However, with the scope of EITI as it stands, they still wouldn’t be included in future reports. To show how important the remuneration payments are to government revenues, I compiled another spreadsheet showing payments that the Baghdad government made to international oil companies, the first of which began with a payment in kind of 2 million barrels of crude oil to BP in May 2011. The main hole in this spreadsheet came from being unable to find the date and amount of the second remuneration payment to CNPC for their activities (as partnered with BP) in the Rumaila field. To put these figures into context, I used the average monthly price of a barrel of Basra light from the Ministry of Oil website and multiplied it by the number of barrels taken as payment by the IOCs to get an estimate of the market value of each shipment. Here, the total in barrels of oil comes to 11.65 million barrels of Basra Light, which comes to an estimate of $1.25 billion. Clearly, these payments constitute a large enough amount to need to be included in the scope of the next Reconciliation report. The research done here does not seek to be exhaustive with regards to payments from the Iraqi oil industry. Rather, it is intended to highlight that there may well be many other avenues of revenues flows both in and out of the Iraqi oil industry. These multi-million or even billion dollar payments need to be addressed before August 2012, when the EITI will face the decision of whether or not to grant Iraq EITI Compliant status. ============= No win Spat with Exxon bad for Iraq - and oil consumers18 October 2012 | By Christopher Swann, Una Galani PrintEmail Comment Save .Iraq’s spat with Exxon Mobil bodes ill for the Middle Eastern nation – and for oil consumers everywhere. Exxon may withdraw from the country’s top field, and the Baghdad government could push Exxon and others out of deals struck with officials in the partly autonomous Kurdistan. The tangle undermines hopes for Iraq’s future oil output. Falling short of the potential would cost the Iraqi economy and, eventually, raise oil prices. In awarding contracts for fields including the flagship West Qurna-1 in southern Iraq, the central government in Baghdad squeezed Western giants like Exxon and Total into deals that offer wafer-thin profits of less than $2 a barrel of oil. Meanwhile oil majors are reliant on the government to build the infrastructure needed to get the crude to export markets. If Baghdad continues to fall behind on this commitment, their returns could shrink further. Add in the security burden, and oil giants have little to lose if they pull out of these arrangements. Deals signed with Kurdistan in the north of the country are more lucrative, but Baghdad sees them as illegal. Yet the Iraqi government may be overplaying its hand. Exxon would not be easy to replace if it pulls out of southern Iraq. Gazprom and Total are equally tainted by agreements with Kurdistan, and Chevron is involved there too. It’s true that Petronas, BP and Royal Dutch Shell have stayed away, dealing only with the central government. Still, with more than $500 billion of investment needed over a couple of decades, according to the International Energy Agency, Baghdad can’t afford to limit the field too much and still expect to extract decent terms. Iraq’s exports hit their highest level in 30 years this September. That’s a good start. But the IEA reckons it can more than double current production of 3 million barrels a day to about 8 million by 2035 – close to half the forecast growth in world demand. If those ambitious goals are not met it is Iraqis, reliant on oil for 70 percent of GDP, who would suffer first. But with less supply to meet rising global consumption, oil users would feel the pain. ============ Author pathai View Profile Add to favourites Ignore Date posted today 01:24 Subject FT: Gulf Keystone claims Wempen misled group Votes for this Posting Voted 11 times. Message October 19, 2012 12:44 am By Michael Kavanagh Disputes over alleged verbal assurances given in a Iraqi car park and claims that a former adviser to Gulf Keystone misled the company over his ability to raise funds needed to win lucrative oilfield licences in Kurdistan have been raised in London’s High Court. Excalibur Ventures, the vehicle of Rex Wempen and his brother Eric, is claiming up to $1.62bn in compensation and damages in a case against Gulf Keystone, the Aim-traded company. Excalibur claims it was cheated out of 30 per cent interest in Gulf Keystone’s assets in the Kurdistan region of northern Iraq that should apply under the terms of a collaboration agreement struck with Texas Keystone, Gulf’s sister company, in 2006. But in opening addresses made by counsel for Texas Keystone and Gulf Keystone, Mr Wempen was accused of attempting to secure a fortune without putting his own capital at risk. Specifically, counsel said he was unprepared to commit the millions of dollars necessary to win part of a controlling stake in Shaikhan block in Iraqi Kurdistan, along with a share in another block, Akri-Bijeel. Mr Wempen played an early role in introducing Todd Kozel, Gulf Keystone’s executive chairman, to opportunities in Kurdistan. But the defendants argue that Mr Wempen antagonised Ashti Hawrami, oil minister for the Kurdistan regional government, at a meeting in 2006 and that Mr Wempen was then excluded from subsequent meetings with the minister. Mr Wempen denies this. Michael Crane QC, representing Texas Keystone, told the court that Excalibur had voluntarily agreed not to be included in attempts to be made part of consortiums applying for production sharing contracts because of the Kurdistan government’s apparent reluctance to approve its inclusion at that stage. He also cast doubt on remarks Mr Wempen claimed were made by Mr Kozel in a car park in the Kurdistan capital of Erbil after the conclusion of talks with Mr Hawrami. These appeared to clear the ground for an application led by Gulf Keystone rather than Texas Keystone. Though Excalibur’s collaboration agreement was formally with Texas Keystone, Mr Kozel is alleged to have assured Mr Wempen: “Don’t worry, I won’t screw you over.” Mr Kozel has disputed the exchange said to have taken place during the taking of celebratory photos. Presenting opening arguments for Gulf Keystone, Jonathan Gaisman QC said that it was Excalibur’s inability to fund its share of signature fees and other investments that prevented it from profiting from the award of the licences. The defence argued that Mr Kozel had attempted to include Excalibur as an investing partner in the months before the granting of the production sharing contract and then in the immediate aftermath through a “farm-in agreement”. But Excalibur was “not within a country mile” of securing funds that it initially signalled it might secure through UBS, the Swiss bank. The defendants also claim that Mr Wempen proposed “some sort of finder’s fee in the region of $5m” at a meeting in December 2007 in return to settle its dispute before the breakdown of negotiations. The case continues. ============= Jonathan Gaisman chopper89x two little quotes from previous clients “Just startling” - one impassioned observer went as far as proclaiming Jonathan Gaisman “the finest advocate in the commercial sphere.” • “Unbelievable intelligence” combining with “tremendous court craft”, he is famed for “demolishing witnesses in cross-examination.” Good hire TK =========== Story so far... B19400 So we have had four days in court, so time for a little look back. It's under a 5 minute walk from Chancery Lane tube station on the Central Line Both Rex Wempen and his brother Eric Wempen have been in court every day. Todd Kozel, John B. Gerstenlauer and Tony Peart for GKP and Simon Raggett from Strand Hanson have been in court every day too (though TK missed one morning session and one afternoon session). Anastasia from GKP has been in and out too. Simon Picken is representing Excalibur; Michael Crane for Texas Keystone Inc and Jonathan Gaisman for Gulf Keystone. The story so far: The KRG wished to develop their oil assets and were keen to sign deals with US companies. RW was in Irbil early and was tasked with finding a suitable US oil company, he found TKI. TKI & Exc signed a 70/30 collaborative agreement to bid for acreage. RW chose a CA over a finder’s fee even though the CA ran the risk of funding and future disqualification. The CA is purely an agreement to bid; it is not a PSC. For reasons unknown it did not matter to RW whether he was a name on any PSC. RW has no contract with GKP. GKP are a Bermudan company, and in emails between RW & EW are described as ‘non-US competition’. GKP were not a party to the CA between TKI & Exc. There is no mention in the GKP board minutes of any reference to the CA. GKP were therefore free to bid for whatever they wanted to bid for. When the time came to awarding a PSC for Shaikan, Hunt had already done a deal with the KRG. This seemed to satisfy the KRG’s desire for a US company and so GKP alone bid for Shaikan. GKP were perhaps too small, so MOL were introduced with a proposed 80/20 (to compensate GKP were allowed to farm in to Akri Bijeel with MOL at 20/80). Before Sh was finalised, GKP board minutes note that troops were beginning to muster on the Turkish border. A US company was again needed to satisfy KRG PR and TKI were brought in. The PSC therefore became 75/20/5. Although well funded at the end of 2007, GKP saw the risks in Sh and wrote to the KRG asking for Exc to be allowed to farm in and therefore bring in more funds. It transpires that Exc had no funds, could not get any funds and neither the KRG nor MOL wanted them in the first place. The case: TKI and Exc have a 70/30 CA to bid. Nothing else. TK wears two hats: TKI & GKP. Exc, getting nothing, want 30% of everything that GKP have. Two points about the trial so far: At no point has there been any mention of Litigation Funders. ETAMIC were mentioned, albeit briefly. There is nothing in writing in any of the court bundles and TK says that all his dealings with them were oral. Quite simple really… ================ Prior to the court case I was fearful that Excalibur may have some damning evidence or other agreement, that we had not been aware of, but their "attack" was to try to discredit Todd and sow confusion around the Collaboration Agreement. GKP defense has kept to the points of law and the facts. Both the law and the facts, seem to me, to completely undermine Excalibur's case. The facts seem to discredit the Wempens enough without our barrister crudely shouting it out. I know there is still a long way to go but after having been in court everyday, it has daily increased my belief in a positive outcome for GKP, So much so that I would be shocked if Excalibur won anything. From being worried last week that I was too over exposed to GKP, I am now looking to increase my holdings! GLA Hector ps There are some posters on here trying spread the "fear" but they obviously haven't been to the court. I can assure you that I met no one in court invested in GKP who is fearful. ======== Jackkozy I'm sure I'm one of those who fits into your thinking, especially since there alwasy seems to be this weird (untterly unfounded) idea that if you ever trade a stock then you must be an EVIL SHORTER. For the record, I am currently long in both shares and CFDs. I'm also perfectly happy to disclose publically if I'm either out or short but then if the SP subsequently drops no doubt the conspiracy theorists (of which there are many) will say that the drop is entirely due to my post. This is the kind of unfortunate nonsense which afflicted Investor48. Rather, I think that many of the longer term holders, like myself, are rather tired and fed up with this journey and all the emotional trauma it's put us through. Personally, whilst I applaud TK and team for acquiring Shaikan and the other KRG blocks, I can't help but feel that every aspect of GKP's strategic management could have been better handled. How many of the non-drillbit related assurances have actually been delivered? Any? Luckily, like Gokana, I off-loaded everything in the high 300s so I can afford to sit back relatively comfortably and mock the situation we find ourselves in. Do I find it funny? No, but I'd rather try and make light of it since my alternative is to be very, very angry. Which is, I suspect, what a lot of investors are, especially following TK's AGM performance. I think we've got every right to be angry and the only antidote to this is to get our pay day sonner rather than later. Given GKP's track record of delivering strategic goals, I unfortuantely draw the conclusion that this will likely be the latter. =========== Exxon are staying in Kurdistan!!! Gaz prom are staying in Kurdistan and I am just going out with them for night. Small E&P company's being pushed out being told within next 2 months DYOR. Oilcan63 ============