Kicking a gift horse in the mouth These numbers are quite accurate but still approximate.
LFD has raised $70 mil and invested it all into Kurdistan.
LFD paid $20 mil capacity bonus payment on signing and by KRG agreement delayed $25 mil final payment, while they invested heavily into the property.
The above $20 mil is not deductable from profit oil, so it has no payback to LFD or GENEL.
After paying the $20 mil; LFD has invested a further $50 mil extra into Kurdistan.
You would think they could have attempted to drill one hole with that $50 mil.
The above $50 mil should be recoverable from profit oil.
LFD had a very quick payback of capital, because the 40% royalty payment comes substantially after payback of capital. This quick payback adds value to the LFD asset.
Basically GENEL gets to assume LFD position and gets the benefit of the LFD $50 mil capital expenditure. GENEL gets to claim this back from profit oil.
They spent $50 million without drilling one 1700 meter well into a known oil reserve.
LFD was given a gift, a shallow proven oil reserve in the Middle East, something to build an oil company on, with wells that could flow 5000 BOPD. A dream come true, talk about kicking a gift horse in the mouth.