Yesterday saw Gulf Keystone Petroleum (LON:GKP) CEO Todd Kozel issue a rare shareholder announcement, in the wake of the recent 22% collapse in his company’s share price, which followed the news he had disposed of 10m of his shares.
I don’t think the recent decline in the share price means much, and I discussed Kozel’s shareholding in more detail in a recent article for the Motley Fool. Today, I’d like to look at yesterday’s ‘news’.
The news, of course, is that once again, there is no real news.
Gulf Keystone Petroleum is still stuck in limbo. It is the 55% owner and operator of the largest onshore oil field in the world that isn’t in the hands of an oil major, but it cannot make any money from it. Yet.
Oil isn’t the problem…
The firm is positioned to start exporting up to 40,000 bopd of in short order, and up to 400,000 bopd in the long term, but it is currently unable to make any meaningful progress towards this goal.
Reading between the lines of the announcement, Gulf Keystone’s construction of its production infrastructure is being delayed because its Field Development Plan (FDP) for Shaikan has not yet been signed off by the Kurdistan Regional Government (KRG).
In turn, this might be because Gulf Keystone’s London court case has yet to reach its conclusion. Although the case is over, the judgement isn’t expected for another month or more.
Gulf Keystone could potentially lose a 30% share of Shaikan if the judgment goes against it, and while most observers think this is unlikely, it is probably understandable that the Kurdish authorities aren’t keen on granting an FDP to a small company that might lose a chunk of its prime asset in a few weeks’ time, reducing its ability to raise funding to execute the FDP.
Recent news reports suggest that the KRG and Iraqi government may be about to kiss and make up over their long-running row about oil export contracts. It sounds positive, but I won’t hold my breath until there is concrete progress, as we’ve been here before.
Meanwhile, pipeline construction from Kurdistan to Turkey continues apace and Genel Energy continues to export oil to Turkey by truck, targeting 15,000-20,000 bopd.
Gulf Keystone badly needs to resolve some of the uncertainty around its investment potential so that it can move forwards with Shaikan — by now, the firm should be on a par with Genel in terms of commercial and operational progress, but it isn’t.
The result of the court case can’t come too soon.
Disclosure: Roland owns shares in Gulf Keystone Petroleum but not in any of the other companies mentioned in this article.
Disclaimer: This article is provided for information only and is not intended as investment advice. Do your own research or seek qualified professional advice before making any purchase decisions.