Kurdistan focussed Oil and Gas Company. Some minor assets in Algeria awaiting final disposal.
• Quick Summary :-http://tinyurl.com/GKP-Flash-Summary
• Website :- www.gulfkeystone.com
• Market Cap (25 May 2011) :- £1105M
• No Shares :- 762 million
• Current SP (25 May 2011) : - 145p
(ii) Operations:- http://www.gulfkeystone.com/operations.aspx
• Algeria (http://www.gulfkeystone.com/middle-east.aspx) assets. Algeria effectively worth zip as GKP are exiting with some liabilities that are equal to approx value of assets.
• Kurdistan (http://www.gulfkeystone.com/kurdistan.aspx) under company GKPI, which partners various other entities (Genel, MOL) in licenses of the Kurdistan blocks.
GKP appraising Shaikan, drilling exploration wells in Sheikh Adi (currently) and Ber Bahr (later) with MOL also drilling a second exploration well in Akri Bijeel block.
Cash position is OK (£100M or so) after a recent placing
(iii) Licenses Ownership : Still unresolved even after new Iraqi colaitin governement place. PSAs will remain as they are IMHO. In any case these are not by any means lucrative with government takes (Royalty, KRG share of Profit Oil, Back-In rights to Contractor consortium, Infrastructure Cost ..etc) resulting in a revenue share of 83% or so.
(iv) Valuation : New improved NAV and DCF model to reflect acquisition of ETAMIC share of licenses, newer estimates of STOOIP, Infrastructure Payments to KRG..etc see link for download information. Also added GKPI's gas volumes and value to this (and corrected a minor error within DCF spreadsheet in calculating the additinal 40% TAX ON GKPI profit oil as "infrastructure payment" to KRG).
Would like to paste image summary here but cant manage the technology.
In any case, quick summary of DCF is that NPV10/bbl for Kurdistan for GKPI on a GKPI Working Interest basis using $80 bbl Brent is approx $4.20 per barel (for POO = $100/bbl then NPV10/bbl = $5/bbl).
This value is not too sensitive to further increases in POO nor too sensitiev either to fall in POO.
Note as GKPI have a special tax to pay called "Infrastructure Payment", agreed when they purchased ETAMIC share, then the NPV10/barrel for MOL or other FOCs in these licenses is significantly higher than that of GKPI. example: - GKPI NPV10/bbl = $4.2/bbl, MOL = $6.92/bbl and for POO = $100/bbl then its $5.05/bbl vs $8.41/bbl respectively.
(b) NAV - this is a fairly conservative NAV but one I am happy with at the moment.
Core 250p (includes Cash + P90 STOIIP values only and also must have COS > 70%)
(v) Conclusion:- very much a buy and still plenty of upside here for near term increase in share price. They may go under the hammer but need to get more CPRs for Akri Bijeel/Sheikh Adi and also prove up alot more resources/reserves via drilling, get into the export of crude side of things (then its a lot mor edifficult for IOM to meddle in legality of contracts issue) and also sort out license ownership.
JPGH - Jun 2011
Filed Under: Energy,