General Discussion on Gulf Keystone Petroleum

8th Feb '10 by JPGH

60 comments 39631 reads

Kurdistan focussed Oil and Gas Company. Some minor assets in Algeria awaiting final disposal.

(i) Background

• 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).

<b> http://tinyurl.com/NAV-DCF-incl-Gas-Jun-11 </b>

Would like to paste image summary here but cant manage the technology.

(a) NPV10/barrel

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…

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lowersharpnose

20th May '10

MOL's results are out

In the Kurdistan region of Iraq, the, Bijeel-1 exploratory well showed very promising preliminary test results. The drilling was finished in April, testing is currently ongoing. In the neighbouring Shaikan Block (operated by GKP, with a 20% undiluted MOL share) an early development project has been started based following the major discovery made by the Shaikan-1 well.

lsn

24th May '10

Report of an imminent fund raising, spotted by rivaldo on ADVFN:

http://www.ft.com/cms/s/0/bb1c57d8-676e-11df-a932-00144feab49a.html

Gulf Keystone Petroleum is preparing to launch a fundraising of up to $170m (£117m), the Kurdistan-focused oil explorer’s second cash call this year.

The Aim-quoted group, one of the most widely followed by retail investors on the London market, has lined up Mirabaud Securities and the Russian investment bank Renaissance Capital to launch the share issue as early as this week, people close to the situation said.

The shares are expected to be placed with institutional investors at a range of 75p to 80p a share, a slight discount to yesterday’s close of 84¼p, which valued the company at £438m. The details of the placing were still being finalised and could change, these people said....

It would be good to get this out of the way, leaving just the small matter of the politics of Iraq and Kurdistan and the approval, or otherwise, of them there contracts.

JPGH

25th May '10

now officially out of the way.....http://www.investegate.co.uk/Article.aspx?id=201005250700104643M

raising £115M at 75p with a reputation like GKP's and in this market is a super deal for GKP.

The proceeds raised will be used primarily to progress the three Shaikan appraisal wells the Shaikan-1 extended well test and production facilities, Sheikh Adi exploration well and the acquisition of further 3D seismic data over Shaikan and Sheikh Adi licences. The funds raised will also be used for any future increase in GKP's interests in Kurdistan assets.

Other highlights....

Shaikan 3D seismic underway and 14% completed
Shaikan-1B (appraisal): - workover rig arriving early June to test prevously tested Jurassic sections usng ESP's (AFAIAA these section sprevioulsy didn't flow so well hence the need for ESP's)
Shaikan-1 EWT: - 8,000 to 10,000 bopd test is expected to commence in August.......believe that when I see it. Add 2 more months would be more like it....not that it matters to GKP finances anymore
Shaikan-2 (apparaisal)- well site prepped and expect to receive rig end of May. June spud.
Shaikan-4 (appraisal) :- well site close to SH-1, Q3 2010 spud date.
Shaikan-3(appraisal) :- shaloow cretaceous well, lwell site beig constructed, Q4 2010 spud date.

No further news on Akri Bijeel other than ongoing testing which I would say is good news.

ManSiarad

JPGH,

any idea what this comment in the RNS might mean?

The funds raised will also be used for any future increase in GKP's interests in Kurdistan assets.

Might they be planning

a) to buy into an existing concession by taking a stake from a financially-distressed party?

b) to seek to actively negotiate further concession acreage?

Or is it just BS?

(On the assumption, of course, that Todd isn't looking to sell up his own personal interests?)

Man Siarad

I didn't spot that one!! Sounds like Blarney to me or is it a reference to GKP's recent taking over of ENTAMICs "responsibilities" which meant GKPI gaining full ownership of assets but also incurred a cash payment to KRG (as well as the additional (lower) profit oil share to GKPI across all GKPI licenses).

Maybe GKP are eyeing up some of HOIL's Miran (West) asset which they might get at a good price after HOILs' recent poor drilling result there?

JPGH

safetyfirst

15th Jun '10

http://www.businessweek.com/ap/financialnews/D9GBP2P84.htm

The president of Iraq's semiautonomous Kurdish region says that it could resume oil exports as soon as a new federal government is formed in Iraq.

Massoud Barzani says his Kurdish Democratic Party is in talks with Baghdad to form a new government that "doesn't exclude any party."

He says that oil-rich Kurdistan has resolved most of its oil revenue disputes with the central government. Barzani says Baghdad also agrees to deals the Kurds signed directly with international oil firms.

Barzani said Tuesday during a visit to Paris that "We're ready, everything is ready" for oil shipments to resume.

He says there is no precise deadline "but it's possible that we'll begin right after the formation of the new government."

Not everyones cup of tea but looks as if Kurdistan is about to get its oil contracts ratified.

Fangorn

4th Aug '10

http://www.investegate.co.uk/article.aspx?id=201008041010255079Q&fe=1

Announcement of the commencement of drilling operations on its Sheikh Adi-1 exploration well effective August 4, 2010.

5th Aug '10

http://www.iii.co.uk/investment/detail/?display=news&code=cotn:GKP.L&action=article&articleid=8001403

retest done of zone that didn't flow so well last November. Now flowing heavy oil at 4,650 bopd.

Gulf Keystone announces the results of further testing of the Butmah (1783m to 1814m) section of the Jurassic on its Shaikan-1 discovery well. Final production rates during this week's re-test were measured at 4650 bopd with an API gravity of 17.68 degrees and a gas oil ratio of 34 standard cubic feet per barrel of oil at a flowing wellhead pressure of 295 psi. This is in line with the previously estimated rate.

The Mus (1627m to 1667m) section of the Jurassic will be re-tested next, followed by the Sargelu (1450m to 1510m), which will then also be configured for long term production testing.

no details on test duration, whether open or closed or whether pump was used. Maybe later some details will emerge. In any case anotrher top trest result from GKP. If only the Iraq politics and Kurd export issues can be resolved.....

9th Aug '10

New RNS http://www.investegate.co.uk/Article.aspx?id=201008090700137264Q this morning confirming the restructuring (ousting of ETAMIC) previously announced in March 201 http://www.investegate.co.uk/Article.aspx?id=201003100700173390I

On 10 March 2010, Gulf Keystone announced proposals to reorganise its interests in Gulf Keystone Petroleum International (GKPI) and in its four PSCs, which required, inter alia, KRG approval. These proposals have been documented in a series of amendments to each of the four PSCs which have been approved and executed by the KRG and by GKPI and each of its partners in the four PSCs.

In the case of the Shaikan Block and Akri-Bijeel Block PSCs certain Third Party Rights have been modified as set out below.
Key changes to the proposals announced on 10 March 2010 are:

· Previously announced payment dates for the Infrastructure Support Payments have been revised so that such payments are fully payable on 15 August 2010.

· The parties to the Shaikan Block and Akri-Bijeel Block PSCs have agreed to extend the period that the KRG may exercise the Option of Third Party Participation to enable the KRG to nominate a Third Party Participant until 30 June 2011.

· Clarification that the existing Ber Bahr Capacity Building Payment of $10 million is now due on declaration of the first commercial discovery.

· There are no other material changes to the proposals or to the post re-organisation interests announced on 10 March 2010 or to the terms of the PSCs other than as set out above.

So GKP cough up this week ($30m or so outstanding I believe), then the ownership effectively reverts to

Shaikan:-       51% net.
Sheik-Adi:-     80% net.
Berbahr:-      40% net.
Akri-Bijeel:- 12.8% net.
With KRG getting a higher % cut/share of profits (they get 40% of GKP's profit oil under the banner "Additional Infrastructure Support Payment to be
allocated to social programs").

With award of KRG Back-In / 3rd party interests get an extension until 30/6/2011.

SP up to almost a year high of 108p at the moment. More re-test results due this week (Mus) with Sargelu to follow next week. BTW the current set of test / retest results are NOT extended test results for these Jurassic sections(merely retest of sections that previously gave trouble or to test previously untested sections of the oil column..... but nevertheless, despite the lack of test time/pressure detail should not be discounted or treated lightly by doubting thomas' out there.....

31st Aug '10

Have updated valuation to include, hopefully, the revised ownership structure post ETAMIC, of Kurdistan blocks.
I have not allowed for any value to Algeria. Added, for fun, a blue sky bit aswell.

http://www.keepandshare.com/doc/2201671/glkp-kurd-model-mark-vii-aug-2010-xls-august-31-2010-10-03-pm-7-8-meg

will update header soon.
JPGH

Daytona

5th Nov '10

I'm amused to see that GKP is now the 160th largest listed UK company. I wonder if they dare move to the main market ?

Amused?

I suppose I am amused too, I am definitely wealthier thanks to the ~tripling since the summer low.

7th Nov '10

Political agreement appears imminent.

Iraq's political rivals reached a breakthrough power-sharing deal in which Nuri al-Maliki, a Shiite, retains the premiership, a spokesman said Sunday, exactly eight months after inconclusive elections.

First we need a government, then we need that government to confirm that the oil contracts signed by the KRG will be honoured by Baghdad. Given that is one of the negotiating points that the Kurdistan MPs require before they will support a coalition, I expect it to follow fairly soon.

Proselenes

8th Nov '10

Goldman Sachs releases today, sell rating for GKP

BUYS

Rockhopper started with buy rating at Goldman Sachs
Nautical Petroleum initiated with buy rating at Goldman Sachs
Northern Petroleum started with buy rating at Goldman Sachs
Nighthawk Energy started with buy rating at Goldman Sachs
BowLeven initiated with buy rating at Goldman Sachs
Desire Petroleum initiated with buy rating at Goldman Sachs
Borders & Southern initiated with buy rating at Goldman Sachs
Falkland Oil & Gas initiated with buy rating at Goldman Sachs

------------

NEUTRALS

Tullow Oil downgraded to neutral from buy at Goldman Sachs
Sterling Energy initiated with neutral rating at Goldman Sachs
Valiant Petroleum initiated with neutral rating at Goldman Sachs
Max Petroleum initiated with neutral rating at Goldman Sachs
EnQuest initiated with neutral rating at Goldman Sachs
Tower Resources initiated with neutral rating at Goldman Sachs
Dominon Petroleum started with neutral rating at Goldman Sachs
Cove Energy started with neutral rating at Goldman Sachs
Faroe Petroleum initiated with neutral rating at Goldman Sachs
Melrose Resources initiated with neutral rating at Goldman Sachs

------------

SELLS

Gulf Keystone Petroleum started with sell rating at Goldman Sachs
Encore Oil started with sell rating at Goldman Sachs

6th Jan '11

"Negative ending" write up in Shares Mag it seems.... long interview to read, little snippet of it below....

http://www.sharesmagazine.com/

Page 30....

".............Summary

Definitely not for widows or orphans since an investment in Gulf Keystone takes in significant technical and political risk. There are a number of potential catalysts in 2011 that could reward an investor brave enough to take a punt but
at 173.2p Shares would steer clear.

Bull case

• Active 2011 drilling campaign
• Potential for resolution of oil dispute in Iraq
• M&A interest

Bear case
• Risks to ownership of assets
• Technical obstacles
• Lofty valuation

..........."

loglorry

I'm not sure "Shares Mag" can be trusted to determine "Loftty valuation" really can they. It all depends how much they can extract in cash for the oil they have found in nothern Iraq and how much more there is to find. If for instance they were to get $10/barrel this statement would be very wrong. Right now the political risk is still high and nothing like that ammount can be assumed but there is a good chance they will do better than the implied value at current market cap.

Risks to onwership of assets is really just the same as Lofty valuation isn't it? If this risk goes away then GKP is cheap as chips on a barrel in the ground perspective. I'd agree that some of these wells are technically difficult or expensive to drill but the rewards are very high and the CoS in Northern Iraq us very high.

Log

17th Jan '11

This comment has been moderated

repobear

KRG statement on oil contracts and revenues Statement by Dr Ashti Hawrami Minister for Natural Resources Kurdistan Regional Government 17 January 2010

Why have you posted a year old article?

djpreston

Repo

Pros doesn't like anything distracting punters away from his ram..errr..stocks.

jonnyt

Don't mention the Falklands....

General Discussion on Gulf Keystone Petroleum

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JPGH

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