General Discussion on Gulf Keystone Petroleum

Monday, Feb 08 2010 by

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

(i) Background

• Quick Summary :-
• Website :-
• Market Cap (25 May 2011) :- £1105M
• No Shares :- 762 million
• Current SP (25 May 2011) : - 145p

(ii) Operations:-
• Algeria ( assets. Algeria effectively worth zip as GKP are exiting with some liabilities that are equal to approx value of assets.
• Kurdistan ( 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).

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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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Gulf Keystone Petroleum Limited (Gulf Keystone) is a holding company, which is engaged in the oil and gas exploration and production. The Company operates in the Kurdistan Region of Iraq. It operates through segments, including Kurdistan Region of Iraq and United Kingdom. The Kurdistan Region of Iraq segment consists of the Shaikan, Ber Bahr blocks and the Erbil office, which provides support to the operations in Kurdistan. The United Kingdom segment provides geological, geophysical, engineering and corporate services to the Company. It operates in the Shaikan oil field. The Shaikan block is situated over 85 kilometers northwest of Erbil, covering an area of over 280 square kilometers. more »

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Sterling Energy plc is an upstream oil and gas company, which is focused primarily on material exploration opportunities in Africa. The Company is engaged in the exploration, development and production of commercial oil and gas. The Company operates in the Africa segment. The Africa segment includes its exploration and development activities. It has exploration projects in Mauritania, Madagascar, Somaliland and Cameroon, together with a production interest in Mauritania. Its Ambilobe block covers an area of approximately 17,650 square kilometers and is located in the Ambilobe basin, offshore north-west Madagascar. Water depths across the Ambilobe block range from shoreline to over 3,000 meters. Its Odewayne Exploration block comprises an area of over 22,840 square kilometers. Its Ntem Concession lies adjacent to the southern maritime border of Cameroon, and covers an area of approximately 2,320 square kilometers. Water depths range from 400 to 2,000 meters across the Ntem block. more »

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60 Posts on this Thread show/hide all

djpreston 29th Aug '11 41 of 60


What better way to get the sp up (if someone's feeling vulnerable and there is big news - oil law - "imminent") than to say "review of strategic options"?

Has Todd's divorce settlement been set yet? If so then he's in the clear to get a bid and much higher price to replenish the coffers without the ex getting any more.

Fund Management: European Wealth
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emptyend 29th Aug '11 42 of 60

In reply to post #59608

Has Todd's divorce settlement been set yet? If so then he's in the clear to get a bid and much higher price to replenish the coffers without the ex getting any more.

Doubt it. AFAIAA his shares are still frozen ...and they haven't sorted the Excaliber suit either.

V difficult to know how its all going to play out......

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Proselenes 8th Sep '11 43 of 60

For those interested GKP Investor Presentations:

DUBLIN - Wednesday 12th October:

MANCHESTER - Thursday 13th October:


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fuiseog 14th Sep '11 44 of 60

Half yearly report this morning. Forward strategy worth a read.


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JPGH 14th Sep '11 45 of 60

Copied in from Fool thread, all thread worth agood  read

Quite a lot to read through in this RNS.
Main new "news"/development for me is the announcement of the sale of GKPs 20% WI (12% post KRG back-in) stake in Akri Bijeel block. I sense a deal is done already here to be announced after result of Bekhme drill (so presumably this too is known to whoever is buying....Valares/Chinese/Korean/Indian IOCs or whoever). How much? Well much of block is undrilled and no appraisal wells to date but it does contain one discovery possibly another at Bechme so could be P50 mean OIIP of 5 billion barrels or 1.5 billion recoverable or 300 MMbbls net to GKP pre back-in. also numerous other structure identified fro drilling so maybe somewhere north of $1 billion to GKP?

Other quick notes

(i) cash position (June 31 2011) is $138 million which is probably enough to cover all G&G/Res Eng/drilling/wages bills for next 6 to 9 months but just about.

(ii) cash burn is as expected considering the co-current drilling programme across 4 blocks and EPS facilities bill.

(iii) Plans for studies for an export pipeline capacity of 440,000 bopd minimum indicates the development plan anticipated for Shaikan.

(iv) Not much revenue coming in to date for EWT crude sales so will need to get a move on with exports or asset sale or else a placing/dulition could sneak up on us smaller shareholders.

(v) Some excellent drill results (Shaikan-4 net pays to date of 278m)

(vi) For Sheikh Adi (GKP 80%).................although there seems to be a huge column (>2000m gross pay) Company says "the natural flow characteristics of many of the pay zones are much poorer than the same zones at the Shaikan Field and artificial fracturing will be necessary. The upcoming series of flow tests will help to confirm this theory. In addition, the eastern side of the field appears to be more folded and thus more likely to be naturally fractured than the western side. Thus, a second exploration well is currently being considered for 2012, prior to commencing an appraisal program for Sheikh Adi".
Due to ownership % and slighly different T&Cs of taxation of Sheikh Adi block then it follows that barrels of oil here are worth (NPV10/bbl) a lot more (maybe as much as 20 to 30%) than those found in Shaikan block hence the considered approach here to ensure a thorough appraisal.

All in all very satisfied with progress to date.

If only the Oil & Gas Law was proceeding with same positive progress......



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JPGH 13th Nov '11 47 of 60

I would not rule out a significant jump to Fridays 175p or so close over coming weeks....

(i) XOM are rumoured to have bought 20% of Shaikan (KRG back-in rights) in addition to the announced 6 blocks they bought into on Friday. KRG may not reveal the T&Cs of deal as they don't have to but they may or it may leak onto internet or XOM may say what it is....this will put a value on GKP's share of Shaikan.

(ii) Also, again rumour, is that Chevron are sniffing around GKP. With Valares deal (producing 2P + to be produced 2C + unexplored upside) and DNO offers from RAK/Petrolia as go-bys then developed/near developed producing 2P values of $5/bbl (Working Interest basis) and this based on Pre Oil Law/Pre XOM deal then GKP's share of Shaikan alone could be taken out for min of $10B or close on $11/share. Throw in Oil Law ratification reality and GKP's other blocks and I can't now not see £7 or higher as a sale price. I was quite pessimistic on GKP take out price last year and would have bitten off the hand of anyone offered >£3....but not any more.

(iii) KRG/Iraq have agreed a draft oil law that is same as the 2007 draft i.e. KRG issued PSCs are legitimate and recognised by Oil Ministry/Iraq Law.


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alano20 20th Feb '12 48 of 60

Response to press reports - confirm they intend to move from AIM to Main market this year.

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thebuffoon 20th Feb '12 49 of 60

Response to press reports - confirm they intend to move from AIM to Main market this year.

As already indicated by them last year.


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nigelpm 20th Feb '12 50 of 60

In reply to post #64156

As already indicated by them last year.

There is of course a difference between an indication and a confirmation.

Yours pedantically! ;-)

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emptyend 1st Apr '12 51 of 60

Unwelcome news:

Iraq's autonomous Kurdistan region halted its oil exports on Sunday, accusing the central government in Baghdad of failing to make payments to companies working there in the latest clash in their long-running dispute over oil rights......

"After consultation with the producing companies, the ministry has reluctantly decided to halt exports until further notice," Kurdistan's Ministry of Natural Resources said in a statement.

"There have been no payments for 10 months nor any indication from the federal authorities that payments are forthcoming," it said.

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jseth123 1st Apr '12 52 of 60

There is little doubt that GKP (and others) have reserves which can be valued at many times their share price. It was only a couple of months/weeks/days ago that people were talking about £10/12/20share. They might be right but the real question is how do you value something that might be worth £20/share or might be worth £0/share? Just what "political risk" percentage can you apply? It's decided at the whim of an unstable and corrupt (IMO) political regime, with the very oil reserves in question being openly disputed. I've never invested in GKP because I just can't see the majors willing to spend £many billion on any form of a maybe like this one. And by the time it's not a maybe, the potential for multi-bagging will be well and truly in the past. Not one for me....but really WTHDIK, I thought the smart money was on VST! (and acted to that effect!) ;o)


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Proselenes 21st Apr '12 53 of 60

I would imagine significant fall out to Kurdistan exposed companies if Exxon do cancel the contracts. They can play this now, if they want, by asking what they get in return for canceling the Kurd contracts, what will the IOM offer to them ? If the IOM offers them something nice I am sure they will perhaps happily cancel their Kurdish contracts.

............Exxon last month told the government last month that it froze its deals with the KRG, but the government wants the deals completely canceled.

"We want more action from Exxon," said Sabah Abdul Kadhim, deputy of the Iraqi Oil Ministry's petroleum contracts. "We want Exxon to cancel its Kurdistan deals."

Abdul Kadhim warned that Exxon could face further action if it didn't terminate its deals with Kurdistan. He didn't explain what action would be taken, but he is thought to be referring to West Qurna-1..............

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JPGH 22nd Apr '12 54 of 60

Pro, why would IOM "offer" Exxon something nice? Other IOCs would cry foul and demand same or cancel their own legally questionable contracts (no oil and gas law in place so legal status of all Contracts awarded by whoever in Iraq/Kurdistan remain questionable).
No, Exxon, who have played ALL these scenarios out and KNOW the final outcome have allowed this Kurdistan Contract situation to be played along ornindeed even may have opted not to bid. A more likely answer is XoM will continue in both parts of IRaq and will await IOM to make next move whether with SHastrani at its helm or maybe not if the IRaqi coalition falls apart.
Exxon and going nowhere.

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Proselenes 23rd Apr '12 55 of 60

Canaccord note today:

"This morning, Gulf Keystone announced Shaikan-4 test results, which achieved an aggregate flow rate of 24,000 bopd over several intervals. Of note is the 14,000 bopd achieved from the Sargelu formation following acidization and retest. Shaikan-4 will now be completed as a producing well tied to the Shaikan-1 and Shaikan-3 Extended Well Test facility.

We currently value Gulf Keystone on the basis of our calculated total NAV of 172p/share using a 15% discount rate and US$90/bbl flat real oil price. We arrive at our 210p/share target price by applying a 22% premium, which accounts for a potential takeout of Shaikan using a 12% discount rate.

Share performance catalyst

Possible sale of Akri Bijeel in the next one to two months, Ber Bahr exploration results in May/June, and a further operations update from Shaikan.

Following the decision not to test portions of the well that appeared to be high quality oil reservoir on the electric logs, and where proven commercial flow rates had been achieved by testing previous wells on the Shaikan block, most of the tests have been conducted in zones which looked marginal on the well logs. Within the total maximum aggregate number, flow rates of about 4,500 bopd have been achieved in a new zone in the Jurassic Upper Sargelu, previously untested, and producible oil has been established in the Cretaceous Chia Gara for the first time, albeit at relatively low rates (130 bopd). Following the conclusion of the Shaikan-4 well testing programme, the well is being completed as a producer and will be tied to the Shaikan-1 and Shaikan-3 Extended Well Test facility.

The Discoverer-4 rig will move to the drilling location of the Sheikh Adi-2 exploration well, north of the Sheikh Adi-1 exploration well, which is expected to spud in June 2012."

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JPGH 23rd Apr '12 56 of 60

Seeing as you highlighted the valuation Pro then consider this....

By using a 12% discount factor for putting potential value on a field that GKP cannot develop themselves and hence will sell on, when the only known buyers are Big Oil (IOCs and semi-NOCs) who value projects, even in risky old Kurdistan, at somewhere between 6% (Chinese, Korean oil companies) and 10%?(Super Majors) Cannacord are showing their incompetence at trying to value ths oil company.
What else have this mob valued incorrectly lately?


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Proselenes 29th Apr '12 57 of 60

Long interview, couple of mentions of Kurdistan and the dislike of PSC's.

pril 29th, 2012
Abdul Mahdi Al-Ameedi

By Ruba Husari

Abdul Mahdi al-Ameedi, director general of Iraq’s oil ministry’s Petroleum Contracts & Licensing Dept. (PCLD), sheds light on the ministry’s fourth bid round scheduled for May30-31, and the service contract on offer, its advantages and shortcomings, in an interview with IOF editor Ruba Husari in Baghdad. (???? ?????? ???? ???)

Q: Offering a service contract t.............

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Fangorn 30th Apr '12 58 of 60

Surprised you didn't link the Kurdistan operational update out today!!!!

Oh it was pretty good. That explains it. :)

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JPGH 30th Apr '12 59 of 60

A real multi billion barrel stand alone commercial oil discovery close to major oil and gas infrastructure and close to key markets, followed by successful appraisal programme (and not wet gas, subject to actual confirmation, the alleged discovery that is) and attracting Big Oil interest is just not worthy of a positive post !!

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the drunken duck 28th Aug '12 60 of 60

Kurdistan players pin hopes on new pipelines Add to ...
Financial Times

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