Any mention of Gulf Keystone Petroleum (GKP) - or any other oil and gas play in Kurdistan - is obviously made against the backdrop of the Islamic State (IS) insurgency. This has not only unleashed fear and uncertainty in the areas affected, but it also makes it difficult to assess how successful GKP has been in its bid to ramp up production from its flagship Shaikan field in Kurdistan. GKP seems to be making headway at the site, albeit slightly more slowly than anticipated, but investors require clarity on revenue recognition.
The latest half-year figures reveal production of 2.3m barrels, achieved at an average production rate of around 12,600 barrels a day (bopd). GKP confirmed a production rate of approximately 20,000 bopd for June, and also reiterated its target of doubling that rate by the year-end, which will depend on the tie-in of three additional wells, Shaikan-7, -8, and -10. But the company also admitted that the security situation could push this milestone into the first half of 2015.
Another concern is that GKP has yet to be paid for oil exports worth around $35m (£21m). While regional troubles endure, GKP could struggle to organise a more effective receivables schedule with the Kurdistan Regional Government (KRG). This would hamper its ability to raise additional debt, and would also force GKP’s management to prioritise spending commitments.
Deutsche Bank anticipates full-year EPS of 12¢, rising to 20¢ in 2015.
| GULF KEYSTONE PETROLEUM (GKP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 78p | MARKET VALUE: | £693m | |
| TOUCH: | 77-78p | 12-MONTH HIGH: | 240p | LOW: 61 |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 63¢* | NET DEBT: | 53% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | nil | -25.9 | -3.1 | nil |
| 2014 | 18.7 | -28.1 | -3.4 | nil |
| % change | - | - | - | - |
£1=$1.66 *Includes intangible assets of £257m, or 29¢ a share | ||||
