The share price of Gulf Keystone Petroleum (GKP) surged after the Kurdistan-focused driller confirmed that it was in preliminary discussions with a number of potential - and as yet unnamed - suitors. GKP, which has a 75 per cent interest in Kurdistan's Shaikan field, is facing an acute working capital shortfall due to a prolonged spat between the central administration in Baghdad and the Kurdistan Regional Government (KRG) over the legal status of the semi-autonomous region's exploration and production licences.
Gulf Keystone is owed around $100m by the KRG for crude exports, and a similar amount to cover early-stage investments. And the strain is beginning to show. The company's cash balance stands at just under $70m (£45m), down from $177m at the end of August. Another $26m is on the way ($20.8m net to GKP), but the company is now undertaking a review of its financing options in order to facilitate is near-term debt obligations. Gulf Keystone carries $575m of debt in high-yield and convertible bonds.
Despite regional security concerns, the scale of GKP's flagship Shaikan operation should attract interest from other producers, particularly given its proximity to the Turkish border. Production at Shaikan hit an average of 40,000 barrels of oil a day (bopd) in December. But plans to ramp up output towards 100,000 bopd and connect to a dedicated pipeline to Turkey have thus far been stymied by liquidity constraints.
