Oh dear. Faced with low oil prices, political instability in Iraq, and an imminent standoff with debt holders, the directors of Gulf Keystone Petroleum (GKP) have been forced to admit there is "significant doubt upon the group's ability to continue as a going concern".
This admission, buried within the oil producer's full-year results, understandably sent the shares on a precipitous slide. As of 16 March, cash balances stood at just $18.1m (£12.5m) net of restricted cash, following payments of $15m in January and March from the Kurdistan Regional Government. "Significant uncertainty" over the timing of the next payment, together with the current rate of cash burn, means there is a substantial risk of failing to meet a $26.4m bond coupon payment due on 18 April without dipping into the $32.5m restricted cash pool.
If that cannot then be topped up by the end of April - and judging by the parlous state of cash flows, that looks possible - then all sorts of nightmarish covenants will be triggered. Even if Gulf Keystone emerges from this debt payment unscathed, the maturity of its bonds in 2017 means it will need to find a further $575m.
GULF KEYSTONE PETROLEUM (GKP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 11p | MARKET VALUE: | £103m | |
| TOUCH: | 10.25-10.75p | 12-MONTH HIGH: | 46p | LOW: 9.5p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 25.1¢* | NET DEBT: | 204% | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 6.9 | -63.8 | -8.0 | nil |
| 2012 | 32.2 | -80.2 | -9.6 | nil |
| 2013 | 6.7 | -31.8 | -3.7 | nil |
| 2014 | 38.6 | -246 | -28.5 | nil |
| 2015 | 86.2 | -134 | -14.4 | nil |
| % change | +123 | - | - | - |
*Includes intangible assets of $315m, or 322¢ a share £1=$1.45 | ||||
