Genel and Gulf Keystone strike at Ber Bahr-1

There has been more good news on the exploration front for Genel Energy and Gulf Keystone Petroleum.

June 3, 2013

There has been more good news on the exploration front from the Kurdistan region of northern Iraq. The Ber Bahr-1 exploration well, in which Genel Energy (GENL) and Gulf Keystone Petroleum (GKP) each hold a 40 per cent interest, sustained a daily flow rate of 2,100 barrels of 15 degree API oil on a sidetracked drill test. After a series of test drills the companies plan to start a phased development of the field in the second half of the year.

IC TIP: Buy at 930p

The relatively heavy oil encountered at Ber Bahr-1 wouldn't really have set pulses racing in either camp. At 930p, Genel's shares are up by a fifth on our September buy recommendation, but we maintain that advice ahead of expected exploration updates. However, at 156p, shares in Gulf Keystone are only 13 per cent ahead of our long-term buy call. This is due, in part, to the slow road toward progress at Shaikan, but also reflects an unresolved legal dispute with Excalibur Ventures - a ruling that isn't due until midway through next month at the earliest. Gulf Keystone's shares trade 31 per cent below core net asset value estimates (excluding an unrisked element of 333p a share), so we reiterate our buy stance even though the Excalibur issue is dampening sentiment.

Last IC view: Buy, 849p, 12 Apr 2013