Gulf Keystone Petroleum (GKP) does “not need to do a deal” according to chief executive Jón Ferrier, amid reports that the Kurdistan-based producer is a takeover target of Chinese oil group Sinopec. Speculation of a sale or merger has grown since bondholders were handed the majority of the main market-listed* group’s equity last October, in a move that all but wiped out small investors. Since then, Gulf Keystone’s share price has risen with an improved oil price, and management has signed an incentive scheme that could greatly reward it, if a binding sale is agreed by the end of 2017.
Speaking on the Investors Chronicle’s Extraction Podcast, Mr Ferrier also said he was confident of finalising a deal with its main customer, the Kurdistan Regional Government, for cash owed for several months of last year's production.
Continuing payments from the ministry, a squeeze on which contributed to the downturn in Gulf Keystone’s fortunes in 2015, should be enough to fund near-term and mid-term work programmes to fund production growth at current prices. The company hopes to increase its output from 40,000 to 55,000 barrels of oil a day in the next couple of years.
“If you look at that incentive plan, the real value comes if I grow a huge amount of value in the field over the longer term, and that’s what it is designed to do,” said Mr Ferrier. Were a company sale to complete before the end of this year, the recently agreed ‘Value Creation Plan’ could split 2 per cent of the acquisition price between Mr Ferrier, chief financial officer Sami Zouari and chief strategy officer Nadhim Zahawi, a Conservative MP with links to Kurdistan’s government.
Though the company has declined to comment on the reported offer from Sinopec, a market-price bid would value the so-called management performance units at £6.2m.
Mr Ferrier also 2016 described as a “pretty ghastly” year in which he was forced to play the “role [of] broker between the shareholders and the debt-holders to try and effect some kind of a settlement”. Though highly dilutive, the 5 per cent left for shareholders in the debt-for-equity swap was better than the management team had initially expected.
“It’s probably very little consolation indeed for many private investors, but we’re doing everything we can to rebuild value in the company,” said Mr Ferrier.
*18 January 2017: The original version of this article said that Gulf Keystone was listed on the Alternative Investment Market. In fact, it joined the main market in 2014. This has been updated.
