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Gulf Keystone awaits contractual clarity

Investment in the Shaikan field is contingent on clear terms between the oil driller and the Kurdistan Regional Government
April 12, 2018

What’s this, a full-year profit for Gulf Keystone Petroleum (GKP)? For the first time since entering Kurdistan, the struggling driller’s bottom line is painted black, thanks in large part to much lower finance costs. In turn, Gulf is starting to build something approaching a cash buffer, having increased bank deposits to $203m (£143m), against $100m of debt, on the eve of these results’ publication.

IC TIP: Hold at 132p

It’s not all happy families. Although operating costs fell in 2017, limited investment in the Shaikan field means production is expected to fall by 9 to 24 per cent from last year’s average output of 35,298 barrels of oil a day (bopd). That intensifies the need to finalise commercial and contractual arrangements with the Kurdistan Regional Government’s (KRG) ministry of natural resources. A crude oil sales agreement, announced in January, is yet to provide Gulf with a definitive operational framework. Until it does, and despite a more consistent flow of payments from the KRG, the company will not sign off on an investment plan that would take Shaikan output to 55,000bopd.

Consensus forecasts are for adjusted pre-tax profit of $26.9m and EPS of 12¢ in 2018, compared with estimates of $8.2m and 3.5¢ last year.

GULF KEYSTONE PETROLEUM (GKP) 
ORD PRICE:153.8pMARKET VALUE:£353m
TOUCH:152.8-154.8p12-MONTH HIGH:153.8pLOW: 86p
DIVIDEND YIELD:nilPE RATIO:35
NET ASSET VALUE:206¢NET CASH:$63.4m
Year to 31 DecTurnover ($m)   Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
20136.7-31.8-3.7nil
201438.6-246-28.5nil
201586.2-213-2284nil
2016194-17.3-30.8nil
201717214.16.2nil
% change-11---
Ex-div:na   
Payment:na   
£1=$1.42