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Gulf Keystone to accelerate Shaikan upgrade

After a strong first half, the Kurdistan driller is set to accelerate plans to upgrade Shaikan
September 10, 2018

In our take on Gulf Keystone Petroleum’s (GKP) full-year numbers, we made three observations. The first – that reliable payments are helping to build a strong cash buffer – remains true. On the eve of half-year results, and following a post-period bond refinancing, the group’s net cash stood at $140m (£108m). Market and management sentiment have both improved, and plans to develop the Shaikan field have been fast-tracked.

IC TIP: Hold at 245p

The second point was around contractual clarity. January’s crude oil sales agreement is still in place, but half-year figures arrived without a finalised production sharing contract with the Kurdistan Regional Government and partner MOL. Completion of the contract, which covers the commercial terms of output from the Shaikan field, had been expected by the end of this month, but should now sign before 2019.

Our third theme – that Gulf Keystone offered “limited gearing to oil prices” – has been disproven. Although production has dipped since the period end, gross output from Shaikan averaged 31,861 barrels of oil per day in the first half, right at the top of the guidance range. A stronger pricing environment was one reason why July’s $100m bond issue was oversubscribed, and helps to explain management's comfort in expanding project cost forecasts for Shaikan’s 55,000-barrel-a-day upgrade programme.

On average, analysts are forecasting full-year earnings per share of 28¢, rising to 46¢ in 2019.

GULF KEYSTONE PETROLEUM (GKP) 
ORD PRICE:245pMARKET VALUE:£562m
TOUCH:244-245p12-MONTH HIGH:304pLOW: 86p
DIVIDEND YIELD:nilPE RATIO:18
NET ASSET VALUE:217¢NET CASH:$122m
Half-year to 30 JunTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
201778.30.620.29nil
201811626.511.7nil
% change+48+4182+3917-
Ex-div:na   
Payment:na   
£1=$1.29