Despite maintaining output at 40,000 barrels of oil per day from Shaikan field and coming up with a solution which ensures it is paid for its crude Gulf Keystone Petroleum’s (GKP) achievements – detailed in today’s announcement - are getting short shrift from the market. It is down 10% to 36p.

There are a couple of reasons why the Kurdistan producer could be getting a negative response. Firstly the markets are firmly in risk-off mode in the wake of the turmoil in Greece. Secondly despite describing this level of production as a ‘minor miracle’ given the upheaval in the region broker SP Angel notes that ‘in the context of realising full value for the asset base, this is still below what is required’. Gulf Keystone effectively put itself up for sale earlier this year, reflecting its struggles with weighty debt obligations.


A ‘diversified marketing strategy’ sees the crude sold in the domestic market in Kurdistan as well as trucked to the Turkish coast. It recently banked payments of $4.9 million for past oil deliveries and $4.9 million as pre-payment for contracted deliveries in the future. As of 26 June the group had $68.7 million of cash but the most recently reported debt position (for December 2014) stood at more than $500 million.

It is worth watching a potential bond issue from the Kurdistan Regional Government (KRG) which could see Gulf Keystone and other Kurdistan operators like Genel Energy (GENL) receive windfall payments due for past oil exports. The KRG was reported to be targeting global bond markets last week.

Issue Date: 29 Jun 2015