Kurdistan oil producer Gulf Keystone Petroleum (GKP) is down 3.4% to 65.2p despite hitting a 2014 production target of 40,000 barrels of oil equivalent per day (boepd) with days to spare.

The reverse probably reflects two things: one, the continued pressure on oil prices which is affecting the rest of the sector; and two, the lack of further news on export payments from the Kurdistan Regional Government (KRG). Gulf Keystone was given a significant boost in November (7 Nov) when the KRG confirmed it would pay an initial $75 million to operators within its borders for oil exports by the end of the month.

It subsequently followed through on this promise and Gulf Keystone received a $15 million payment for exports from its Shaikan field. The KRG also indicated further payments would follow on a regular basis. The market is now hungry for these 'further payments'.


The group finally hit its 40,000 boepd target on December 27 and now has seven producing Shaikan wells with an eighth due to come on stream this month. According to chief executive officer John Gerstenlauer the 'immediate focus' is to ensure a stable rate at or around 40,000 boepd (we ran an in depth interview with Gerstenlauer last year). The £595 million cap's oil is currently trucked to Turkey for export but the long-term plan is to access a pipeline, a move which would significantly reduce costs.

Cantor Fitzgerald reiterates its buy recommendation and 154p price target following today's announcement, commenting: 'We believe that reaching its challenging production rate (a rarity in the mid cap subsector) demonstrates that GKP can successfully develop Shaikan into a material producer in the Kurdish region... receiving regular payments for these exports remains the focus for the market despite an initial payment of $15 million to the company in receipt of Shaikan export oil sales for November 2014.

'If achieved, a further payment in the near-term will go some way to establishing a pattern of regularity and to alleviate this particular investor concern in our view.'

Issue Date: 05 Jan 2015