Monday, 1 November 2010

The Strange case of GKP, part 2

So exactly a year ago (how time speeds by) I wrote a short article on Gulf Keystone Petroleum, a bizarre small oil stock that was full of a strange mix of shady investors and lots of oil.

It was always a high risk, but interesting investment. A year on and there have been enough twists and turns that it is worthy of an update.

Firstly, the shady investors, ETAMIC were, umm, paid off earlier this year with a big share placing. This was painful at the time as shareholders saw the stock fall, but in the medium term it has proved a big boost. To rid the company of its association with an unknown entity could only be a good thing.

Next the company, having found lots of oil last year, needed to prove it up and start to sell some. Just today it has announced that virtually all its drilling is finding oil in Kurdistan. For a small oil company this is unheard of - other companies like Sterling Energy drilling nearby have not been so lucky.

Also since a second placing in the Company just a few weeks ago there has been more institutional investor involvement which has stopped the shareprice acting like Desire oil and going up or down 10% to 20% per day. A much less heart stopping investment. Even the skeptical press like FT Alphaville (who are always rightly skeptical of small company success stories as most plummet back to Earth) have come around to not quite dissing the company so much.

Finally, there is still a big piece of intrgue in that Iraq has failed to produce a stable Government. Without that there is still lots of risk in GKP not having full control of its own destiny. This accounts for its still not unrealistic valuations.

Personally, I think the future is bright but short for GKP, as soon as the Government of Iraq ratifies its contracts the company will be taken out - I thought this would be pre-Xmas 2010 but this seems optimistic now; That will make CEO Mr Kozel smile beyond his wildest dream. It is an interesting share story, one that happens only once in a while.


James Higham said...

The question is when was the best time to buy in? Earlier?

CityUnslicker said...

at nearly $2 billion market cap the really big opportunity is now past - lots of the coming news is in the price....but if the wells discover as much oil as they hint at today, then maybe under £2 is not such a bad price.

share trading only ever works when you worry about future prices rather than the past though; someone once said it was no guide, eh?

Budgie said...

GKP looking good today - up 12%. That's a big jump - too much? They did hover around the 140s mark for some weeks. No complaints though, because it's distinctly better than RPT and XTR.