Tuesday, 30 August 2011

Is GKP really going to sell itself now?

An article in the Sunday Times (paywall so no link) has suggested that GKP, a highly traded AIM share and decent chunk of my portfolio, are looking to put themselves up for sale. Now, traditionally, these type of announcements are known as Sunday Times RNS - i.e. management use the paper to make statements to market that help to influence share prices. It is a an old practice, hence STRNS as  common refrain in the City.

However, this article relied on Investment Bankers spilling the beans rather than any company executives. So this morning we have the Company itself releasing a statement:

Response to Press Speculation
Gulf Keystone notes the recent press speculation regarding a potential sale of the Company.
Whilst the Board does not normally comment on speculation, the Company confirms that it remains committed to creating value for shareholders, via the continuing 2011/2012 drilling programme on its world-class assets in the Kurdistan Region of Iraq. Whilst there is clearly increasing interest in the region in which Gulf Keystone operates, the Board is not in discussions with regard to a sale of the Company.
Todd Kozel, Executive Chairman and CEO, commented:
"The Board of Gulf Keystone is confident that it has built an enviable asset base in Kurdistan, with significant further upside potential. We are therefore committed to continuing to successfully prove the potential of our oilfields in Kurdistan. We consider the true value of the Company to be significantly above any figures quoted in recent press articles."

So that may be the end of it. What is intriguing though is the bankers are trying to play this up? GKP is sitting on huge assets of oil reserves but without legal clarification from the Government of Iraq the value of the oil can only be speculative. Even as it has built bigger asset base, the share price has been sinking this year.

Clearly, one day the company is going to get bought up and so the bankers, keen on fees, want this to be brought forward into a quiet M&A market. But for the company, it makes no sense to sell until it has a view of the legal settlement and a price it can take as profit for producing the oil it has found - given that current estimates have 400% spreads, pricing it too opaque.

It seems unlikely therefore a deal is near unless GKP have inside knowledge of the progress in the Iraqi parliament:

A) They know the laws will go through this year and so need to line up advisors for a sale in Q3 or Q1 2012.
B) They know the law is going nowhere and think now is a good time to get out,with the management being a few hundred million dollars better off - leave someone else to reap the long-term rewards.

Given that debates about the oil law are common knowledge in Iraq, I doubt either of the above to options. Intriguing nonetheless. All in all, should still be a nice boost to the shareprice over the next few days.


Budgie said...

GKP is one of my few positives in the speculative side of my (small) portfolio. Surely Iraq needs exports?

CityUnslicker said...

2 years to get the legislation through is outrageous. But then imagine we found North Sea Oil today for the first time and Scotland wanted to do its own thing and cut its own deals - complicated.

Budgie said...

Perhaps the Scots should go back to Ireland and leave the oil for the British?

Anonymous said...

Perhaps the English should go back to Germany and give England back to the Welsh.

Budgie said...

"The Origins of the British - A Genetic Detective Story" by Stephen Oppenheimer. The information below about his work is largely taken from the Bradshaw Foundation website.

Stephen Oppenheimer’s groundbreaking genetic research shows that the ‘Anglo-Saxon invasion’ contributed only a tiny fraction to the English gene pool.

Around three quarters of English people can trace an unbroken line of genetic descent through their parental genes from settlers arriving long before the introduction of farming.

Much the same as Scotland and Ireland in fact. Please keep up.

Bill Quango MP said...

But the Normans conquered the aristocracy.
Until very recently, maybe even just 2 generations ago, it was all William, Richard,Stephen etc.

{Before Ryan, Hector, Javelin, Sky, Tyler, Ethan etc. William is still very popular, making a comeback thanks to a royal personage.}

Ethelred,Edwy,Ethelbard. Out of favour for 1000 years or more.

Only Edward managed to keep up. But not in the original Ä’adweard. {Which is just as well, children being what they are about names.}

But Edmund/Edouard was already a favourite in France, so its an accident. if you wanted to get on the dark ages, it was name change time.

Budgie said...

BQ, all the invaders - Celts, Romans, Angles, Saxons, Vikings, Normans - tended to simply replace the previous "establishment". Large scale genocide was not practiced because the newcomers needed the peasants to go on working.

And of course there were inter British raids and conquests - the Irish raided the northwest of what is now England and also Wales - the Scots (Scotti, from Ireland around C5th) ousted the native Britons in what is now lowland Scotland.

Timbo614 said...

"BQ, all the invaders - Celts, Romans, Angles, Saxons, Vikings, Normans - tended to simply replace the previous "establishment". "

I feel a compo rehearsal coming on :)

So.. err.. we need to arrange an invasion then...

Who should be pick to be invaded by and why?

Points for humour originality.. ahh well you know the rules.

Budgie said...

Well, I might have said India, except when I had a bit more cash I visited the place. I asked our guide about Indian politics and her description of their politicians was just like my (unspoken) complaints about ours. So perhaps it is universal, unfortunately.

CityUnslicker said...

Qataris - lots of issues morally and culturally, but lots of money to smooth things over...