Tuesday 30 August 2011
Is GKP really going to sell itself now?
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.