Gulf Keystone (GKP), the Kurdistan focused oil explorer has been tumbling in recent days. It is currently down 10% at 132p. As I wrote in my review of GKP earlier in February (http://contrarianinvestoruk.blogspot.com/2011/02/gulf-keystone-petroleum-interesting.html) , I was concerned about the political and legal risks and at 180p, it had gotten ahead of itself.
Despite a rising oil price, GKP is dropping as fears continue to grow that factions in Kurdistan may try and break away from Iraq. Also that the contracts that the semi-autonomous government has signed may be torn up leaving foreign oil companies with nothing more than pieces of paper.
There's plenty of good shares in the nice and secure North Sea before you start putting your money into Iraq (Encore, Nautical, Xcite etc.) . The risk/reward is in favour of the sellers at the moment. Institutions are selling and it would not be surprising to see this below 120p. If you compare two Frontier explorers, GKP with RKH, the latter is far less risky as its assets are more secure and there is no litigation hanging over it. Even if RKH is in the South Atlantic, its still UK sovereign territory!
Despite a rising oil price, GKP is dropping as fears continue to grow that factions in Kurdistan may try and break away from Iraq. Also that the contracts that the semi-autonomous government has signed may be torn up leaving foreign oil companies with nothing more than pieces of paper.
There's plenty of good shares in the nice and secure North Sea before you start putting your money into Iraq (Encore, Nautical, Xcite etc.) . The risk/reward is in favour of the sellers at the moment. Institutions are selling and it would not be surprising to see this below 120p. If you compare two Frontier explorers, GKP with RKH, the latter is far less risky as its assets are more secure and there is no litigation hanging over it. Even if RKH is in the South Atlantic, its still UK sovereign territory!
This has always been my issue with GKP too.
ReplyDeleteOf course those that got in very early in GKP have seen the best rise which was the initial leap on the phenomenal findings. That was the best time to be in but now...I think this could be a long drawn out and perhaps painful game of cat and mouse in Iraq. Trust me, there's a forum devoted to a bunch of US diehards (mostly) who have been waiting YEARS for the Iraqi currency to revalue so they can hope to make a fortune and it's still not happening for them.
Be prepared to be mauled on the iii forums for your stance. They won't have a thing said against their beloved cash cow, GKP. Realism doesn't even enter into it over there. I agree with you, GKP has amazing potential but it could be a long wait. Money's better off in Rockhopper, Xcite and Encore.
Buy British.
ReplyDeleteI agree, there seem to be many investors who are in love with GKP. Yet the risks are substantial despite the company's prospects if they can ever start selling crude oil in any volume from their Shakilan discovery. With Iraq, nothing is certain. If other oil stocks in safer zones were massively over valued I could understand why people would be tempted to take a punt on the likes of GKP. But there's a lot of bargains in the North Sea, so why take the risk?
ReplyDeleteAs to being mauled on iii forums, if anyone can explain to me why my stance in wrong on a reasoned not emotional basis, I am happy to change my mind. iii posters just slagging this blog off with no facts is probably par for the course, but I've learnt to have a thick skin!