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!
