What's Gulf Keystone really worth?

Gulf Keystone Petroleum is still struggling to collect money owed, so new boss Jón Ferrier has now adopted a "diversified marketing strategy". But with talks regarding asset sales or sale of the entire company also ongoing, broker Cantor Fitzgerald gives its view on prospects.

Ignoring the flagship Shaikan field, Gulf's most attractive asset from a buyer's perspective is Sheikh Adi, reckons Cantor analyst Sam Wahab. Gulf has an 80% working interest in the 127 million barrel (2C net) project, which has no dilutive rights and is in a sole partnership with the Kurdistan regional government. Buyers also have Gulf's 40% stake in Ber Bahr to consider, along with its 12.8% non-core interest in the Akri Bijeel block, which Gulf has spent three years trying to offload.

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"From an operational perspective, Shaikan is performing well with current production in excess of 40,000bopd," says Wahab. "Recent encouraging results from Shaikan-10 in addition to the completed Shaikan-11 well, we believe the company is on track to meet its 100,000bopd phase 1 target once a decision is made on further investment."

"Our valuation ascribes 131p/share to a 10% DCF [discounted cash flow] at Shaikan, as well as GKP's remaining 2P and 2C reserve/resource base; and -30p/share to the company's financial liabilities. We therefore reiterate our BUY recommendation and TP of 101p."

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.