Interactive Investor

Why Gulfsands Petroleum just surged by 70%

22nd March 2016 17:22

Lee Wild from interactive investor

For the second time in a fortnight, Gulfsands Petroleum has been forced to issue a statement confirming it knows of no reason for a spike in its share price.

"Gulfsands Petroleum Plc notes the recent increase in the company's share price and confirms that it is not aware of any reason for this movement," read a brief statement, identical to a previous missive issued on 11 March.

Ending Monday's trading session at 7.75p, a surge in demand from retail investors sent shares in the Syria-focused oil company above 13p mid-morning Tuesday, up 70%. They were just 5.38p on Friday when the struggling company said it lost over $69 million (£49 million) in 2015.

It emerged over the weekend that Syrian oil tycoon Ayman Asfari had bought 50 million Gulfsands shares, or 10.5% of the company, through his ME Investments vehicle.

There's talk about the timing of the purchase, coming as it did just before new peace talks began in Switzerland. Speculation is also doing the rounds that EU oil sanctions against the war-torn country could be lifted. However, Gulfsands didn't sound very confident last week. It said:

"Whilst no definite timeline can be substantiated, the board continues to believe that the EU Sanctions will be lifted within five years and will continue to monitor all activity focused on resolving the situation in Syria."

But Asfari, who also runs oilfield services provider Petrofac, is a canny operator and investors are backing his judgement on this one.

"Ayman is probably the most up to speed about Syria and undoubtedly the best connected," oil analyst Malcolm Graham-Wood told Interactive Investor Tuesday. "I spent a few days there with him a little while ago and I'm sure that he is on the case."

But things need to happen at Gulfsands urgently.

"Almost everything outside of Syria is up for farm-out; something needs to be done quite soon I suspect," Graham-Wood said last week.

With so much speculation, Gulfsands shares will remain a dangerous place for retail investors. Problem here is that, while any surge in buying activity will drive the share price sharply higher, there will be plenty of willing sellers happy to get out above December's record low at 2.5p. Only for the brave, this one.

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.