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We are precisely two weeks away from Gulf Keystone Petroleum (LSE:GKP) making its move from the AIM to the Main Market on the LSE. GKP’s share price is at 148.75 this afternoon, down 1.82% from its closing price on Friday, 7 March 2014, and down 4.6% from February
I came across a recent interview with Todd Kozel, CEO of Gulf Keystone, that provided some insight into the growing potential of that company especially relative to the region of Kurdistan in which his company operates. The interview took place at the 4th Kurdistan-Iraq Oil and Gas Conference.
Production Strategy
I should note that Todd Kozel is an interesting man and about as straightforward as one can get. He speaks with a casual candor blended with an astute insight into the oil business in general, the region in which GKP operates, and, of course, his own company’s operations. When asked about GKP’s strategy, he responded that it was “to find oil.” With a twinkle in his eye, he explained that the company had, at the time of the interview, added a second oil train and was targeting three major milestones – 40,000 boe per day; 100,000 boe per day; and 250,000 boe per day – during the next five years. Our ADVFN story, “GKP Headed to LSE Main Market,” gives some insight into how well they are doing in pursuit of their goal.
Investment Risk
Kozel did not pull any punches when he was asked about the relative risk of investing in oil exploration and production. He said that investment is at “full risk.” Personally, I see all investment as being at full risk. With oil, however, you tend to feel the risk a lot more. On the other hand, he was obviously quite pleased to note that the Gulf Keystone had been both lucky and good. That news may not change the risk factor, but it sure can change how it feels.
Doing Business in Kurdistan
- Ease of Doing Business – Kozel was quite complimentary about doing business in Kurdistan. Of course, he was on Kurdistan soil when he was interviewed, but I’m guessing that his answer would have been the same, regardless. Although he mentioned that oil services were “not cheap” in the country, he also said that that were not out of line, that he had heard no complaints about working with the Kurdistan government and that he felt that Kurdistan is a good place to do business.
- Stability of the Region – We spoke a bit about the stability, or lack thereof, in the region in our story on 03 March, “All’s Quiet on the GKP Front.” In that story, one of the issues that we addressed was the proximity to Syria as a persistent threat to the oil business in Kurdistan. In fact, Kozel not only cited the Syrian conflict as a threat to the stability of the region, he openly declared that it IS impacting the region, particularly with the outflow of refugees crossing the Syrian border into Kurdistan. The flood of refugees is causing fundamental economic and logistic problems for all nations surrounding Syria, including Turkey, Lebanon, Israel, Jordan and Iraq, as well as Kurdistan.
But the thing that set this interview apart for me was the fact GKP’s board had determined last year that, beginning on 01 September 2013, it would set aside $1.00 per barrel in a fund to help provide clothing, shelter, and infrastructure for the Syrian refugees. That increased my level of respect for Kozel and GKP, because, whilst other companies may voice a concern about potential disruption of their business, Gulf Keystone is doing something to alleviate the problem. That is another thing that diminishes the “feeling” of the risk in GKP.
To see the interview on video, click here.
