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Sometimes I think that if it were not for bad luck, Gulf Keystone Petroleum (LSE:GKP) would have no luck at all. It seems like every time the company catches a break, something goes wrong. The GKP share price was down 0.58% today to 90.47, much closer to the low end of its 52-week range of 81.81 to 245.00, proving once again that the mining and petroleum sectors – especially with regard to those companies that are heavily weighted toward exploration or transitioning from exploration to production – are not meant for the faint of heart.
High Hope Highlights
In what seems like a never-ending pattern for GKP, bad news always seems to follow good. For example:
- A lot of hope has been pinned on the estimated 13.7 billion barrels of oil underground at the Shaikan field. However, a Competent Person’s Report issued in March determined that there may be only 9.1 billion. CEO Todd Kozel had to explain to the public that the report “represents a conservative estimate, based solely on reserves being targeted with 26 wells, representing less that 25% of all wells currently envisaged for the Shaikan development.” Unfortunately, people pay more attention to the initial news (the CPR) than they do to the whole truth in a rebuttal.
- When GKP transitioned into production, its initial milestone was 16,000 bopd. It has met that goal. But, it was difficult to commercialize that oil because the anticipated Kurdistan pipeline had not yet been completed. Therefore, oil had to be transported by tanker trucks across some very unfriendly terrain, delaying, at least in part, the revenue stream initially projected for that production.
- The good news recently was that the pipeline was finally opened and accessible. That was followed by international politics, as customer countries refused to accept Kurdish oil until the Kurds and the Iraqis can come to an agreement on export issues. This issue remains unresolved.
Now the oil is being produced and is flowing to port in Turkey via the pipeline. That should be the game winner. But, until the political issues are resolved, many countries consider it to be “illegal oil” and will not allow ships carrying it to enter into their ports. One tanker has already been stuck at sea after being rejected by the US State Department, which said, “We do not support the export or sale of oil absent the appropriate approval of the federal Iraqi government.” So, because Iraq does not fully accept Kurdish independence, the ship has failed to be able to offload the oil. Another fine example of bureaucracy preventing progress.
Now a second tanker has been loaded and is off to sea. Perhaps, it is more appropriate to say that it is off to see where it can offload.
From My Perspective
It has been said that it is hard to beat a man who keeps getting back up. I believe that GKP is doing nearly everything right, but that it keeps getting sucker-punched. All it has to do is keep getting back up. Eventually it will win. If the company can meet its target production of 40,000 bopd by the end of 2014, it should begin to generate its forecasted earnings. When it does, I expect the GKP share price to reach unprecedented heights.
I am neither a prophet nor a prognosticator. I may be a nose picker, but I am not a stock picker. I’m just an observer working for a patient publisher. I just report the numbers. You’ll have to do the math. For me, this adds up to an investment opportunity to multiply my money several times over.
