Does Gulfsands Petroleum plan a cash call?

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On 15th February I suggested selling shares in AIM listed oil producer and explorer Gulfsands Petroleum (LSE:GPX) at111.5p. The shares are now 96p. One reason NOT to sell is that Gulfsands is debt free and has net cash but I wonder how much it actually has. A buzz of IR activity of late makes me wonder if there might be a placing ahead.

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You should read that February 15th piece which is underpinned by a note from commissioned researcher Edison carefully as it explains why the shares are overvalued.

Read it carefully but I extract from that note a table from Edison which implies that – as at February 15th it was forecasting that Gulfsands would be almost out of cash by Christmas 2014. The recent purchase of assets in Morocco (a sensible diversification away from Syria) will suck up stacks of cash and so even by Christmas 2013 the net cash position is forecast to be down to $27.7 million. But…


Year end Revenue ($m) EBITDA ($m) PBT ($m) Debt ($m) Net cash ($m) Capex ($m)
12/11 7.9 (23.6) (23.9) 0.0 124.2 (45.6)
12/12e 5.2 (21.5) (13.5) 0.0 94.3 (6.4)
12/13e 6.5 (5.2) (6.7) 0.0 27.7 (34.0)
12/14e 16.2 4.4 2.5 0.0 12.3 (19.8


Having checked out the last couple of sets of results, Gulfsands always has trade payables of c$7 million more than trade payables and so you can knock the 2013 and 2014 true net cash numbers down to $21 million and $5 million.

And on March 1st Gulfsands also announced that it had picked up two exploration blocks in Colombia where it is obliged to shoot a good amount of seismic in late 2013 and early 2014 with two wells planned for a year later. It strikes me that this will not come cheap.

Of course if there is a speedy, swift and clean resolution to matters in Syria that will change the picture but that cannot be guaranteed and Gulfsands has a prudent management team that must plan for any eventuality. It could, of course, slow its capex and exploration activity but a presentation that went up on the website the other day implies otherwise.

Having been vindicated on the earlier call I am not sure this is a sell at 96p – the shares could spike in Syria resolution but on a fundamental basis I cannot see how this stock is worth much more than 90p. And so II certainly would not buy unless I got a clear statement that Gulfsands will not be considering an institutional placing in the next year to fund its development plans.  The maths look clear to me. If I was a shareholder I’d seek clarification on that matter.

Tom Winnifrith writes for 10 US & UK websites in the US and UK and you can get alerts on all of his articles by following him on twitter @tomwinnifrith or you can get links to all his material via his own blog – which also carries a range of content on the evils of the EU, the global warming con and other matters at


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