Gulf Keystone Petroleum - Positive Fundamental Changes

DISCLAIMER: This should not be seen as financial advice to buy or sell stock!



Morning,


I'm a technical fan of Gulf Keystone Petroleum (GKP), but I'm going to put that to one side for the moment and briefly discuss the positive changes that have occurred recently that have made me decide to add to my long position here:



1. Independent Oil Sales:

- To quote the 29/06/2015 RNS: "Currently, sales of Shaikan oil comprise crude oil export deliveries by truck to the Turkish coast and sales to a domestic buyer under a new six months contract which provides for off-take of between 12,000 and 40,000 bopd." 


- This suggests to me that we're finally in a place where the cash position can be allowed to either grow slightly and or remain in a neutral position.


- In addition to this, the chances of a placing being required to satisfy the bond holders of the company in accordance with the general overheads is now significantly reduced.


- If this 12,000-40,000 is sold at the rumoured market rate of $29/barrel (see LSE.co.uk), then this gives a daily revenue stream of between $348,000 and $1,160,000, which should certainly provide some stability to the company in the short term.


- Added to this, the rumour on the market (see LSE.co.uk) is that the current production rates are been split between this independent and the Kurdistan government at a 50/50 ratio, giving a daily revenue figure of £580,000.



2. Kurdistan Bond Raising:

- This is a possible fundamental change in the region that will allow for the possible repayment of debt to GKP by the Kurdistan government along with the future payment of oil produced - this begins to reassert the company's potential dominance in regards to both its production expansion and its asset size.



3. Kurdistan Vs ISIS:

- Kurdistan have proven themselves to be a very good weapon against ISIS in conjunction with US Army technical drone support, which places GKP in a much more geopolitically safer place toil companies in the region.


4. Recent Institutional Activity:

- According to Morning Star, the following funds have recently added positions in the company:

iShares MSCI EAFE Small-Cap
iShares Core MSCI EAFE
SPDR® S&P International Small Cap ETF
iShares Core MSCI Europe
iShares MSCI Europe Small-Cap
iShares MSCI United Kingdom Small-Cap
iShares MSCI Global Energy Producers


http://investors.morningstar.com/ownership/shareholders-major.html?t=GKP



5. Asset Sale Probability:

- All of these factors (especially the increased chances of an increase in payment consistency) add to the potential value of the company to potential bidders and a cashflow positive environment for the company would make GKP a significantly more viable bid for larger companies.


- We must also remember that they are sat on what can only be described as a "world class" asset, which under the current low share price makes GKP a screaming target for M&A in the Kurdistan region.


- On a balance of probabilities the chance of a significant increase in the share price seems more likely over the coming months and years than a major fall, but as ever, do your own research.



Enjoy,

The Masked Stock Trader