Gulf Keystone Petroleum Limited Becomes Bid Target After Court Win

Today’s court victory means Gulf Keystone Petroleum Limited (LON:GKP) is now a tasty takeover target, says Roland Head.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Gulf Keystone Petroleum (LSE: GKP) shares were suspended until noon yesterday, but more than made up for lost time by gaining nearly 20% when trading started. They’ve since fallen back a bit, and are now around 16% above Monday’s close.

The cause of the temporary suspension was the long-awaited judgement in Gulf Keystone’s court battle against its former partner, Excalibur Ventures, which claimed it was entitled to a share of Gulf Keystone’s prize asset, the 14bn barrel Shaikan oil field.

Judge Christopher Clarke ruled against Excalibur yesterday, confirming Gulf Keystone’s undisputed ownership of its prize asset, and allowing the firm’s shareholders to look forward with confidence.

Turning the corner

Earlier this year, Gulf Keystone faced criticisms relating to its corporate governance, legal troubles and lack of progress in bringing Shaikan into production. All of those criticisms have now been addressed, and today’s court victory means that the firm’s move from AIM to the Main Market later this year should be assured.

The remaining obstacle facing Gulf Keystone, and other major Kurdistan producers, is the region’s lack of export infrastructure. This should be addressed later this year, when a pipeline allowing direct exports from Kurdistan to Turkey is due to come into service.

In parallel to this, Gulf Keystone is building out its production infrastructure, and expects to be producing 40,000 barrels of oil per day by the end of the year, and 150,000 bopd by 2015, triggering strong cash flow growth.

Shaikan likely to get bigger

Gulf Keystone’s Shaikan field is already a giant, boasting a mean estimate of 13.7bn barrels of oil in place. However, it’s quite likely to get even bigger, as Gulf Keystone continues to drill development wells to test the limits of the field.

The firm is currently drilling the Shaikan-7 well, which is expected to complete in spring 2014. If successful, Shaikan-7 could lead to a significant upgrade to Shaikan’s resources.

Takeover target?

According to Gulf Keystone, Shaikan is the largest onshore oil development in the hands of an independent operator anywhere in the world. It’s an obvious takeover target, especially as Kurdish oil is relatively cheap and easy to extract, compared to offshore oil fields.

Most investors believe that a takeover is the natural end goal for Gulf Keystone, and with both Exxon Mobil and Chevron already present in Kurdistan, plus likely strong interest from Asian national oil companies, a bid might not be far away.

The next Gulf Keystone?

A takeover bid could be very profitable for Gulf Keystone investors, but if you are looking for oil and gas shares that can provide spectacular, multi-bagging gains, then you will need to focus on smaller, more risky companies.

If this interests you, then I’d recommend you take a look at How To Unearth Great Oil & Gas Shares a special report from the Motley Fool. It contains some great tips on selecting resource shares. To get your copy, click here now — it’s completely free, but availability is limited.

> Roland owns shares in Gulf Keystone Petroleum.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

More on Investing Articles

Investing Articles

Prediction: 12 months from now, £5,000 invested in Tesla stock could be worth…

Tesla stock has endured a miserable year so far, falling by 29%. Muhammad Cheema takes a look at how it…

Read more »

Investing Articles

See what £10,000 invested in Tesla shares at their mid-December peak is worth today 

As the world absorbs the full scale of Donald Trump's tariffs, Tesla shares are reeling. Investors who bought the stock…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Dividend Shares

2 ‘safe’ LSE dividend stocks to consider as global markets sell off

As global markets experience high levels of volatility due to economic uncertainty, investors are piling into these ‘safe-haven’ dividend stocks.

Read more »

Investing Articles

US stock market rout: an unmissable opportunity for investors?

His tech-heavy portfolio has been smashed by Trump’s tariffs. However, Dr James Fox believes there could be some opportunities in…

Read more »

Investing Articles

After a 13% ‘Trump tariff’ fall, is the Barclays share price too cheap to miss?

Does the Barclays share price fall mean we should all panic and run screaming from the stock market? Nah, of…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

2 investment trusts to consider for a Stocks and Shares ISA

These two investment trusts have a different focus -- but our writer sees both as worth considering, one more for…

Read more »

Investing Articles

Deutsche Bank reiterates Buy rating on 9.6% yielding FTSE 250 stock that was “most shorted in UK”

Our writer investigates why a major broker remains optimistic about a FTSE 250 stock that was once the most shorted…

Read more »

Investing Articles

2 things to remember when stock markets are turbulent

US trade policy has rattled the stock markets in New York, London and elsewhere. Our writer outlines a couple of…

Read more »