Soft Landing For Gulf Keystone Petroleum Limited On Iraq Unrest

Gulf Keystone Petroleum Limited (LON:GKP) reiterates production guidance and rises 4%.

Mark Stones

Mark Stones (TMFMumbojumbones) joined The Motley Fool in 2014 and initially worked as a writer for Fool.co.uk, before joining the Fool’s analyst programme. Mark earned a BA in English from Loughborough University. Although he spends more time reading annual reports than Russian literature these days, he still appreciates a novelist’s antipathy toward the accepted view, which is a useful attitude when trying to sniff out hidden gems on the stock market. His approach to investing has been largely influenced by the principles of Warren Buffett and Peter Lynch. He also takes a special interest in the work of healthcare companies. Outside of investing, Mark plays guitar, enjoys good writing and has a guilty passion for combat sports.

Published 13 June, 2014 10:45 am BST

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.

Gulf Keystone Petroleum (LSE: GKP) (NASDAQOTH: GFKSY.US), the oil explorer with operations in the Kurdistan region of Iraq, reiterated today that its operations our progressing in line with previous guidance. Despite unrest and escalating violence in Iraq — which sent Gulf Keystone shares down more than 10% on Wednesday — the firm is on schedule to reach 20,000 gross barrels of oil per day (bopd) by the end of Q2 2014.

The firm added plans to increase production at its Shaikan oil field are on track, and production capacity should increase to 40,000 bopd by year-end 2014. In June the company received its second and third payments of $6.85m and $6.88m respectively for crude oil export sales, as well as a further $1.5m from domestic sales.

To boost production rates and provide spare well capacity then further wells will come online in 2014 and two additional production wells, Shaikan-9 and -11, are planned to be drilled later in the year.

Todd Kozel, the chief executive, commented:

“Our crude oil export sales have now surpassed our historic sales into the domestic market, and our revenues are expected to increase significantly in the second half of 2014 with the establishment of a steady payment cycle for the Shaikan exports sales.”

Shares in Gulf Keystone Petroleum increased by 3.5p, or 4%, to 83.5p during early trade this morning. Before today analysts were expecting that the firm would reveal earnings per share of 8p in its 2014 annual results. After this morning’s price movement, therefore, the shares may trade on a P/E of 11.

Of course, the decision to ‘buy’ — based on those metrics, today’s production update and the wider prospects for the oil industry — is entirely your decision.