http://www.gulfkeystone.com/ The firms exploration programme in Algeria is going well and "the shares look good value", say the Investors Chronicle. Your comments please. goal.

always unsettling when an executive director sells a slab of shares (333,333 of them)..... now we know why the fall over the last few days

in hind sight should have sold a few at the top and come back in now but no worries.,.

.

2 company sells in a period when they can---but they have sold exactly the same number as the options which they can take up when the sp went through 1.50. so it makes sense--Lord and Lady T are not made of money as we know from his record in the house!

loads going on in the near future....letting them go that cheap will prove to be a mistake.....the lord and lady must have bills to pay......

Looking good .....if only Sterling Energy could get lucky as well.....

Another excellent post by dalesman,i'm sure he won't mind me using it here?
cyril


Sorry Flaver for not making myself clear

Lets start again

GKP has a 75% stake in Shaikan, Texas Keystone 5% - effectively as you say 80%

This is then diluted due to the KRG carried interest and the backin rights to a fully diluted 51%

We gave away half our working entitlement to etamic. In the deal to retrieve etamics share we agreed to a 40% ASIP tax on profits. ASIP is a support and infrastructure tax levied by the KRG .

Now there are two ways to view this. You can use the fully diluted 51% and 9% entitlement under the PSC or you can reduce the WI to reflect this tax and use the full 15% working interest under the PSC contract. Both Daniel Stewart and I use the latter. This reduces the effective WI to 32.64% at Shaikan (this fig incorporates the Texas Keystone 5% reduced accordingly)

So our fully diluted WI after the ASIP tax is 32.64%

As a company we are not interested in the Oil in Place figures only in the recoverable barrels. 4.2b OIP at a 33% recovery gives 1.386bb we have 32.64% of this which gives 452.36mbo. Using a NPV10 calc I then attribute $3.50/barrel for this oil. This gives an unrisked valuation of 1.52 / share so everything else is in for free at the current share price!

HTH

Dalesman

$3.5 per barrel ?.....isn't that very low ?...

From the "UPS" thread

UPS
GKP 142.50p ( 142.25 / 142.50p )

Reason: Rising from oversold on the chart as is reaching the 20 days MA as a support on the past. A very positive level 2. Considered very undervalued on the oil find on Kurdistan as oil prices are rising.

Intraday

3 month Bollinger Bands,RSI, S Stochastic and 20 days MA

Charts - 2 days

The Kurdistan players are all rising...GKP,SEY and HOIL.

September 30, 2010

Gulf Keystone Narrowing Its Focus to 4 Major Blocks in Kurdistan Ahead of First Production Before 2011





Entering the interview with tabloid fuelled images of conflict and chaos, Gulf Keystones Finance Director Ewen Ainsworth relieved my misconceptions of Kurdistan in Iraq by confirming that whilst the company has some operational procedures specific to Iraq, the region is booming economically with Turkish companies in particular beating a path to the area. The companys share price took off in July, after it announced the establishment of an 18,000 bopd capacity oil production treatment and truck loading facility, and has maintained that momentum ever since. There are of course risks to operating in such a politically and socially vulnerable country, but the attractions are obvious and threats manageable.
The main source of the current excitement is the Shaikan Block covering an area of 283 square kilometres and operated by 75 per cent interest holder Gulf Keystone. Dynamic Global Advisors has independently estimated gross oil in place of between 1.9 (P90) and 7.4 (P10) billion barrels, with the structure approximately 30 kilometres x 5 kilometres in size. The company is aiming to be in production by the end of this year at a rate of between 8,000-10,000 bopd and will truck the...

the crude to a local refinery, before the final product is sold locally.

Gulf Keystone is still finding its feet to some degree, but production increases towards the 18,000 bopd capacity of the first facility are dependent upon a number of factors including the capability of the well and the volume of traffic on the road. This feet finding also extends to the sale of oil with quarterly auctions fixing the price for the following quarter. Current prices are in the region of US$250- US$350 per tonne with Gulf Keystones oil corresponding to approximately 6.5 barrels per tonne. Operating costs are expected to be in the region of US$1 per barrel, but the bigger costs are transportation (a few dollars per barrel) and the facilitys construction costs (US$15 million), although on a per barrel basis construction could be tiny.

Gulf Keystone also has a number of appraisal wells at Shaikan which, along with the nearby Sheikh Adi (80 per cent owned by Gulf Keystone) Block, could see the facilities at the Shaikan-1 well replicated if production testing returns positive results. Sheikh Adi is almost two months in to a 6 month drilling programme with the Sheikh Adi-1 well planned to dive 3,850 metres in depth and provide some answers to the companys internally derived oil-in place structure estimate of over one billion barrels of oil. Elsewhere at the companys 20% owned Akri-Bijeel Block, operator and 80 per cent owner MOL is focused on the big structures, for which there are two and believed to be of a similar size to that at Shaikan. Testing and evaluation continues but the Bijeel-1 well has already flowed 3,200 bopd on an earlier test.

Gulf Keystones final asset in Kurdistan is the Ber Bahr block which has the potential to be the largest of the lot. The company owns a 40 per cent interest alongside operator and fellow 40% holder Genel Energy International with Genel continuing to evaluate seismic and geological data before exploration work to define a location for drilling in early 2011. The Kurdistan Regional Government has the remaining 20 per cent (carried) interest.

Having now made substantial discoveries in Kurdistan, the Algerian assets have been usurped and been put up for sale. Ewen believes there are opportunities for larger players, and indeed a deal with British Gas has already been struck, but the expected returns to Gulf Keystone were unworthy of the requisite substantial cash investment necessary to deliver the predicted cash cow.
With 4 highly prospective blocks in Kurdistan, Algeria would have been an expensive diversifier, and although the company is now more vulnerable to country risk, modern portfolio theory would direct investors rather than companies to pursuing a diversification strategy. Ewen believes that the company has enough cash to see it through until the second quarter of next year, and while the receipt of cash flows from production at Shaikan towards the end of this year will be welcome, a fund raising is likely in the first half of 2011.

Beyond that the Gulf Keystone will ramp up production in a measured fashion given the challenges it is, and will continue to, face, but producing at the eminently achievable production rate of 30,000 bopd is believed capable of providing the company with financial self sufficiency. Gulf Keystone is enjoying tremendous success in a corner of the world many would avoid, but where risk and rewards are eternally intertwined, there is a hell of a lot of money to be made in Iraq.

weldone kuzemko, nice read..

it's a nice investment too!

it just came out on www.oilbarrel.com if any one in LGO there is another good read.
Back GKP i like the fact that Kurdistan GOV has 20% interest. most improtantly every time you read about GKP or any RNS comes out it sound like MANAGEMENT are working double shifts to build this company and it's assets to FTSE potential.

trouble with oilbarrel is that it is more a promotional forum than one for dispassionate viewpoint and critique

More from that man dalesman.
cyril

Core NAV for GKP

Since writing my Blue Sky Thinking post things have changed and quite a lot of what was Blue Sky Thinking has become Core.

My own research gives a base case of 5.09 right now using $70 oil

You can view it here

http://img838.imageshack.us/img838/4069/screenshot20101010at112.png


Lets look at what has changed.

OIL IN PLACE.

Various notes have been circulated which changes this variable.

Akri Bejeel was given 7950m by UBS
Miraboud have now said that the are happy to include 7400m barrels at Shaikan
The company has said they expect 50% at Sheik Adi so thats 3700
And we can stick with Genels 1900m at BB for the moment.

Pumping these into the NAV makes a difference and as far as I am concerned now represent the base figures

RECOVERY

This is one of the most potent variables in a NAV. Hoil still give 33- 50% guidance. Miraboud uses 30% but with a caveat that they expect this figure to be exceeded. John G gave 33% while Gramacho prefers to use a more conservative 25%. I am happy to go with 33%

OIL PRICE ASSUMPTION

I still use $70 as my base assumption. Currently we are North of $80 oil but I am happy to stick with $70 oil - lets not get carried away!

GAS

GKP gave guidance on gas from the Triassic Im using 5TCF at boep of $1.75. Some of you may wish to exclude gas but the deal on delivery in the Nabbuco pipe certainly brings gas into the calculation as far as Im concerned.

PRICE / BARREL

Im using the Daniel Stewart method of discounting the 40% ASIP tax by reducing the entitlement on each block accordingly. So for example Shaikan is reduced from 51 WI to 32% but you can then ignore the support and infrastructure tax in the calculations. I am then using $3.5/ barrel which is my NPV10 fig this is equivelent to $2.2/barrel if the block entitlement reduction is not carried out.

Now Mirabaud is only using $1.85 in its calculations that is below many service contracts awarded in the south. Im happy that my $3.5 /barrel is IMHO conservative and allows lots of upside for the next man!

These changes give 5.09, and in my book represents the base case.

Pleased DYOR.

As GRH mentioned I will be away from the boards for a while no not a cruise!
Keep the faith!

Kind regards.

Dalesman

putting on the pennies this am.,.

nice to see the progress......lets hope it builds momentum.....

GLA

Anyone read the FT today about GKP?