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.

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?

no, but saw they might be looking for a fund-raising at 140

nope not me.
if it was positive and bullish then i would suggest not buying monday.
just my opinion. could be wrong.
regards
jkd

perhaps another post that crossed in the ether?
regards
jkd

Gulf Keystone raises $175m for Iraq project
By Christopher Thompson

Published: October 16 2010 01:41 | Last updated: October 16 2010 01:41

Gulf Keystone Petroleum, the Aim-quoted oil explorer, has raised $175m (109m) to accelerate its Iraq-based drilling programme in a surprise share placement.

The placement, which has not yet been announced, was run by Mirabaud Securities and priced at 140p a share. Gulf Keystones shares closed at 143p on Friday.

There's a more lengthy article on it.
Broker RNolan DS called it a 'stunning development'
wait and see i suppose?

W/e FT wasn't hugely impressed with the recent placing. Apparently last month the CEO had said the GKP was fully funded through to summer 2011. For a company which doesn't yet make a profit and has no proven reserves, pretty much everything is pinned on the Shaikan discovery which is still being drilled. Additionally, Etamic investment fund, had defaulted on it's first payment for it's buy in to the Iraq assets, forcing GKP to raise more cash elsewhere.

Cash raised at 140p.....super increase......market has priced this up....still have some....wish I had topped up now....

Loads of news to come on Akri Bijeel, Sheikh Adi and Shaikan.
Not too late for a top up if these drills are as good as some predict.

Just came across this posted oh Friday.
cyril


FROM TIMES ONLINE SHOULD BE IN PAPERS TOMORROW

When the first Western oil explorers arrived on the dusty streets of Erbil, the Kurdish capital of northern Iraq, shortly after the 2003 war, there were many who declared that finding oil in this rugged mountain region would be a bit like shooting fish in a barrel.
The region was one of a diminishing number in the world that held huge geological promise but for political reasons had barely been touched by the oil industry. If the fish in a barrel analogy may have bordered on hyperbole, it has not turned out to be wildly inaccurate.
Of the eight wildcat exploration wells drilled in northern Iraq in 2009, half of them struck oil, a far higher success rate than in most established oil-producing regions.
And while not every company has hit the jackpot, discoveries by two UK-listed explorers Gulf Keystone Petroleums giant Shaikan find and the Heritage Oil discovery at Miran West ranked among the worlds top three finds in 2009. For lucky investors in these companies who were willing to brave the risks early, it has been quite a ride.
Now the story appears to be entering a new phase. Last week, Americas Marathon Oil became the first of the big global oil majors to enter the region. Its acquisition of four exploration blocks north of Erbil is of huge significance. For years, friction between Baghdad and the Kurdish regional government, which signed the initial exploration contracts, led the worlds top oil companies to shun the north so that they were not shut out of the auction for the even bigger prizes of the countrys south.
Marathons move, however, could be the opening gambit in a frenzied consolidation play. It is a big vote of confidence, Richard Savage, oil analyst at Mirabaud, said.
Until now, Kurdish Iraq has been the playground of the independents, the chancers and mavericks of the oil industry willing to bet that contracts they had signed with Erbil would not be torn up by Baghdad. That danger now looks increasingly remote because the support of Iraqs five million Kurds for the new Government in Baghdad is likely to be essential if it is to form a majority.
Some kind of resolution over oil contracts between Erbil and Baghdad is probably only a matter of time an agreement that would pave the way for the start of exports.
Meanwhile, with other industry giants such as Chevron, Eni and Statoil all thought to be waiting in the wings, a string of deals could be in the offing as they scramble to gain a foothold.
For investors, it is a question of picking the best of the bunch.

Many of the companies with acreage in Kurdish Iraq are privately held or listed overseas, but among the three London-listed groups Gulf Keystone stands out as a clear favourite. Its discovery of up to three billion barrels of crude at Shaikan was made in a higher-quality reservoir than many its rivals a fact recognised by the City last Monday, when a 109 million offering of 78 million new shares was oversubscribed.
Gulf Keystone, whose share price was languishing at just over 10p a year and a half ago, now stands at over 153p, which values the company at a cool 1 billion.
Cash from its share offering will be used to accelerate its drilling programme.
Although shares in Gulf Keystone no longer look cheap, the company is an obvious takeover candidate and it is worth noting that Marathons newly acquired Atrush block is located immediately north and adjacent to Shaikan, making it a tempting snack for the American group if it decides to bolster its presence in the area.
Of course, not all of the companies have been as fortunate. Shares in Sterling Energy, another UK-listed group, halved last month to 67p after disappointing results from its Sangaw North well. All is not lost for Sterling, whose drilling programme is still under way, but the chances of a Shaikan-style discovery appear remote.
Meanwhile, Heritage Oil, the exploration company originally founded by the former mercenary Tony Buckingham, has stirred excitement with its 2009 find at Miran. Heritage has plenty of cash and plans to use some of it to boost its Iraqi presence.
Yet while there is little doubt over its size, there are concerns about the quality of the Miran reservoir, where the carbonate rock is less porous than at Shaikan. Instead, the oil is trapped in fractures between the rocks, raising questions about the ease with which it can be extracted.
Meanwhile, Heritage has other issues to contend with, not least of which is a tax dispute with the Ugandan Government over the proceeds from the sale of its stake in an earlier discovery there.
There is a silver lining to this. Heritages assets in Kurdish Iraq are being valued at a significantly lower level than Gulf Keystones. The company is trading at a 24 per cent discount to its net asset value, which is attractive relative to the sector trading at a 9 per cent discount.
For investors, northern Iraq is no place for the faint-hearted, but there are signs that conditions are improving and the potential rewards are difficult to ignore.

I think we might see an early firework display?
cyril

Gulf Keystone today announces the following update for the current exploration and testing activities in the Kurdistan region of Iraq:



Shaikan-3



The well is currently in the Cretaceous Garagu Formation at 1,229 metres, measured depth. Oil shows have been observed both while drilling and also in a core. The wellbore is being conditioned prior to logging the well. Subsequently, the well will be drilled to TD and a 7-inch casing string will be run, finally, the pay interval will be tested.



Extended Well Test Facilities at Shaikan-1



A total of 10 truck loads of crude from the Shaikan-1 discovery well have now been sent to different refineries and oil processing plants in Kurdistan. The results of refined product yields from these product test runs continue to be analysed, after which a domestic price will be set for the Shaikan, Sargelu crude oil.



Sheikh Adi-1



The well is currently drilling in the Cretaceous at 899 metres, measured depth. Oil shows have been encountered in a core taken in the top Cretaceous. In addition, oil shows have been seen in the surface returns whenever there have been full or even partial returns. Log evaluation also indicates high hydrocarbon saturations over a minimum gross interval of 50 metres in the first Cretaceous zone encountered. However, hole stability issues (swelling, unstable shales) preclude the possibility of a production test at this time, doing so would involve running an unplanned casing string thus jeopardising our ability to reach the primary Jurassic and Triassic targets. Plans are to drill ahead to the primary targets and leave the Cretaceous intervals for later testing.



Bijeel-1



Kalegran, a 100% subsidiary of MOL, and the operator of the Akri-Bijeel block is continuing well test operations on the Bijeel-1 discovery well. Release of the Weatherford 842 drilling rig is scheduled for mid-November at which point the rig will move to the Shaikan-2 location and begin drilling the first deep appraisal well on the Shaikan structure.



Drilling Rig Tender



The GKP bid evaluation team is currently reviewing the eleven technical and commercial bid proposals that were received in response to the Company's tender. GKP expects to award a contract to the successful bidder during November. The selected rig will be used to drill the Shaikan-4 appraisal well.



Shaikan and Sheikh Adi 3D Seismic



Acquisition of approximately 525 square kilometres of 3D seismic data for the Shaikan block is 98% complete and data processing and evaluation have commenced. On Sheikh Adi, approximately 300 square kilometres of seismic data acquisition is 10% complete.



Commenting on today's announcement, John Gerstenlauer, Chief Operating Officer said "We are very encouraged by the log results and oil shows seen thus far in the Sheikh Adi-1 exploration well. The well logs and oil shows in this well not only point towards significant potential in the Cretaceous but also serve to further de-risk the oil potential of at least the Jurassic age targets deeper in this well. In addition we have made significant progress in establishing a fair price for the Shaikan Sargelu crude oil in the Kurdistan market in preparation for routine domestic oil sales."

Looking good for 200p soon.