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.

http://www.albawaba.com/business/iraq-erbil-kurdistan-reconstruction-real-estate-534552

http://www.shafaaq.com/en/index.php?option=com_content&view=article&id=8990:plans-to-establish-a-second-oil-pipeline-from-kurdistan-to-turkey&catid=48:business&Itemid=73

Gulf Keystone Petroleum
I haven’t written much about GKP lately as I know that they have a very busy quarter coming up and there hasn’t been much news recently as the company keeps its powder dry. Shareholders in GKP are notoriously savvy and also a tad impatient so the dearth of news has been how you say, uncomfortable. So what have they got to look forward to and what is good news and what is less so?

In terms of how much they are producing and more importantly selling, I think the progress is still a bit pedestrian, as although they have received payment for two cargoes they are still waiting for one more. PF-1 is producing at nearly 10/- barrels a day which is a touch light but with Shaikan- 4 being worked over this should get up to nearer 15/- b/d by the end of March. Shaikan-8 which was due to be a gas injector may end up as a producer after all and PF-2 is due to completion next month and three wells are being prepared to feed it with a target of 20/- b/d although with sales uncertain at the moment I wouldn’t ink in too much revenue quite yet. Finally on drilling, Shaikan -7 which was about to spud when I visited back in June is still drilling, after some equipment problems, now fixed, I understand that the well is around three months away from TD as it is still in the Jurassic with the deeper and dicier Triassic still to come.

So whilst that news is ok, if a bit tardy what else is to come? Well I expect a host of announcements in the next month or two, all connected to the move up to the main market one way and another. The move will be accompanied by a new CPR which I expect in the second half of March and although there are some analysts expressing some concern about more possible than probable and proven it will be an opportunity for the company to give us all some real detail on the assets. The move up process, like almost everything, has taken longer than expected but if this really is imminent then it should be good news, after that the company can release results and get more information into the market.

The shares, like a lot of E&P companies, have suffered in the malaise attributed to the sector and in no way reflect the substantial value that exists in its portfolio. Rumours of bids and even the successful court case have not boosted the price at all lately and the chart is looking dangerously close to the 150p support, any further weakness and 130p is the next level. The company are doing all they can on an operational level to deliver the goods and over the next couple of months we shall see what this will mean, the truth is that they will need support from other operators in the region to restore faith in what is a notoriously tricky political and physical region. Whether it be oil sales by Genel and DNO, drill bit success by Hess or Chevron or cohesion between Erbil and Baghdad, as ever patience will be needed, I still think that the upside from this level is substantial but will be dependent in the first instance by a good CPR. Watch this space


Http://www.malcysblog.com/2014/02/oil-price-shell-ithaca-tullow-gulf-keystone-tv-finally/#sthash.hFRM2ydI.dpuf

http://www.basnews.com/en/News/Details/KRG-could-cut-water-supply-to-Iraq-to-put-pressure-on-Baghdad-/13484

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Deleted post as no confirmation.

My question is will this ever go up ?....disappointing to say the least....

GFK is unfortunately still tainted by Cowboy Kozel, further damaged by his unseemly courtroom behaviour with the Excalibur Carpetbaggers

however, once the pipeline is completed, and a working relationship established with Baghdad, the i would hope that GKP sp will at least start to reflect the value of its apparent assets

AFR is certainly another that should be watched .... its holdings and assets in this region are very considerable, but if memory serves me correctly, these are only in their books at cost

http://www.investegate.co.uk/gulf-keystone-petrol--gkp-/rns/notification-of-proposed-aim-cancellation/201402240700187357A/

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Will they(BP.) show interest ithe KRG?

The future of BP's flagship Rumaila oilfield in southern Iraq is in jeopardy after a bureaucratic snarl-up in Baghdad forced the company to axe a hundred crucial contractor jobs. The move highlights the mounting challenges facing western oil majors in Iraq, and bodes ill for the country's ambitious plans to revive an oil industry still recovering from years of war and sanctions. Some oil majors are so disenchanted with the difficulties of doing business in Iraq that they are considering leaving the country for good. - Financial Times

but kurdistan is damn nearly a separate entity, and therein lies the clue
worth noting that, unless i'm much mistaken, exxon still has its feet firmly in kurdistan, and exxon is effectively an arm of us gov't

Also worth noting.
http://www.fool.com/investing/general/2014/02/23/how-dire-is-the-situation-for-these-oil-majors.aspx?

"Exxon's capital expenditure rose during 2013 by 6.7% to reach $42.5 billion. Roughly 10% of this amount, or $4.3 billion was allocated toward acquisitions. But in 2014, the company is likely to maintain a similar amount of capex. Chevron's capex sharply increased by over 22% in 2013, year over year, and reached $41.8 billion. Out of this amount, $4 billion was allotted toward new acquisitions. Chevron also plans to maintain its capital spending at $40 billion. But the lack of growth in capex doesn't necessarily mean these companies will grow slower; this could suggest that there are fewer assets worth investing in at current oil prices. Moreover, it will allow these companies to keep their dividend payments and reduce the financial risk they may face."

and the relevance of the above?

Available funds which could be used, if they decided to make an offer?

">

i.e. just a load of irrelevant clutter :-)

Time to walk the dog,me thinks.

http://www.basnews.com/en/News/Details/Turkish-Energy-Minister--Kurdistan-is-our-only-solution-to-tackling-gas-prices/13637

From our AB partner.

http://ir.mol.hu/sites/default/files/2013_Q4%20FlashReport_ENG_0.pdf

"These include the fast - track development of the Akri-Bijeel Block, which could already deliver its first oil by the second quarter of 2014."

"In the Akri-Bijeel Block after the successful tests of the Bakrman-1 exploration well(maximum flow rates of 3,192bbl light density oil with 40°API gravity and 10.19 MMscfd gas inflow)the FINANCIAL STATEMENTS IN THIS REPORT ARE UNAUDITED 6 commerciality of the Akri-Bijeel block was decleared in Q4 2013.
Two appraisal wells are under drilling at the moment in the Bijell Appraisal area. Drilling of Bijell-2 continued, actual depth was 3,903 m at end of December. Bijell-4 was spud on 1st December 2013, depth was 1,898 m at end of December.
After sidetracking Bijell-7 is temporary suspended. Surface facility for early production is ready and the hydrocarbons shall be introduced immediately after to the completion of Bijell-1B.
Full coverage 3D seismic acquisition was continued and expected to be available in H1 2014.

o In Shaikan Block the Field Development Plan of the block was approved in 2013. Daily oil production from PF-1 has reached 10,000bopd, export of the Shaikan crude, produced through PF-1 is commenced in January 2014. Shaikhan-4 has been connected to PF-1 and the contribution from this well is scheduled to commence soon. PF-2 is scheduled to be commissioned by end of March 2014. Drilling at Shaikhan-7 continued, depth at end of December was 2187 m."

dalesman


We are told that Shaikan is huge, equivalent to the distance between Heathrow and City Airport.

Into this huge anticline we have only drilled 8 wells, which in term of the vast area covered by Shaikan is a very small number on which to assess reserves.

A reserve engineer will err on the side of caution.

He will calculate the volumes in a small radius around each drilled well and effectively say that within that small radius he can be certain of x million barrels which he assigns the tag P1 (Proven) he will then assign a further figure as P2 (Proven + Probably) and finally a P3 figures (Proven+ probable + possible)

The area that is covered by these figures, will be small and so in this first CPR I expect a low number to be assigned to 2P Reserves. That figure is only the beginning, the starting point and that figure will rise over time.

Just for emphasis I’ll say it again, this is not a final number.

As further development drilling takes place in the spaces between existing wells, this uncertainty due to extreme distances will be resolved. These gaps in understanding will be filled and the 2P figure will rise over time.

Determining what lies outside a small circle described around a well bore is a tricky business for the reserve engineer and his reputation will be on the line - hence I expect a conservative report.

If connectivity can be proved to his satisfaction between wells then the reserve figure will also rise and this may well be the case for some of the wells at Shaikan, particularly those clustered around PF1.

Without this additional insight the reserve engineer has no way of assessing if the intervals between wells are tight or the fracture system is continuous over a large area.

He needs to know the properties of the fracture system, its ability to channel oil to the well bore and he needs to assess the possibility of compartmentalization in various far flung areas of the field. (I'm thinking of the Shaikan 6 area)

The ultimate 2P figure will undoubtedly rise with time and with production, more insights will be available to the reserve engineer. The depletion rates will become available and these too can be fed into the equation. As an aside John G has said that the depletion rates at SH1 have been minimal – good news.

Add into this mix the application of enhanced recovery methods and the 2P reserves WILL rise. Shell raised a 0.3% RF to 30% in tight fractured carbonates in Oman using steam injection.

In conclusion to this section of my post I'm not at all worried about a lowish
reserve figure as it is just the starting point. The figure is needed for listing.

This figure also allows a considerable amount of reserve based lending to be available to the company.

As well as reserves a CPR will also allocate contingent/ prospective resources.

Reserves, Contingent and Prospective resources all require a recovery factor to be applied and this will be the first time that a definitive RF will have been produced.

Both CR and PR will have a value, which can be also be applied to GKP.


The reserve figure will in addition allows a considerable amount of reserve based lending to be available to the company should it be needed.

Indeed the current talk about these first reserve figures is actually a distraction.

We are at the beginning of the race towards the prize. The reserve figures will be considerably greater in the future and will increase as many more wells are sunk.

Look at the figures for DNO. Their reserve figures have been dramatically elevated over time as development wells were drilled.

As DNO has moved to drilling horizontal wells, DNO have also been increasing production. It is this increase in production that should be the focus for GKP PI’s, not reserves.

In addition (IMHO), we have not yet been given the final OIP numbers for Shaikan. Nothing has ever been quantified for the cretaceous and additional areas to the NW I believe have still not been included in the final figures. 21 billion OIP is IMO a distinct possibility and any such addition will lift the final valuation.

A major will have its own valuation and IMHO it will be applying figures for forward production and what it believes it can elevate that production over the length of the contract (which I think it would re negotiate) including the application of ERM.

I therefore don’t see a low ball CPR as a problem.

What we SHOULD be focusing on is the RISING production figs.

20,000 to 40,000 to 100,000 and on to 250,000 bopd +.

In all this talk about reserves these figures are conveniently being lost and yet it is the production figures that should be the prime focus for investors.

The reserve figures are only part of the mechanism for listing to be achieve.

Concentrate on the rising production and you then get a truer valuation of the company, and a greater understanding of the potential that GKP offers to its shareholders.

Kind regards

Dalesmann

A reserve engineer will err on the side of caution.

he might, but the likes of TK sure won't, he said cynically