City firm FoxDavies has reiterated its 'buy' stance on oil company Gulf Keystone Petroleum (LON:GKP) following an analysts site visit.

The broker points out there is "little doubt" that the company's Shaikan asset is world class, which will provide further upgrades to net reserves.

But also adds that the full value of the firm's assets have yet to be unlocked via effective access to Kurdistan's export market.

Analyst Dr Zac Phillips said Kurdistan and Baghdad were currently locked in a battle for Kurdistan's share of the export revenues and until Kurdistan achieved access to those revenues, GKP's production would be limited to revenues generated by sales into the domestic market.

Highlighting in the note how far the company had come, Dr Phillips said that besides the Shaikan asset, the firm's Sheikh Adi discovery had "excellent" potential.

"Add to this the fact that security fears have been overdone, and that the region is largely trouble free, the outstanding issues relate to access to exports, or more specifically, export revenues," said the analyst.

He said following the visit, he had adjusted the target price for the stock to 350 pence (current price: 203.75 pence), believing it better reflected the risks associated with the portfolio.

"Further upgrades cannot be ruled out, and as a result, we are reiterating our BUY recommendation," he said.

Excalibur has deposited a further £3.5 million into court as security for the costs of Texas Keystone, a company founded by Gulf’s chief executive Todd Kozel.

It has also made interim payments of £110,000 to Gulf Keystone and two of its subsidiaries and £60,000 to Texas Keystone, following the English Commercial Court’s order on March 14.

Gulf Keystone holds Production Sharing Contracts for four exploration blocks in Kurdistan, including the Shaikan block, one of the largest oil discoveries in recent years.

In December 2010, Gulf advised investors that Excalibur was claiming entitlement to an interest of 30 per cent in its companies’ blocks in Kurdistan.

Gulf Keystone continues vigorously to dispute and contest the allegations and claims asserted by Excalibur.

Gulf Keystone’s share price was down 5.04 per cent to 241.90 pence per share as at 3.09 pm.

The plans include a provision for a share-based bonus in the event that the company, or more than 50 per cent of its assets, is sold. This ‘exit event’ would see the Gulf Keystone board receive 2 million shares, worth around £5 million.

Other GKP employees would share a further 8 million shares, worth more than £20 million today.

Additionally, GKP said that directors and employees would receive a maximum of 10 million shares between them as part of the 2011 bonus and it set out some terms for future share-based bonuses. 

A cash bonus was also being paid in respect of the company’s performance in 2011, it said.

"The performance-related awards announced today are in recognition of the company's remarkable growth and outstanding drilling success in the Kurdistan Region of Iraq,” said deputy chairman Mehdi Varzi.

“These plans fully align management and employees with shareholders' interests by incentivizing company employees to continue to achieve significant value creation for the benefit of all shareholders.”

Varzi said the firm had achieved considerable growth, reflected in the increase in the share price from £0.05 pence in March 2009, before the first Shaikan well was drilled, to today's levels, of £2.63, which would place the company in the FTSE 100 index by market capitalisation. 

He added: “While the AIM index fell by almost 20 per cent between the end of 2010 and today, the company's growth rate in terms of its market capitalization in the same period has been 76 per cent, reflecting our outstanding success in finding billions of barrels of oil.

“Since we made one of the largest world class discoveries of the last decade at the Shaikan field in 2009, our independently audited mean resource estimates for Shaikan have increased by 375 per cent. 

“In combination with preliminary resource estimates for the equally massive structures of Akri-Bijeel, Ber Bahr and Sheikh Adi, today Gulf Keystone has a share of gross, P50 oil-in-place resources of at least 16 billion barrels across our four licences in the Kurdistan Region of Iraq, one of the last frontier oil provinces in the world."

Excalibur Ventures has been told to deposit £9.5 million into court as part of its legal claim against Gulf Keystone (LON:GKP).

The dispute is scheduled to go to trial in October in the English Commercial Court.

Ahead of that Excalibur has been told to pay £6 million within 21 days as security for Gulf Keystone’s costs and a further £3.5 million for the costs of Texas Keystone, a company founded by Gulf’s chief executive Todd Kozel.

Gulf Keystone said that Excalibur was also ordered to pay the costs of the hearing on 14 March and to make interim payments of £110,000 to Gulf Keystone and its two subsidiaries and £60,000 to Texas Keystone within 21 days.

Gulf added it continues vigorously to dispute and contest the allegations and claims asserted by Excalibur.

Gulf Keystone holds Production Sharing Contracts for four exploration blocks in Kurdistan, including the Shaikan block, one of the largest oil discoveries in recent years.

Shaikan holds independently audited gross oil-in-place volumes of between 8 billion barrels to 13.4 billion barrels.

Excalibur Ventures is claiming up to 30 per cent of the company’s blocks in Kurdistan.

Gulf Keystone Petroleum (LON:GKP) today confirmed its plans to make the step up from the AIM market.

The company intends to get a premium listing on the official list of the London Stock Exchange this year, it said. 

The company first announced its intention to make the move in September.

At the same time GKP revealed an ambitious plan to develop its world class oil discoveries in the Kurdistan region of Northern Iraq.

This includes the continued development of the Shaikan oil field and the Sheikh Adi block, as well as exploration on the Ber Bahr blocks. It also unveiled a plan to develop a 440,000 barrels a day oil pipeline connecting Shaikan to the main Kirkuk-Ceyhan export pipeline.

It also decided to sell its 20 per cent stake in the Akri Bijeel asset. Earlier this month GKP announced it had hired corporate advisers to assist with the sale.

The block is operated by a subsidiary of Hungary’s MOL Hungarian Oil and Gas Plc, which owns the remaining 80 per cent interest.

The Bijell discovery, by MOL’s estimates, contains 2.4 billion barrels oil-in-place.  And ongoing exploration and appraisal work programme is targeting existing and identified hydrocarbon prospects in the Akri-Bijeel block.

Strand Hanson Ltd and Perella Weinberg Partners will be jointly responsible for coordinating and advising the company on the proposed sale of its 20 per cent interest in the Akri-Bijeel block, in the Kurdistan region of northern Iraq.

The block is operated by a subsidiary of Hungary’s MOL Hungarian Oil and Gas Plc, which owns the remaining 80 per cent interest.

The Bijell discovery, by MOL’s estimates, contains 2.4 billion barrels oil-in-place.  And ongoing exploration and appraisal work programme is targeting existing and identified hydrocarbon prospects in the Akri-Bijeel block.

Gulf Keystone announced its plans to sell the Akri-Bijeel stake in September, as part of a broader strategy for the company’s future development.

It also comes after a brisk round of consolidation of the emerging Kurdistan oil industry last year.  

The period also saw Vallares, then a £2 billion vehicle for Hayward and City financier Nat Rothschild, merge with Turkish firm Genel, one of the leading players in Kurdistan. Afren (LON:AFR) and Petroceltic (LON:PCI) also inked deals in the region.

Gulf Keystone Petroleum (LON:GKP) has received permission to transfer its interest in the Hassi Ba Hamou permit in Algeria to BG Group and Sonatrach at no cost. 

The receipt of formal government approvals ends a process that began back in 2010.

It is part of a strategic exit from the country which will allow the company to concentrate on its world class oil assets in Kurdistan, the semi-autonomous region of Iraq.

Todd Kozel, company’s chief executive, said:  "We are pleased that with the HBH transfer we have made good progress towards achieving our goal of a gradual strategic exit from Algeria. 

“We are firmly focused on our operations spanning four exploration blocks in the Kurdistan Region of Iraq, including the Shaikan world-class discovery, where the 2012 and 2013 high impact drilling campaign is currently underway following excellent results achieved in 2011.”

The flagship Shaikan block is estimated to contain 8 billion barrels of crude calculated on a P90 basis – meaning the oil has a 90 per cent certainty of being produced.  The P10 value is 13.4 billion barrels, giving a mean figure of 10.5 billion barrels.

The last update was possibly one of the most encouraging so far as the company’s chief operating officer, John Gerstenlauer, said the Shaikan-4 may be the best well it has logged to date.

It achieved a flow rate of 4,970 barrels and 7 million standard cubic feet of gas a day from a thin zone at the bottom of the lower-lying Kurre Chine B formation.

The oil was a 39 degree API light crude, while the gas flowed at a wellhead pressure 1,101 PSI. 

In the Kurre Chine C, Shaikan-4 achieved a flow rate of 563 barrels a day and flowed 3.65 million cubic feet of gas. These were two of seven planned well tests.    

Gulf Keystone Petroleum (LON:GKP) told investors that it is not in talks to sell the company.

The statement comes after a weekend report claimed that US giant Exxon Mobil was lining up a bid for the company. The report claimed that the American oil firm had sounded out GKP over a £7 billion takeover, which would price the AIM-quoted stock at 800p a share.

Subsequently GKP shares gained as much as 30 per cent to reach an all time high of 219.75p a share.

However this afternoon the firm put out a response to what it called ‘unfounded press speculation’ regarding a potential offer for the company. 

"The Board of Gulf Keystone does not normally comment on speculation, but confirms that it remains committed to creating value for shareholders, via the continuing 2011/2012 exploration and appraisal programme on its world-class assets in the Kurdistan Region of Iraq,” it said.

“Whilst there is clearly increasing interest in the region in which Gulf Keystone operates, the Board is not in discussions with regard to a sale of the company.”

Gulf Keystone Petroleum (LON:GKP) shares were trading at new highs this morning on speculation that US giant Exxon Mobil is lining up a bid.

A weekend report claimed the American oil firm had sounded out GKP over a £7 billion takeover, which would price the AIM-quoted stock at 800p a share.

It went on to say that GKP’s board would not accept such a deal and a number of other companies were monitoring the situation. The other potential suitors named by the Sunday Independent were Sinopec and Chevron.

At the time of writing, neither Gulf Keystone nor Exxon had commented.

In early trading, GKP shares gained as much as 53.5p, or 32 per cent, and were changing hands at 220p.

Last month it was reported that Exxon had signed contracts with the Kurdistan Regional Government for six blocks within the semi-autonomous region of Iraq.

While it was seen as a massive vote of confidence in the area, it was also seen as a potentially incendiary move which may provoke a political backlash from the Iraqi authorities in the south.

It comes at a delicate time as Baghdad and the KRG attempt to pass legislation that would support the award of these potentially lucrative oil and gas contracts in Kurdistan.

Of late, the region has become a magnet for mid-tier players such as Marathon, Hess (NYSE:HES) and Repsol (MCE:REP).

GKP was, however, one of the early entrants. Its exploration success in the past three years, principally the massive Shaikan oil discovery, has seen the firm grow into one of AIM’s largest companies.

Indeed, the firm’s corporate transformation is reflected by its plan, announced in September, to step up to London’s main market in the coming months.

The company now plans to build a second extended well test production facility. This will allow the firm to establish oil production in the order of 40,000 barrels of oil per day from the Shaikan field.

"Following these successful well tests at Shaikan-2 and in anticipation of equally positive results from the Shaikan-4 appraisal well, we plan to design and build an additional testing and production facility for Shaikan-2 capable of producing a minimum of 20,000 bopd,” said chief operating officer John Gerstenlauer. 

“The completion of the ongoing upgrade of the existing Shaikan-1 & 3 EWT facilities will lead to an initial production of 20,000 bopd of Shaikan crude to export specifications by mid-2012. 

“The Shaikan-2 facility will increase this production target to 40,000 bopd by the end of 2012.” 

Gerstenlauer added: “With Shaikan being one of the three major producing oil fields in the Kurdistan Region of Iraq today, we look forward to making a significant contribution to the mid-term regional production and export targets recently announced by the Kurdistan Regional Government."  

Shaikan-2 well was drilled nine kilometres south-east of the Shaikan-1 discovery well.

Nine well tests were conducted on Shaikan-2,  in all target formations in the Triassic and Jurassic, and it achieved a maximum aggregate flow rate of 18,900 barrels of oil per day.

The preliminary results of the testing programme formed part of the new data used by to calculate the most recent upgrade to the independently assessed oil in place estimate for Shaikan.

Shaikan is currently estimated to contain gross oil-in-place volumes of 8-13.4 billion barrels. This is calculated on the P90 to P10 basis, with a mean value of 10.5 billion barrels.

The Shaikan-2 well will be completed as a producer and tied to an additional EWT facility which Gulf Keystone plans to build and install in 2012.

Now that the testing programme is complete the drill rig is moving on to the Shaikan-6 appraisal well location. This is nine kilometres east of the Shaikan-2 appraisal well.

Shaikan-6 is set to spud before the end of  2011. It will be drilled to around 3,800 meters, subject to technical conditions.

Gulf Keystone Petroleum (LON:GKP) today appointed Lord Charles Guthrie as a non-executive director of the company.

Lord Guthrie has a distinguished background in the military, politics and business. He served in the British army from 1957 to 2001, during that time (between 1997 and 2001) he was chief of the defence staff and the principal military adviser to the government. 

"As we set about the further strengthening of our Board, we are delighted to welcome Lord Guthrie to Gulf Keystone as a non-executive director,” said chief executive Todd Kozel.

“He brings a wealth of experience to the company, honed over a long and distinguished career in which he has worked at the highest levels of strategy and policy development, both in the UK and abroad.  

“We greatly look forward to his positive contribution to Gulf Keystone as we continue to capture the value of our world class acreage in Kurdistan."

Last month Gulf Keystone revealed the details of its ambitious plan for the next stage of its development. It also raised US$200 million through an oversubscribed placing. 

The new cash will allow the company to increase its focus on the aggressive programme of exploration and appraisal drilling on the Shaikan, Sheikh Adi and Ber Bahr blocks in Kurdistan. Some of the funds will also be used to expand the group’s production and export capabilities.

This was the latest in a series of significant announcements in the past few weeks which have seen the company outline its ambitious plans for the future.

In his interim results statement GKP founder and chief executive Todd Kozel unveiled a plan to sell a 20 per cent interest in the Akri Bijeel field, which hosts a known oil discovery and is expected to fetch ‘hundreds of millions of dollars’.

These funds, along with the US$200 million raised yesterday, will be spent on a programme to upgrade the existing Shaikan Extended Well Test (EWT) facilities, which will increase existing production capacity to 20,000 bopd (from Shaikan 1 & 2) and allow it to build a second testing and production facility (for Shaikan-2 & 4) which will also be capable of producing 20,000 bopd.

As well as supporting work on a new export pipeline capable of carrying 440,000 barrels of oil each day.

The company told investors that an independent preliminary evaluation of the Sheikh Adi resources, carried out by Dynamic Global Advisors (DGA), indicated a significant range of between 1 billion barrels (P90) and 3 billion barrels (P10) of gross oil-in-place volumes.

Combined with the company's more explored Shaikan oilfield and the Akri-Bijeel discovery, the group’s assets are now estimated to contain almost 12 billion barrels of oil (P50). 

Chief operating officer John Gerstenlauer said that today’s report further demonstrates the world class nature of Gulf Keystone's assets in the Kurdistan Region of Iraq.

Meanwhile Gulf Keystone continues to unearth more oil as it continues its appraisal drilling. Indeed the Shaikan discovery alone is currently estimated to contain between 5-15 barrels of oil.

"This independent report demonstrates the potential of the Sheikh Adi block with between 1 and 3 billion barrels of gross oil-in-place. This report reinforces our belief in having encountered yet another potential world class oil source,” Gerstenlauer said.

"We plan to further evaluate the Sheikh Adi structure and define and assess this complicated geological structure. The Sheikh Adi oil-in-place numbers are all the more significant due to our 80 percent interest in the block.” 

The DGA report was based on wireline logging data from the Sheikh Adi-1 well, core samples, 2D and 3D seismic and regional data.

Gulf Keystone also confirmed today that it has completed drilling Sheikh Adi-1, which was the first exploration well on the structure, to depth of 3,780 meters in the Triassic zone. It said that a series of flow tests will now be performed on a number of Jurassic zones in the well. 

However, testing in the Triassic zone will not be possible due to issues relating to casing integrity at these depths.

Sheikh Adi is immediately to the west of Shaikan block. Gulf Keystone has a 80 per cent working interest in Sheik Adi, and the remaining 20 per cent interest is held by the Kurdistan Regional Government.

It said that Excalibur will no longer pursue its claim in the International Chamber of Commerce Arbitration in New York.

Excalibur is, however, content that all its claims against Gulf Keystone, and its two subsidiaries, should be determined in the English Commercial Court in London.

The trial has provisionally been scheduled for October 2012 in the English Commercial Court.

“The (Gulf Keystone) companies continue vigorously to dispute and contest the allegations and claims asserted by Excalibur,” the company said in a stock exchange statement.

An injunction was awarded in April preventing Excalibur from pursuing its arbitration proceedings in the International Chamber of Commerce until a final determination on its claim has been made in the English Commercial Court.

Then last month on June 28, Gulf Keystone revealed that it had been awarded costs in the latest phase of their protracted legal battle with Excalibur Ventures, which is claiming up to 30 per cent of the company’s blocks in Kurdistan.

A £250,000 payment was received by Gulf Keystone on July 12.

Gulf Keystone, which operates in the Kurdistan region of northern Iraq, has some of the world’s most exciting oil targets. Its flagship Shaikan is deemed to contain anywhere between 5 and 15 billion barrels of oil, and this is just one of its prospects.

The company is in the middle of a high-impact drilling campaign that could utterly transform its fortunes and those of the entire region.