Oil producer Gulf Keystone Petroleum Limited (LON:GKP) has beefed up its cash position again and is now ready to start selling to markets outside of Iraq, according to analysts at Cantor Fitzgerald.
Gulf told investors earlier on Monday that it had received US$15mln from the Kurdistan authorities for crude oil sales, meaning it now has US$104.5mln in the bank.
“GKP is now a well-capitalised entity, with sufficient financial resources to grow its production base for sale to the export market,” said Cantor’s Sam Wahab.
It’s been a whirlwind few months for Gulf Keystone, which only recently secured its financial future through a debt restructuring that handed the majority of equity to debtholders.
Wahab thinks the company is now through the worst of it, and can look to press on. He still has the stock as a ‘buy’ with a share price target of 2.7p – more than double its current level.
“Gulf Keystone Petroleum has undergone a substantial restructuring of its financial position, against the backdrop of challenging market conditions in terms of commodity pricing and civil uncertainty in Iraq,” concludes Wahab.
“Our updated valuation highlights the material upside potential of the company’s share price now that these burdens are partially clear.”
While the potential remains large at Shaikan – which is currently producing around 33,000 barrels of oil per day – the key issue of consistent payment remains a concern for the analyst.
“2016 has already seen the [Kurdistan authorities] miss a number of monthly payments,” said Wahab.
“At the company’s last results [in June], unrecognised revenue arrears were estimated at US$28mln, and we expect that figure to be around US$64mln today.”
Shares were unchanged at 1.23p.