Headlines
• In Brief:
o Gulf keystone (LON:GKP,– 129p) – ($159mm (58p) – $552mm (200p)) – Steady as She Goes
o Northern Petroleum (LON:NOP,– 4.50p) – What a Difference a Year Makes
o Premier Oil (LON:PMO,– 88p) – These Are Not the Covenants You're Looking For
In Brief
• Gulf keystone (LON:GKP, – 129p) – ($159mm (58p) – $552mm (200p)) – Steady as She Goes: Today's trading update is a more relief than setting the world on fire, but there is a sense that after the turbulence of the last 6 months that, operationally at least, Management have gained control over all they can control. While all operators in Kurdistan will be pressing the government for revised payment terms, one has to remember that it’s better to deal with a slow paying KRG than a tyrannical Daesh, so this may be longer term than many think. Following today’s guidance for 2017 (minimum ~32m bpd), we have adjusted our outlook for the Company, our valuation remains $159 – 552mm, 58 – 200p.
• Northern Petroleum (LON:NOP, – 4.50p) – What a Difference a Year Makes: Today's announcement regarding the start of the Company's Canadian winter work programme is in stark contrast to where the Company was 12 months ago, when it was facing a difficult 12 months ahead. The transaction with High Power Petroleum has provided much needed financial resources, and while access to the WASP technology is yet to prove itself, in essence, as long as it does no harm, there is nothing but upside from here. To our mind the key takeaway from today, is that the Company is able to redevelop its asset base and allows the Management team to start to leverage off of the production base to gain further exposure to value enhancing or cash generating assets, positioning the Company for the next uptick in the cycle; we think that the number of distressed assets in Canada provides an ideal hunting ground for the Com pany. While the last 12 months, on the whole, hasn't been a fun time, the last 3 months have rewarded investors' faith in Management, which now need to take the Company to the next level.
• Premier Oil (LON:PMO, – 88p) – These Are Not the Covenants You're Looking For: Today's news of a deferral of the covenant tests are becoming "de rigour," and reminds the market of the fact that the negotiations are not final, yet. For now though, both the Company and creditors seem to be working well to find the revised framework that works for both parties. While we have no doubt that the Management team will ultimately be successful in negotiating the covenants, we are becoming increasingly confident that the Company will emerge in a different form from how it entered this process, whether the management is changed, the portfolio trimmed, or both, remains to be seen.