By Tom Winnifrith | Wednesday 5 August 2015
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Bombing attacks by Turkey on their kinsman, ISIS chopping off heads of their soldiers? A record heatwave in the region killing the old folk and kids? A war on three fronts? Bugger that, these are but trivial issues for the Government of Kurdistan, top of its agenda is protecting the wealth of Bulletin Board morons who own shares in Gulf Keystone Petroleum (GKP). Well that is what flip flop Ben Turney, Paul Curtis and other bulls of this stock want you to believe. They are wrong.
These diehard bulls (anyone care to apologise for the abuse I got saying the shares were a sell at 189p and all the way down to the current 31.375p) reckon that news that the KRG will start to pay – unspecified – amounts to oil producers for past and current oil sales in Kurdistan means that the woes of Gulf Keystone are over.
Paul Curtis argues that the KRG will ensure that Gulf gets enough cash to cover its operating (presumably including PLC) costa and to cover interest payments on its mountains of debt. Really? He makes the error of assuming that the KRG gives a monkeys about who owns the assets in its region. Does it really care if it is shareholders in a shitty little British company or bondholders in a shitty little British company? Of course not.
Do he and flip flop really think that in between watching videos of their kinsman being bombed or beheaded the officials at the KRG will be doing a monthly calculation to work out how much they need to hand over to ensure that Gulf is operating at cash breakeven after interest costs? If Gulf runs out of money because revenues are not sufficient to service debt – which I regard as more than likely by Q1 2016 – there will simply be a debt for equity swap that sees shareholders wiped out.
The price on the bonds already discounts that. The price of the equity does not. And that is why the shares remain a sell with a – pro tem – target price of 10p. The shares should be option money. At 31.375p, they are priced way too high for that.
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