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The naivete and arrogance of youth - flip flop talks bollocks on Gulf Keystone, its a slam dunk sell

By Tom Winnifrith | Thursday 12 November 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.


A few minutes ago flip flop Ben Turney - who has called this stock disastrously wrong - once again put the bull case for shares in Gulf Keystone (GKP) at 27p. I've been a bear from 180p all the way down. I remain a bear. My initial target is sub 10p but this could be a zero. I explain all in another mini podcast.

Remember to get your free Bearcast ticket to hear from great bears from the US, Oz and the UK and more of this sort of material from me on 28 November at Gold & Bears by entering the promotional code SPGB25 when booking HERE - tickets will be sent out within 24 hours of order.


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More on GKP


Comments

5 comments

  1. Good piece….totally agree!
    Three Bearcasts today so the question is For avoidance of doubt can we now presume your sabbatical is now over.
    My siblings raised a smile when I said you were taking a break obviously sick of Tom Winnifrith with my daily bearcast booming out or me with my headphones on laughing….(they knew!!!) haha.
    It seems I need to break it to them gently….
    Long may your reign of Sherriff continue……

  2. Tom

    You ignore the pari passu 13% bonds which are trading c. 60 cents. If a company genuinely going bust, all bonds trade at same discount to par regardless of coupon.

    Also the two largest institutions coughed up over £10m at 32p placing earlier this year.

    KRG have said will pay arrears next year as total exports approach 1m. This would transform GKP.. Obviously when oil price bounces, that will have similar uplift of KRG revenues and ability to pay arrears.

    Last month GKP said they had interested parties lined up to buy GKP or part of Shaikan but waiting for three months of payments as proof of commitment……

    Finally, the point you are really missing is that GKP/Genel/DNO production is declining. The oil companies have told KRG they will not commit the required capex to increase production unless certain KRG pay up. GKP want to increase from 40K to 70K bopd and then onto 100K bopd. Hence they are talking to bidders/farm in partners. KRG obviously want these talks to succeed since quickest route to higher production. Letting GKP go bust and BH’s pick up the pieces would have opposite effect.

    AND SEND TOTALLY THE WRONG MESSAGE TO OTHER WESTERN INVESTORS WHO KRG ABSOLUTELY DESPERATE TO ATTRACT SINCE THEY HAVE NO MONEY! It would be disastrous. KRG living off these oil revenues and need to boost ASAP.

    As I’ve said before, I have no view on equity and wouldn’t buy. As a bondholder, my greatest concern is the political stalemate re Bazarni and how this plays out.

  3. Tom

    This bearcast clearly demonstrates why amongst more sophisticated investors, your held in such high esteem.

    The argument you make is irrefutable …… Keystone is a bargepole stock!

    As with so many of these AIM oil stocks, this company has never made a profit, never generated any free cash flow and with net debt in excess of $460 millions its loosing money handover fist…….. cash in hand has fallen from $262 millions in 2012 to $67.50 millions 2015.

    With interest cover in excess of minus 7.50 times…….. even if oil prices recovered to $80/100 per barrel, Keystone would still be a margin basket case at present crude price levels its on borrowed time!

  4. Paul – so at 60 cents the yield on the 13% bonds is 21% – I think that tells you everything about the value of the equity.

    Zippo

    T

  5. Tom

    I’ve also been buying Shamaran 11.5% bonds at 53 cents. They are 25% owned by Lundin claim Lundin financial backing. Also not in production until mid 2016 so not exposed to current oil price. Next door to Shaikan.

    Hence similar yield to GKP 13% and in no imminent danger of going bust,

    These yields are result of oil debt being downgraded to junk status and risk adverse funds then forced sellers into thin market


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