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.

Tom Winnifrith Bearcast 31 January - Is it time to buy oil shares aggressively?

By Tom Winnifrith

31 January 2016 05:52

More:

The weekend press is full of stories of doom and gloom and dividend cuts for BP (BP.) and Shell and clearly there are a stack of smaller companies that are totally screwed and where shareholders are likely to face total wipeout. In that vein I discuss Magnolia (MAGP), Igas (IGAS), Gulf Keystone (GKP), XCite (XEL) and, of course, LGO Energy (TOAST). But is there a case for buying oil shares as a long term invester. I look at a few cases from BP down to Union Jack Oil (UJO). Perhaps there is no rush but the time will come.

This area of the ShareProphets.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ShareProphets.com. ShareProphets.com does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ShareProphets.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ShareProphets.com and is not intended to be relied upon by users in making (or refraining from making) any investment decisions.

Comments

Steve Sutton

31 January 2016, 07:20

Tom

You have been proved right concerning GKP with your predictions of a price drop from £1.30 to current but that % move correlates entirely with the sector as a whole.

Some consider Gulf Keystone’s assets to be of strategic importance to the Government of Kurdistan (KRG) GKP will survive so long as the KRG continue to pay their dues, failure to do so, thus allowing Gulf (or come to that Genel) to go under will be seen as an extreme negative to future investment in Kurdistan by multi-nationals.

The above is extremely important, It explains why the KRG have paid NOC’s regularly over the last 4 months and have pledged they will continue to do so despite the enormous strain they are under financially.

GKP are owed over $300m by the KRG, this is never mentioned by detractors (for obvious reasons)

In respect of GKP’s bond commitments, well you answered this yourself in an article you posted by Zero Hedge. Bond-holders cannot hope to recover their investment in a fire-sale, they might get back 15% of their cash.

Bond-holders will have no option but to work with the company, this has already been demonstrated BTW. GKP are not in default in any way with bond-holders at this time.

There are some suggestions that a tranche of GKP shares are held by the KRG themselves, if that is the case more reason for them to support GKP through troubled times in my view.

GKP is no LGO, it is high risk, very high risk, but it has legs to survive, time will tell – fortune sometimes favours the brave !!
Colin

31 January 2016, 07:21

Seems to me you’re a big fan of Schumpeter