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Gulf Keystone: the Final Chapter.

By Lucian Miers | Saturday 24 September 2016

Disclosure: The author has a short position in one or more of the shares mentioned. 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.

On Thursday, as expected, the bond holders in Gulf Keystone (GKP) agreed to the restructuring which will give them 85.5% of the company. All that remains is for the scheme to be sanctioned in court next Friday, a formality. Within five working days of that date just shy of 20 billion shares will be dispatched to noteholders.
This gives them a crucial head start over current shareholders who have to wait until on or around October 14th before they receive any shares from the open offer.
Eventually Gulf may well be put out of its misery by a larger player. DNO the Norwegian oil company which has interests in the region has indicated a willingness to pay 1p per share in cash and stock and may even be prepared to go a bit higher. But with 1p representing around $300 million, it is, in my opinion, extremely unlikely to double its offer which is what the current share price is implying will happen.
The former guaranteed noteholders who are about to own 65% of the company with 15 billion shares and get their money back plus interest at 1p are unlikely to hang about. They will doubtless have read the prospectus which states
Currently, the company is of the opinion that the Group does not, and will not even following the restructuring have sufficient working capital for its present requirements”
They will also have noticed (as will DNO and any other potential acquirer) that the Kurdistan Regional Government’s monthly payments have not been forthcoming since the June installment was made (“We don’t know why we’re not being paid” CEO Jon Ferrier told Reuters yesterday)
Anyone left holding Gulf Keystone stock is probably beyond help, but those punters who have recently been buying it before the tsunami of stock hits the market in 10 days’ time are completely insane. 

En passant I see that things have gone a bit quiet at Igas as it enjoys its last days a two-digit stock. I expect low single digits when the necessary restructuring is announced.

This article first appeared on the Nifty Fifty website which Lucian Miers runs with Tom Winnifrith & Steve Moore. To access the website ahead of the next share tip from Tom & Steve and ahead of a new shorting idea from Lucian GO HERE

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