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Gulf Keystone; buy the new beginning

By Ben Turney | Thursday 17 July 2014

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.

It is always extremely difficult to pass comment on companies from the outside, without really knowing what has happened behind closed boardroom doors. Even so, I am as certain as I can be that my call last month, that M&G Investment Management was preparing to dump Todd Kozel from Gulf Keystone’s (GKP) board at today’s AGM, has come to pass. We’ve just heard that Mr Kozel has withdrawn his bid for re-election to Gulf’s board, but with this announcement coming immediately before the AGM, I think we can all be fairly safe in assuming it was a case of his jumping before being pushed. Even though Mr Kozel is going to remain as an officer of the company, his departure from the board is a welcome step in the right direction and I am more bullish on Gulf’s prospects as a result.

On June 12th, I suggested that Gulf was a buy at 75p, on misplaced concerns about the latest Iraqi insurgency. A month later, and despite the ongoing troubles in the region, I now wonder if the intraday low of Gulf’s share price on that day (72.25p) marks the bottom for this stock. Much will depend on the rest of the year’s production figures, but I am now looking at a new entry point into Gulf, based on the MIDAS Method.

It has been a while since I used the MIDAS Method to analyse Gulf’s share price. I have been waiting for a chance to pick a bottom in the stock price, which I have a degree of confidence in. Now that I have this, you can see the new JUN2014 support line I have created below;

The first thing you will note is that Gulf currently trades below JUN2014 support, currently projected at 95.1p. The last price I saw for Gulf was 92.75p.

If you’ve followed my MIDAS analysis in the past, you will know the optimal time to purchase a stock using this method is when the price rises positively through support. In this case, it probably would be best to wait for such a move, but I am sorely tempted by the price today as there could be great news around the corner.

So far, Tom’s scoop about the JV with Chevron hasn’t come to pass. Even though he remains tight lipped on the details (rightly so), Tom remains confident in his source (I asked him today). Now that Mr Kozel is nearly out of the way, I wonder if this might prove to be the catalyst for a JV to happen. I must stress this is pure speculation on my part, but the more Gulf looks and feels like a proper listed company (I think you all know what I mean) the greater the likelihood it becomes an attractive commercial partner.

With momentum apparently building in the background for Kurdish independence, this really is an exciting time Gulf. It is going to be very interesting to see how the company reinvigorates its board after the director culls of today (non-exec Mark Hanson has also retired today from the board) and a few weeks ago. Assuming it manages to recruit some genuinely independent heavyweights, this could be a very encouraging sign. It will also probably be important to keep an eye on what M&G does next. So far, the investment company’s role in reforming Gulf looks like it has been very positive. If M&G remains quite and retains its current stake, this too could be another sign that this beleaguered company has finally turned the corner.

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