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.
On a financial level I have always been bearish on Gulf Keystone (GKP) long arguing that the shares were really only worth 30-50p – something that has not endeared me to the Bulletin Board Morons. Well I guess I was right. But what has changed to make this an outright slam dunk short sell? Answer: ISIS.
Incidentally HERE is my first red flag piece on Gulf from April 2013 with me saying sell at 154p and I have consistently argued that fundamental value was 30-50p. I would now target the bottom of that range or less.
Without doubt these Islamofascists are truly the most repellent force on this planet. Opponents or those who are not the right sort of muslim are beheaded, crucified or shot. Even children are beheaded. Although I see that in the Guardian that the ISIS flag is now also flying in Poplar East London alongside the Palestinian flag, it is in Syria and Iraq where the headway is being made.
Peering at my maps today it struck me that ISIS is now in Mosul and really is not that far from Gulf’s operations. If I was a westerner out there with Gulf I would right now be weighing up the pros and cons of a large tax free salary and possible beheading for me, the wife and kids or heading back home. It is not a hard call.
I see that Afren (AFR) has today mothballed one operation. If ISIS continues to advance Gulf will be effected before long. Is there something corporate happening at Gulf? My source who insisted that a jv with Chevron was imminent has gone cold. He was a reliable source and I am sure that something was happening but right now no-one is going to want to invest in fields less than 150 km from the ISIS front line. You would have to be barking mad to want exposure to this region.
Gulf’s problem is that it is drowning in debt and in order not to face yet another cash crunch next year it has to ramp up sales – having invested the capital – fairly dramatically. I put it to you that ISIS may well put a stop to that ramp up.
I hope that this does not happen and that ISIS fighters – including we hear 500 from the UK – are wiped off this planet. But I fear that they have momentum and that the much vaunted military prowess of the Kurdish army is not proving to be quite what we all thought. If ISIS does advance and Gulf suspends any operations its shares will be 40p before you can say “another 100 kids beheaded in Mosul.” On a risk reward basis Gulf - and for that matter Genel (GENL) - are not good bets. But it is the financial position of Gulf which makes it particularly hazardous.
Gulf is a sell and a short at 68.25p and don’t go back unless ISIS is thrashed militarily.
Tom Winnifrith has just published his new e-book, The 49 Golden Rules of Making Money from oil, gas and mining shares. You can buy it on Amazon for £6.25 or you can order a FREE copy HERE
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