What You Were Buying Last Week: Gulf Keystone Petroleum

LONDON -- One of Warren Buffett's famous investing sayings is "be fearful when others are greedy and greedy only when others are fearful" -- or, in other words, sell when others are buying and buy when they're selling.

But we might expect Foolish investors to know that, and looking at what Fools have been buying recently might well provide us with some ideas for good investments.

So, in this series of articles, we're going to look at what customers of The Motley Fool ShareDealing Service have been buying in the past week or so, and what might have made them decide to do so.

Real bargain?
With its share price having plunged 25% in the last month alone, 2013 has not been a good year for Gulf Keystone Petroleum  (LSE: GKP  ) . But maybe that's why it's at No. 2 in the latest "Top Ten Buys" list* -- some investors clearly see the depressed price as an opportunity to buy.

With its majority working interest in the Shaikan block, in the Kurdistan region of Iraq, Gulf Keystone is sitting on the lion's share of around 14 billion barrels of oil-in-place. If the company can recover a decent percentage of that, its current share price of 132.5 pence could turn out to be a real bargain.

But that's a gigantic "if". Oil exploration companies are already at the risky end of the investing spectrum, and operating in a political-minefield like Kurdistan greatly exacerbates the uncertainties. 

Cautious investors may also be deterred by the fact that Gulf Keystone is still involved in legal action against its former advisor, Excalibur Ventures, over a disputed interest in its oil assets. Due to delays a verdict isn't now expected for some months. A decision in its favor could see Gulf Keystone free to enter the FTSE 250, and might well revive take-over interest from the likes of ChevronTotal, or ExxonMobil, either of which eventuality should help provide a decent return for anyone buying at the company's current valuation. But if the verdict goes against it, Gulf Keystone's share price could be seriously dented.

And anyone with concerns about directors' pay might be troubled by the fact that Todd Kozel -- the combined Chairman and CEO of Gulf Keystone -- was rewarded with around £14 million in salary, bonuses and vested share options in 2012, despite the fact that his company is loss-making. That said, if Gulf Keystone does eventually deliver the goods, I doubt if shareholders who bought last week will begrudge Kozel his massive remuneration package. But there's that gigantic 'if' again.

Top long-term shares
If investing in an oil exploration company seems rather too risky, as well it might, you should definitely check out the latest free Motley Fool report -- "5 Shares To Retire On". This report contains five top long-term share selections from our team of analysts here at the Motley Fool.

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* based on aggregate data from The Motley Fool ShareDealing Service.


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9/28/2016 5:58 AM
GKP $2.11 Up +0.03 +1.30%
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