Eyes Down for Gulf Keystone Petroleum's Results

LONDON -- Gulf Keystone Petroleum  (LSE: GKP  ) , the oil and gas exploration and production company with operations in the Kurdistan Region of Iraq, is due to announce its annual results on Thursday this coming week (20 June).

At the time of writing, the shares of this £1.3 billion AIM-listed giant are trading at 151 pence -- some 15% down on a year ago compared with a 5% rise for the AIM 100 index.

How will Gulf Keystone's business have performed in 2012 compared with last year? And will the results justify the weak performance of the shares? Here's your cut-out-and-check results table!

 

FY 2011

H1 2012

Forecast
FY 2012

Revenue ($m)

6.9

15.5

46.5

Profit before tax ($m)

(63.8)

(29.4)

(50.0)

Earnings per share (EPS) (cents)

(8.0)

(3.7)

(5.3)

Cash and cash equivalents ($m)

208

130

n/a

Source: Digital Look. Forecast FY 2012 assumes USD to GBP exchange rate of 1.62

Analysts see revenue accelerating in the second half of 2012 to double the $15.5 million generated during the first half, giving a full year total of $46.5 million.

Profits and EPS are forecast to remain deeply in the red, though losses are expected to be lower than in 2011. Analysts reckon accelerating revenues during 2013 will see profits and EPS turn positive for the first time by the end of the year.

We're almost six months past Gulf Keystone's year-end of December 2012 (most companies reported months ago), and events of 2013 have already largely consigned the 2012 numbers to history.

Production and drilling
Gulf Keystone said within its half-year report released last September that it intended to commission two early production facilities within its Shaikan field "to increase production to 30,000-40,000 barrels of oil per day [bopd] by mid-2013".

The schedule seems to have slipped a bit. Six weeks ago the company said mechanical assembly and connection works on the first of the two facilities should be complete by the end of June, "which will be followed by a period of start-up, commissioning and ramping-up of production to a target of 20,000 bopd, increasing to a capacity of 40,000 bopd in the coming months following the commissioning of the [second facility]".

Gulf Keystone should be in a position to update shareholders on progress when announcing its results next week. Revenue from the early production facilities will help support the company's drilling and appraisal programs, which shareholders can also expect to be updated on.

AIM to main
Gulf Keystone said last September that the company intended to move from AIM to the main market of the London stock exchange -- a move that would "likely take place during 2013, subject to meeting the eligibility criteria".

A fortnight ago, the company told us it had started a search for an independent non-executive chairman and at least one other independent non-executive director. Earlier this week the board announced it had engaged an executive search firm to assist in the process.

We're not likely to hear of any appointments to the board in next week's results, unless the headhunters have worked extremely quickly. As the non-exec appointments are part of Gulf Keystone's preparations for moving to the main market, neither can we expect to hear anything much in the way of further news on the move.

Litigation
Gulf Keystone has been locked in a long-running legal battle with a former advisor to the company, Excalibur Ventures LLC. Excalibur claims it was cheated out of a 30% interest in Gulf Keystone's multi-billion-barrel assets.

The trial was completed on 1 March this year, but the judge has yet to give his decision. It was said that the judgment could be "in excess of three months" from the completion of the trial -- which means any time after June 1. Gulf Keystone is confident it will win the litigation -- as are most independent commentators -- but a loss would be a sizable blow to the company.

Shareholders will be relieved to see the uncertainty removed, and, who knows, a favorable judgment from the court might just come in time for next week's results.

Spectacular returns
Gulf Keystone is a popular stock with private investors -- probably many of you reading this article hold shares -- but it isn't the only oil play in town with the potential to deliver spectacular returns for shareholders.

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