(MENAFN- ProactiveInvestors) Scrutiny over oil prices and uncertainty over payment schedules overshadowed what would have otherwise been a red letter day for Gulf Keystone Petroleum ().
The Kurdistan based oil producer today told investors it had finally hit its target production rate of 40000 barrels a day on December 27 – in time to meet its promised year-end deadline.
It also revealed that production powered on from there to load 58000 barrels from the Shaikan Field in the semi-autonomous region of Iraq for export via Turkey.
GKP now has seven producing Shaikan wells with an eighth due to come on stream this month. And according to chief executive John Gerstenlauer the “immediate focus” is to ensure a stable rate at or around 40000 barrels a day.
Investors nevertheless remain reticent to buy up the GKP shares – which have fallen from 188p to 63p in the past twelve months - due to pressure on sale prices which are at a discount to the ever receding Brent benchmark and there remains uncertainty over ongoing mechanisms for crude export payments.
As Cantor Fiztgerald analyst Sam Wahab points out "receiving regular payments for these exports remains the focus for the market"
GKP was handed a cheque for an initial US$15mln for its exports in November but the future payment schedule has yet to be clarified.
"If achieved a further payment in the near-term will go some way to establishing a pattern of regularity and to alleviate this particular investor concern in our view" Wahab added.
Longer term the plan is to finalise access to a pipeline rather than trucking its heavy oil which is much more expensive.
Gerstenlauer pointed out that 2014 “was not without its challenges” with the ISIL’s push into Northern Iraq uppermost in investors’ minds.
In the last year the share price has dropped 63% as the strained relationship between Kurdistan and the Iraqi government as well as production and financing concerns have also conspired to drive GKP’s stock lower.
"We are pleased to begin 2015 on the back of a positive end to last year having achieved the company's record daily production and crude oil export sales rates from the Shaikan Field” said Gerstenlauer.
In early trade the share price was little changed at 67.65p valuing the business at £613mln.
City broker Northland Capital reckons GKP has “strong underlying fundamentals” with production costs estimated at around US$9 a barrel and pointed out the stock is currently trading on a “undemanding” price to earnings multiple.
“In another territory it would seem a ripe takeover target (and may be in future depending upon geopolitical developments)” analyst Andrew McGeary said.
“However this is offset by the significant risk profile that continues to mean it is not one for the faint hearted.”
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