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GKP investors face serious dilution but there’s good news for Kurdistan oilers

Apparent political progress in Baghdad may prove something of a de-risking factor for Gulf Keystone, but, may also help embolden DNO as it is a major contributor to the Kurdistan’s export volumes.
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Baghdad says there's a “foundation to solve all the issues” with the KRG

Investors in Gulf Keystone Petroleum Limited (LON:GKP) may be bracing for some serious dilution, but, there is some seemingly promising news for oil companies in northern Iraq.

An understanding has been reached between Baghdad and the Kurdistan Regional Government, which means there is now a “foundation to solve all the issues”, according to comments from Iraq’s prime minister Haidar Abadi.

It followed meetings with a Kurdish delegation, headed by the KRG prime minister Nechirvan Barzani in Baghdad on Monday.

Iraq is now expected to lift a partial ban on the export of oil produced by the Kirkuk field, currently operated by the KRG, and it has also been agreed that the overall export allocation from the region will double to 300,000 barrels per day.

Abadi told reporters that a mutual understanding had been reached with regard to “most issues”, including military co-operation with “all available Iraqi forces” expected to take part in operations to drive out ISIS from the city of Mosul.

Plainly, Kurdistan remains a volatile and unpredictable place to do business – and there have been false dawns in terms of the oil export arrangements between Baghdad and the KRG in the past – but there presently appears to be some accord.

The latest accord represents a potential positive for oil companies such as Genel Energy PLC (LON:GENL), DNO (STO:DNOO) and Gulf Keystone, continue to pump oil under interim export arrangements – and all continue to receive payment from the KRG in arrears.

Earlier today, Gulf Keystone launched a US$25mln share sale to existing shareholders. It is part of the group’s restructuring, which will also see US$500mln of new equity handed over imminently to the oil firm’s lenders.

Gulf Keystone needs the injection of cash to keep crude pumping at 40,000 barrels a day from its Shaikan field, though larger neighbour DNO recently made a US$300mln move for the company. The approach was rebuffed by GKP as it focussed on sealing the restructuring.

Whilst the apparent political progress in Baghdad may prove something of a de-risking factor for Gulf Keystone, it may also help embolden DNO as it is a major contributor to the KRG’s export volumes.


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