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Investec initiates coverage on Gulf Keystone with a ‘buy’ recommendation

Published: 11:47 04 Jul 2011 EDT

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Gulf Keystone (LON:GKP) has a transformational asset in Kurdistan in the Shaikan oilfield, according to analysts at Investec. 

Investec’s Angus McPhail initiated coverage on the Kurdistan based oil firm this morning with a ‘buy’ recommendation, targeting 198 pence a share.

The oil and gas analyst highlighted the fact that GKP’s five well 2011 programme is focused on ‘low risk/high return’ appraisal wells. He also emphasises that GKP will boost production volumes and cash-flows as it begins to export oil from the Kurdistan region of northern Iraq from August this year.

“The agenda of the Kurdistan local government appears clear - get the oil out and revenues in, with gas prospects coming last in line to be developed,” the analyst said.

“The fact that another regional operator, DNO, was paid for its first oil sale last month shows tangible evidence of this.” 

Looking at the group’s significant reserve position McPhail said: “Gulf Keystone has resources in place of 4.9bn-10.8bn barrels, which we expect to gain further credence on a Ryder Scott report due for release shortly.” 

“The Shaikan-2 appraisal well is the next catalyst and we should get results in July.”

The Investec ‘buy’ recommendation is the latest bullish write up on GKP. Last month Evolution Securities analyst David Farrell said that Gulf Keystone shares are undervalued and the current price represents an attractive entry point. 

"Since November last year the share price is effectively unchanged. This is despite a 79 percent increase in the central case for Shaikan Oil in Place Estimate to 7.5 billion barrels, discoveries at Bijeel and Sheikh Adi and apparent progress on the legal front,” Farrell said.

"Gulf Keystone is now just weeks away from commencing international exports at a rate of 5,000 barrels a day. With near term drilling catalysts and the potential for further resource upgrades at Shaikan we see the current share price as an attractive entry point."

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