Gulf Keystone (LSE:GKP)

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GKP investors question Kurdistan strategy

GKP investors question Kurdistan strategy

Gulf Keystone Petroleum (GKP) announced the commencement of crude oil exports from the Shaikan field in Kurdistan on Thursday, but some investors were concerned about its relationship with the Kurdistani Ministry of Natural Resources.

As the Shaikan field is not yet connected to a pipeline, between 198,300 and 215,000 barrels of crude oil were trucked to Turkey in December and should be exported through the port of Dortyol later in January.

Two further cargoes of similar size are to be exported by the end of February.

"Significant progress has been made since the Shaikan Field Development Plan was approved in June 2013," commented chief executive Todd Kozel.

"We began commercial production 30 days after its approval and now the first cargo of Shaikan crude is being sold to the international market.

"As we are increasing Shaikan production, we are developing a flexible marketing strategy in co-operation with the Ministry of Natural Resources of the Kurdistan Regional Government to achieve the best price for our crude."

Investor view

However, some Interactive Investor discussion board users were dubious about what a flexible marketing strategy entailed.

"When the ministry says jump, we jump," user 'Mandelsputin' suggested. "When the ministry says stop jumping, we stop jumping."

While other users were less suspicious, such as 'Trinderm' who believed that a flexible marketing strategy could simply mean considering both "domestic and export options", it was evident that many were concerned about the extent of the ministry's involvement in Gulf Keystone's decision making.

Gulf Keystone is currently selling 9,000-10,000 barrels per day of Shaikan crude from its first Shaikan production facility. Work at a second production facility on the field is almost complete.

Legal dispute ongoing

Gulf Keystone also announced it was pursuing the founders of Excalibur Ventures for the recovery of costs from the three-year legal dispute between the two companies.

All claims brought against Gulf Keystone were ruled invalid on 10 September and although Gulf Keystone and the other defendants, two of its subsidiaries and Texas Keystone Incorporated, have recovered £17.5 million from Excalibur, there is still around £5.6 million outstanding.

As this was not paid by 31 December, Gulf Keystone has begun proceedings against Excalibur's funders Psari Holdings, Mr Adonis Lemos, BlackRobe Capital Partners, BlackRobe AEO Investors I, Platinum Partners Value Arbitrage Fund, and Hamilton Capital.

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