Gulf Keystone Petroleum up for sale

Gulf Keystone Petroleum has hoisted up the For Sale sign and is already in talks with a "number of parties" about selling assets, or the entire company. A couple of weeks after admitting it was working on longer-term financing options, the Kurdistan-focused oil company is also trying to thrash out new financing terms with key stakeholders.

Amid feverish speculation about the possible take-out price, shares in Gulf Keystone surged by 55% to 55p, a three-week high and valuing the business at £500 million. Only last week, oil analyst Malcolm Graham-Wood told Interactive Investor that oil industry bosses had to wake up and smell the coffee" and accept M&A was the answer to plunging oil prices. 

Afren has already gone down that route. Others have, too. Mobile payments struggler Monitise is desperate for a buyer and insurance outsourcer Quindell is offloading its legal services arm.

We also recently ran a video titled "Will Gulf Keystone be taken over" in which Malcolm outlined the company's obvious attractions and speculated as to what the business might be worth.

One analyst we spoke to Wednesday had calculated Gulf Keystone's total risked net asset value at 56p, but accepts that there would be some M&A premium. However, debt on the balance sheet and issues around the irregularity of payments make that premium difficult to predict with any accuracy.

Clearly, it needs someone with deeper pockets than debt-addled Gulf Keystone to develop the company's high-class Shaikan field. A state-run oil company might be interested, reckons one City expert, possibly a big Chinese concern.

Gulf currently has cash balances of $69.3 million and has been told another $20.8 million for Shaikan crude will hit the company’s bank account shortly. But Gulf is also carrying so much debt that bondholders will be crucial in getting a deal done.

And, as the company admits, talks are at a preliminary stage and there is no certainty that any offers will be received and any transaction concluded, or, if it is, at what price.

Remember, Afren couldn't agree terms with Nigerian oil company Seplat earlier this month, leaving its share price languishing at multi-year lows. Dragon Oil  lso ditched plans to pay almost £500 million for Petroceltic late last year. Petro shares are currently changing hands for 132p.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.