Genel's Kurdistan shipments raise hopes for Gulf Keystone

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Genel Energy (GENL) has started to ship crude oil into Turkey from the Kurdistan region of Iraq in small quantities.

"While the amount is small, what it does do is clearly demonstrate that the Kurdistan [Regional Government] is keeping to its timetable of permitting exports independently of Baghdad," stated analysts at FoxDavies.

"The volumes may be small, but this is a significant step forward, and paves the way for the wholesale export of crude in the next 12 to 18 months."

Should investors buy Gulf Keystone?

The news bodes well for the region, as well as for the companies operating there, including Gulf Keystone Petroleum (GKP).

Last year was a rollercoaster for the company, which saw the shares reach a peak of 433p in February, before falling 60% to end the year at 177p.

However, the clouds seem to be clearing for the oil and gas explorer.

One of the big problems Gulf Keystone has faced is a ban on oil exports caused by disputes between the Kurdistan Regional Government and Iraq's central government. However, Wednesday's news appeared to be paving the way for exports to flow from the region once more. In fact, plans to build a new pipeline to increase export capacity are already underway.

Secondly, Gulf Keystone has been engaged in a legal dispute with a company called Excalibur Ventures, which is claiming that an agreement dating back to 2006 entitles it to a 30% share of Gulf Keystone's subsequent discoveries.

However, January should see the matter settled one way or another and remove any uncertainties. Winning the case would likely pave the way for a move to the FTSE 250, which would give it greater exposure to large, institutional investors.

Thirdly, Kurdistan has an estimated 45 billion barrels of oil, with Gulf Keystone's 51%-owned Shaikan asset estimated to hold 14 billion barrels in place. Even if investors assume only a quarter of this is recovered, that equates to just 95p per barrel at the company's current market capitalisation of approximately £1.65 billion.

Finally, with Shaikan the biggest asset in Kurdistan, the explorer could be on the radar for other players in the region, including Chevron (CVX), Total (TTA) or ExxonMobil (XOM). Gulf Keystone's attractiveness could be further augmented if the company wins the court case, as this would remove any obstacle to a takeover bid.