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Gulf Keystone Petroleum Fights Weak Share Price with Buyback Scheme

  • Gulf Keystone Petroleum has announced a $10m share buyback program.
  • The company believes its share price is trading at a significant discount to its intrinsic value.
  • Gulf Keystone expects continued free cash flow generation based on increased production and selling prices.
Offshore Oil

Gulf Keystone Petroleum has laid out plans to return $10m (£8m) to shareholders as its board attacked the company’s weak share price.

In a trading update published this morning, the company, a leading independent oil producer in the Kurdistan Region of Iraq, said that production during the first few months of 2024 had been “robust”, with gross average sales for the year-to-date coming in at 37,000 barrels of oil per day (bopd). It said realised oil sale prices had risen to $27 per barrel from $25/bbl due to “strong local market demand.”

As a result of the increased production and selling prices, the company said its liquidity position has “continued to improve,” and it added that its free cash flow breakeven is at gross sales of c.20,500 bopd at current selling prices.

Combined with the “minimal 2024 work programme”, Gulf Keystone said it expected “continued free cash flow generation.”

Considering the company’s position, Gulf Keystone said its board believes the company’s share price “trades at a significant discount to the intrinsic value of the Shaikan Field [its main asset] and does not adequately reflect the near-term cash flow generation potential from local sales.” To that end, the board has initiated a share buyback programme.

The group added that it would look to return additional capital to investors if its capital position remained robust.

Gulf Keystone has been hurt over the past year by the closure of the Iraq-Turkey oil pipeline, the conduit that once handled about 0.5 percent of the global oil supply. Closed in March 2023, there’s still no sign of the parties coming to an agreement over reopening, which has forced the company to turn to local oil sales instead.

The closure and subsequent hit to profit lumped the company with a loss of $11.5m (£9.05m) after tax against a $266m (£209m) profit the year prior.

Over the past year, shares in the company have fallen 14 percent.

By CityAM 

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