Shares in Gulf Keystone Petroleum, an independent explorer with major assets in the Kurdish region of Iraq, have taken a battering on London’s AIM market today, following a negative analyst note from HSBC.
Equities analyst Peter Hitchens at HSBC yesterday rated the stock ‘underweight’ ahead of the market opening, and has set a 280p target price after initiating coverage.
As of 10.35AM GMT, the shares have collapsed by 13.5% to 293p, suggesting aggressive selling by investors, some of whom have ridden the stock from lows of 13p two years ago. The shares still show a gain of over 100% over the year.
“The market is enthusiastic about Gulf Keystone Petroleum’s prospects following its discovery of the giant Shaikan field in the KRI,” says Hitchens in a note to investors. “Although we do not doubt that this is a world class discovery, we believe the upside is already more than reflected in the share price, which was boosted by press speculation.”
The company, which rejoices in a large and dedicated base of individual private investors, has been the subject of repeated speculation that it would be acquired at a huge premium.
While Gulf Keystone has reported the beginning of oil production, and boasts a 10.5 billion barrel field at Shaikan, it cannot sell its oil abroad until the legal status of its oil deals with the Kurdish Regional Government are approved by Baghdad.
A report in December London’s Independent on Sunday, which failed to name or cite sources, claimed ExxonMobil was looking to acquire the company for 800p a share.
The report, which included speculation that a bidding war may emerge between Exxon, Chevron and China’s Sinopec to push the sale price higher still, was later described as “unfounded” by Gulf Keystone.
Announcements by officials in Baghdad that Exxon may back out of the six deals it has signed with the Kurdish Regional Government, and Hussain Al-Sharistani’s intransigence regarding the status of oil deals in the region, may also be weighing on the price. Baghdad says Exxon has only a few days to respond substantively to queries about its intentions in the region.
The announcement of Exxon’s move into Kurdistan was a fillip to share prices of the region’s independents, triggering feverish takeover rumours.
