Gulf Keystone Falls as Attention Turns to Funding Iraq Field

Gulf Keystone Petroleum Ltd. (GKP) fell the most since July in London trading as attention turned from a court victory last week to the scale of spending needed to develop fields in Iraq’s Kurdistan region.

Shares dropped 8.2 percent to 200 pence, valuing the Bermuda-based oil explorer at 1.8 billion pounds ($2.9 billion).

The explorer won a court case this month against a former associate who claimed a stake in Gulf Keystone’s Shaikan discovery, which sent the shares up 17 percent on Sept. 10.

Gulf Keystone plans to increase output at Shaikan to 40,000 barrels of oil equivalent a day by the end of the year and sees output at as much as 150,000 barrels a day within three years, an increase it says it can finance from its own cash flow.

“This marks the end of the exuberance around the stock after its court victory and the beginning of the next phase,” said Charlie Sharp, an analyst at Canaccord Genuity Securities Ltd. in London. “The question is how they get from where they will be in early 2014, at about 40,000 barrels a day, to their next big target.”

The company plans to move up to London’s main stock listing by the end of 2013. Its first half loss narrowed to $26.4 million from $31.4 million a year earlier.

“We think it’s unlikely the 40,000 barrels a day by year-end will be reached in time,” Jamal Orazbayeva, an analyst at Westhouse Securities, said in a note. “We are mainly concerned with general and administrative cash costs, interest payments and the net debt position.”

The company said today that at least eight wells will need to be drilled at Shaikan to get to 150,000 barrels. It will need to build two additional oil-processing facilities that will cost as much as $250 million each over 18 months.

“We’re turning the corner with production,” Chief Executive Officer Todd Kozel said in a telephone interview. “Gulf Keystone is in the strongest position it’s ever been in.”

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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