Gulf Keystone Drops by Most in Six Weeks After Payment Lag

Gulf Keystone Petroleum Ltd. (GKP), an oil producer in Iraqi Kurdistan, fell the most in six weeks in London after saying it has so far been paid a quarter of what it’s due for oil exports, while also suffering from mechanical failures.

The company fell 7.4 percent to 91 pence, the biggest drop since March 31. It got $6.46 million for its first export sales from its Shaikan wells and is still owed $24 million because of a time lag between production, shipment and payment, Hamilton, Bermuda-based Gulf Keystone said today in a statement.

“This therefore gives rise to uncertainty in the timing of revenue recognition and guidance for 2014,” the company said, estimating sales for this year of $150 million to $180 million.

The stock has underperformed since the company released a lower-than-anticipated resource report in March, said Sam Wahab, a Cantor Fitzgerald analyst in London who has a buy rating on the stock. “The shares will continue to languish until Gulf Keystone can demonstrate it will meet historically set production targets,” he said.

Mechanical failures during drilling prevented Shaikan-7 reaching its targets, Gulf Keystone said. The cost of the exploratory well should be recovered within six months of start-up as it will become a “prolific” producing asset, it said.

Gulf Keystone moved to the main stock exchange in March.

To contact the reporter on this story: Nidaa Bakhsh in London at nbakhsh@bloomberg.net

To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Tony Barrett, Alex Devine

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