Gulf Keystone Tumbles to Seven-Year Low as Future in Doubt

  • Kurdistan-focused oil company faces `material uncertainties'
  • Boosting balance sheet essential to continue as going concern

Gulf Keystone Petroleum Ltd. fell to a seven-year low in London trading after saying its future depends on obtaining new funds and restructuring the balance sheet as bond repayments loom.

The shares sank 22 percent on Thursday to 9.4 pence, the lowest close since March 25, 2009.

“The group faces material uncertainties relating to its ability to meet the significant coupon payments in April and October 2016,” the London-based company said in a statement. It also faces debt repayments of $250 million in April 2017 and $325 million in October 2017.

“We’re not shying away from the fact that we’re in a very difficult position,” Chief Executive Officer Jon Ferrier said in a phone interview. The company is dealing with “some self-inflicted issues” and trying to bring costs down, he said.

Gulf Keystone, which operates in the Kurdish region of northern Iraq, has had to contend with a collapse in oil prices of more than 60 percent since mid-2014 as well as irregular export payments from the Kurdistan Regional Government. A year ago the company announced a strategic review as it sought partners or a buyer. Efforts to find a buyer have so far failed, it said Thursday.

“Given the current sector dynamics (low and volatile oil prices and geopolitical issues in the region), a transaction is unlikely in the near term,” the company said.

Gulf Keystone has lost 75 percent of its value in the past 12 months as funding problems have multiplied. The company has $53 million of annual interest payments on its bonds, due in April and October.

“The market is rightly focused on the state of the balance sheet and the liquidity position,” Tim Hurst-Brown, an analyst at Mirabaud Securities LLP in London, said by phone. The company is doing a “pretty good job” operationally given its limited finances, he said.

Gulf Keystone’s production averaged 30,500 barrels of oil a day last year and will rise to as much 35,000 barrels a day this year, according to the company.

Restructuring Options

Bondholders including GLG Partners Inc., Sothic Capital Management LLP and Taconic Capital Advisors LP are working with Houlihan Lokey Inc. on Gulf Keystone’s debt restructuring options, people familiar with the matter said last month.

The company’s $325 million convertible bonds due October 2017 are indicated at 15 cents on the dollar, while the $250 million notes due April 2017 are at 46 cents, close to record low levels, according to data compiled by Bloomberg.

“I don’t know how they’re going to meet those payments, frankly,” said Lionel Therond, head of oil and gas equity research at Standard Advisory London Ltd. “That’s the type of capitulation we’re waiting for in the industry for things to get back to a new normal.”

Gulf Keystone said it has yet to receive Kurdish export payments for last month. Ferrier said he’s “not surprised” because the main pipeline from Kurdistan to the Turkish port of Ceyhan was shut down in February after it was attacked. Exports resumed March 11.

Before it's here, it's on the Bloomberg Terminal.