Gulf Keystone Petroleum, an oil explorer focused on Kurdistan, is a favourite among many private investors, not least because of takeover speculation bubbling below the surface.
With the company causing some excitement with its latest exploration well, there has been much talk that it could attract attention from larger groups wanting a presence in the region. US giants such as ExxonMobil have been mentioned, and the company was even forced to announce in December it was not in talks about selling a stake in the business.
Still, its followers have seen its shares more than double since the start of the year, and its market capitalisation is more than £3bn. If not for the fact it is listed on Aim - the junior market - it would pretty much be a shoo-in for the FTSE 100.
Today its shares have slipped 7.25p to 389.75p on a bit of profit taking. But analysts at Seymour Pierce have issued a new recommendation on the business just a couple of days after beginning coverage with a buy rating and 374p target price. They said the entry of Exxon and Total into the Kurdistan region enhanced its credibility as a possible major oil producing province. They added:
We feel that the persistent take over rumours are premature, but likely to be accurate in the longer term.
Today, raising his price target to 524p but at the same time suggesting investors might cash in some of their gains, Seymour analyst Dr Doug Youngson said:
Gulf Keystone continues its strong run in 2012 and has surpassed our original share price target of 374p. We have reviewed our valuation for the company's 2C [contingent] resources and have now moved from the low case scenario to the best case scenario. This moves our valuation for these resources from 317p to 467p, all other assumptions remain the same.
The next major share price driver will be the result from the Ber Bahr-1 well which we expect to come in early March. Gulf Keystone has been one of the strongest performing stocks on Aim this year. Investors may want to consider taking profits ahead of the next well result to mitigate against the risk of a poor outcome.
And so, at the moment, they seem to be doing.
