Oil producer Gulf Keystone Petroleum has seen its shares slide 12% after it unveiled a deeply discounted fundraising.
The company, focused on Iraqi Kurdistan, has raised $40.7m with a share placing at 32p a share, pushing it down 5p to 35.5p.
It is one of a number of businesses in the region facing irregular payments for crude oil by the Kurdistan Regional government. It said:
The proceeds [of the placing] will be used to strengthen the company’s financial position in the near term, whilst the previously announced review of longer term financing options, and potential corporate actions, continues, alongside the ongoing work with [the KRG] to establish a regular payment cycle for past and future production [from its 75% owned Shaikan field] and payment of arrears.
Gulf is in discussions with a number of parties about possible asset sales or a disposal of the whole company. Meanwhile it has also announced that Simon Murray will be stepping down as chairman, to be replaced immediately by independent director Andrew Simon until a permanent replacement can be found.
News of the successful fundraising comes a day after a group of investors led by former Tullow Oil chairman Patrick Plunkett said they had offered to help Gulf Keystone with its financing problems but had not received a positive response. Plunkett told Reuters:
We are confused. We believe our approach is demonstratively a far better proposition that a stop-gap placing. We were expecting to get some interactin with the company but it didn’t happen.
On the fundraising, analyst Sam Wahab at Cantor Fitzgerald said:
In our view, today’s announcement represents an important milestone for the company. We believe that in raising additional capital at this stage underlines continued shareholder support for Gulf Keystone’s story against the backdrop of difficult macro-conditions and civil instability in Iraq.
Despite concerted efforts on behalf of company management, slower than anticipated progress in ratifying an oil law between the KRG and the federal government, and difficulties in receiving payments for export production has weighed heavily on the company’s share price. We...move our recommendation to buy (from under review) with a new target price of 112p.
