Today was scheduled to be the big day for Gulf Keystone Petroleum’s (LSE:GKP) migration from the AIM to the Main Market, but that has been pushed back until tomorrow, 25 March 2014. Meanwhile the GKP share price continues it’s three month decline that began in earnest on 06 March. The GKP share price is currently at 100.70, down 1.52% from Friday’s close and down 30% from that date earlier this month.
It has become increasingly clear to me through this past month of focus on GKP (see our ADVFN stories published on 17 March, 13 March, 10 March, 03 March, and 24 February), that sentiment is more dramatically affected by apparent bad news that it is by good. Not that this is a major revelation to anyone. The first share price nose-dive took place on the 13th and 14th of this month following the company’s operational update. After a brief return to favor on the 17th, when GKP shares reached 117.00, but only for a day.
A Competent Person’s Report, issued as a condition of migration to the Main Market and released on 13 March, indicated that the number of barrels of oil in place might be less than what Gulf Keystone had previously assessed it to be. However, regardless of the accuracy (or inaccuracy) of the findings, the size and potential of the Shaikan fields is massive by any measure.
On Thursday, 20 March, GKP issued its Main Market Admission Prospectus. The prospectus was released along with a brief regulatory announcement of its publication. In that announcement the company reported that it “is of the opinion that the Group does not have sufficient working capital for its present requirements, that is, for at least the next 12 months from the date of the Prospectus.”
Whoa! What’s that? Get my broker on the phone! (He says, tongue in cheek.)
Really? Based on two lines of a two-page report? I suppose reacting thoughtlessly may be quicker that actually ready the 460-page prospectus, where the details can be discerned, especially at Part 16, ¶18. But, then, this is just another example of the dumbing-down of the general populace, including the investing portion of it.
I have no idea how many companies actually have the cash on hand to meet all of its requirements for the next 12 months. I doubt that anyone has that kind of statistic available. But, really, it’s practically – and I do mean practically – insignificant, especially when the company also indicates how it expects to have adequate capital available. The announcement outlined at least four ways that will happen.
- Continued, consistent production and sales generated by reaching the company’s 40,000 bopd, which it is clearly on the way to achieving. Remember, the company is on target with its commercialization plan to generate revenues adequate to sustain operations, exploration, development and profit.
- Receipt of £5.6 million due to GKP for reimbursement of litigation costs.
- Revenue from a potential sales of GKP’s interest in the Akri-Bijeel Block
- Exercise of options by several other participating parties.
Without cash infusion from these four sources, the company forecasts a worst-case scenario in which the shortfall would continue for a definitive period of nine months to 31 January 2015, at which point the deficit would begin to decrease. “These shortfalls are calculated on a reasonable worst-case scenario basis with the Company applying available mitigations.” The worst case scenario is that none of the four events occur as expected.
The nerve-calming ingredient for me is the company’s position of full-disclosure, which includes both the fact that the migration to the Main Market does not included additional offering of shares, and the fact that the announcement also subtly indicates that it would seek additional funding before it comes to any crisis point. I continue to believe that the future is as bright for GKP as it was for Annie when she sang, “Tomorrow, tomorrow, I love ya, Tomorrow – You’re only a day away!”