Will the GKP or 88E share price make you richer in 2019?

Will 88 Energy Ltd (LON: 88E) beat Gulf Keystone Petroleum Limited (LON: GKP) in 2019? I see only one winner.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

What’s happened in the world of 88 Energy (LSE: 88E) since I last examined the company in October? Several things of significance, as it happens.

A big one was the raising of an additional £5.56m (before expenses) through a new share placing with “domestic and international institutional and sophisticated investors” (I love the “sophisticated”, whatever that’s supposed to mean).

The new cash is needed, among other things, to keep the company’s drilling and testing programme going at its Icewine project in Alaska, where 88E could be sitting on very significant hydrocarbon deposits. Current targets will continue to be probed, while the company will also try to “identify and exploit new opportunities on the North Slope of Alaska.”


Financial pressure has been eased by the raising of this new cash, but the last couple of operations updates have really only been about progress with infrastructure and engineering. That’s all good and seems to be going according to plan. But what investors are really waiting for is progress on the commercial viability of its Alsakan prospects which, so far, don’t appear to be easy to get at.

The other big development is the new fall in oil prices. While it had already slipped a bit, the price of a barrel was still above $75 back in late October, but it’s now dropped below $60 — currently a few cents below $58, as I write.

That’s got to hurt “oil tomorrow” prospectors like 88 Energy. I’d expect it to impact on the likelihood and possible terms of the farm-out deal the firm is working on — and there’s not long to go to the targeted end-of-2018 now.


Recent news from Gulf Keystone Petroleum (LSE: GKP) has been more welcome, though dull (which, in the world of oil investing, can be very good). It’s essentially been a steady stream of “Shaikan Payment Update” notifications telling us of the millions the Kurdistan Regional Government has been paying the company for its oil.

The payment for September shipments came to $27.1m (with $21.2m net to the company), and that’s pretty much representative of its regular monthly receipts.

The other big positive about Gulf Keystone, as evidenced by interim results, is that it’s nicely profitable. The six months to 30 June brought in a record post-tax profit of $26.7m, and the company recorded a cash balance of $219m (which had risen to $240m by 7 September) set against $100m in debt. That debt was refinanced in July, and looks solid for the next five years.


The Gulf Keystone share price is, again, very much dependent on the oil price, and we’ve seen another big fall as the price per barrel dips further. But the shares are still up more than 55% so far in 2018, and are up 90% over the past 12 months.

The success of Gulf Keystone is something that 88 Energy investors will hope to emulate. But it’s important to remember that Gulf’s survival and success came at a big cost to early investors — those who owned shares back when the payments crisis was in full swing were effectively wiped out.

Even with cheaper oil, Gulf looks relatively safe to me and a decent investment. But I see 88 Energy as still a pure gamble.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Photo of a man going through financial problems
Investing Articles

2 dividend shares I’d avoid like the plague in today’s stock market

The UK stock market is full of high-yield dividend shares that could equate to a steady stream of passive income.…

Read more »

Abstract bull climbing indicators on stock chart
Investing Articles

£17,000 in savings? Here’s how I’d aim to turn that into a £29,548 annual second income!

Generating a sizeable second income can be life-enhancing and can be done from relatively small investments in high-dividend-paying stocks.

Read more »

Investing Articles

With as little as £300 a month invested, this stock could net £16,000 a year in passive income

Putting a few hundred pounds each month into the stock market could eventually generate a five-figure annual passive income, this…

Read more »

Black woman using loudspeaker to be heard
Investing Articles

This dividend stock could pop next week!

This dividend stock happens to have one of the biggest dividend yields I've come across -- 10.7% -- but I'm…

Read more »

Investing Articles

Up 81%, can this FTSE 100 turnaround share keep surging?

This recovering retailer has been one of the FTSE's greatest performers over the past year. Royston Wild considers whether it…

Read more »

Happy couple showing relief at news
Investing Articles

£10,000 in savings? I’d buy 4 passive income shares to target a £100 per week second income!

By buying passive income shares today, I have a great chance to eventually make life-changing wealth. Here's how I'd invest…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

I think this may be an unmissable chance to buy an oversold UK share before it rallies hard

Harvey Jones piled into this beaten down UK share because it looks cheap and offers a sky-high yield. Now he's…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

How I’d invest £500 a month in shares to target a £29,000 second income

Investing in shares is a tried-and-tested way to build a second income. Our writer explains how he’d do it, starting…

Read more »