The Motley Fool

Why I think the GKP share price could be the oily to go for in 2019

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.

Happy New Years 2019 With Fireworks
Image source: Getty Images

A quick look at the Gulf Keystone Petroleum (LSE: GKP) share price shows something remarkably similar to the oil price chart.

When the value of an oil explorer is based solely on the value of the hydrocarbon assets it’s sitting on, but which are not yet being pumped to the surface, I think that’s perhaps reasonable as there really aren’t any better ways to try to quantify its value.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

But when we’re looking at a productive and profitable company, I don’t see anything rational in valuing it depending on today’s oil price. We all know that the oil price varies, and surely we also know that any specific day’s spot price bears little relationship to the long-term stream of profits to be expected from a successful producer.

Regular cash

Now that Gulf Keystone has overcome its early problems getting regular payments from the Kurdistan Regional Government, and the cash for its Shaikan oil is coming in regular as clockwork, we have a much better way of valuing the company. We can use its earnings, actual and forecast.

We saw a modestly positive EPS in 2017, and predictions suggest EPS of around 22p per share for the year just ended. That would put the shares on a P/E of a little under 10, which seems modest to me.

Rapid growth

The firm’s latest operational update revealed average gross production in 2018 of 31,563 barrels of oil per day (bopd), which is at the upper end of the company’s 27,000-32,000 bopd guidance.

With guidance a little higher for 2019, at 32,000-38,000 bopd, analysts are expecting largely flat earnings.

Gulf is working on the bottlenecks in its production process, expecting the work to be completed towards the end of 2019, and that’s expected to boost capacity as high as 55,000 bopd.

If that goes according to schedule, the City’s analysts are seeing a doubling in earnings per share by 2020, and that would drop the P/E multiple as low as 4.5.


If we look at a company like Aminex, its share price has collapsed over the past couple of years, and it’s been volatile at a relatively low level over the past six months. Valuation-wise, it’s still pretty much at the guessing game stage for Aminex, with the company’s farm-out deal looking positive, though there’s only a tiny first profit on the cards for 2020.

And looking riskier, UK Oil & Gas (LSE: UKOG), which was so recently such a great hope with its so-called Gatwick Gusher, has seen a share price collapse. It’s proving very difficult turning apparent hydrocarbon resources into actual flowing oil. There’s no profit on the horizon yet, and it’s anybody’s guess how long the cash-burn phase will last, and who will fund it.

I go for profit now

Meanwhile, back at GKP, we’re getting a regular payment update every month. The company has enjoyed cash receipts of $225m net during 2018, and was sat on $294m in cash at 15 January, saying it’s “fully funded to complete the expansion to 55,000 bopd.”

If you’re looking for a smaller oil producer for 2019, I reckon GKP is one to go for — and it’s on my personal shortlist.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.