Can the Gulf Keystone Petroleum (GKP) share price double your money?

Here’s why I think Gulf Keystone Petroleum (LON: GKP) shares could be the best oil & gas bet for doubling your investment cash.

| 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.

A few short years ago, Gulf Keystone Petroleum (LSE: GKP) was tottering on the edge of going bust, with the company delivering oil to the Kurdistan Regional Government (KRG) without being paid. The money owed was building up and Gulf’s cash reserves were dwindling, and it looked like the only thing that could save it was an about-face from the KRG and the commencement of payments.

Turnaround

Thankfully, that’s exactly what happened, and the KRG has been good to its word ever since – it must sooth the heart of every Gulf Keystone investor to see that “Shaikan Payment Update” headline every month.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

On top of that, under the leadership of chief executive Jón Ferrier, the company has refinanced its debt, is generating steady profits, and has even reached the point of paying dividends – a situation that must turn investors in a lot of other small oil companies green with envy.

A few factors have resulted in a share price retrenchment in recent months, as earnings are expected to fall this year. There have been some delays, and a maintenance and upgrade phase has led to some production capacity being taken temporarily offline.

But that’s clearly short-term stuff and it should leave the company in a better state to raise its production levels in the future.

Healthy production

And even after the downgrade, Gulf’s estimated production rate still comes in at 30,000 to 33,000 barrels per day. I think it’s interesting to compare that with UK Oil & Gas, whose test well production of Portland and Kimmeridge hydrocarbons at Horse Hill has reached a little over 71,000 barrels – total, ever.

The faltering oil price hasn’t helped as the world production glut continues, and prices around $60 aren’t inspiring confidence.

Still, even on reduced earnings expectations for this year, the shares are trading on a forward price-to-earnings (P/E) ratio of under 12. What’s more, if the mooted 70% jump in EPS for 2020 comes off, GKP shares would be on a P/E ratio for that year of only 7 – unless, of course, the price doesn’t rise in the meantime.

Buyback

It’s not just me who thinks Gulf Keystone shares are on a bargain price now. The company itself does too, and it’s been steadily purchasing its own shares since a buyback programme was announced in July.

So what we’re looking at here is a smaller oil company that’s raking in cash, saw its year-end cash balance reach $295.6m last year (from $160.5m a year previously), says it’s fully funded for all phases of its Shaikan expansion, and has enough of the folding stuff to be paying dividends and buying back its own shares.

Expansion

Add to that the planned expansion of production capacity, and as long as we see no major disasters in the meantime, if 2020 profits come close to what is currently being anticipated then I can see a significant share price up-rating on the cards.

The chance of Gulf Keystone doubling your money over the next five years? I reckon it’s probably higher than with any other oil company on the market right now.

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.

More on Investing Articles

Buffett at the BRK AGM
Investing Articles

I’m listening to Warren Buffett about investing for the future

How does Warren Buffett incorporate an uncertain future into his investment strategy? Christopher Ruane explores what he's learnt from the…

Read more »

Worker on sofa and team on laptop screen talking and discussion in video conference and dog interruption.
Investing Articles

The Alphabet share price has fallen 25%. Time to buy?

The Alphabet share price has fallen sharply in 2022 -- and our writer scents a buying opportunity for his portfolio.

Read more »

Close-up of British bank notes
Investing Articles

How I’d invest a Stocks and Shares ISA to target yearly dividends of £1,350

Our writer reckons he could invest a £20,000 Stocks and Shares ISA to generate substantial dividend income. Here's how he…

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

UK shares to buy now: how I’d invest a £1,000 lump sum

Our writer highlights some shares to buy now for his portfolio that he hopes offer both growth and income prospects.

Read more »

Investing Articles

3 top FTSE 100 shares to buy in a recession

Our writer explores three FTSE 100 shares that could protect the value of his stock market portfolio in the event…

Read more »

A Rolls-Royce employee works on an engine
Investing Articles

Could I double my money with Rolls-Royce shares?

Rolls-Royce shares have been on a downward track this year amid ongoing-pandemic related challenges. But is now a good time…

Read more »

Smiling senior white man talking through telephone while using laptop at desk.
Investing Articles

Down 50%, are Scottish Mortgage shares a bargain growth pick?

Scottish Mortgage shares have been on a steep downward track over the past six months. Down more than half, is…

Read more »

Note paper with question mark on orange background
Investing Articles

4 reasons why I would — and wouldn’t — buy Tesco shares for June

I’m looking for the best FTSE 100 shares to buy in early June. Is Tesco a brilliant blue-chip I should…

Read more »