Right now I’m looking at some of the markets most popular companies to try and establish whether or not they have the potential to return to historic highs.
Today I’m looking at Gulf Keystone Petroleum (LSE: GKP) (NASDAQOTH: GUKYF.US) to ascertain if its share price can return to 412p.
Of course, before we can establish whether or not Gulf Keystone can return to 412p, we need to establish what catalyst caused the company’s shares to reach this level in the first place. It would appear that Gulf Keystone reached this high at the beginning of 2012, concluding a rally that began during December the previous year.
As far as I can see, this rally was driven by two factors. Firstly, there was a significant amount of speculation in the market that Gulf Keystone was about to be acquired by a large peer. In addition, it seems as if this rally was fuelled by positive exploration results from the company’s world class Shaikan oil field.
But can Gulf Keystone return to its former glory?
Gulf Keystone’s Shaikan oil field is widely quoted as one of the largest oil discovery’s in recent times and the company’s positive drill results, as well as initial production rates have only confirmed the fields potential. Indeed, with this huge discovery behind it, I feel that Gulf Keystone has all the foundations in place to make another run at 412p.
In particular, according to Gulf Keystone’s own predictions, the company should be producing 40,000 barrels of oil per day for the majority of this year. This works out at 14.6 million barrels of oil per year, and if the price of oil remains around $100 per barrel, Gulf Keystone’s revenue for 2014 will be in the region of $300 million — not bad for the company’s first full-year of production.
What’s more, management has predicted that within 18 months the company’s production will hit 100,000 barrels of oil per day, which works out at more than $700 million in revenue per year.
In addition, I should mention that City analysts believe there are over 2.5 billion barrels of recoverable oil in Gulf Keystone’s Shaikan field. Gulf Keystone has an 80% interest in the field, so it would appear that Gulf Keystone’s Shaikan oil reserves alone are worth around $200 billion.
So overall, Gulf Keystone has an interest in one of the largest oil discoveries ever and the company’s profits are set to explode during the next few years. As a result, I feel that the company can return to 412p.
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In the meantime, please stay tuned for my next FTSE 100 verdict.
> Rupert does not own any share mentioned within this article.