Genel Energy PLC And Gulf Keystone Petroleum Limited Surge On Positive News Flow


It’s been a terribly disappointing year for investors in Genel Energy (LSE: GENL) and Gulf Keystone Petroleum (LSE: GKP). That’s because shares in the oil and gas operators that are focused on the Kurdistan region of the Middle East have fallen by 20% and 53% respectively since the start of the year.

Of course, there has been good reason for their falls. Political instability in the region has increased significantly during the course of 2014, with investors becoming nervous regarding their current and future operations. Furthermore, the falling price of oil has certainly made an additionally negative impact on their share prices, too.

However, shares in both companies are up strongly today, with Genel seeing its share price rise by 12% and Gulf Keystone’s being up 9%. Here’s why.

Gas Agreements

A major reason for Genel’s share price being higher today is news of a deal for Kurdistan to provide Turkey with gas. Indeed, it is believed that the two countries have signed an agreement that could see Kurdistan supply Turkey with up to 10% of its gas requirements moving forward. This could prove to be excellent news for Genel, since around 40% of its asset base is situated in the region, via the Bina Bawi and Miran fields in particular.

The deal could mean that Genel enters into an offtake agreement, which is essentially where it would agree to sell a portion of its future production in the region. As such, the news of a deal between Kurdistan and Turkey is being seen as hugely positive for Genel, with investor sentiment improving significantly as a result. Furthermore, with Gulf Keystone also focused on developing its gas exploration activities in the region, the news is likely to have had a positive impact on its share price, too.


Meanwhile, shares in both companies are also making ground today due to a separate announcement that the Kurdistan Regional Government (KRG) intends to make payments for oil sold during the course of this year. Indeed, it is estimated that the KRG has sold around $3 billion of oil in 2014 and intends to make an initial payment of around $75 million to oil producing companies in the region.

What makes this news even better, though, is that the KRG also intends to make payments on a regular basis moving forward. As such, the medium to long term futures of Genel and Gulf Keystone appear to be much brighter than before the announcement was made.

Looking Ahead

Clearly, operations in the Kurdistan region of the Middle East are likely to continue to remain uncertain over the near-term, simply because of the political instability that is present in Iraq. However, with upbeat news flow, investor sentiment can quickly turn. As such, for less risk averse investors, they could prove to be worthy longer-term buys.

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Peter Stephens has no position in any shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.