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Is AFC Energy plc A Better Buy Than Gulf Keystone Petroleum Limited?

Shares in AFC Energy (LSE: AFC) are up by 18% today after the fuel cell power company announced that it has received the first partial building permit to build an industrial alkaline fuel cell facility in Stade, Germany.

This is excellent news for the company and means that AFC will be able to progress with foundation works, as well as piled foundation works and the building of a reinforced steel concrete base plate as it seeks to build what will be the world’s largest industrial alkaline fuel cell facility. And, with it being the fifth milestone in the company’s 2015 Power Up programme, it shows that AFC remains on track to deliver the fast-track execution timetable for the 240kw KORE fuel cell system, which is scheduled for the second half of the current year.

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Polar Opposites

Of course, recent news flow for AFC has been very positive and has caused investor sentiment to improve dramatically and push the company’s share price up by a whopping 147% since the turn of the year. This is a very different scenario to that experienced by investors in Gulf Keystone (LSE: GKP), with the oil producer experiencing a number of challenges that has caused its share price to fall by 44% year-to-date.

Looking Ahead

In fact, things could get worse before they get better for Gulf Keystone. As well as being unable to export the oil it produces due to a lack of clarity regarding payments from the Kurdistan Regional Government (KRG), and therefore being reliant on domestic sales which generate lower revenue, the company failed to find a buyer when it put itself up for sale recently. This means that its cash flow issues could become a significant problem, with either a rights issue or some kind of debt for equity swap being the most likely outcomes for the company as it seeks to improve its financial standing.

Meanwhile, AFC continues to have huge potential. As well as today’s news it recently signed a deal with two South Korean companies to create a joint venture that is expected to deliver $1bn of revenue over the next ten years. And, with it continuing to make excellent progress regarding its alkaline fuel cell system, it seems to have a bright future ahead of it.

Certainly, AFC’s share price may not rise by 147% over the next three months (as it has over the last three months) but, with investor sentiment behind it and the company going from strength to strength, it appears to be a much more appealing energy stock to own than Gulf Keystone.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the 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.

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