Gulf Keystone (GKP) the end of schizophrenia

I noticed a few people might be disappointed with the recent GKP RNS. However for me it was the start of a new birth, focus and direction.

When companies move from explorers to producers it can be a painful and traumatic experience, the whole company needs to change and not only find and define assets but also to reduce costs, make a profit and manage what in most cases is a massive increase in workforce and size.

The same transformation occurs when a company moves from AIM to a main listing, gone are the days of appeasing private investors, when the company moved forward and saw the share price increase by selling a dream that everybody will be a million. Welcome the days of spreadsheets, price earning ratio’s and broker notes that determine when the Institutional investors will decide to invest. Again this can be a painful experience as shares move from Private investors to pension fund managers.

Rather than selling a dream, they need to sell a company using real figures, where the analysis can produce a report which will then go before an investment committee before a sector or industry head gives the green light for an investment to take place. Such committee’s are not impressed with maybe’s and dreams.

GKP is moving along this journey and is trying to perform multiple transformations at the same time, unfortunately this has put it in some pretty ugly positions as the share price shows. The company hasn’t helped itself by not knowing quite which way to face either. I spoke to somebody close to the company today and the reply I got was that this RNS “shows the door that Gulf Keystone is now facing and about to walk though”, this will be finalised when we get the news that Todd Kozel will step down in a few weeks time.

At last the schizophrenic nature of the company will be removed, gone will be dreams and in will be professionalism.

This won’t make some private investors happy and I can already hear the screams through this keyboard. Gone will be the details of exactly what happens at the company. The SH 7 update is a perfect example of this, before Private investors complain, do you think BP would give a blow by blow account of exactly why a drill failed ?...The answer is NO.  They wouldn’t. The main market would only care that it failed, it doesn’t sit there dreaming of finding another 1bn barrels of oil. Indeed the market cares about the revenue and profit over the coming 2 years or so. With that in mind GKP duly updated the market on potential profit figures. We come to the next charge which is why didn’t GKP try and estimate BOPD flow rates for SH 7 rather than just saying it’s a significant producer. Quite simply again no company gives out flow rates which are not 100% certain on the main listing, for AIM they do it all the time. If GKP issued a flow rate which was too high or too low, people would complain. Again would you expect BP to issue flow rates before it was certain ?

I am sure many will view the RNS as being poor or negative, however I say without hesitation that those people do not understand the transformation journey that or the door way that GKP is about to step through. Ignore such people, focus on the profits, bottom line figures and the amount of oil connected to the PF terminals. 

As an investor you need to decide whether you’re a dreamer or a hard nosed money maker, thankfully GKP have now made the choice for themselves.