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March 31, 2015

UPDATE - Gulf Keystone share sale raises US$40mln as takeover talks continue


Gulf Keystone Petroleum (LON:GKP) shares fell around 10% after a share sale raised US$40mln to bolster the group’s finances while it continues negotiations to potentially sell the company.

The Kurdistan-based oil company is issuing 85.9mln new shares priced at 32p each to new and existing institutional investors.

The cash injection adds to the company’s cash balance of around US$86mln, and comes amid uncertainty over payment schedules and after the company has called on some of its lenders to waive certain financial covenants.

Sami Zouari, GKP’s chief financial officer, said: "This successful placing will strengthen the company's financial position while discussions with interested parties in relation to possible asset transactions or a sale of the company and the board's assessment of a number of longer-term funding options to progress to the next Shaikan production target of up to 70,000 barrels of oil per day are ongoing."

“The share issuance was flagged before, so doesn’t come as a surprise,” said analyst Jamal Orazbayeva.

Sam Wahab, analyst at Cantor Fitzgerald, described the new placing as an important milestone for GKP, as he reinstated a ‘buy’ recommendation and set a target price of 112p.

“We believe that in raising additional capital at this stage underlines continued shareholder support for GKP’s story against the backdrop of difficult macro-conditions and civil instability in Iraq,” he said in a note.

“Despite concerted efforts on behalf of company management, slower than anticipated progress in ratifying an oil law between the KRG and the federal government, and difficulties in receiving payments for export production has weighed heavily on the company’s share price.”

GKP separately announced that non-executive chairman Simon Murray is to retire from the board with immediate effect. @MasterMetals MasterMetals Blog

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