Update: Equity issuance strengthens financial position
GKP’s oversubscribed equity offering gives it renewed financial strength, with cash in hand of over $120m. This allows GKP to invest to maintain its current capability of 40mb/d and cover operating expenses in 2015 even without receipt of revenues from oil sales (which we fully expect it to receive in time). Additionally, the removal of the book equity ratio put option illustrates the commitment of the bondholders to the asset base. The current share price reflects uncertainty over receipt of revenues, but we believe the KRG fully appreciates the importance of Shaikan to the region, and that a reliable payment cycle will come in time. Our core production and development NAV is 56p/share, increasing to a full NAV of 90p/share. We also examine other valuations given the strategic process now entered into, which reveals potential upside from these estimates.
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