Kurdistan, along with East Africa and the North Sea, has been identified by an analyst at brokerage Seymour Pierce as a key oil and gas region that is likely to see significant positive momentum this year.
Dr Doug Youngson initiated coverage on eleven stocks and picked the three places as his ‘Top Regions’. In Kurdistan, he picks out Gulf Keystone Petroleum and Heritage Oil & Gas.
He highlights an estimate by the US geological survey that Kurdistan hosts 40 billion barrel of oil and 60 trillion cubic feet of gas with low geological exploration risk
He says the semi-autonomous region of northern Iraq is more stable than the rest of the country and this has been one of the drivers of new investment in the area.
“Activity in Kurdistan has been steadily increasing in recent years with the entrance of several small and medium independent E&Ps,” the analyst said.
“However, the region finally got the “seal of approval” following the announcement that ExxonMobil was to acquire significant acreage in six exploration blocks in late 2011. More recently, speculation has mounted that Total were planning a similar move, although this has yet to be formally announced.
“We believe that the increasing influx of foreign oil companies into Kurdistan and the increasing capital expenditure they bring is the most likely driver for resolution of the oil law.
“Increases in production outside Kurdistan have been disappointing so far and if Iraq is to see any tangible increase in production in the short to medium term we believe that this will come from Kurdistan.”
The analyst says that Gulf Keystone Petroleum has been a long term player in Kurdistan and it has seen considerable exploration success so far, with it finding around 15 billion barrels of oil in place.
“This year will see [Gulf Keystone Petroleum] move into export production for the first time, resulting in the first significant cash inflows,” he said.
“The entrance of ExxonMobil and Total into the region has enhanced its credibility as a potential major future oil producing province. We feel that the persistent takeover rumours are premature, but likely to be accurate in the longer term.”
In the year ahead he expects share price drivers to come from further resource upgrades and increases in production at the Shaikan field.
Meanwhile, Youngson is also watching Heritage Oil which, he says, has struggled to recover since its Miran West field was confirmed to be gas bearing and not oil bearing. He says Heritage is looking at ways to export the gas and it is still exploring Miran.
The analyst reckons positive results could boost the share price in 2012.
(Source: Proactive Investors)