Could Kurdistan Unrest Hit UK-listed Oil Firms?

However, analyst Melanie Savage at UBS - which recently initiated coverage of the stock - believes the market has been wrong to factor in an 80% chance of loss into its shares.

"Heritage gains access to low geological risk exploration by operating in areas of relatively high political risks," she explained before tagging the stock with a 'buy' recommendation and hailing it its top pick in the European exploration and production sector.

David Hart, analyst at Westhouse Securities, agrees that the company could benefit from renewed talk of a resolution in Iraq and has also tagged the stock with a buy recommendation.

"I suppose in some sense, the closer you get to the coalition, the closer you become to creating a firm hydrocarbon law," he continued, before adding that they have a strong balance sheet to fund further drilling in the province.

In a sign of confidence in the region, US mid-tier player Marathon Oil took a stake in four exploration blocks in Kurdistan late last month, marking its first foray into Iraq.

Samuel Ciszuk, analyst at IHS Global Insight, commented: "The entry of an IOC the size of Marathon will be taken as a significant confidence booster by the KRG and sends a particularly strong signal as it coincides with the central government's awards of three strategic gas fields to second or third tier bidders.

"Its entry will be interpreted by many as a vote of confidence in the KRG's ability to secure its upstream investors' interests vis-a-vis the Iragi government and ensure that even if the region's production sharing agreements have to be renegotiated, the terms would continue to be more profitable than those Iraq itself has offered."

However, Ciszuk warns that while Kurdistan is attempting to manoeuvre itself into the position of kingmaker, they could well overestimate their influence and thus push Iraq's other factions into uniting by demanding too much.

(Source: Interactive Investor)

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