Having met with management of Gulfsands Petroleum again recently, CEO Mahdi Sajjad was somewhat upbeat that there is a very real possibility of at least a partial lifting of the EU sanctions against Syria when up for renewal in early December. A little known fact is that for them to be renewed, ALL 26 member states need to vote through the renewals or they are not carried. In other words, just one nation has the power of veto.
Given the ongoing civil war in the country and the humanitarian toll this has taken together with the absolutely abhorrent ISIS murderers making inroads into decent chunks of Syria, there is in fact serious logic to actually doing a deal with the Assad to government to (a) alleviate the pain on the Syrian people through the lifting of the oil embargo and (b) gaining access to strategic posts within the country to attack ISIS on the front foot instead of via piecemeal airstrikes.
We are not even remotely informed enough to go into the political machinations involved in such a deal but would point out that should the sanctions actually be lifted on the oil embargo then, as relayed HERE, this would be transformational for GPX. It is worth taking a look at the video below in which Commercial Director Ken Judge sets out that they could get upto 20k barrels a day almost instantaneously. Patently that would have a material effect on the company’s cashflows.
The “market” generally has an uncanny habit of pricing in news before it is announced and perhaps this is the reason for the creep higher in the stock this last week, in contrast to both the headline oil price and the sector at large. Additionally, from the look of trade reports the last few days, it seems like the market is short of stock with only modest purchases lifting the shares higher.
An alternate explanation for the renewed strength could be that news is imminent on a farm in of GPX’s Morrocan assets where the company has been enjoying good drilling success recently, specifically in their LTU-1 well. Indeed, potential news in this vein or on the company’s wider portfolio of assets was alluded to both in the video above with Mr Judge and per the line below in the recent results: –
“In the course of those preparations we have received a number of enquiries about our willingness to consider working with well known, potential joint venture partners in undertaking the exploration programmes to be conducted in the next few years. We will continue to examine these approaches which fit with our strategy of having well-funded and technically competent partners share with us the cost of future exploration.”
“These resourcing opportunities include farm-outs of interests as well as asset-level and corporate-level financing initiatives… at its meeting on 23rd September 2014, the Board concluded that, given the quality of the Group’s assets and the advanced state of discussions with the prospective counter-parties with which we are engaged, the various initiatives being pursued provide a reasonable basis of expectation that appropriate resources will be accessed, not only to enable the Group to continue as a going concern, but to exploit the potential of the Group’s business model.”
As ever time will be the ultimate arbiter of what is behind the renewed price strength. GPX remains a core holding with our Titan portfolios. We are hopeful for the sanctions to be ultimately lifted and this catalyst to drive a material re-rating of the stock.
CLEAR DISCLOSURE: EXPOSURE TO GULFSANDS SHARES IS HELD BY RICHARD JENNINGS AND TITAN INVESMENT PARTNERS FUNDS. This piece should not be taken as an advocation to buy (or sell) these instruments and you should always take independent financial advice in relation to your own circumstances.